The Cost of Incorrect Information on Your Credit Report

Posted by Tom Blandford in Personal Finance on 2 February 2018 - Tom is a Credit Analyst at checkmyfile

Your credit file is compiled from a number of different sources, including payment history from each of your lenders (past and present) and public data as reported by local authorities and courts. The majority of people find that everything held about them is correct, but due to the large amount of information being shared, errors in the information reported can happen, which can lead to issues when you go to apply for credit.

Spotting any errors and taking the appropriate steps to ensure that the relevant parties have amended them is the key to making sure that you don’t end up paying more than you have to when you take out a loan.

See how information appears on your checkmyfile credit report

Why are there mistakes on my report?

Mistakes on credit reports are rare, but they can happen as a result of typos or variations on names and addresses, which in some cases will appear as an additional financial association or previous address. This type of information shouldn’t affect your ability to get credit in its own right, but could lead to problems if a lender is unable to locate your actual address easily as part of their credit check.

In some instances (usually family-shared homes) where two or more occupants have the same first and last name, credit reference agencies may mistakenly place missed payment and default markers on the wrong person’s file. This negative information could hurt your chances of getting accepted for credit, as it would show (wrongly) that you’ve got a history of missing payments.

While not all errors will negatively influence an application’s outcome, incorrect information on your file can slow or stop some applications or result in a significantly higher interest rate on some credit products, which is why it’s important to check your credit report regularly to see what lenders see.

How wrong information can affect future applications

Not only is the outcome of an application affected by the type of information appearing on your file, but also the type of credit you apply for.

For credit products such as mobile phone contracts, the cost of incorrect information can be minor to your application as there is usually great competition in the market with many similar deals available, so where one mobile phone provider might decline an application, one of its competitors might well be happy to have them as a customer.

For higher-cost and higher-risk products like a mortgage or credit card, the presence of incorrect information is more likely to hinder the application or offer you a higher interest rate. If you’re unable to get a low enough APR, then you could end up paying much more in the long run as a result.

As mortgages assess many facets of your credit file, even basic information like your current listed address being wrong can be a blocker. Even if you’ve got a great history of borrowing and repaying, admin errors on basic information like this can cause a setback.

How to dispute incorrect information on your report

To get incorrect markers or info removed from your file, you’ll need to contact the responsible party, namely the lender or credit reference agency reporting it. If a debt, default or CCJ is incorrectly appearing on your file, you may need to get the lender to confirm that the debt is not your responsibility before passing this on to the credit reference agency, who will amend this for you.

When you contact a lender to have information removed from your file, the lender has 28 days to provide a response, whether that be an amendment or the confirmation that the information is being investigated.

Most lenders report monthly updates to the credit reference agencies so if the lender agrees that the information should be amended, the amendment should appear on your credit report in the next month or so.

Compensation for incorrect credit report entries

If you’ve been rejected a good rate for a mortgage or loan and had to go to a sub-prime lender, costing you more in repayments as a direct result of incorrect negative information on your report, there’s a chance you could be able to claim compensation. However, you’ll have to prove that you’ve been left out of pocket by the inconvenience, rather than relying on the banks’ good nature.

Compensation for incorrect credit reporting is provided by lenders rarely, and it is often in the form of a small amount as a goodwill gesture for your inconvenience, rather than a life-changing amount of cash. For a claim to be made, you’ll need to have supporting evidence to back up your claim and even then, it shouldn’t be expected in every case.

It can be hard to prove that incorrect information has damaged your finances, and unless it’s something glaringly serious like an incorrect default, it’s hard to measure exactly what the impact has been. Additionally, credit applications assess many factors so it can be very difficult to pin down a single reason for an application to be declined unless you are told by the issuer, so it can be difficult to provide evidence the banks would accept.

How to check your credit file for errors

Routinely checking your credit report will allow you to identify and remove incorrect information before any real damage is done, so it’s a good habit to get into – even if it’s only two or three times a year for less credit-active consumers.

Be on the look-out for any entries you do not recognise; if you see any loans or missed payments that aren’t for with services you’re familiar with, get in contact with the lender to find out exactly what you’re paying for and make sure that your card hasn’t been used fraudulently.

Because each of the credit reference agencies carries their own version of your credit file, it’s important to check the information held by each one. Your checkmyfile credit report uses data from all four of the UK’s main agencies, so you can make sure you’re covered the next time you apply for credit, no matter which CRA the lender uses.

If you haven’t already, you can check your Multi-Agency Credit Report at checkmyfile – it’s FREE for 30 days and then costs just £14.99 per month, which you can cancel at any time.

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