How to check that your credit score is correct

RyanD
November 1, 2012

Consumers who apply for a new credit card or a loan may discover that they have low credit scores, but this is too late. They must know what their scores are before they apply for new credit because low scores can prevent them from receiving the credit they need. The fact is that their credit scores may not be correct. If they know what is in their credit reports, they can make sure that there aren’t any miscalculations.

The Three Major Credit Bureaus: TransUnion, Equifax and Experian

The three major credit bureaus are TransUnion, Equifax and Experian, and they maintain a file on every American consumer. When consumers obtain credit from lenders, these lenders have the option of reporting to these three credit bureaus that the consumer makes payments on time, makes regular late payments or does not pay at all. These actions are just part of what contributes to how these credit bureaus calculate a credit score.

Why Credit Scores May Be Artificially Low

Credit scores can be miscalculated for several reasons. For example, someone can steal another person’s identity and obtain a loan with that person’s social security number. The person whose identity was stolen will not know that he has defaulted on a loan and that the lender is reporting this fact to the credit bureaus unless he obtains a copy of his credit reports at least once every year. Because 35 percent of a person’s credit score is based on whether or not the consumer repaid the credit extended to him on time, this person’s credit score will not be calculated correctly in this instance.

Credit scores are often miscalculated because of erroneous entries on credit reports. Sometimes, creditors report a debt that is not owed to them because of an error, and this affects credit scores negatively. How much debt is owed compared to how much credit the consumer has been extended amounts to 30 percent of a person’s credit score. If a credit report demonstrates that a consumer owes more money than she actually does, the credit bureaus will calculate the wrong debt-to-credit ratio. A higher debt-to-credit ratio will cause a consumer’s credit scores to be lower than they deserve to be.

Why People Need to Obtain Their Credit Reports

Smart consumers who obtain their credit reports before they apply for new credit learn whether or not someone has stolen their identity and whether or not there are errors. If there are errors that are contributing to a low credit score, these consumers have legal rights to dispute them. This is something that they can do on their own, but they can also pay someone to do it for them.

The Consumer’s Legal Rights

If a negative item is incorrect, consumers have the legal right to dispute it directly with the credit bureaus at no cost. However, they will not be able to have a negative item removed if it is accurate. In the event that they are denied credit or their identity has been stolen, they are entitled to a free report from the three credit bureaus if they request it within two months of being denied a loan, a credit card or insurance.

Once consumers discover that there are errors on their reports that they need to dispute, they will be able to bring these inaccuracies to the credit bureaus’ attention. The bureaus are under the obligation to investigate this matter with the companies that are reporting these errors without charging the consumer.

Byline: Ryan D once used KEL Credit Repair when his credit went through a rough patch.