My credit report has always been admirable; it has never received a single derogatory remark. A few years ago, I had applied for an auto loan, with high hopes of purchasing my dream car.
I was appalled to discover that I wasn't eligible for an auto loan. What’s worse - I had no clue as to why it was rejected!
Upon further probe into my credit report (which I hadn't bothered to check earlier), I was shocked to discover that I had an unknown delinquent loan account! Of course, it was a reporting error. However, the loan was rejected, my car purchase plans were postponed, and I had to wait for quite a long time to get the matter sorted out.
How Do Mistakes in Credit Reports Cost You Financially?
Mistakes in credit reports are very common as well as blunderous. If they go unnoticed, these mistakes can fatally damage your credit health for no fault of yours at all. A reporting error can occur for multiple reasons and on multiple aspects of your financial life.
It could bring down your credit score and also put you in difficult situations.
It could spoil your credit health with a disparaging remark.
Lenders can refuse to lend money to you due to these credit report errors.
Read on to understand how serious these mistakes can be and how you can keep yourself safe from their consequences.
What Kind of Errors Could Turn Up on Your Credit Report?
Your credit report could contain simple mundane credit report errors such as incorrect name, address, gender, and erroneous identity numbers like PAN, Aadhaar, or date of birth. These credit report errors do not affect your credit score. You do need to get them rectified nonetheless.
There could also be mistakes in the payment dates, account status, date of loan closure, etc. Such mistakes are severe and will affect your credit score. Your loan application could get rejected or you could be blacklisted by banks due to these errors on your credit report. If you find one of these mistakes, you need to act immediately.
However, this is not exactly the limit. Errors on credit reports could be way worse. Someone else's loan could appear on your credit report, or there could be a mistake in the amount overdue. These errors have serious implications and can harm your credit report considerably.
If you wish to keep your credit report clean, you must keep tracking your credit score from time to time. You can use mymoneykarma's Intelligent Finance Tool to stay on top of your credit reports. Whenever you spot a mistake, act immediately and get it rectified.
Who Makes These Errors?
Compiling a credit report is a multi-layered process. The banks and financial institutions make data entries and submit them to the credit bureaus; the credit bureaus aggregate your data from different sources and formulate a report. The credit report errors could occur at either or both of these stages.
There are a plethora of possible errors at the submission stage. The data submitted by the financial lenders is compiled and entered by many people. Human errors are natural. Manually entered data could have typographical mistakes.
There could be other mistakes pertaining to your credit behavior as well, such as payment or settlement status, latest balance, outstanding amount, etc. Credit report errors could also originate from the time lag between collecting the data and submitting it. Here’s an example-
Let's assume that your payment date is on the 5th of every month and the lender submits its reports on the 8th - your payment submission might not reflect in the report and your account status might not get updated.
Sometimes banks outsource the task of loan collection to third-party agencies, who might collect the amount from you but make a slight delay in depositing the same and informing the bank about it. Cheques might also take time to be processed and hence your submission dates might be erroneously recorded.
At the aggregation stage, there could be manual as well as machine errors. Bureaus generally use complex algorithms to assess your data. There could be computational errors due to unavailability or similarity in personal details. For example, your name could be the same as another person's and his or her loan could appear on your credit report by mistake.
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