Errors in a credit report is as bad as having a bad credit score because you would never know how an error could be viewed by your lender and the credit bureau.
The importance of credit score and credit report is by far known to many of us. Checking and being aware of your credit score is a huge step towards maintaining your credit health. Your credit report is a snapshot of your entire credit history and it is the basis on which a lender approves or rejects your requirement for credit. With that understanding, you might be doing everything possible to keep your credit score good and maintain credit-healthy habits.
However, have you spared a thought towards if your credit report is error-free and what are the common errors that can be found in a credit report? Errors in a credit report is as bad as having a bad credit score because you would never know how an error could be viewed by your lender and the credit bureau. You may even be denied a loan — whether home loan, car loan, personal loan or any other loan — because of this.
It is quite possible that there are errors in a credit report. Some of the common ones are:
Errors Due to Wrong Credit Accounts
Your credit report is nothing but a reflection of how responsible you have been towards your credit accounts. When those credit accounts have errors, you would obviously end up with an erroneous credit report that could cost you your credit score. Some of the common errors under this category are:
# Closed Accounts Being Shown as Open: Your lender has a duty to report all transactions pertaining to your credit account right from the approval to repayments /defaults till its closure. It is possible that an account that is closed is erroneously shown as open. This may go on to show that there are payments due towards the account which may come up as a red flag. Another error here could be that the account you have already closed are shown as ‘Settled’ accounts, which means that you have only partly paid your outstanding to the lender and haven’t made a clean closure. Future lenders would not take this lightly.
So, if you notice a closed account being shown as open or settled, it is good to report the error immediately and take up the matter with your lender with proof of closure of the account.
# Accounts Wrongly Being Shown As Delinquent: While you may be dutifully making EMI payments, what if your lender has failed to report it to the credit bureau? And thereby, your account may end up being shown as delinquent. For loan accounts, delinquency is reported at 30, 60, 90 and 120 days past the due date and for credit card accounts when the minimum amount due is also not paid on the due date.
Delinquent accounts would mean an immediate drop in credit score and would gravely affect the possibility of getting any further credit.
# Accounts with Incorrect Credit Limit or Balances: Your credit limit is a major determinant of your credit utilization ratio which is important for calculation of your credit score. If a lower credit limit is reported, your credit utilization ratio goes up which may end up impacting your score in the wrong way. A wrongly reported balance can also have similar effect on your credit score.
In addition to these errors, there is a possibility of some minor errors caused due to oversight like the ones below.
Your Permanent Account Number (PAN) is the basis for all reporting towards your credit report. As PAN is a string of 10 alphanumeric characters, it is quite easy to miss or get jumbled resulting in wrong PAN being shown against your name. It may belong to someone else too and the loans /credit cards belonging to that person may be reflected against yours.
A mismatch between your name and PAN is also possible. Cases like these may occur if you have got a name change done or use different forms of names for different accounts.
Further, you may also be subject to identity theft, where someone else has fraudulently used your identity to obtain credit which can land up as errors in your credit report.
Errors in credit reports can only be identified when you regularly check your credit scores and reports. Do not wait until you require credit. You might never know, it might be late by then.
(By Ranjit Punja, CEO and Co-Founder, CreditMantri)