Different Types of Credit Report Errors and How to Fix Them

If you are planning to apply for a loan, check your credit report and go ahead with the loan application process only if you have the required CIBIL for home loan. In general, all lenders require borrowers to have a credit score of at least 750. Such a credit score is the mark of a highly creditworthy borrower who can be completely trusted with loan repayment. Borrowers who do not pay loan EMIs on time, borrow more than they can easily repay and have a high amount of debt have a low credit score and lenders do not want such borrowers as client. Loan approval, therefore, does not come easy for such borrowers. However, sometimes, when borrowers check CIBIL online, their credit report shows a low score, even when they have never defaulted on loan payment and in general, have a healthy and responsible attitude towards credit. This happens due to credit report errors.  

Credit information bureaus assign credit scores to borrowers based on the information supplied to them about the borrower by financial institutions and commercial lenders. Since lenders and financial institutions maintain records of millions of customers, it is not uncommon for them to pass wrong information about a borrower to credit information bureaus. Credit report errors arise due to misinformation or wrong information passed on to credit information bureaus by lenders. Borrowers and loan applicants are advised to check their credit report regularly and make sure there are no errors in it as errors can make it difficult for loan applicants to get approved for a loan, especially if the error is such that it is directly impacting the borrower's credit score in a negative way or making it difficult for the lenders to access the borrower's credit profile.  

Let us look at some of the most common types of errors that creep into credit reports. 

Common Types of Credit Report Errors 

1. Incorrect Personal Information  

Your credit report is an electronic representation of all the loans you had availed of and have successfully repaid and all the loan accounts you currently have. It contains information about you, such as your name and address, that helps lenders identify you as a borrower. When the personal information provided in the credit report is inaccurate, it becomes difficult for lenders to identify you. This could also lead to your credit profile getting mixed up with another borrower. Therefore, borrowers must check their credit report from time to time and make sure that all the personal information provided in their credit report is correct.  

2. Incorrect Account Information  

The credit report also contains information about all the accounts that you currently have. Sometimes, account-related errors also creep into the credit report. For instance, sometimes open accounts get reported as closed and closed accounts get reported as open. Similarly, sometimes, borrowers are labelled as owners of an account even when they are just authorized users. Such errors have a direct bearing on a borrower's credit score and therefore, borrowers must make sure there are no account-related errors in a borrower's credit report. 

3. Incorrect Credit Limits  

Not just your loan accounts but your credit cards and how you use them also affects your credit score. Sometimes, credit reports show wrong credit limits for different accounts. This impacts a borrower's credit score because the credit limit has a direct impact on a borrower's credit utilization ratio, which in turn, makes up almost 30% of a borrower's credit score. Borrowers must, therefore, make sure that when they check CIBIL score, the credit limit for different loan accounts is correct.  

4. Duplicate Accounts  

Duplicate accounts refer to cases when the same account, loan or debt is listed more than once. Once again this impacts a borrower's credit score as it impacts their debt-to-income ratio, etc. 

5. Fraudulent Accounts  

Sometimes, lenders and financial institutions pass on information which leads to a borrower having accounts on their credit report that they do not even own or are responsible for. Similarly, sometimes, credit reports contain transactions that a borrower has never made. These errors are categorized under fraudulent accounts category. When borrowers check CIBIL online, they must make sure their credit report has no fraudulent accounts on it.

6. Incorrect Credit Report

A common credit report error is loan accounts that have already been closed by the borrower appearing as open in the credit report. This is one of those errors that has a major impact on a borrower's credit score.

7. Incorrect Loan Delinquency

Another error that impacts a borrower's credit report or CIBIL for home loan is when certain accounts are reported as delinquent or in collection even when they borrower has made all repayments on time. Loan delinquency is a major concern. Borrowers who repeatedly do not pay loan EMIs on time or default on loan repayment are deemed highly risky and therefore, no lender lends money to such borrowers. If your credit report shows loan accounts that have already been repaid as delinquent, act immediately. This credit report error can bring down a borrower's credit score by almost 100 points and completely ruin their chances of availing of a loan.

8. Incorrect Repayment Hisotry

Lastly, sometimes lenders pass wrong information about a borrower's repayment history. This leads to a borrower having a low CIBIL score even when they have repaid all loan EMIs and credit card bills on time. Incorrectly reported late payments do not impact a borrower's credit score the way incorrectly reported loan delinquencies do, but they most certainly also have a negatively impact on a borrower's credit score and their eligibility for loans.

Credit report errors can completely ruin one's chances of loan approval. Therefore, borrowers must check CIBIL score at least once every six months and make sure their credit report has no errors in it. If they see any errors in the report, they must raise a dispute with the concerned credit information agency. Let us look at how borrowers can dispute credit report errors.  

How to Dispute Credit Report Errors?  

On checking your credit report, if you find that there is an error in your report which has caused your CIBIL score to drop down, act immediately. Report the error to the concerned credit information bureau by filing a dispute. Here's what you can do to dispute credit report errors.  

• If your CIBIL score has dropped down even you have paid all EMIs on time and have been a disciplined credit user, the first thing you must do is write to the concerned credit information bureau and ask them for a detailed copy of your credit report. Once you have your credit report, go through all the information and scan the report for any kind of credit report error that might be bringing down your credit score.  
• If you do see an error in your report, collect all the documentation that you will need to submit while reporting the discrepancy in your credit report. 
• Once you have all the documentation, raise a dispute. You can do so either by writing a letter to the concerned credit information bureau or filing out a dispute form.  
• Please note that no credit information bureau can act on your complaint on its own. When you report an error, and submit supporting documents to prove your claim, the credit information bureau you have written to will contact your lender or the financial institution that has passed on the wrong information and seek clarification. Only after the lender/financial institution applies will the credit information bureau make changes to your credit report.  
• When credit information bureaus write to a lender, it is mandatory for them to reply to the query within 30 days. Once the lender replies to the query, the credit information bureau will forward the response to you. If you are happy with the response, the credit information bureau will make changes to your credit report and the application will be considered closed. If you are not happy with the response, you can raise another dispute.  
• The whole process takes anywhere around 45 days. So, borrowers are advised to remain patient.  

In most cases, credit report errors get resolved quickly. However, sometimes, the dispute is denied. What should a borrower do in this case? If your credit report error dispute is denied, you can either submit a complaint to the Consumer Financial Protection Bureau or seek legal representation. However, in most cases, it never comes to this and credit report errors get resolved quickly and easily. 

Final Words

Borrowers planning to apply for a loan of any kind must have a good credit score. A good credit score convinces a lender of a borrower's repayment capacity and creditworthiness. Thus, when borrowers have a high credit score, lenders not only approve their loan application quickly but also offer them loans at low interest rates and other better loan terms and conditions, such as long repayment tenor and higher loan sanction. Therefore, borrowers are advised to check CIBIL score online (TransUnion CIBIL is the most famous credit information bureau in India and the CIBIL score it assigns borrowers is known as the CIBIL score) and apply for a loan only when their CIBIL score is at least 750. If their credit score is 750, they must apply for a loan only after improving their credit score. But credit score does not always go down due to mistakes of borrowers. Sometimes, financial institutions and lenders pass wrong information to credit information bureaus, which in turn, leads to a borrower's credit score going down. Therefore, borrowers are advised to check their credit report from time to time and make sure there are no errors in their report which are bringing down their credit score. If they see any errors, they must report them immediately and get them rectified as soon as possible as credit report errors can completely ruin one's chances of loan approval.