Here’s How 30% of Americans Are Putting Their Credit at Risk

Posted by Nikitas Tsoukalis on March 22, 2017

Here’s How 30% of Americans Are Putting Their Credit at Risk

Say you have great credit or no credit risk. You usually pay off your credit card – or minimally have your debt-to-credit ratio at or below 30 percent. You’ve always paid your bills on time. You have solid credit history. So when you head in to the lender’s office to get pre-approved for your dream home, you shouldn’t have anything to worry about, right? You should be pre-approved no problem and ready to hit the trail house hunting.
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But then you get a rude awakening when you meet with the lender – your credit score isn’t in the excellent shape you thought it was, and it’s going to really limit your home buying status. What the heck happened? For many Americans, the aforementioned scenario could have been prevented by just checking their credit report. That’s right, mistakes happen. In fact, it’s estimated that up to 20 percent of all Americans have some sort of error on their credit report. It’s why most professionals suggest Americans check their credit reports at least once a year, as it’s really the only way to detect errors and then take the proper steps to dispute said errors so that your credit score can return to where it should be.

Common Credit Report Errors and Credit Risk

A WalletHub study estimates that as many as 37 percent of all Americans haven’t checked their credit report in over a year, and that 16 percent of all Americans have never checked their credit report. That’s not good, as the credit bureaus allow consumers to pull it for free once a year. Why not take advantage of the opportunity? Failure to do so could cause you to miss detecting significant errors, such as:
  • Mix ups: It’s not uncommon for the credit reporting bureaus to mix up information for consumers that share the same surname. So, for instance, if your name is Joe Smith and Mike Smith from California defaulted on an auto loan, there’s the off chance that your surnames could cause confusion when this information is reported.
  • Incorrect data: Sometimes, lenders or banks just make mistakes and report incorrect data about your history to the bureaus. These can usually be easily corrected by just showing documentation of your loan or account status.
  • Duplicates: Another common error is for the same account to be listed twice on your credit report. The big credit risk issue related with this mistake is that it will likely impact your credit utilization, or the debt-to-credit ratio. Like we mentioned in the opening, if this ratio is at or less than 30 percent, then you’re likely to have a higher credit score. Consumers that utilize more of their allotted debt-to-credit ratio will likely have a lower credit score.

Disputing Errors

As soon as you notice an error on your credit report, take action to dispute it. Disputes can either be carried out with the credit bureau or with the lender/bank involved that reported the information to the bureau. Simply gather documentation supporting your dispute and submit it to the respective party. By law, you will receive a response within 30 days from the time the party receives it. This response will confirm removal of the incorrect information, insist that they’re correct or ask for more information on credit risk.