A recent study by the Policy and Economic Research Council (PERC) found that less than 1% of all credit reports examined prompted a dispute resulting in a significant change of 25 points or higher in their credit score. This study was commissioned by the big three national credit bureaus, Equifax, Experian, and TransUnion.
However, a study in 2004 by the National Association of State Public Interest Research Groups (PIRGs) reported that 79% of the credit reports surveyed contained a serious error or mistake on a financial account, as well as on personal demographic errors like misspellings and outdated information.
So which study should consumers trust? Do minimal, or a majority, of consumer credit reports contain errors?
Actually, it doesn’t matter which study is correct, because even a small chance of error is enough reason to clean up your credit report.
Whether there is a small or large chance your credit report has an error, it’s always worthwhile to check your credit report and wipe it clean. Here’s three simple reasons to do it:
1) It’s free. Government-mandated site AnnualCreditReport.com lets you check your credit report for free once a year from each of the three big credit bureaus. Whether you have a 1% or 79% chance of finding an error, it’s still free to double-check.
2) You could score big points. Reported errors include everything from mistaken identities (such as a credit card account listed under the wrong John Smith), to old, settled debts reappearing on a credit report. While the percentage of credit reports with errors is disputable, the fact that errors have a significant impact on your credit report is a fact. Cleaning up your report can lift your credit score upwards of 25 points, which can lead to significantly better interest rates, financial options, and a better chance of approval from lenders.
3) You could score a few points, and it’ll still make a big difference. Believe it or not, a credit score change in a few points could make all the difference your financial opportunities, especially if you’re between credit score ranges. A difference of just two points, between a 698 and a 700, may result in the difference of a one third percentage point difference on a mortgage interest rate offered to you. That two point difference can ultimately cost a homeowner about $11,700 in interest charges on a $165,000 30-year fixed rate mortgage, assuming 6.29% is the lowest rate. With $11,700 on the line, think it would be worth it to check your credit report now?
Checking your credit report for errors is the single most simple and free credit action you can do to potentially result in significant savings. Clean up your credit report for free, and then monitor your credit score for free at Credit Karma to track your credit health’s progress.
Check out the FTC’s quick facts on how to check your credit report and dispute errors, and finally check it off your financial to-do list.