Check Your Credit Reports for Errors Before You Apply for a Loan

Most advice about improving a credit score is about changing your behavior: pay on time, keep balances low, open fewer accounts. But there is a cheaper first step that has nothing to do with behavior at all. Before you apply for a loan, make sure the information a lender will see is actually yours and actually correct.

Your credit score is calculated from the contents of your credit reports. If a report contains an account that isn't yours, a payment marked late that you made on time, or a debt listed twice, the score built on it can be lower than it should be. A lower score can mean a higher rate, a smaller approval, or a denial. And the fix, when there is one, is free.

How to get all three reports at no cost

The three nationwide credit bureaus (Equifax, Experian and TransUnion) are each required to give you free copies of your report. The official source is AnnualCreditReport.com, the only site authorized by federal law for this purpose. The bureaus have made weekly free reports available there on a permanent basis, so you can pull them as often as you like, and you don't need to spread them across the year.

Pull all three, not just one. Lenders don't all report to every bureau, and the bureau a lender checks may not be the one you looked at. An error can sit on one report while the other two are clean.

One note on what you'll get: the free reports show your data, not a score. If you want to see how the numbers translate, that's a separate step, and the score you see may not match the one a lender uses. (We cover why in a separate article.)

What to look for

Read each report slowly, with a pen if it helps. The errors that matter most tend to fall into a few groups:

• Accounts you don't recognize. An unfamiliar card or loan can be a simple mix-up with someone who has a similar name, or a sign of identity theft.
• Wrong payment history. A payment marked 30 days late that you made on time, or an account listed as open that you closed.
• Wrong balances or limits. A balance that's higher than your statement shows, or a credit limit that's missing or too low, can inflate how much of your available credit appears used.
• Duplicates. The same debt listed more than once, for example by an original creditor and a collector.
• Personal details. Misspelled names, old addresses, or a wrong Social Security number digit can be a sign that files have been mixed together.

Also check the inquiries section. Hard inquiries for applications you never made deserve a closer look.

How to dispute an error

Under the Fair Credit Reporting Act, you have the right to dispute information you believe is inaccurate or incomplete. The Federal Trade Commission walks through the process in Disputing Errors on Your Credit Reports, and the Consumer Financial Protection Bureau has a similar guide, How do I dispute an error on my credit report?

The general shape is the same in both:

1. Write to the bureau that shows the error. Say exactly what is wrong and what you believe is correct. Include copies, not originals, of supporting documents such as a statement or a payoff letter.
2. Keep a record. Send the letter in a way you can track, and keep a copy.
3. Expect an investigation. The bureau generally has to investigate, typically within 30 days, and send you the result. It may also pass your dispute to the company that supplied the information, which must review it too.
4. Check the result. If the item is corrected or removed, ask for an updated report. If it stays, you can add a short statement of dispute to your file.

You can also dispute directly with the company that reported the information. Doing both is reasonable when the error is serious.

Timing matters

If you are planning to apply for a loan in the next few weeks, start this process early. Disputes take time, and a correction made after you've applied doesn't undo the offer you already received. The best moment to look is a month or two before you apply, when there's still room to fix things.

It's also a good reason to compare offers once your reports are in order. A soft-pull comparison won't affect your score, and you can see what you're likely to qualify for before you commit to anything. You can compare your pre-qualified offers → when you're ready.

The bottom line

A clean report doesn't guarantee approval, and a correction won't turn a thin file into a strong one. But errors are one of the few things that can hold a score down for reasons that aren't about you. Checking takes less than an hour, costs nothing, and puts you in control of the information a lender will use to decide.