Have you recently reviewed your credit report and discovered errors? Is the wrong name or address listed in your report? Is there a credit card recorded that is not yours? Does it list an account as unpaid that you know you have paid off?
If you answered yes to any of these questions, don’t fret! It is very common to find errors such as these in your credit report. When you are faced with an error on your credit report, it may be best to file a dispute.
What is a credit dispute?
A credit dispute allows you to report and fix inaccurate information listed on your credit report. After filing your dispute with the credit bureau, they will analyze your report to find and verify the inaccurate information. You cannot file a dispute for information that is undesirable but accurate. Make sure that the information that you are asking the credit bureau is a legitimate inaccuracy or discrepancy. Checking on your credit reports is vital to maintaining healthy credit, as mistakes left unchecked can hurt your credit score.
What happens to your credit report while you’re disputing an item?
When you file a dispute with the credit bureau, your credit report will be marked with a special code. This code signals to outside observers that you have filed a dispute and that it is currently being looked into. The FICO system treats disputed accounts differently, and so many people believe that disputing an item can hurt your credit score. This isn’t entirely true, however, as something that is being disputed cannot hurt your credit score. But, it may temporarily display your credit score higher than it usually is. This is because disputed items are excluded from your credit score calculation while the investigation is ongoing. After your dispute has been reviewed and the code is taken off your report, FICO will include all appropriate information in the calculation of your credit score.
What are the pros and cons of filing a credit dispute?
Pros of filing credit disputes:
Filing a credit dispute can greatly help your financial situation, most notably by helping raise your credit score. For example, if you come across an error on your credit report, like payments falsely marked as late, this can cause your credit score to drop, and wrongly so. By reporting discrepancies to the credit bureau as soon as possible, you are able to address the error before it causes too much damage to your credit score. Filing a dispute is fairly straightforward and only takes up to thirty days to work through.
Cons of filing credit disputes:
As previously mentioned, you should be sure that you only file disputes for genuine inaccuracies. If you file a dispute for accurate but unfavorable information on your report, the credit bureau will take action against you. Although your credit score may go up temporarily when you have a dispute code on your report, it will revert back to its original state once out of review. It is unwise to file a dispute only to temporarily have a higher credit score and better qualify for a loan you are seeking. Lenders will usually wait to move forward with your application until your account is free of disputes, they view it as a liability.