3 Personal Finance Tips for Challenging Items on Your Credit Report

Credit reports are designed for accuracy, but errors do happen.

You've taken the plunge and ordered copies of your credit report, but reports aren't always simple to read. Investopedia explains that reports are broken into sections that cover your personal identifying information, inquiries, accounts in good standing, credit items, and items that might be negative. If you notice something that's not quite right, it's time to investigate and perhaps file a dispute.

Although credit reporting agencies strive to provide accurate information, mistakes happen. You shouldn't approach a dispute as if the reporting agency is trying to cause harm. They have no vested interest in whether your credit score is good or bad. Instead, go into a dispute with the mindset of working with the agency to resolve an inaccuracy.

Here are three steps to take if you discover something's amiss with your credit report:

Determine What's Accurate and What's Not

Some items on your credit report might seem obvious, such as a credit card account that you never opened. Some things might not be as easy to determine. Credit report items can remain for 7 years, sometimes longer, so take into account any activity that you might have made years ago that could still appear.

The name of a creditor might also be confusing, and could make an item seem like an error. If you have a department store credit card, the issuing bank, not the store's name, might be associated with the account on your credit report. To help identify confusing items, you'll need to examine balances, payments, and credit limits as well as the creditor name.

Gather Every Bit of Documentation You've Got

Documentation is everything, no matter what you've heard. Simply disputing an item without any backup won't get you very far. When you challenge an item on your credit report, it is true that the creditor will look into the situation and perhaps even remove the item if there's no evidence that it's valid. But instead of taking that chance, offer your own proof upfront and you're more likely to succeed.

A bank statement showing that a check cleared or debit transaction posted on time is ammunition for challenging late payments on your credit report that aren't accurate. High balances can be disputed by providing copies of billing statements that show otherwise. Whatever the negative mark on your credit, make copies of it to send with the dispute.

Keep the dispute letter polite, professional, and to the point.

Write a Dispute Letter

Sometimes an error will only show up on one or two reports, but often the error is on all three. You'll need a dispute letter written to each of the three credit reporting agencies, Equifax, Trans Union, and Experian, indicating where the error exists.

Give as much information about the disputed item as you can. You can even make a copy of the credit report, circle the item to make identifying it easier, and send it with the letter. Make copies of everything you send to each of the reporting agencies, and keep a file with dates that show each time you make contact and each time the reporting agencies answer back.

Disputing credit report errors is part of being responsible with your finances. Each time you get a copy of your report, which you should do once a year, take a few minutes to examine what's there.

Mint.com helps you keep a sensible budget, and it can also help you find the documentation needed to dispute errors on your credit report. With all of your accounts documented in one place, you can easily locate the backup you'll need to show evidence of an error.

Sign up for your free account today, and your credit report could thank you.