You have spent years saving up your hard earned money, and you are finally ready to buy a home or new car. But before you submit an application, experts say that you should check your credit first.
“You want to be up to speed with what’s on your credit report in advance so that you can fix any error that you might find,” says Consumer Reports money reporter Octavio Blanco.
Credit reports errors are quite common. In fact, a study found that one in four people has at least one error on their report, which Blanco says can lead to problems.
“The worst thing that you can have is to be surprised that there’s an error and be denied credit because you didn’t know something was incorrect," he added.
While credit report errors are not new, the number of complaints about this problem to the Consumer Financial Protection Bureau has reached record levels, and a big reason for that is the CARES Act.
Last year, at the beginning of the pandemic, the deferral government offered a lifeline to people who were struggling financially. Companies that offered federally backed loans, including mortgages, student loans and some credit card and car loans, provided deferral options without a late payment penalty.
“But what’s happening,” said Blanco, “is it’s causing confusion and it’s leading to those deferred payments showing as late, and so that’s really hurting people.”
Those incorrect late payments on your credit report could negatively affect your credit score, and your chances of getting a loan. It is all happening at a time when people need it the most.
“People are struggling financially and looking for loans,” said Blanco. "And when they apply for a loan, they are being denied because of these errors showing up on their credit report.”
Blanco says that is why you need to check your own credit report before you apply. You can do that for all three credit bureaus: Equifax, Experian and TrandUnion and for free at annualcreditreport.com.
Checking your own credit, Blanco says, will not affect your credit score. He says that if you notice an error on your credit report, the first thing you should do is write a certified letter to the credit bureau and include any proof you might have that a mistake was made.