By Matthew Gillman, Business Financing Expert & SMB Compass Founder
Growing your healthcare practice involves capital, yet many borrowers fail to secure funds due to errors in their credit history. In fact, one in four credit reports is inaccurate, making it difficult for many small business owners to move forward with their goals.
A study conducted by the Federal Trade Commission revealed that about 21% of consumers had reported errors in their credit reports; 13% said that these errors affected their credit scores, and 5% confirmed that credit errors were serious enough to be denied a loan or pay more than they should.
In line with the National Credit Month, we’re outlining the different credit errors you need to watch out for. Factors like outdated addresses, incorrect phone numbers, or misspelled names may seem too small to affect your loan application. Still, you should ensure all information is accurate to improve your chances of getting approved.
Check out the most common credit report errors below.
Activities mistakenly recorded under your name
Did you see a new bank account you didn’t open, a newly approved credit card application, or some hard inquiries you’re sure you never made? This could mean that someone else is using your personal information without your knowledge.
Identity fraud reports have increased over the past two years, given that most transactions are being done online. In a February 2021 report from the Federal Trade Commission, Americans reported losing $3.3 billion due to identity fraud in 2020, from $1.8 billion in 2019.
A separate study reported that 127 million Americans had been victims of credit card fraud at least once in 2021. Some of these credit card scammers have attempted to steal billions of dollars from cardholders during that period.
When you spot these fraudulent activities or even minor ones that have been wrongfully recorded under your account, make sure to report them to credit companies. When left unattended, these issues might cost you hefty charges and keep you from getting financing.
Wrong personal information
Whether you’re applying for a personal loan or small business financing for your healthcare practice, you need to double-check the personal information you provide on your credit.
According to the Federal Trade Commission, one in five people has an error on at least one of their credit reports, which may lower your credit score and impede you from getting a loan.
Some of the most common personal details you need to keep up-to-date are the following:
- Full name and any aliases, as well as variations (such as married or maiden names)
- Contact numbers
- Current, permanent, and previous addresses
- Marital status
- Date and place of birth
- Race, color, religion, and country of origin
- Social security number
- Clinic location
Bear in mind that keeping these personal details accurate keeps you from being misrepresented by someone else who has the same name as yours. When lenders are able to verify your identity and see that there are no errors in your account, the loan application process will take faster.
Outdated payment history
If you’re hoping to get a loan for your business, one of the first things lenders will look at is your credit score. This is determined by a variety of factors, including payment history. If you have any outdated payments on your record, it could negatively impact your chances of getting approved for a loan.
Outdated payments can stay on your credit report for up to seven years. That means if you’re hoping to get a loan in the near future, lenders will see that you have missed or been late on payments in the past. This information can make them hesitant to approve you for a loan, as they may view you as high-risk.
On top of your payment history, check any errors in your balances. See if the loans already paid in full are recorded properly. If you think there are mistakes in your account balances and payment history, you may reach out to credit bureaus like Equifax, Experian, and TransUnion to dispute them.
Incorrect reporting of account status
Having a variety of accounts–such as business credit cards, personal and auto loans, a line of credit, etc.–can be helpful in obtaining a high credit score. In fact, 10% of your FICO score involves your credit mix, which establishes your trustworthiness in repaying debts.
However, having a variety of credit can be confusing especially when you’re not keeping track of which accounts have already been closed and which ones are still active.
On top of that, some of your accounts may be incorrectly reported as late or delinquent even when you have been repaying your loan on time. Other errors may include incorrect current account balances or credit limits. Lenders may frown upon these errors, preventing you from securing capital.
How do you dispute these errors?
If you requested a credit report and you’ve spotted any of these errors, you can contact any credit bureau to help you make the ramifications. Here’s a step-by-step process:
- Write a letter to the credit reporting company that gave you the report (Equifax, TransUnion, or Experian).
- Explain in writing the errors you spotted in your credit report and explain why they were wrongly recorded.
- Include the correct information in the letter. Don’t forget to include your contact information, such as your phone number, current address, and e-mail address.
- Attach a copy of your credit report to your letter to support the dispute. It also helps to highlight or encircle the disputed items so the credit reporting company knows where to look.
- Send your dispute letter to the credit reporting company and ask for a return receipt.
If needed, you can seek the help of finance experts to assist you with this process. Best of luck!
About the Author
Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.