Forget the 1% or the 99%, be in the 21%!

Human error. Our idiosyncrasies are charming, and our pet peeves make great cocktail party banter, but our errors can be maddening to others. This is especially true in credit reporting, where 79% – yes, SEVENTY NINE PERCENT – of credit reports include inaccurate information. Sure, many errors are small, such as a misspelling of your name, but 25% of the errors are large enough to cause you to be denied credit.

Each lender and creditor has its own database of information. The timeliness of reporting from these databases to the credit bureaus can vary dramatically (some report immediately, some on a 2-3 month rolling period, some never report at all). Further, some lenders report to all three major bureaus while others report to only one or two. When data is reported, the information is often transferred via manual data entry, passing through several sets of human hands (and thus human foibles) as the data is consolidated and moved from system to system. Some errors, large and small, are destined to occur, and they can be time consuming and labor intensive to correct.

A place where errors often occur is with bankruptcy. Some errors are from data entry, but the far more nefarious error in this case is an inaccurate Charge Off…

Each and every account should be included in a bankruptcy filing, even the accounts that are in good standing. Lenders though will sometimes write off an account once they stop receiving regular payments, and this is called a Charge Off. This happens due to the timing of the bankruptcy paperwork, and it allows the lender to write the loss off on their books and lower their tax liability. However, a Charge Off on a consumer’s credit report can have devastating long-term effects, even worse than the bankruptcy. The Charge Off continues to carry an unpaid balance on the credit report, and that is a red flag to potential lenders that this consumer doesn’t pay his or her debts. Current lenders can use a Charge Off as a reason to change the terms of their lines of credit and start charging more interest.

Errors, mistakes, slip-ups, and blunders – they happen. Thankfully, even credit reporting errors can be remedied with early detection (periodically review your report – at least annually – to ensure there aren’t any inaccuracies) and diligent correspondence with lenders. In the event of a bankruptcy, ensure all outstanding accounts are included and aren’t charged off to help you get back on your financial feet as soon as possible.

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