Question: Our credit score recently declined so we got free copies of our credit reports but could not find a single incorrect entry. We haven’t gone out and bought a yacht or opened a bunch of new accounts, so what’s happening?

Answer: There’s no doubt that credit reports can contain errors and when they do the result can be lower credit scores and higher mortgage rates.

The Federal Trade Commission found in a 2013 study that “approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.”

A 25-point error may not seem like a big deal, but it can be the difference between a credit score of 660 and 695.

According to MyFICO.com, a 660 score is considered “fair” while 695 is in the “good” range. The site estimates that 28 percent of borrowers with a “fair” score will become delinquent versus 8 percent in the “good” category. If you’re a lender you know such things – and price mortgages accordingly.

You did the right thing by getting free copies of your credit reports, reports available at AnnualCredit Report.com. You also did the right thing by checking each transaction item to see if it properly reflected your credit activity.

The catch is that you may be looking in the wrong places. Although it seems reasonable to assume that a credit report ding is the result of an improperly reported transaction, it’s also possible that the report itself may contain administrative information which is simply wrong. Let’s look at some examples:

First, is your personal information correct, such items as your name and Social Security number? There can be a huge difference between “John C. Smith” and “John E. Smith.” If a Social Security number is off by a digit, you may be getting credit for someone else’s financial good conduct. Or, you might be punished when they’re late with a payment.

Second, take a look at current and past addresses. By any chance have you been confused with someone who has the same name but lives 700 miles away?

Third, is your auto loan with the West Bank of the Hudson listed twice? If one account is shown twice it might seem as though your total debt is higher than it really is and that could impact your credit score.

Fourth, does the report include “too old” items? While negative items such as foreclosures and bankruptcies become less important over time they can still impact credit scores.

Generally, an item can only stay on a credit report for seven years. Chapter 7 bankruptcies can be retained for 10 years while Chapter 13 bankruptcies can remain for seven years.

Judgments can be complex – typically they’re reported for seven years but some can remain outstanding as long as 20 years. In addition, if a judgment is renewed it can continue to stay on a credit report even longer.

Fifth, if you have ended an account, does the report say it has been “closed by the consumer”? This is an important piece of information because it says that the account was not blocked by a lender because of nonpayment or late payments.

Resolving Disputes

If you feel that a credit report item is incorrect or out-of-date, you will need to file a dispute form with one of the three leading credit reporting agencies. This process is free and can be started online at the following sites:

• Equifax – https://www.equifax.com/personal/disputes
• Experian – https://www.experian.com/disputes/main.html
• TransUnion – https://www.transunion.com/credit-disputes/dispute-your-credit

It helps to have paperwork to back-up your claim. Police reports, checks, receipts, bankruptcy paperwork, photographs, court documents, student loan disability letters, and creditor letters can provide the evidence needed to revise a credit report.

Importantly, there is no guarantee that a disputed item will be changed. Also, you may have to wait for results.

If a claim is not accepted, you have the right to add a 100-word consumer statement to your credit report. There are pros and cons to adding such statements.

The preference here is not add a statement to your report. Instead – when making a mortgage application – ask the loan officer for the opportunity to explain the negative item. This will give you the opportunity to offer more than 100 words as well as to supply evidence and context.

Time is also an issue when correcting credit reports. It can take four to six weeks to get a response from a credit reporting agency.

For this reason, it makes sense to check credit reports two to three MONTHS before speaking with mortgage lenders. You can use this time to assure that credit reports are accurate and give you the best possible credit score.