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If you have seen wrong information on your credit report — and plenty of people have — you’ve probably wondered how it got there. After all, if the statements you get from your lenders are accurate, shouldn’t your credit reports be? Credit reporting agencies manage billions of pieces of information about our credit histories, though, and there are several ways mistakes can happen.

1. Consumer Errors

Although many of us apply for loans and credit cards online these days, there will still be times when you fill out an application by hand. If your handwriting is unclear, or if you make a mistake filling it out, that error will be entered into the creditor’s system and may make its way to a credit reporting agency as a result.

One thing you can do to help reduce these types of errors is to fill out credit applications accurately and carefully, and to use your best handwriting. Another suggestion: If you are a Jr. or Sr. or have a family member with a similar name, be consistent in using your full name.

2. Furnisher Errors

“Furnishers” refers to companies that supply information to credit reporting agencies, such as credit card companies, mortgage and auto lenders, collection agencies, and the companies that supply public record information such as bankruptcies, tax liens and repossessions.

“The furnishers are the banks, lenders and debt collectors that have subscriptions to the credit bureaus. It is not uncommon that they mis-enter information which they send to the credit bureaus, which results in errors,” says Robert F. Brennan, Los Angeles-area consumer credit protection attorney at SoCalCreditDamage.com.  “Also, an even greater problem arises when furnishers are tasked with correcting these problems, which sometimes are hard to detect or track down in a maze of electronic information,” he says.

And there is always the possibility that a dispute can hurt your credit. Refuse to pay that last cellphone or medical bill because you don’t think it is correct? Watch out — it could wind up on your credit report.

Some furnishers of information may just be sloppy or not have good records to back up the data their reporting. The Consumer Financial Protection Bureau recently took action against a Texas-based auto lender that allegedly provided wrong data to credit bureaus through “systemic inaccuracies,” ordering the firm to pay a $2.75 million fine.

Or look at the mortgage meltdown where numerous mistakes were made by banks and mortgage loan servicers. If those agencies don’t have the proper records required to foreclose, it’s hard to imagine that all the information they are reporting is correct.

3. Credit Reporting Agency Errors

“As sophisticated as the bureau’s databases are, they are still subject to computer errors, as with all automated systems,” Brennan warns. “Mis-reporting credit information or ‘mixing files’ continues to happen at the bureau level as well.”

It’s important to understand that information ends up on a credit report because it gets “matched” with other information about a consumer, and that process isn’t failsafe. Mismatching of consumer’s information can lead to mistakes on credit reports, sometimes serious ones.  “If a consumer has even a false address or a false middle initial in his or her credit report, over time this can result in his or her file getting mixed with someone else’s. This problem is even bigger if he or she happens to have a similar Social Security (number) to another consumer with a similar name,” Brennan says.

Credit reporting agencies rely on information from furnishers, and if the information they get is wrong the credit report will be wrong. As the saying goes, “garbage in, garbage out.”

“Mistakes by public record contractors: the bureaus contract out their collection of public records information (foreclosures, judgments, bankruptcies, etc.), and these independent contractors can often make mistakes in providing the information to the bureaus,” Brennan warns.  “As with the other furnishers, these contractors sometimes make mistakes in trying to correct their own mistakes.  This is another frequent source of credit report errors.”

4. ID Thieves

If an identity thief opens accounts in your name, the credit reporting agency probably won’t know there’s a problem and neither will the creditor involved until you report it. That’s one reason why identity theft can go undetected. Unless you are checking your credit or trying to get credit, you may not know something’s wrong. Credit report mistakes can be a sign of identity theft. If you check your credit reports (which you can do for free once a year) and see an account you don’t recognize, it’s important to dispute the account immediately.

It Adds Up

With all the possible ways mistakes can creep onto credit reports, you will want to check yours for accuracy. If you check your credit reports once a year through AnnualCreditReport.com (or stagger your requests so you are getting one report from each major agency every four months), you also want to make sure you have a system in place to monitor your credit throughout the year. You can get a free credit score plus an action plan for your credit updated every 14 days on Credit.com. If you do find mistakes on your credit reports here’s how to dispute them.

More on Credit Reports and Credit Scores:

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