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Consumer Guide to Credit Reports Part 4

We’re continuing the conversation about how review your credit report, specifically Account Status and Unknown or Fraudulent Accounts.

Account Status: Active vs. Closed

It is not uncommon for consumers to mistakenly believe that they have closed an account. In actuality, it remains open and continues to accrue fees, interest, penalties, charges, etc. Accounts that are not properly closed can negatively impact a credit report. It also can affect your score, harming your ability to get approved for a rental lease or car loan. I recently helped a client who had an open account that should have been closed. When digging into the situation, we found the lender had an internal communication error. Regardless of the reason, all “open” accounts listed on a credit report are deemed valid, unless properly contested. When analyzing your credit report, methodically review each account to determine its activity status (open vs. closed). Note any errors and take appropriate steps to have the lender fix its reporting to the credit bureaus. For those accounts that are properly noted as closed, be sure the timing is correct and you didn’t incur additional fees, penalties or interest.

Unknown or Fraudulent Accounts on Your Credit Report

Probably the most alarming error to catch on your credit report is finding an unknown or fraudulent account. This can be an indication of identity theft or fraud. The good news is that are numerous consumer laws that protect you. The bad news is that you have to contest the account and prove you didn’t actually open it.  When seeking to remedy the situation, be sure to document your facts. It may also be worthwhile to have identity protection. a service where you receive alerts when your credit is accessed and accounts are opened.

The worst action you can take for unknown or fraudulent accounts or an error in the account status is no action.  Stay tuned for information on debt-to-credit ratios.

About Sean Hanley

Practicing law since 2007, Sean specializes in the ever-changing laws related to real estate, business and estate planning. Embracing technology with a focus on personalized service, he understands the challenges of living and thriving in Silicon Valley. Tapping into his education in economics and business administration, Sean also serves on the non-profit Willow Glen Business Association.

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