Saving with 6abc: Avoid problems by checking your credit score

Your credit score is based on your credit reports. But a Consumer Reports' survey finds close to half of Americans never check their credit reports to make sure they're accurate.

Errors can wreak havoc with your finances and take a long time to untangle.

Nathaniel Lewis is hoping to move out of his apartment and purchase a home. But recently, when he sought help applying for a mortgage, he discovered his credit report showed he had bad debt totaling more than $180,000.

He says, "When I saw what was on my credit report I was flabbergasted. About 80 percent of it wasn't mine."

The problem was another man with the same name whose records had gotten mixed up with Nathaniel's.

A new Consumer Reports survey of 3,000 Americans found that credit errors are surprisingly common. Of those who checked their reports, about 20 percent found mistakes that could lower their credit scores.

Tobie Stanger from Consumer Reports explains, "Mistakes can lead to losing out on a job, on an apartment rental or on a good interest rate on a loan. That is if you're not turned down altogether. Credit report mistakes can really hurt."

For instance, on a $300,000 30-year fixed mortgage, if your credit score drops 100 points from a good 780 down to an okay 680, you'll pay almost $25,000 more during the life of the loan.

Stanger tells us, "It's not so easy fixing a credit report error. More than half of the people in our survey who tried were either rejected, ignored or faced some other roadblock."

To dispute a credit report, first tip: avoid companies that promise to fix your credit for a price.

Put your request in writing to one or more of the three major credit-reporting agencies: Experian, Transunion and Equifax. Be sure to include proof of your identity and your full Social Security number.

For serious errors, Consumer Reports also says you may have to resort to hiring a lawyer. And remember to check your credit report regularly, which you can do free once a year with each of the three major credit bureaus.

Go to AnnualCreditReport.com.