Millions of credit reports have errors
Millions of Americans have mistakes on their credit
reports, some of which are serious enough to lower credit scores and result in
worse credit offers, a new government study finds.
As many as 42 million Americans have errors on their
credit reports, according to a Federal Trade Commission study of around 1,000
participants and 3,000 credit reports released Monday.
"Errors in credit reports can cost you a loan, a
competitive interest rate, a job, security clearance and insurance," said
John Ulzheimer, president of consumer education at SmartCredit.com.
Not all of these errors will impact your ability to get
credit, however. In fact, only 2.2% of reports contained errors so serious that
they could lead consumers to receive higher-priced credit than they deserve.
But because the three biggest credit bureaus -- Experian, Equifax and
TransUnion -- each maintain credit reports for about 200 million consumers,
that error rate still means 10 million Americans are being denied loans or
getting stuck with higher interest rates due to errors on their reports.
The Consumer Data Industry Association defended this 2.2%
error rate, saying in a statement that overall, the report "shows that 98%
of credit reports are materially accurate."
"[T]he measure of accuracy is tied to the question
of when an error has a consequence for consumers, not just when a report
contains an error that will have little or no impact on creditworthiness,"
the CDIA said.
A mistaken address won't lower a consumer's credit score,
for example, while a misreported late payment may, said CDIA president Stuart
Pratt.
To avoid being deemed a higher risk than you really are,
it's important to look at your credit report from all three major credit
bureaus to make sure everything is correct. Free annual credit reports are
available at annualcreditreport.com, yet fewer than one in five consumers check
theirs, according to a separate study released by the Consumer Financial
Protection Bureau.
"[C]onsumers should check their credit reports
regularly. If they don't, they are potentially putting their pocketbooks at
risk," Howard Shelanski, director of the FTC's Bureau of Economics, said
in a statement.
But even if you do take the time to review your report
and dispute an error, there's no guarantee of a quick fix.
In some cases, the credit reporting agencies will rely on
information provided by data furnishers like lenders and debt collectors even
if it's wrong, said Ulzheimer. The CDIA's Pratt said credit reporting agencies
thoroughly investigate disputes and data furnishers are required to do the
same. And sometimes, what a consumer views as an error may not really be
incorrect, he said. While some disputes can be frivolous, others are
misunderstandings.
Consumer lawsuits filed against credit bureaus and data
furnishers under the Fair Credit Reporting Act, which typically involve
complaints about credit report errors, jumped to a record high of 2,249 last
year, according to litigation tracking website WebRecon.
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