Credit report errors more common than you think

Imagine you want to get a loan, but the banks just won't do it. Why?Because the credit reporting companies claim you've passed on to an early grave.

It's a scary surprise that one in four people find on their credit report. That's the number of people studies suggest have potentially serious errors on their credit report. But how do they get there and what can they mean for your financial security?

It was a day when all seemed fine and right in St. Louis until Columnist Kevin Horrigan got some confusing news.

"We were looking around to refinance our mortgage and my wife started looking at stuff that the bank was sending back and said ‘Yikes, the bank says you’re dead,'" said Horrigan.

Yes, you read that right: dead. Not of this realm. Deceased. Something that would surely complicate Horrigan's plans to refinance his home.

So what was the bank's source for their tip? His credit report.

"At some point some human being made an error and got me mixed up with someone else," said Horrigan.

And it's the sort-of mix up that may be in your future. A study by the Federal Trade Commission found that one in four consumers had errors on their credit reports with up to five percent of those errors being "serious."

"It could impact every aspect of their life. From getting a job, getting insurance, getting a car loan, getting an apartment. All that could be impossible," said consumer protection attorney Creighton Cohn.

And Cohn says fixing the problem isn't easy.

Federal lawsuits have been filed in Missouri, all saying that despite numerous appeals from consumers, the three major credit agencies-- Experian, TransUnion and Equifax, all continued to mistakenly report them as being dead, barring them from getting loans and new housing.

But it's not supposed to be like that. Under federal guidelines, credit bureaus are supposed to review any error claims and respond to consumers within 30 days.

The problem?

 That FTC study also found that when a consumer complained about an error to one of the three credit reporting agencies, only 21 percent of them saw any kind of  modification on at least one of their credit reports.

"I've seen a lot of disputes that have been really well written with lots of facts and documents, and they still come back and say, 'we don't believe you, we're going to keep it on your credit report,'" said Cohn.

And even mistakes that don't involve you being dead can be hard to fix. Experts say some of the most common errors involve a debt that doesn't belong to you appearing on your report and ruining your credit.

"It doesn't matter if it's a $25 collection or a $5,000 collection, if it hits their credit report, it can drop their score 100 points or more. They get it corrected, it can take months or a year for that to rebound, or even longer than a year," said Mike Richter, credit counselor.

The bottom line? Don't wait until you need credit to check your report for errors

"I know all the consumer experts say check your credit report. Yeah but life gets busy. But it's a good idea. You may be deader than you think," said Horrigan.

Horrigan was able to straighten his issue out within a few weeks.

If you do find an error, what can you do?

Experts say as soon as you spot an inaccuracy on your credit report, gather documentation that proves the information is wrong and submit it to the credit bureau.

In a statement, Equifax suggested the following:

  • Document information. One of the first things your viewers should do is document the information they believe is incorrect or inaccurate.
  • Data furnishers. If a consumer believes that there is an error on their credit report, one of the first things they may want to consider doing is contacting the data furnisher – that is, the lender or creditor or provides the information to the credit reporting agencies.
  • Credit reporting agencies. If a consumer believes that an item of information contained on their Equifax credit file is incomplete or inaccurate, they can notify Equifax directly. Upon receipt of the appropriate information, Equifax will promptly investigate the matter with the source that provided the information. Equifax investigates the accuracy of the information reported -- free of charge.
  • Make copies. Be sure to tell your viewers to make copies of any documentation they may send to either the data furnishers or credit reporting agencies – not the originals.


How does Equifax work with consumers to fix errors?

Within a month of a dispute request, Equifax notifies consumers of the results of its dispute investigation. Based on the results of the investigation, Equifax will either update the current status of the disputed information (which may include letting a consumer know if the furnisher of the information verified it was reporting correctly) or delete the item from the credit file. Consumers should know that if information that was disputed has been verified as accurate by the creditor, it will remain in your credit file. In these cases, a consumer can add a statement of explanation to their credit file.

According to the Consumer Data Industry Association (CDIA):

  • 2.2% of all credit reports have a material error that can change the price of credit or a loan. Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, p. A-4. www.ftc.gov/os/2013/02/130211factareport.pdf •    Credit-active consumers who disputed one or more items with credit bureaus = 1.3% to 3.9%. Key Dimensions and Processes in the U.S. Credit Reporting System: A review of how the nation's largest credit bureaus manage consumer data, Consumer Financial Protection Bureau, Dec. 2012, p. 27. http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf
     
  • In 2011, the Policy and Economic Research Council (PERC) published a review of 2,000 consumers and more than 81,000 credit accounts for those consumers on their credit reports18. The study was the most comprehensive and statistically sound study to ever be performed on the accuracy of data collected and maintained by Equifax, Experian and TransUnion and it is the first (and only) third-party peer-reviewed study dealing with the issue of credit report errors and their material effect on the credit worthiness of consumers. Among other findings, PERC found that 95% of all consumers who participated in the dispute process were satisfied with the outcome.




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