Have you checked your credit report this year? Even if you have, you may be one of the 40 million Americans with a mistake on your Equifax, TransUnion or Experian report, according to an eight-year government study being released Monday by the Federal Trade Commission (FTC). The reliability of the credit reporting industry is under major scrutiny after a report on the FTC’s study on Sunday’s “60 Minutes.”
Errors are Common on Credit Reports
One in five Americans has an error on their credit report, and one in 10 has an error that might lower their credit score. That’s a 20 percent error rate and a 10 percent severe error rate in an industry that has a direct impact on your everyday life.
On “60 Minutes,” Steve Kroft reported on the story of Judy Thomas, whose credit report was tarnished with errors that prevented her from doing things that should never have come into question. “I couldn’t refinance; I couldn’t get a car; I couldn’t co-sign for my children’s student loans,” she told Kroft. “And I’d worked hard for my credit, and these people were taking it away from me.”
Judy’s report erroneously showed deficient loans taken out by Judith Kendall, who lived in another state. She tried to dispute the items but got nowhere, and that was when she decided she had to take action, by suing Equifax and TransUnion in federal court. The agencies settled for an undisclosed amount after a year-long battle.
Judy’s situation is not different from what many Americans deal with when they get their hands on their credit reports. Retired veteran David Smith’s credit report showed a false bankruptcy that triggered foreclosure proceedings.
These situations are on the extreme end of the spectrum. Some of the common errors include paid bills shown as delinquent, and bad debts belonging to others with similar names or Social Security numbers. The problem is not only that the agencies are making mistakes, but that they are unwilling to put forth the necessary effort to fix the errors.
Credit Disputes are Handled Poorly
To dispute an item on your report, you have two options, according to the “60 Minutes” report: a toll-free number that connects to a representative in India, or a P.O. Box where you can send a letter and documents supporting your claim. If you challenge a credit report, your dispute will likely be investigated in the Philippines, South America or India.
Kroft travelled to Experian’s dispute resolution headquarters in Santiago, Chile, where he interviewed three former employees, who had some discouraging things to say about their former employer. Three shocking points were made:
- They were mandated to process 90 disputes per day.
- They were not allowed to call or email anyone involved in the investigation.
- The creditor was always right.
Will Agencies Change their Ways?
Why even have dispute resolution processes if they are not going to be done properly? Because it is more costly to change the processes than it is to just pay out million-dollar verdicts on the rare occasions that a consumer like Judy Thomas sues, according to the “60 Minutes” report. Will they ever change their practices?
Probably not until they are forced to do so. Fortunately, that change may come sooner rather than later, as the dispute procedures uniformly used by the credit reporting agencies appear to violate the Fair Credit Reporting Act. The new report by the FTC should trigger a series of investigations into the practices of the three major credit reporting agencies.
Interestingly enough, representatives from Experian, Equifax and TransUnion all declined to be interviewed for the “60 Minutes” feature.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].