Study: 10 Million Americans Face Costly Credit Report Errors

Mistakes by credit reporting agencies could be costing American consumers thousands of dollars, according to a report by the Federal Trade Commission (FTC).

The FTC found that 5 percent of consumers have serious errors on their credit reports that cause them to pay more for home and car loans, insurance and other products. With approximately 200 million credit report files on record at the three major credit reporting companies – TransUnion, Experian and Equifax – that means 10 million consumers are paying more for loans and products than they should.

“These are eye-opening numbers for American consumers,” said Howard Shelanski, director of the FTC’s Bureau of Economics. “The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”

Consumers are entitled to a free credit report every 12 months. However, the Consumer Financial Protection Bureau estimates that only 20 percent of consumers request one.

“Your credit report has information about your finances and your bill-paying history, so it’s important to make sure it’s accurate,” said Charles Harwood, acting director of the FTC’s Bureau of Consumer Protection. “The good news for consumers is that credit reports are free through annualcreditreport.com, and if you find an error, you can work with the credit reporting company to fix it.”

‘60 Minutes’ Blasts Credit Bureaus

The FTC report, which was released Monday, was featured on a “60 Minutes” broadcast on CBS on Sunday. The broadcast highlighted the fact that 40 million Americans have an error on their credit report. The “60 Minutes” segment included an interview with an Ohio woman, Judy Thomas, who spent six years fighting with the credit reporting agencies to have mistakes corrected on her report.

Thomas’ credit had been destroyed when the agencies erroneously showed deficient loans taken out by a Judith Kendall, who lived in Utah. Thomas showed “60 Minutes” reporter Steve Kroft a mountain of paperwork exchanged with the credit bureaus that detailed the mistakes, but no changes were ever made to her credit report.

The case was headed to federal court before the agencies offered Thomas an undisclosed settlement that she accepted.

All three credit reporting agencies refused requests from “60 Minutes” to answer questions about the story, but one of the companies, Experian, issued a reply on its website a day later.

The reply said, in part: “60 Minutes ran a story on the credit reporting industry tonight and unfortunately, much of the story was inaccurate or misleading.”

Monetary Effects Dramatic

Nevertheless, mistakes on your credit report can be costly in a lot of ways. Your credit score helps determine the interest rate you pay for loans on homes and cars; it can be a deciding factor in renting a home or apartment; and it can even affect your ability to get hired, if employers equate a good credit score with reliability.

Credit scores range from 330 to 830, and most companies looking at credit reports operate on a tiered system, giving people at the high end far more favorable status than those in the middle or low end. The cutoffs for top, middle and lower tiers vary from business to business, but missing out on a tier level by even one point can make thousands of dollars’ worth of difference in how much you pay for a loan.

For example, someone with a credit rating of 689 could be paying 4.5 percent interest on a loan, while someone with a credit rating of 690 qualifies for the next tier up and pays only 2 percent for the same loan. That could become a significant amount of money, depending on the size of the loan and the repayment period.

Tips on Disputing Reports

If you want to check the information on your credit report, the place to start is by obtaining a copy of your report at annualcreditreport.com. Compile accurate documentation to dispute any inaccuracies on your report.

The next step is to go to the website for each of the credit reporting agencies – Equifax.com, Experian.com and Transunion.com – and file a dispute online, by mail or phone.

From there, contact the lending institution related to the error and ask that it contact the three reporting agencies to update your information.

If all else fails, contact the Consumer Financial Protection Bureau, a new federal agency that serves as a watchdog over the credit bureaus.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at bfay@debt.org.

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    Sources:

    1. Tonis Valing / shutterstock.com
    2. Fleck, C. (2013, February 11). You May Be Paying Higher Rates Due to Credit report Errors. AARP. Retrieved from http://blog.aarp.org/2013/02/11/you-may-be-paying-higher-rates-due-to-credit-report-errors/
    3. Andriotis, A. (2013, February 11). Fixing your error-ridden credit report. Marketwatch.com. Retrieved from http://www.marketwatch.com/story/fixing-your-error-ridden-credit-report-2013-02-11?link=MW_latest_news
    4. Veiga, A. (2013, February 12). Tips on disputing errors on your credit report. Seattle Times. Retrieved from http://seattletimes.com/html/businesstechnology/2020337729_consumercreditreporttipsxml.html?prmid=4939