Credit Reports: One in Four Credit Reports Contain Errors --
How to Fix Mistakes on Your Credit Report
Studies of the American credit reporting system and the three credit bureaus (or credit reporting agencies as they are now called) by consumer groups and the Federal Trade Commission over the last three decades have found that one in four credit reports, or 25 percent, contain serious errors on them, serious enough to result in a consumer being denied credit or a mortgage. Mistakes on credit reports can also result in a consumer paying a significantly higher interest rate on credit cards, auto and mortgage loans, insurance rates, or being denied housing or a job.
In one study, more than 90 percent of credit reports evaluated in the study contained accounts that did not belong to that particular person, and many of these accounts were listed as delinquent, which would seriously impact that person's credit score.
In a past study, a consumer group studied 200 credit reports of people living in 30 states. They found that 80 percent of the credit reports contained at least one error and 55 percent of the reports had the person's name or other personal information such as address, social security number, etc., incorrectly listed. Thirty percent of the reports showed open credit accounts that had been closed by the consumer.
In 2013, the CBS news program 60 Minutes did a news segment on the terrible shape that the credit reporting system is in and criticized the three major credit reporting agencies, Experian, Equifax, and Trans Union, for their constant violation of the Fair Credit Reporting Act (FCRA). This act requires that the three credit bureaus investigate when consumers notify them that items on their credit reports are inaccurate, or don't belong to them, or are not shown as being paid off, etc. The 60 Minutes piece revealed that an eight year study by the Federal Trade Commission has found that 40 million Americans have at least one mistake on their credit reports and 20 million Americans have at least one significant mistake on their credit report that lowers their credit score by at least 20% and hinders their ability to obtain credit and loans or causes them to pay a higher interest rate for the financing that they do get.
Although Americans send in 8 million disputes about their credit reports to the three major credit reporting agencies each year, many seem to have trouble getting the credit bureaus to remove the negative information, even when they offer proof that it is incorrect. This is becoming such a big problem that more people are suing the credit bureaus. A recent suit that got a lot of publicity occurred in early 2013, when an Oregon woman was awarded a $18.5 million judgment against Equifax after she filed suit against the credit reporting agency for failing to remove false information from her credit report after requesting that they clean up her credit report repeatedly over a two year period.
How do the three big credit reporting agencies get away with violating the Fair Credit Reporting Act? Lax oversight by the Federal Trade Commission, the federal agency in charge of regulating and punishing the three major credit reporting agencies, is the main reason. It does appear that the FTC is on the verge of taking action against the credit bureaus and might pass tighter rules to make them more responsive to consumers' needs.
Check your credit report with all three credit reporting agencies -- Equifax, Experian and Trans Union -- once a year to check for mistakes. You can obtain a free credit report once a year.