Who’s Right About Credit Report Errors…Consumers or the Industry?

Collections--qmI’ve written about credit report errors several times over the past 9 years and the topic is what we in the writing world refer to as being “evergreen”, meaning it’s timely regardless when it’s published.  As such, here’s circa 2013′s version of credit report errors…

There haven’t been very many studies on credit file accuracy but the past 2 years have been especially active to that respect.  In 2011 an organization called PERC published their results of a credit file accuracy study and in early 2013 the Federal Trade Commission did the same. And, ~8 years ago a group called PIRG did the same.

The results of the studies varied.  PIRG suggested 70-80 percent of credit reports contain errors.  PERC suggested that less than 1% contained material errors and the FTC suggested that 10-21% contained confirmed errors. The results varied as much as they did for one reason…the definition of the word “error.”

Whether it’s Webster’s definition of the word versus a “material” error or a “confirmed” error, the varying definitions in aggregate are a little like Baskin Robbins and their 31 flavors…there’s something for everyone! Plus, if you really wanted to split hairs on the topic then you could argue that 100% of credit reports contain errors because the data is not real time. Pull your credit report today and look at the credit card balance/s…they’re not correct because they’re based on your most recent statement not your most current balance.

I’m not suggesting that all credit reports contain errors.  To the contrary, I lean in the direction of the industry’s use of the material error definition, which is an error that can cause your credit scores to be lower. I think if you surveyed people off the street and told them that the “weight” and “height” figures on their Drivers Licenses was wrong they’d respond with “eh, I don’t really care.” That’s why cosmetic errors on credit reports are likely less offensive, unless you’re just being hypersensitive and looking for a reason to be angry.

Also, read >  Are Criminal Records on Credit Reports?

An incorrect address cannot lower your credit scores.  A missing employment record cannot lower your credit scores. A missing former name cannot lower your credit scores. Incorrect late payments…now we’re talking!

Still, until more people claim their free credit reports via annualcreditreport.com there will always be a large number of consumer credit files that contain errors. The credit bureaus don’t know if data sent to them by Bank of America or American Express is incorrect.  They assume it’s accurate and that the lender is doing their part to ensure maximum possible accuracy, which is a requirement under the Fair Credit Reporting Act.

The Federal Trade Commission’s findings (10-21% consumer error rate) is only that bad because an abysmal 4% of free credit reports are claimed every year. That leaves hundreds of millions of credit reports unclaimed year over year and if you don’t claim your credit reports you won’t know about errors and won’t file disputes with the credit bureaus.

My parents use to tell me that if I complained about something without trying to fix the problem then I was doing just that…complaining. And nobody likes a complainer. If you don’t like the fact that 10-21% of you have errors on your credit reports then don’t complain about it unless you choose to do something about it first. If after you’ve made an attempt to have your credit report errors corrected AND the files are still incorrect…then you have a right to complain, and sue.

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.

 

Also, read >  What is a Credit Freeze?