You pay your bills on time and haven’t overextended yourself with revolving debt, so there’s really no need to worry about your credit score, right? Don’t be so sure.
One in four credit reports contains errors serious enough to cause consumers to be denied credit, a loan, an apartment or home loan or even a job, according to a survey released Colorado Public Interest Research Group.
“Most people don’t even find out that their credit reports contain errors until it is too late – when they have lost the loan, been denied the mortgage, or been turned down for an apartment,” said Nicole A. Boojamra, consumer lawyer with CoPIRG.
National credit bureaus Equifax, Experian and Trans Union collect and compile information about consumer creditworthiness from banks, creditors and public records such as lawsuits, tax liens and bankruptcy filings. Each maintains a file on nearly every adult American. The resulting credit report amounts to a consumer’s financial résumé. The credit score calculated from this report is a consumer’s financial SAT.
During the last decade, the state PIRGs and other consumer organizations have issued numerous reports showing that sloppy credit bureau practices are at fault for errors in consumer credit reports.
“These Big Three credit bureaus make billions of dollars selling a faulty product that jeopardizes the good names of one in four consumers,” Boojamra said. “Their reports could mix you up with a total stranger or fail to report that you’ve paid off a loan or debt. When that happens, you either pay too much for credit, or get denied credit, insurance, a home or a job.”
In December, Congress passed the Fair and Accurate Credit Transactions Act, which included the right to a free annual credit report on request and a number of provisions designed to improve the accuracy of credit reports.
On June 4, the Federal Trade Commission finalized its rule for implementing the new consumer right to a free credit report, rolling it out over a nine-month period, beginning on the west coast in December and finishing on the east coast in September 2005.
“The FTC caved in to the unsubstantiated demands of the Chicken Little, Can’t-Do credit bureaus,” Boojamra said. “This rule unreasonably delays access to free reports for much of the country.”
Regardless of the delay, CoPIRG recommended that consumers examine all three credit reports at least once each year, before they apply for credit. Consumers can get free reports in Colorado, Georgia, Maryland, Maine, Massachusetts, New Jersey and Vermont. Consumers who have been denied credit, are unemployed or collecting benefits, or believe themselves to be victims of identity theft or fraud also may receive a free copy of their report. In other circumstances, consumers will pay about $9 for a report until the Federal Trade Commission fully implements the new law.
“The most common reflection of our reputation as a trustworthy consumer is our credit report, but one in four reports is seriously flawed,” Boojamra said. “Consumers have to check up on the credit bureaus to make sure they are telling the truth about us. The State Legislature and Congress should do everything in its power to make sure these credit reports tell a true story.”
CoPIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy.
Key findings include:
* 25 percent of the credit reports contained errors serious enough to result in the denial of credit
* 79 percent of the credit reports contained mistakes of some kind
* 54 percent of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger or was otherwise incorrect
* 30 percent of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.