Credit reports are depressingly prone to errors
From now on, I'll be scouring, instead of browsing, my credit report for errors.
It turns out that 5.2% of consumers in a new study by the Federal Trade Commission had errors on their credit report so serious that it could lead them to pay higher rates for loans.
The eight-year-long study, which was required by the Fair and Accurate Credit Transactions Act, examined the credit histories of 1,001 consumers for accuracy from the three major credit bureaus.
Overall, it found that an overwhelming 26% of consumers in the study had at least one "potentially material" error on their report — errors on things like credit inquiries and late or missed payments.
“These are eye-opening numbers for American consumers,” Howard Shelanski, director of the commission's Bureau of Economics, said in a statement about the study.
There's no doubt about that.
No one asks us if we want credit agencies to track our every financial move, but they do, and they do it pretty badly.
The study suggests that out of the 200 million consumers that major credit bureaus are estimated to have on file, between 20 million and 42 million have confirmed errors on their financial histories.
That's a high error rate, especially for an industry that basically holds our lives in the palms of their hands.
Your credit score and report can affect just about everything, from how much you pay for a loan to whether or not you get a job, because many employers pull credit reports as part of the hiring process.
(Check out our advice on how to land a job despite bad credit if that's been a problem for you.)
And since your credit reports are used to calculate your credit scores, errors can mean a lower score.
Indeed, approximately one in 20 consumers in the study had serious enough mistakes that their FICO scores increased more than 25 points after corrections were made.
In addition to making errors, credit agencies often fail to fix mistakes that we report.
Of the 262 consumers in the study who disputed information, 21% were unsuccessful in getting their reports modified, and 42% said their report had been modified but that there were still errors.
Only 37% claimed that all of their concerns were addressed.
Still, it's important to check your credit report often.
You're entitled to a free credit report from the three major credit agencies once every 12 months by law at AnnualCreditReport.com. (Any other website or service that claims to provide free credit reports is lying. They're going to charge you.)
But even if we do catch the errors, there's no denying that credit agencies could and should at least simplify the dispute process.
These errors are almost always to our detriment, and that makes building financial security much harder than it already is.
Have you attempted to correct an error on your credit report? Was it as difficult as this study suggests?
You can read the full FTC report here: http://www.ftc.gov/os/2013/02/130211factareport.pdf.
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