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Credit Bureau File Errors

The article below was produced by www.uspirg.org. The references to U.S. credit bureaux apply equally to the Canadian credit bureaux. All 3 Canadian credit bureaux are owned by U.S. parent companies. Items in [brackets] or italicized have been added by an editor.

One In Four Credit Reports Contains Errors Serious Enough To Wreak Havoc For Consumers

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 new survey released today by U.S. PIRG.

"The big credit bureaus and big business tolerate big mistakes in credit reports," said Ed Mierzwinski , U.S. PIRG Consumer Program Director. "But those mistakes ruin the financial reputations of hardworking Americans."

Three national credit bureaus, Equifax, Experian, and Trans Union, collect and compile information about consumer creditworthiness from banks, creditors and from public records such as lawsuits, tax liens and bankruptcy filings. The so-called "Big Three" 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.

Over 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.

"It is outrageous that inaccurate credit reports could damage 1 in 4 consumer's ability to buy a home, rent an apartment, obtain credit, open a bank account, or even get a job," said Mierzwinski. [Insurance premiums are also subject.]

U.S. PIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy. Key findings include:
- Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;
- Seventy-nine percent (79%) of the credit reports contained mistakes of some kind;
- Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;
- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.
In December 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACT 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 2004 and finishing on the east coast in September 2005.

"In the last five years the FTC has fined the Big Three credit bureaus millions of dollars for not helping consumers clean up inaccurate reports, yet recently allowed the credit bureaus to roll out the new right to a free credit report at a snail's pace," said Mierzwinski. "It's shocking that most of the country needs to wait until next year to get the important rights Congress promised them last year."

Regardless of the delay, PIRG recommended that consumers examine all three credit reports at least once each year, before they apply for credit.

Consumers can already get free reports in Colorado, Georgia, Maryland, Maine, Massachusetts, New Jersey and Vermont. Consumers who have recently been denied credit, are unemployed or collecting benefits, or believe themselves to be victims of identity theft or fraud may also receive a free copy of their report. In other circumstances, consumers will pay about nine dollars for a report until the Federal Trade Commission fully implements the new law.

U.S. PIRG also called on Congress and state legislatures to finish the job and to go beyond the FACT Act to protect consumers' financial privacy and ensure the accuracy of credit reports. Specifically, U.S. PIRG called on Congress and state legislatures to strengthen a consumer's private right of action to seek redress through the courts when a credit bureau or a creditor fails to protect personal information or to comply with an investigation; limit or prohibit the use of a consumer's Social Security number; and give consumers more control over who has access to their credit reports and when.

States have been responding to the recent rash of security breaches by passing strong identity theft protections. In the beginning of the year, only four states—CA, LA, VT and TX-- had passed "security freeze" laws that allow consumers to restrict access to their credit reports and prevent thieves from taking out credit in their names. And only California required companies to notify consumers when their personal information had been compromised. Now, a total of ten states have passed security freeze laws and at least fifteen states have passed security breach notification laws based on the CALPIRG-backed California laws. In addition, the New Jersey General Assembly has passed what would be the strongest security freeze law in the country, as it would take a step forward by making security freeze tool easier for all consumers to use. That bill awaits action by the New Jersey Governor, and he has publicly supported the bill.

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