Bucks: Are Serious Errors Lurking in Your Credit Report?

How accurate is the all-important data in your credit report? It depends on whom you ask.

Previous estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. But according to a recent study paid for by the Consumer Data Industry Association, the trade group for the credit bureaus that assemble and sell credit reports, that rate is much lower. Consumer advocates, meanwhile, were skeptical of those results.

The study, conducted by the Policy and Economic Research Council, found potential errors in 19.2 percent of credit reports examined. But once consumers disputed potentially problematic errors and got the bureaus to fix them, less than 1 percent of these corrected reports led to meaningful increases in credit scores.

And what is meaningful in the credit score context? Well, very few of the corrections led to a big enough credit score gain to push those consumers into a better “credit risk tier,” where they would have access to cheaper loans and such.

But that’s a pretty narrow way to view the results. Consumers typically want to hang on to every last point they can — especially at a time when lenders are reluctant to extend credit.

Score wise, the report found that less than 1 percent of all credit reports examined, or 0.93 percent, prompted a dispute that resulted in a correction that boosted scores by 25 points or more. About 1.2 percent of reports resulted in a score increase of 20 points or more; nearly 1.8 percent of reports saw scores climb 10 points or more; and slightly more than 3 percent had an increase of 1 point or more.

Keep in mind we are not speaking in FICO terms, or the popularly known credit score scale that most lenders use. Instead, the study measured scores using the bureaus’ VantageScore credit score, whose scale ranges from 501 to 990. The higher the score, the better the credit rating.

Consumer advocates pointed out that even seemingly low error rates can affect millions of consumers because each of the big three credit bureaus — Equifax, Experian and TransUnion — have at least 200 million credit files. So a 1 percent error rate would translates into two million consumers per bureau, noted Chi Chi Wu, a staff attorney at the National Consumer Law Center. For those consumers, “the credit bureaus should conduct real and meaningful investigations of disputes, which they do not,” she said.

Here’s how the researchers arrived at their numbers: Over all, the study, which included 2,338 consumers, found that 19.2 percent of credit reports had one or more pieces of information that a consumer believed could be inaccurate and disputed. Of those reports, 63 percent, or 12.1 percent of all reports examined, were found to contain errors that could potentially have “material impacts” that could lead to “possible adverse consequences.” Ultimately, 7 percent of reports in the study were disputed.

Consumers received their credit reports from one or all of the three bureaus, along with a credit score. They were instructed to identify any errors and then to file disputes with the relevant bureau, which then calculated scores based on the corrected report too. The study found that most changes were consistent with the consumers’ requests and that 95 percent of participants who lodged disputes were satisfied with the outcomes.

But satisfaction is almost certainly easier to achieve when you have a dedicated phone line for the participants making disputes — and one of the big bureaus did. Michael Turner, president and chief executive of PERC, said there wasn’t a meaningful difference in the results from the bureau that had the special phone number versus those that did not.

Experts also questioned the way the study participants were found. Instead of being randomly selected from the population at large, they were recruited through the Synovate Global Opinion Panels, where one million consumer members are compensated to complete an average of 12 to 14 surveys annually. But Mr. Turner said that the study’s sample “looks very much like an adult population on every sociodemographic metric.”

“We are transparent and are making available to academics and regulators the underlying data and the results from our independent peer review,” he added.

Still, it wasn’t enough to completely quiet the study’s critics. “To claim less than 1 percent have meaningful errors is kind of like trying to change an “F” to an “A” on you report card,” said John Ulzheimer, president of consumer education at SmartCredit.com, who also pointed out that the study thanks the three credit bureaus for providing “numerous insights, guidance, and invaluable assistance with the implementation of the research.”

The Federal Trade Commission is conducting a nationwide study of its own that also examines the accuracy of credit reports. It’s expected to deliver its results next year, and, it may include recommendations for legislative action. Perhaps that study will provide more clarity.

Have you discovered any serious errors in your credit report? What did you do to fix them? And what do you think of the study?

Article source: http://feeds.nytimes.com/click.phdo?i=fa66464dabf62c18291aa29eb7ee8e10