Americans are not happy with the country’s primary credit rating agencies.
That’s after new data from the US Consumer Financial Protection Bureau indicated that consumer complaints about credit reports more than doubled from 2018 to 2021. The main reason was “inaccurate information,” which topped the list of consumer credit reporting complaints.
On a stern note to Equifax (EFX) and Experian and TransUnion (TRUE) This week, Washington, DC-based Consumer Reports called on credit bureaus to “ensure the accuracy of credit reports, including making credit reports permanently free for consumers so they can watch for errors.”
Under current federal law, US consumers can access one free credit report from each major bureau per year through yearcreditreport.com, but will have to pay credit bureaus for more frequent access starting in 2023, according to Consumer Reports.
“Errors in credit reports are very common and can have serious consequences, especially for those who are already struggling to make ends meet,” said Syed Ijaz, policy analyst at Consumer Reports. “Consumers should be able to check their credit reports free of charge whenever they want to make sure they are fair and accurate. No one should pay to access their financial information.”
The system is the problem
Credit experts say the fact that the consumer credit reporting process actually invites errors and omissions isn’t helpful.
“Every time a debt is sold to a new collection agency, there is a new opportunity for the debt to be misreported to the reporting agency,” said Chris Mottola, financial and credit card analyst at MerchantMaverick.com. to break it down and bypass it in a way that can exacerbate errors.”
Specific problems range from identification errors to balance errors to account state errors. “Anything that can go wrong in terms of data entry and management can go wrong with credit reports,” Mottola said.
Credit reporting errors have led to real-world problems for consumers.
“Earlier this year, Equifax once again provided false credit scores to millions of Americans trying to get loans,” said Lyle Solomon, lead attorney at Oak View Law Group. “Some of the errors were severe enough to affect the interest rates offered to consumers and, in some cases, lead to their applications being rejected.”
The case is getting worse.
“The real causes of the problem are the same as they have been for years: big data, over-speed, and a lack of incentives for accurate reporting,” Solomon said. “Each major credit bureau contains more than 200 million credit files, which add up to over a billion different pieces of information. And every month, those billions of information are updated.”
Given the vital role credit reports play in the financial decisions that consumers experience, direct action in eliminating these errors should be a high priority by these same consumers.
While Consumer Reports suggests that the problem lies with credit reporting agencies, there are steps consumers can take to mitigate credit reporting errors. Consumer Reports recommends taking these steps to combat credit reporting errors.
- Prepare conflict materials for each office: The three major credit bureaus – Experian, Equifax, and TransUnion – don’t communicate with each other, so it’s smart to contact each one. Consumer Reports notes that “filing a dispute with each credit bureau, rather than the lender or bank, provides the protections that govern how quickly it can be dealt with.” “It also provides a legal pathway to sue credit bureaus and creditors or collectors, if necessary.”
- Evidence gathering: If you’re filing a dispute over misreported debt, include account statements or payment records. “Credit bureaus can reject claims without sufficient back-up information as ‘frivolous.’ Resubmitted claims can be rejected if they are deemed to be similar to previous ones.
- Create a paper path: Write a message explaining the problem. Avoid using the standard online forms provided by credit bureaus, which may further simplify your dispute by requiring you to choose from pre-selected check boxes. “In addition, by submitting your dispute online, you may inadvertently waive your right to sue as an individual or in a class action,” the post added.
- Send all materials by certified mail: Keep copies for yourself. This makes it easy to ensure that credit bureaus follow legal timelines. Consumer Reports stated that “credit bureaus have five days to bring the disputed information to the financial institution or debt collector that provided the information.” “If this company does not investigate and respond to the dispute in a timely manner, the credit bureaus are legally obligated to delete the information.”
- If you lose your dispute, consider working with an experienced attorney: Consumers can sue a credit bureau or financial institution for credit reporting errors. Find a lawyer through the National Association of Consumer Advocates at Consumeradvocates.org