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Despite Legal Reforms, Most Credit Reports are Inaccurate

The 1996 amendments to the Fair Credit Reporting Act were intended to improve the accuracy of consumer credit reports by imposing duties-and some limited liability-on creditors who made inaccurate reports to the credit bureaus or failed to adequately investigate consumer-disputed items.

Even so, The Consumer Federation of America's 2002 study indicated that 29% of consumers had variances of 50 points or more among the credit scores reported for the three major credit bureaus, placing millions of consumers at risk for mistaken assignment to high-cost high-risk lending pools. A similar study conducted by the Federal Reserve Board of Governors revealed that 70% of consumers had at least one account with incomplete information.

Two years later, the U.S. Public Interest Research Group asked adults in thirty states to order their credit reports and complete a survey on the accuracy of those reports. The survey uncovered a staggering percentage of errors and intentional inaccuracies, including:

• 25% of the credit reports examined contained serious errors-errors that could result in the denial of credit, such as inaccurate delinquencies or accounts that did not belong to the consumer
• 54% of credit reports contained errors in the demographic information, including misspellings, outdated information, and information belonging to another consumer
• 22% of credit reports listed one or more loans twice
• 30% of credit reports listed closed accounts as remaining open

In the final analysis, 79% of credit reports studied contained at least one inaccuracy. Some of those inaccuracies are errors caused by sloppy reporting, a lag in information updating, or the erroneous merging of reports on two consumers with similar information. However, not all credit report inaccuracies are mistakes.

For instance, some creditors intentionally fail to report certain information that would increase a consumer's credit score. This practice reduces the consumer's options for more favorable credit elsewhere, helping to ensure that the customer remains with that creditor. The reduced credit score that results also helps the current creditor to justify higher interest rates and fees than the consumer might otherwise qualify for.

Some creditors and debt purchasing companies even report debts that they know are too old to legally appear on consumer credit reports, and may even be uncollectible. By reporting an account that is too old to be legally collected or that has been discharged in bankruptcy, the creditor or debt purchasing agency creates an incentive for the consumer to settle that debt, even though he is no longer legally obligated. A variety of state and federal statutes protect consumers against this practice, and if the debt has been discharged in bankruptcy the creditor or debt purchaser is also in violation of the bankruptcy discharge.

Every adult should regularly review his credit report and take advantage of the procedures available to challenge and correct inaccuracies. And if items discharged in bankruptcy appear on your credit report, fill out our free case evaluation form to find out how NCBLC may be able to help you enforce your discharge.

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