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Correcting credit mistakes
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May 18, 1999: 6:03 a.m. ET
With errors commonplace, checking up on credit reports may be wise
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NEW YORK (CNNfn) - It's a loan applicant's worst nightmare.
After years of diligently paying your bills, your credit is deemed "no good" and the bank systematically rejects your request.
The culprit is an erroneous credit report, whose false contents have identified you as a financial delinquent.
Such scenarios remain commonplace, according to the U.S. Public Interest Research Group, despite efforts to improve the accuracy of credit histories.
In a study last year, the consumer watchdog group found that as many as 70 percent of credit reports contain some sort of faulty information, with 29 percent including errors serious enough to result in the denial of credit.
Because a credit report is the critical piece of information used to determine whether consumers will be able to obtain a credit card, purchase a house, rent an apartment or get a loan, the preponderance of errors is worrisome, says Jon Grolinger, consumer program director for the California division of PIRG.
"A credit report today is really the most common reflection of your good name," Grolinger said. "A false report may make you look like a miscreant or worse, even though your record may be sterling."
Fighting falsehoods
The types of errors found in credit reports vary greatly.
Personal information may be misspelled, outdated or belong to someone with a similar name. Reports may contain information on accounts that have been long closed or paid off. They may also be missing vital information, such as steady mortgage payments, that could boost your creditworthiness.
If you are denied a loan or any type of credit due to negative information supplied by a credit reporting agency, you have the right to view a free copy of that report, provided you make your request within 60 days.
Once you have determined that the report does indeed contain inaccuracies, you will have to write the credit reporting agency and indicate what you believe is false.
"The burden is on the consumer for finding the error and getting it fixed," Grolinger said.
Correspond with the agency both by phone and in writing and by registered or certified mail to assure your complaint is received. Include any relevant documentation you may have that could help correct the error.
By law, the credit reporting agency is required to investigate the item in question within 30 days of receiving your complaint. The agency must also forward any relevant information to the information provider -- the credit card agency or bank, for instance, that is claiming your accounts are delinquent.
The information provider is also responsible for investigating the matter. If an inaccuracy is found, the lender must notify credit reporting agencies nationwide of the mistake so it can be corrected in your file.
Upon completion of the investigation, the credit agency must provide written results and a free copy of your report if the dispute results in a change. You also may request that any employer who has received a credit report during the past two years or anyone else who has requested credit information in the previous six months be sent updated information regarding your financial situation.
Throughout the process, you should also deal with information provider directly, telling them in writing that you dispute an item. The information provider is then required to note the dispute when it reports your credit status to a credit agency.
Ignorance not bliss
Mistakes are not the only problem when it comes to credit reports, since what a credit agency does not know about you can hurt your chances of getting loans and other credit.
Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors, including some travel, entertainment, gasoline card companies, local retailers and credit unions, supply information to credit reporting agencies.
About 20 percent of credit reports are missing major credit, loan, mortgage or other consumer accounts that demonstrate the creditworthiness of the consumer, according to PIRG.
As a result, you may be denied credit on the basis of an "insufficient credit file" or "no credit file." If you have accounts that don't appear in your credit file, consider asking the credit reporting agency to include them in future reports. They are not required to do so, but many credit bureaus will add verifiable accounts for a fee.
Bear in mind, however, if these creditors do not report to the credit reporting agency on a regular basis, these added items will not be updated in your file.
Expediting the process
Getting a credit report error fixed can be an arduous process.
"If you're applying for a loan, and there are mistakes on your credit report you didn't know about, it's going to take time to get that information removed," said Federal Trade Commission spokesman Howard Shapiro.
Despite legislative efforts to improve the response time of credit reporting agencies, the PIRG study found that more than 10 percent of consumers waited two weeks or longer to receive their report once they had requested it.
If you find a credit agency is being difficult, there is recourse.
You can file a compliant with the Federal Trade Commission's Consumer Response Center. Although the commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations.
An ounce of prevention
To avoid the hassle of getting a mistake corrected in the first place, experts recommend checking your credit status on a regular basis.
"You get an annual physical every year," said Grolinger. "It seems your credit should be worthy of the same inspection."
You can obtain a copy of your report for under $8 from any of the three primary credit reporting agencies: Experian, Trans Union and Equifax. Getting copies of your report at least once a year from all three agencies is a good idea, since they may not all contain the same information, says Grolinger.
Checking up on your credit status is especially important if you plan to make a big purchase, such as a car or home, are looking for a new job, or expect to sign an apartment lease.
The knowledge may spare you any unpleasant surprises.
"The person lending you the money for your new car is probably not going to believe the information on your credit report is mistake." said the FTC's Shapiro. "It could turn into a real nightmare through no fault of your own."
-- by staff writer Nicole Jacoby
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