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How Many Credit Reports Contain Errors? Take a Guess…

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WrongJust how many credit reports contain mistakes? And how many of them are serious enough to have an impact on consumers’ credit scores?

It’s an excellent question and one that has not yet been answered adequately. Perhaps the most widely quoted survey on this topic was one conducted in 2004 by U.S Public Research Interest Group, which surveyed just 200 consumers and found that 80% of reports contained some kind of mistake, while 25% contained “serious” errors. While the credit reporting industry has widely disputed that study, to my knowledge, no other surveys have been released to refute those findings.

In order to get at an answer to the question of credit report accuracy, Congress directed the FTC to conduct a study of credit report accuracy. The study began in 2004 and continues through 2012, with a final report to be issued in 2014. Interim reports are due every two years. The 2010 interim report was issued on January 12, 2011.

[Consumer resource: How to Correct an Error on a Credit Report]

The study works like this:

–          Invitations have been sent by mail to a large number of consumers, with the goal of getting 1000 consumers to participate. The FTC is sending more invitations to consumers with below-average credit scores in an attempt to make sure those consumers are adequately represented in the study.

–          Consumers review their reports with the help of experts, and get their initial FICO scores. Possible mistakes are identified and the reports are sent to FICO for rescoring to determine how those mistakes may impact the consumer’s credit scores (first rescoring).

–          Consumers dispute mistakes with the CRAs.

–          If the reports are corrected, the corrected files are sent to FICO for a second rescoring.

It sounds like a much needed study. The results should be meaningful, given that the reports will be rescored after mistakes have been disputed to help determine the impact of those mistakes on credit scores. As the FTC describes it, “The study will reveal the main types of confirmed material errors, their relative frequencies, and impact of such errors on a consumer’s credit standing.”

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On the other hand, the fact that this study was included in legislation passed in 2003 but won’t be fully completed until more than ten years later is pretty mind boggling. According to the 2010 interim report, fewer than 300 consumer’s credit reports have been analyzed so far. Why has it taken that long to put the study together and get it underway?

And while I do think that a government study was warranted here, I have to wonder why the industry didn’t do its own study years ago. Is it truly possible that credit reporting agencies are selling this data to lenders and insurers without knowing how accurate it is?

I am looking forward to the FTC’s final report, but it sure seems a long way off. I don’t believe it will change my basic advice, however: check your credit reports at least once a year and dispute mistakes.

© Chad Mcdermott | Dreamstime.com

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  • Randy Johnson

    Why don’t they wait unitl 2024 or 2034 when the data will be totally meaningless.

    This just exhibits one of the problems with govrenment “solutions” to our problems, The name on the bill but take 53 pages to describe what they are going to do and how they are going to do it.

    That same effort could have produced a REPORT that would be statistically close to the one that will cost millions and take years.

  • http://ThePhoenixAgents.com Heather

    My knee-jerk reaction was the same as yours: why should this take so stinking long?!

    But after thinking for a minute, and visualizing my most recent credit report… It’s 32 pages and contains notes about my first credit card, obtained when I was college. Even if we’re only focusing on payments in the past 24 to 36 or 48 months that could affect my score today, I’d be hard-pressed to find the time to slog through that many years of monthly credit card statements and cancelled checks to prove – or disprove – the info on my credit report.

    Maybe this is about too-busy consumers as much as it’s about glacially slow government bureaucrats.

  • http://www.credit.com Gerri

    Heather,

    Your point is well taken. Though keep in mind they have mailed many more invitations than the 1000 needed to get the sample. Those who respond will get help from an expert. So presumably it should be at least a bit easier than doing this on your own.

    Thanks for weighing in!

    Gerri

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