2/22/2013 7:30 PM ET|
5 fixes credit bureaus need to make
Recent studies reveal that errors on credit reports affect millions of us, shining a light on the murky process for fixing those mistakes.
According to a recent government report, most credit reports don't contain serious errors, and most people who spot mistakes on their reports are able to get them fixed.
So why worry? Well, two reasons:
• Some of those errors are serious enough to cause you to pay more for loans and insurance. That's why you need to check your credit reports annually, as too few people do.
• Not all errors are easily fixed, and the credit bureaus' automated dispute investigation system can leave you hellishly stranded. There's often no human being at the bureaus who can help you -- and that's a serious problem.
The Federal Trade Commission's recent study of credit bureaus and a December 2012 report by the Consumer Financial Protection Bureau (.pdf file) shine a spotlight on a flawed system that's wielding increasing power over our lives.
Credit bureau information is used not just by lenders to evaluate loan applicants and set interest rates. It's also used by insurers to set premiums, by landlords to grant rentals and by employers to help determine whom to hire, promote and fire.
The FTC report showed that as many as 50 million Americans have errors on their credit reports; for 10 million, those errors could be depressing their credit scores significantly. Yet the CFPB report estimated that only 22% of U.S. adults who have credit reports actually looked at them last year. (If you haven't checked yours, go to AnnualCreditReport.com to do so. Don't bother with "free credit score" or other look-alike sites, some of which are operated by credit bureaus but are not the free federally mandated site.)
Getting bad information off your credit files can be as easy as clicking the "dispute" buttons provided with your online reports. That's what Ann Dieter of Chicago did when she found six department store accounts that had been closed showing as open 10 years later.
"I got them all removed," she wrote on my Facebook page.
Ashley Cortese Fraschilla of Philadelphia had a very different experience. Her attempt to resolve an error got nowhere.
"There was a negative account that was not mine that was associated with me somehow," Fraschilla wrote. "I disputed it and later I get an email that basically said that whoever the creditor was said it was real, so it was staying and there wasn't really anything else that I could do about it."
Fraschilla's experience illustrates a huge weakness of the credit report system: Credit bureaus typically defer to what the lender or other "data furnisher" says. If a creditor insists on reporting an error, there's no one at the credit bureaus who will intervene.
Sometimes just figuring out what the problem is can be a challenge. Judy Thomas of Ohio, who was interviewed by "60 Minutes," couldn't refinance her home or get a car loan despite having no blemishes on her credit reports that she could see.
The trouble, it turns out, is that credit reports supplied to consumers can be very different from the ones companies see. In Judy Thomas' case, the reports lenders were seeing mixed her information with that of one Judith Kendall.
Thomas said she discovered the problem only when a loan officer left a file on his desk unattended and she saw the other woman's information mixed in with hers. Thomas told "60 Minutes" she sent the bureaus hundreds of letters, including some from the other woman's creditors asserting the debts weren't hers.
Those documents highlight another problem: You can supply proof that you're right, but there’s no guarantee anyone will ever see it.
The federal Fair Credit Reporting Act requires that the credit bureaus "review and consider all relevant information submitted by the consumer" and forward to the creditor "all relevant information that the (credit bureaus) received from the consumer."
Consumer advocates complain the bureaus often fail to do either. Instead, disputes are reduced to one- or two-digit codes and forwarded electronically to the creditors. The electronic system that the bureaus use, called e-OSCAR, doesn't allow attachments.
Now that you understand the problems, here are some solutions:
More from Liz Weston:
VIDEO ON MSN MONEY
With low scores, you pay higher interest. Who gets that extra money? The lender. Who did the lender get the lower score from/ The credit bureaus that sell the information to lenders.
Cozy system. Guess who gets ______.
The fix of the system is pretty simple, and would require 3 things.
1) Consumers own their information, not lenders, nor the agencies. Even if it's shared or agreed to be shared as part of a loan, ownership is still retained by the individual at all times, and revocation of any such sharing can be done at any point in the future.
2) Lenders and Credit agencies have the obligation and burden of proof to prove their data reporting is valid. That burden of proof should be a very high bar as well.
3) Mistakes on said report by a lender, and or by the Credit agency, as well as failure to correct is brought into civil law under libel and let the tort lawyers have a field day suing the crap out of both parties.
I personally had information on my report that was false and each company blamed the other for the problem.
murderers, rapists and child molesters
They are way out of control, and need to be held liable for their ineptitude. But it's the banks and insurance companies who reap the benefits of a person's poor credit score.
Oh, and when you file a dispute? It LOWERS your score automatically, just to get the incorrect crap removed!
Do not forget the insurance company’s who run car fax. They say your car repair is better then when comes out of the factory as new. But sell a report to lower your value of a car. The insurance use a clue report which I have found to be wrong three times in the last five years. I have a dispute with transunion now for a medical bill in 2011 have not any medical treatment since 2009. Filled a dispute 30 days ago no answer yet.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON CREDIT SCORES
PCs and travel are hot, big-screen TVs and Apple aren't so much, in our August Buying Guide.