Credit Reporting Errors
Credit report errors cause all kinds of problems for people. One of the big problems with credit reporting is an extremely high rate of errors:
- 20% have a confirmed error
- 13% have an errors that affects their score; and
- 5% have an error serious enough to lose an opportunity.
While 5% does not seem like a lot, when it comes to your financial report card, it is unacceptable. Would you get in an airplane if one in five fell out of the sky? See, 5% is not acceptable. It means millions of people have errors on their credit report.
Credit reporting agencies have been criticized for “parroting” the furnishers, but they continue this practice. It is especially bad because 40% of disputes involved debt collectors. What incentive does a debt collector have to correct their reporting? They only want to get paid.
Errors on credit reports come from two sources, the credit reporting agencies themselves and the banks, lenders, and other creditors and institutions that furnish data to the credit reporting agencies.
Furnisher errors. Furnishers sent upload large sets of data about consumer to each one of the major credit bureaus about once a month. Any errors in this data will get reporting by the credit bureaus. The credit reporting agencies will screen some of this data to catch some inconsistencies but given the volume of data they receive each month, they cannot pay any attention to individual entries. Credit reporting laws do not require and the big credit reporting agencies can not perform a separate audit or review of this data to ensure accuracy.
The computerized nature of the data means that if a furnisher send the inaccurate data to one credit reporting agency, then the same erroneous data will likely be sent to all the agencies.
Furnisher errors fall into two different categories. The first is mistaken data. Like the incorrect payment history, status, or account balance. The second is attributing the account to someone other than the owner. These “ownership” errors can occur because they are reported on a spouse’s report or other authorized user who is not liable. Identity theft can cause an ownership errors can occur. A phenomenon known as a mixed file can cause someone else’s credit file and information to appear on your report.