By David Lazarus Los Angeles Times
WWR Article Summary (tl;dr) As columnist David Lazarus points out, "Mistakes in your credit file aren't just a hassle. They can result in higher interest rates or borrowing costs, and even fraud or identity theft if your files are linked to someone else's."
Los Angeles Times
First the good news: Your credit score may have just gone up. That's because the big credit agencies have cleaned house a bit, removing outdated info that may have been weighing on your creditworthiness.
The bad news: You can't rest easy. There's still a better than fair chance you've got obsolete or mistaken data in your credit file, and fixing it can be like running an obstacle course.
"The whole thing is a major pain in the butt," said Linda Sherry, director of national priorities for the advocacy group Consumer Action.
"It shows that their business is not about helping consumers," she told me. "It's about selling products to consumers and selling people's information to others."
Mistakes in your credit file aren't just a hassle. They can result in higher interest rates or borrowing costs, and even fraud or identity theft if your files are linked to someone else's.
An important thing to keep in mind: The law is on your side. More on that in a moment.
The three big credit agencies, Experian, Equifax and TransUnion, operate in a shadowy industry that most people are aware of but may not know much about. This is deliberate. The companies would rather you don't ask too many questions.
After all, they neither sought nor received permission from consumers to collect and profit from people's personal information. Yet they now hold millions of files containing billions of data points.
With credit files being automatically updated on a daily basis as people interact with creditors, employers, landlords and others, errors are inevitable, especially for anyone with a relatively common name.
Some errors may be trivial, a misspelled business title, say. Others can have far-reaching consequences.
"If a landlord says you trashed an apartment and you didn't, you'll have to correct that if you ever want to rent an apartment again," Sherry said.
The number of people with a collections account on their credit report fell to 25 million in June, down from 33 million the previous year, according to a recent report from the Federal Reserve Bank of New York. The total collections balance reported on accounts declined by about $11 billion.
This is due in large part to an overhaul initiated by credit agencies after the Consumer Financial Protection Bureau found that many credit files contained outdated information.
The modern credit-reporting industry started benignly enough. It all began with a Tennessee grocer named Cator Woolford, who drew up a list of customers in 1898 for a local grocers' association. The list included a description of each customer's creditworthiness.
Soon other merchants expressed interest in buying Woolford's list, and the business grew from there. In 1979, Woolford's Retail Credit Co. changed its name to what we know today as Equifax.
TransUnion was born in 1968 as the holding company for Union Tank Car Co., which leased rail cars to other businesses.
Experian was created after Britain's leading credit-reporting company purchased TRW's U.S. credit business, then based in Irvine, in 1996. The company is now based in Dublin, Ireland.
These guys are anything but perfect. Equifax reported that hackers made off with the personal information of about 148 million consumers last year, including names, addresses, Social Security numbers and driver's license numbers. The onus is on consumers to spot and respond to any mistakes in their credit files. If you don't do it, no one will.
A 2012 report by the Federal Trade Commission found that 26 percent of consumers discovered "at least one potentially material error on at least one of their three credit reports." A follow-up study three years later revealed that 70 percent of these consumers still believed their files were erroneous.
As of the end of last year, the Consumer Financial Protection Bureau said it had handled more than 281,000 credit reporting complaints since 2011.
Nearly a third of all complaints received by the agency last year alone involved credit reporting. More than half of those pertained to incorrect files.
You're entitled to a free copy of your credit file every year from each credit agency. You can obtain yours online at AnnualCreditReport.com. Make a regular habit of checking each one.
If you spot any mistakes, that's where the frustration can begin. Each credit agency has its own online dispute resolution process. Be ready to back up your complaint with supporting documents such as credit card statements or canceled checks.
This is something you can also try to do by phone, but I don't advise it, not unless you're prepared to spend long hours on hold watching the seasons change.
In most cases, the credit agencies have to respond within about 30 days, but that doesn't necessarily mean errors will go away. They're also supposed to inform other credit agencies of any mistakes, but that doesn't necessarily mean the other guys will clean house.
Be patient. Be persistent. And if that doesn't work, consider being litigious.
Under the federal Fair Credit Reporting Act, you have a right to sue if you are harmed by an error in your credit file, a denied loan, say. Do a search for "FCRA attorney" to find a lawyer in your area who might handle the case.
Also, be prepared to contact the "furnisher" as well. That's the entity that may have provided bad info to the credit agency in the first place, for instance a bank or credit card company. If their records remain spotty, you'll just have to go through the entire process again down the road.
Here are some suggestions for lawmakers to make things easier:
Require each of the Big Three credit agencies to send people a free copy of their credit report annually, rather than having consumers submit a request. These companies are making tons of money from our data. The least they can do in return is proactively share what they know about us.
Create a single online portal for fixing credit-file errors, with all corrections going to all credit agencies. Require each agency to confirm receipt of a correction and proof that the fix was made.
These are not unreasonable demands. Experian made $994 million in profit in the fiscal year ended March 31. Equifax pocketed $587 million last year. TransUnion walked away with a profit of $245 million.
At least a small slice of all that dough could go toward making people's lives easier. ___ ABOUT THE WRITER David Lazarus, a Los Angeles Times columnist, writes on consumer issues.