Is My Credit Report Accurate? For Over 40 Million Americans, the Answer is No
Charles Hoffman’s story could happen to anyone. He paid his final bill with Verizon, closed the account, and assumed that was the end of the matter. But just months later, despite receiving a confirmation statement from Verizon, Hoffman noticed a dip in his credit score. The cause? A “delinquent” bill which had, in reality, long been paid. How do you know if your credit report is accurate?
Federal Study Finds up to 42 Million Credit Reports Contain Errors
Charles Hoffman has been dutifully paying his utility bills for decades: he is 87 years old. But despite having what he knew to be a long history of full and timely payments, Hoffman’s credit score suddenly took a mysterious hit. He traced the decline back to an error on Verizon’s behalf and was eventually able to put the company in touch with credit agencies to remove the negative mark.
“I feel a lot better now. Now all I want is the credit report to be fixed,” Hoffman says. “I’m 87 so it’s not that I’m going for a mortgage. It’s the principle. If anyone looked it up, I’d be an adverse risk.”
But what if Hoffman had been going for a mortgage? What if he had been in the process of obtaining a loan?
While it’s an unpleasant truth to confront, the reality of the matter is that stories like Hoffman’s take place with far greater frequency than anyone would like to imagine. According to a recent study conducted by the Federal Trade Commission, as many as 42 million Americans have mistakes on their credit reports — that’s about 13% of the entire national population. (When you factor out children, who obviously do not have credit reports, that portion becomes even greater.) The study used a sample population of about 1,000 participants and 3,000 credit reports.
As FTC Chairman Jon Leibowitz told 60 Minutes, “Here’s what we found. Some pretty troubling information. One out of five Americans has an error on their credit report. And one out of 10 has an error on their credit report that might lower their credit score.”
He adds, “It’s a pretty high error rate.”
Leibowitz’s blunt assessment is painfully accurate: it is a “pretty high error rate.” And for the approximately 20 million Americans whose reports include serious errors, the consequences could be denied loans, increased interest on loans, inability to take out a mortgage — the list goes on. In the words of John Ulzheimer, who is the president of consumer education at SmartCredit.com, “Errors in credit reports can cost you a loan, a competitive interest rate, a job, security clearance and insurance.”
So we’ve established that credit reporting mistakes are far more common than you probably thought. But what can you actually do about it?
What Should You Do if Your Credit Report Has a Mistake?
First, it’s important to understand the difference between your credit report and your credit score.
Your credit report is the more general of the two, and draws on a variety of sources (e.g. landlords, utility companies) to track your overall credit history, like a report card. It will include information like your credit balances, your timeliness with bill payments, and any liens or records of bankruptcy.
Your credit score is a specific number, which is determined by an algorithm used by a credit reporting bureau. The most widely-used formula is FICO, and the number can range from 300 to 850. Generally speaking, a credit score of 700 or higher is considered “good.”
As a consumer, you should know that you have a right to an annual, free credit “checkup.” You can get your yearly report from any of the three major reporting agencies: Experian, TransUnion, and Equifax. This gives you a perfect opportunity to make sure you don’t notice anything that looks suspicious or incorrect. To quote FTC Bureau of Economics Director Howard Shelanski, “Consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”
If you do notice a mistake (as so many Americans, unfortunately, will), it’s up to you to contact the reporting agency in writing informing them of the dispute. You should keep a copy for yourself just to be safe. The agency should then respond within 30 to 45 days, and should also notify other reporting agencies if an error is in fact confirmed. You should also give written notice to the actual company which is responsible for the error (e.g. a utility service provider).
If you’re interested in improving your credit score, 720 Credit Score may be able to help. To arrange for a free and confidential appointment, call the law offices of Young, Marr & Associates at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania, or contact us online today.
☑ Been paying credit card balances that seem to never go down?
☑ Lost your job and are now having trouble keeping up?
☑ Attempted to work out a payment arrangement to no avail?
☑ Been notified of a mortgage foreclosure action?
☑ Been denied for a mortgage or other line of credit?
If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.