So What Are the Real Chances There’s a Mistake in Your Credit Report?

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A comprehensive study of consumer credit reports by the Federal Trade Commission found that the accuracy of consumers’ credit files is better than some surveys had indicated, but worse than the industry has claimed. 

According to the FTC, 26% of people thought they had mistakes on their credit reports that would impact their credit scores. In reality, per the FTC’s new study, 13% actually did. This is considerably lower than the 25% rate of credit report mistakes the watchdog group U.S. PIRG found in a 2004 study. That same study found that a whopping 79% of consumers’ credit reports contained “either serious errors or other mistakes of some kind.”

Ed Mierzwinski, U.S. PIRG consumer program director, says the FTC’s larger sample size and the wider scope of the research — it looked at 1,001 people and 2,968 reports — contribute to the lower mistake rate. “This is very important stuff,” he says. “I think it’s a good study.” Mierzwinski says the fact that more people think they have serious errors on their reports than actually do is because credit reports are hard for the average layperson to read.

That’s the good news. Sort of. Here’s the undeniably bad news: “For 5.2% of the consumers, the resulting increase in score was such that their credit risk tier decreased and thus the consumer may be more likely to be offered a lower auto loan interest rate,” the FTC study states. In other words, if people had only known better, they could have been paying less each month for their cars.

(MORE: Why Are Credit Report Errors So Hard to Fix?)

The credit scores of a small portion of consumers were changed by up to 100 points after an error was corrected, the FTC says. Depending on what your credit score is initially, 100 points could mean the difference between getting and not getting a mortgage or a credit card. A 100-point swing would certainly make a difference in what kind of rate a borrower would get on those products and other loans. It could also affect how much a person pays for car insurance and whether or not they’re deemed eligible to rent an apartment. In some cases, it can even be a factor in whether or not that person can get a job.

Rather curiously, the Consumer Data Industry Association (CDIA), the trade group for the credit bureaus, issued a release saying that the FTC’s study verifies the accuracy of the information in people’s credit reports. Previously, the group cited industry-backed research that claimed an error rate of less than 1%.

Unsurprisingly, consumer advocates don’t agree with the CDIA’s perspective. “The credit bureaus make mistakes,” Mierzwinski says. “That’s what this is about.”

Norm Magnuson, CDIA’s vice president of public affairs, pointed out that the FTC’s research shows that just over 2% of all reports contain errors. (Since each person has multiple credit reports, a mistake could show up on a report issued by one credit bureau but not the others.)

(MORE: New CFPB Thinks Credit Scoring is Confusing, Too)

“We think it’s more valuable and informative to provide the numbers at the consumer level,” says FTC economist Beth Freeborn.

Consumer advocates say even a 5% error rate — which equals about 10 million Americans — is unacceptably high. “There needs to be serious and wholesale reform of the credit reporting industry,” Chi Chi Wu, staff attorney at the National Consumer Law Center, says in a statement.

Wu and Mierzwinski both say the Consumer Financial Protection Bureau can help by monitoring the credit bureaus, which director Richard Cordray said the agency would begin doing last year.

The one point of agreement on which the CDIA, PIRG and the FTC come together is the need for consumers to check their credit reports regularly and be on the lookout for mistakes. “Obviously, I think pursuing accuracy is the best thing for consumers,” Freeborn says.

13 comments
Djamal Amra
Djamal Amra

I promise myself hello my friends how are you To be so strong that nothing can disturb my peace of mind. To talk health, happiness and prosperity to every person I know. To make all my friends feel that there is something worthwhile in them. Look at the sunny side of everything and make my optimism comes true. To think only the best, to work only for the best and expect only the best. Be as enthusiastic success of others as mine. To forget the mistakes of the past and focus on the greatest achievements in the future. To wear a cheerful expression at any time and give a smile to every living creature you meet. To allow time for both my personal growth that I have no time to criticize others. To be too large for worry, too noble for anger, too strong for fear, and too happy to permit the presence of trouble. To think well of myself and to proclaim this fact to the world, not with harsh words but great deeds. To live in the faith that the whole world is on my side, always agree with myself Thanks for your comment I'm glad you like.

Twalah Jackson Pring
Twalah Jackson Pring

Nothing on mine is accurate and never has been..I dont have the time to go thru and correct all of the "mistakes", I am just glad it shows all my payment are made....Never trust a Credit bureau as the final word..

Stephanie Burkes
Stephanie Burkes

You also can request credit reports directly from each of the 3 agencies & in states like GA you get 2 free per year

lucholalo25
lucholalo25

@TIME @TIMEBusiness here in Peru it happens all the time, seems like it were on purpose

DURBEM
DURBEM

@TIME @TIMEBusiness "Os ambientes que se criam no carnaval favorecem a violência, acidentes, etc... Na Bahia o Governador Quer Dois por Ano

lifesmandarin
lifesmandarin

@TIME @TIMEBusiness And don't take advantage of it.

Cy_Chronicles
Cy_Chronicles

@TIME @TIMEBusiness This does not come as any surprise. Anyone who really looks at their credit report will find some erroneous information.