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.