Why Are Credit Report Errors So Hard to Fix?

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Illustration by Alexander Ho for TIME

A yearlong investigation by the Columbus Dispatch has uncovered systemic flaws in the data collection and dispute resolution processes used by the credit bureaus. For Americans who find errors in their credit files, this can mean months of frustration trying to get the mistakes corrected. And during that painful process, many people are denied credit cards, mortgages and car loans, or are forced to pay much higher interest rates because of errors on their reports — errors consumer advocates say the bureaus could easily fix if they so choose.

The Dispatch‘s series of articles about the issue caught the attention of Ohio Attorney General Mike DeWine, who calls the findings “stunning and infuriating,” and tells the paper he’s reached out to his counterparts in other states with the aim of jointly pursuing this issue. “We’re going to take this and run with it,” he says.

The analysis included 30,000 consumer complaints filed with the Federal Trade Commission and attorneys general in 24 states. The complaints were about unresolved errors in credit files held by one or more of the big three credit reporting agencies: Equifax, Experian and TransUnion. The Dispatch‘s research shows an error rate of around 30%. In many cases, attempts to fix even simple mistakes dragged on for months, according to interviews with some of the people interviewed by the paper.

(MORE: CFPB Focuses on Debt Collection, Credit Reporting Companies)

Stuart Pratt, president and CEO of the Consumer Data Industry Association, the trade organization that speaks for the credit bureaus, defends the industry in the Dispatch‘s investigation, calling the examples “isolated problems.” He says many of the mistakes in people’s credit reports aren’t the type that he calls “an error of consequence.”

“The important question [is not] whether or not we found an error, but how many errors are consequential,” he added. Pratt claims that in industry-backed research, only half of a percent of the credit bureau databases contain errors that would prevent someone from obtaining credit or affect their interest rate.

Perhaps unsurprisingly, consumer advocates came up with some different results when they crunched the numbers. “Studies from U.S PIRG and Consumers Union have found errors in 25% of credit reports serious enough to cause a denial of credit,” a 2009 report by the National Consumer Law Center says. That report also cites an FTC study in which the results of an (admittedly small) pilot program found errors in 53% of credit reports.

Pratt tells the Dispatch the FTC’s numbers can’t be relied upon because they’re self-reported, meaning they could include people trying to get a legitimate debt erased in order to game the system. He estimates that at least a fifth of all the FTC’s complaints fall into this category.

Chi Chi Wu, staff attorney at the NCLC, dismisses the notion that a person trying to lie to the credit bureaus would turn to a federal law enforcement agency to accomplish this.

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

What about if your credit report is merged with someone else’s? The NCLC’s Wu says credit bureaus use truncated Social Security numbers, which can lead to one person’s data being merged with another if their numbers are similar. The bureaus “have been known to mismerge files when the consumers’ names are similar and they share seven of nine digits in their SSN,” the NCLC says in its 2009 report.

“I’m not aware of the bureaus using a truncated SSN,” Pratt says.

He may not be, but this practice was described by Equifax during a 2006 lawsuit against Discover Financial Services as an explanation as to why one woman’s credit file had been mixed up with that of another woman. At the time, Equifax said, “The files in this data bank are ‘built’ using a search logic that is designed to organize credit information in a single file pertaining to one consumer if the information matches at least seven of the nine digits of that consumer’s Social Security number, and has the same name and same state of residence.”

Pratt also says the Social Security Administration is partly to blame for both “double-issuing” Social Security numbers and for accidentally listing living citizens as deceased.

The NCLC’s Wu says that even though consumers buy credit reports from the bureaus, consumers are not the primary clients. Companies that buy or supply data are, which Wu says is a disincentive for bureaus to address consumer complaints. “The credit bureaus don’t want to spend money investigating disputes [because] there’s no profit for them,” she says. “That’s why they’ve automated the heck out of the dispute system.”

Wu’s advice: “If you do have an error, dispute it a couple of times and then get an attorney.”