You Found Credit Reporting Errors? Join the Club

If you haven’t checked your credit report recently - fewer than 1 in 5 people do so - here’s a good reminder of why you should:

"Credit history" highlighted in greenA new college grad from Iowa got a copy of his credit report for the first time and discovered numerous negative accounts, including a mortgage that he didn’t have. In fact, the mortgage was reported to have been taken out when he was a sophomore - in high school. An obvious error, yet he couldn’t get the mortgage scrubbed from his record. And after three tries, he was advised by the credit bureau to stop disputing the account.

This story comes from a report released this week by the Consumer Financial Protection Bureau on credit reporting complaints.

Under the law, consumer credit reporting agencies, as well as merchants or others that provided disputed information, are supposed to investigate and correct errors on credit reports.

Right.

That’s why the CFPB received 31,000 consumer complaints since the federal agency began oversight of large credit reporting companies about a year and a half ago. Top complaints: incorrect information on reports, frustration with the credit bureaus’ investigation of disputes and trouble getting free credit reports as required by law.

“This is one of the key areas that need real overhaul by the CFPB,” says Ruth Susswein, deputy director of national priorities for the nonprofit group Consumer Action. “The way it works now, it allows the credit bureau and the creditor to point fingers at each other. No one is accountable enough for resolving the problems.”

She says a “reasonable investigation” is supposed to be undertaken when a consumer disputes an entry on a credit report, and the CFPB needs to define what that means.  Right now, she says, “these disputes are handled in an automated fashion.”

When you challenge information on a report online, your supporting documentation is whittled down to a two- or three-digit code and a few words, Susswein says.  The creditor, which might have provided the inaccurate information in the first place, then compares the coded dispute with what’s in its file, she says. The creditor then confirms its records, which is not an investigation into verifying that the information is correct, she says.

“This is not reasonable. This is unfair,” Susswein says.

The CFPB is warning creditors, debt collectors and others that provide consumer information to reporting companies that they must undertake an investigation and, when mistakes are found, notify all that received the faulty information.

Meanwhile, if you have no luck fixing incorrect information on a report, tell the CFPB.  The agency forwards your complaint to the reporting company, which has 15 days to respond with what action it has or will be taking. Once consumers get the response, they have 30 days to challenge the finding with the CFBP.

Plenty do. Of the 20,560 complaints forwarded by the CFPB to credit reporting companies, 17 percent of consumers disagreed with the outcome. It’s not clear how much disputing a finding helps, though.

Still, the figures emphasize how important it is to review your credit reports on a regular basis. Correct errors because they can damage your credit score, causing you to pay more for loans and credit cards. Be forewarned: It’s not likely to be an easy fix.

Photo:  IvelinRadkov/istockphoto