Consumers and lending organizations rely upon the accuracy of credit reports
for borrowing large and small sums of money, for anything from a store
credit card, to purchasing a home. But how accurate is the information
contained in your credit report?
The Fair and Accurate Credit Transactions Act of 2003
In 2003, Congress directed the Federal Trade Commission to conduct a long-term
study of the accuracy of consumer credit reports. Conducted between 2004
and 2012, the
study included 1001 volunteer consumers, and reviewed a total of 2968 credit
reports from the three major credit reporting agencies: Equifax, Experian,
and TransUnion. Invitations were sent out to consumers, with more invitations
going out to those with below-average credit scores, to ensure that this
group was adequately represented.
With the help of credit experts, consumers reviewed their credit reports
and FICO scores. If mistakes were identified, they were disputed with
the credit agencies. If there were corrections, the reports were submitted
back to FICO for a second scoring.
And the Verdict?
The FTC released the eye-opening results in December 2012. According to
the FTC, 21% of participants discovered a "confirmed material error"
in at least one of their credit reports. A confirmed material error is
a mistake significant enough to impact the consumer's overall credit
score. Most errors involved reporting mistakes from consumer finance accounts
(such as credit cards) or collections agencies. 5.2% of participants identified
an error so significant, that their lowered credit score resulted in paying
higher interest rates.
Credit agencies monitor the credit of about 200 million Americans. Based
on this limited study, potentially 40 million Americans have errors on
their credit reports, with 10 million of us paying higher interest rates
due to these errors. Avoid paying for these mistakes by reviewing your
credit report from each of the main agencies at least once a year, and
take immediate action if you find anything amiss.
If you are being harassed by creditors,
contact us for help today.