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How Accurate is Your Credit Report?

How Accurate is Your Credit Report?

Women Calculating BillsConsumers 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.