Title: Credit reports. Subject(s): CREDIT bureaus; CONSUMER credit; CREDIT scoring systems; CREDIT Source: Consumer Reports, Jul2000, Vol. 65 Issue 7, p52, 2p, 1 chart, 1c Abstract: Investigates the realm of credit reports and how potential lenders may view the consumer. Details of a survey conducted by 'Consumer Reports' employees; Equifax; Experian; Trans Union; Mistakes commonly made; Misleading information; Recommendations for ensuring accurate credit representation. AN: 3182077 ISSN: 0010-7174 Lexile: 1160 Database: MAS Ultra - School Edition Print: Click here to mark for print. View Item: Full Page Image [Go To Citation] Section: YOUR MONEY CREDIT REPORTS How do potential lenders see you? Paul W. had long taken pride in his meticulous money-management habits -never so much as a late-paid bill in his entire adult life, the Wisconsin resident boasts. But last year the small-business owner was stunned: An auto dealer told him a problem with his credit report could hold up approval of his application for a car loan. An alert code placed on his report, it turned out, flagged Paul as a potential source of fraud. Ultimately a loan was approved, but his year-long struggle to clear the error from his record left Paul frustrated and embarrassed. "These mistakes have devastating consequences for people," he says. Paul fell victim to a problem that could affect any consumer, no matter how carefully he or she cultivates a good credit history. Americans are relying on credit to finance more and more consumption. At last count, the typical household maintained 14 credit-card accounts, each with its own potential for error. Though the industry group that represents three big credit-reporting agencies - Equifax, Experian, and Trans Union -maintains that less than 3 percent of all mistakes could result in the outright denial of a loan, even small discrepancies can have repercussions. For low-income consumers, often burdened with debt, errors increase the chances that they'll pay more for credit, putting them further in a financial hole. Then, too, would-be lenders - and a host of other companies including employers and insurers - are fine-tuning the tools they use to identify potential risks by tapping the data on your credit report. Your report can be used to determine, among other things, what it will cost you to borrow and how much you'll have to pay for insurance - indeed, whether you'll be able to get competitive rates at all. You may not be able to tell when small errors in your credit report could result in a higher price or a denial of service. Consumers today must also wrestle with new issues. The growing incidence of identity theft - effectively, when a felon commandeers a victim's good credit to run up unauthorized charges - makes it imperative to keep tabs on your credit records. DISTORTED IMPRESSIONS We set out, over a three-month period this spring, to judge just how common credit-report problems are - and how severe. We asked 25 Consumers Union staffers and family members to apply for their reports and scrutinize what they found. (For a summary of each company's service and contact information, see "Giving Credit," below.) While not randomly selected, our panel was fairly representative of a wide range of middle-income consumers. Recruited from Connecticut, New Jersey, New York, Texas, Vermont, and Washington, D.C., the participants included a diverse range of borrowers, from young adults just beginning to establish a credit profile to those seasoned by years of managing personal debt. Some had pristine credit histories, a few had spotty borrowing experiences, and a couple had some serious debt problems in their past. About half of the participants were instructed to apply to the three credit bureaus. Another 12 were directed to try out some of the newer commercial services - for a fee, they offer to consolidate the findings of all three reports in a single statement - to see how those credit-tracking options compare. Several were told to write or phone in their requests; others applied for their reports online. (Only Equifax provides reports immediately over the web. Experian reports are available online through consolidators. Trans Union lets you order online but delivers its reports by mail.) In all, we received and evaluated 63 credit reports - and found inaccuracies in more than half with the potential to derail a loan or deflect an offer for the lowest-interest credit card. Six reports we requested never showed up, though we were charged for three of them. Here, from most serious to least, is a catalog of the errors and potential problems we found: Mistaken identities. All three agencies rely chiefly on Social Security numbers to verify that information is entered on the correct report. It's the Social Security identifier, too, that's supposed to guarantee that the right report doesn't end up in the wrong hands. Yet this seemingly fail-safe approach broke down in our test. One panelist, with a "Jr." in his name, applied online through Equifax, which confused his record and his father's. Two others, applying through Experian and Trans Union, had their records mixed up with those of total strangers. Misapplied charges. We found two instances where reports showed inappropriately attributed debts. One participant's Equifax report listed a $36,000 bank lien belonging to a stranger. And a second panelist discovered an unexplained past-due amount of $1,135 on a report she received from one of the online consolidators. Uncorrected errors. The Fair Credit Reporting Act entitles consumers to contest mistakes on their credit records and to have them promptly corrected. When a challenge is filed by a consumer, a credit bureau is required to complete an investigation and amend the report as required within 30 days. The consumer is entitled to receive a corrected copy no more than 5 days after that. But our test showed that it doesn't always work out that way. One woman, who wrote to Equifax last November to correct a number of errors, discovered only when she participated in our test that several corrections did not show up on the consolidated report she received in March. Misleading information. We found inaccuracies in current addresses and employers, birth dates, and lists of former addresses in 26 reports. One staffer, who has lived in the same home for 13 years, had six different addresses on his report. This was easily explained: The rural route number had been changed once, then converted to a regular street name. But a lender who didn't bother to ask might assume that this individual was a transient, potentially making him ineligible for favorable credit terms. Inconsistencies. A lender can accurately size up your creditworthiness only when all relevant information describing your past debt management is available. Yet when we compared reports on the same individual from each of the three agencies, we found that all three rarely showed the same information. The reason: Creditors are not required to report information about you to all three bureaus. So a problem that fails to show up on one report may stand out in sharp relief on another as a warning flag to a potential lender. Likewise, the failure to post information about your reliable payment history could diminish your appeal to a new creditor. Prying eyes. On average, each report we received had been inspected by eight lenders, auto dealers, insurers, potential employers, and utility companies whom the recipient had authorized, in the ordinary course of business, to conduct a credit check. As few as four such inquiries for a credit-card approval over a period of, say, 60 days can have a negative impact on your credit prospects, since they suggest that you may be aggressively trying to line up new credit to support unsustainable spending. RECOMMENDATIONS Here are ways to ensure that your credit record represents you fairly and accurately: Audit your credit report annually. Unlike other authorized inquiries on your account, inquiries from you will not impair your creditworthiness, so get a copy from each of the three major bureaus once a year. Check your credit at least two months before you apply for a major loan. That should give you time to identify potential impediments and begin to resolve them. Compare all three reports carefully. The devil is in the details, so don't take anything for granted. Make sure your name, Social Security number, address, and other identifying information are accurate and spelled correctly on each report. You may want to start the comparison by looking at Experian's report, which we found the most reader-friendly. Typically, it took staffers less than half an hour to peruse all three reports.
Fix mistakes - however small. If you find errors in your report, inform both the credit bureau and the creditor who put it there, in writing. Don't rely on the credit bureaus to share amended information with each other. Play it safe by contacting all three bureaus with your change. (Equifax and Trans Union send correction forms with your report; Experian lets you file corrections by phone.) You should receive amended reports within a week of the time the changes take effect. If you don't, follow up. Close old accounts. Potentially just as serious as the errors we found were the many instances when the reports showed - accurately - that long-unused accounts were still active. Even when these dormant accounts have had a zero balance for years, many lenders view them as potential liabilities since they could be reactivated at any time. If you haven't used an account in at least two years, get rid of it. In addition to boosting your creditworthiness, fewer open accounts may reduce the risk of identity theft. Don't bother with credit-monitoring services. From our informal test, we found little reason to pay a third-party provider to apply to the credit-reporting agencies on your behalf or to monitor activity on your credit records. Third-party reports were returned a bit more quickly, but contained less detail, than reports we ordered directly. Start paring down debt. Eliminating all the mistakes on your report won't necessarily leave you with a pristine credit record unless you have your debt well under control, so it pays to start a sensible debt-reduction program. If you need help, contact one of the 1,450 regional offices of the not-for-profit National Foundation for Credit Counseling (800 388-2227;www.nfcc.org). The call center can help locate an office near you and schedule an initial appointment. Giving credit The reports that our test panelists received from each of the credit-reporting bureaus contained inaccuracies with about the same frequency and degree of severity. But the reports differed significantly in terms of clarity and completeness. In most states you'll pay $8.50 (plus tax where applicable) for a report from each bureau. You're entitled to a free copy of a report used as the basis for turning you down for a loan, insurance policy, or job, when requested within 60 days of the denial. CREDIT BUREAU EQUIFAX EXPERIAN TRANS UNION Completeness No summary of Summarizes Lists negative potentially potentially information negative items negative items first. Minimal on your record. and accounts in personal Minimal good standing. information, information Gives the such as prior about your most account addresses and payment information, spouse's name. history. including Minimal Doesn't say how month-by-month information long a closed payment history about your account will and how long a payment stay on your closed account history. record. will stay on Doesn't say how Minimal your record. long a closed personal Has the most account will information. personal remain on your information, record. including spouse's name and other Social Security numbers attributed to you. User Fair Format is Helpfully Friendliness readability; easiest on the categorizes the compact table eyes, and plain most adverse requires you to English information for refer to keys writing style you. But the on other pages. is easiest to layout is hard Accounts are understand. to follow. listed Spells out Some people alphabetically. creditors' ordering by Only one of names so you phone were our attempts to don't have to instructed to order online interpret mail in their succeeded, and abbreviations. request and to the report Only one of pay by check. arrived by our attempts to Mail orders e-mail within 5 order reports took 11 days, minutes. online phone orders Reports ordered succeeded, and took 7 days, by phone the report and online arrived in 7 arrived by mail orders took 8 days; those in 8 days. days. ordered by mail Orders took 13 days. requested by mail took 12 days to reach us; orders by phone arrived in 8 days. Contact 800 685-1111 800 392-1122 800 888-4213 www.equifax.com www.experian.com www.transunion.com P.O. Box P.O. Box 2002 P.O. Box 740241 Atlanta, Allen, Texas 1000 Chester, Ga. 30374-0241 75013 Pa. 19022 PHOTO (COLOR) Copyright of Consumer Reports is the property of Consumers Union and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. Source: Consumer Reports, Jul2000, Vol. 65 Issue 7, p52, 2p, 1 chart, 1c. Item Number: 3182077
