“They did what?! Is that even legal?” – An interview with Improve My Credit USA

Credit Reports

1: How many people have errors in their credit scores?

A couple years ago, the Federal Trade Commission completed a study which determined that when checking credit reports, one in four people will find errors which could alter their credit scores. Even worse, the study mentioned that some of these errors are so significant that they could impact the rates that people are eligible for when it comes to getting loans and so on.

I have to say that I think that one in four is a low estimate. I see errors on people’s credit reports all the time. I don’t think most people want to run the risk of their report being the one with the error that slips through the cracks and goes unnoticed until they’re suddenly given a really high quote for a new insurance policy or loan.

Even if you accept the FTC’s number without question, it’s still a serious problem. I mean, what if you applied that number to other industries? What if one in four new homes were built with mistakes in them? The error rate is just too high.

2: Why do credit bureaus make so many errors?

This is one of those situations where multiple factors come into play. Experts and consumer advocacy groups have voiced a lot of opinions on this topic, too.

What I can tell you for sure is that the credit industry relies on formulas which utilize just seven of nine digits from a consumer’s social security number, along with a partial name match, when retrieving data for credit reports. Why do they use this system of partial matching? Well, people within the industry will say that this partial data search makes it more likely that the information on a credit report reflects the consumer’s full borrowing history.

As you can imagine, a lot of mistakes come up for people with similar names and social security numbers, like people in the same family. Despite assertions from the credit industry that the partial match formulas are necessary to retrieve all of the relevant data, people who study the credit industry aren’t necessarily convinced that the partial match system is a good idea, and some would argue that in fact that partial match system has a financial motivation behind it.

When consumers have more debts on their credit reports and lower credit scores, banks can offer them higher interest rates. But banks aren’t the only players with a motivation to see errors on credit reports. Debt collectors, too, often go after consumers to collect on debts on credit reports even when consumers actively dispute these debts. In fact, the Consumer Financial Protection Bureau has released data which indicates that more than one in every three disputes with credit reports are related to issues with debt collectors.

Because the law makes it the consumer’s responsibility to correct errors on credit reports, where’s the motivation for credit bureaus to avoid errors in the first place?

3: How does the Fair Credit Reporting Act help protect consumers, and what do people need to know about it? 

First of all, consumers need to know that like many federal laws, the FCRA is a long and complicated document with lots of ins and outs. The credit bureaus know every inch of this law, but consumers are often ill-informed about their rights. In short, the FCRA was drawn up to protect your right to have accurate information in your credit report and fair treatment from credit reporting agencies, which includes a fair investigation of errors in your credit report that you officially inform them about.

Despite the implementation of the FCRA over forty years ago, consumers continue to experience difficulties in their dealings with credit bureaus. As an example, in March of 2015, the attorney general of the state of New York came to an agreement with the credit bureaus to change the way that they deal with errors as well as medical debt. According to a Reuters news story, the agreement requires credit bureaus to “be more proactive in resolving disputes over information contained in their reports.”

Everyone who works with consumers on repairing their credit is hopeful that more reforms like the recent agreement in New York are on the horizon!

4: How do you help people address issues with their credit score?

First, we work individually with each client to find the specific items on their credit report that are causing problems with their credit. When a client finds items that he or she thinks are inaccurate, we act on the client’s behalf to undertake a dispute process, starting by considering the facts of the client’s information in the context of the rules surrounding credit reporting.

It isn’t always easy for clients to identify errors—and then to know how to proceed. There are more than 300 rules which indicate what makes an item “accurate” or not on a credit report, so how would clients know all these rules on their own? We use our expertise to help our clients navigate this process.

A big part of our work with clients involves education in terms of how to make the most of their credit. You can improve your credit scores dramatically by making the best use of your existing credit. We help clients see what items come together to shape their credit score and how to take manageable actions to improve their credit profile.