Finding credit report errors is easy, fixing them maddening
Someone used Tyrone Davis's personal information to take out a student loan for a technical school in Baltimore, then defaulted on the loan. Now, Davis can't get his credit record straightened out.
"My whole life is messed up," says Davis, 41, of Richmond, Va.
Davis, who works nights as a floor technician for Wal-Mart, said he gets at least two calls a day from a debt-collection agency. He's planning to get married in May and would like to buy a house, but he can't get a mortgage.
As of Sept. 1, everyone in the U.S. can get a free credit report from each of the major credit-reporting agencies once a year. Many people are going to find mistakes on their records. But for some, identifying a problem is just the start of a long, hard fight to get the record corrected.
The time-consuming battle can lead to frustration and anger. But beyond that, it can put a hold on a person's life.
Davis says he can prove he never took out the bad student loan on his record, but no one is interested in the evidence.
He "didn't go to the school, he didn't sign the loan, he didn't co-sign the loan," his attorney Jason Krumbein said. "He's largely unable to obtain credit anywhere. Not even a cell phone."
The process of correcting errors on credit reports is "Kafkaesque and Orwellian," says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "Count on it taking a long time."
Problems with credit reports are not uncommon, consumer groups say. A survey last year by the U.S. Public Interest Research Group found that 79 percent of credit reports contained errors, and 25 percent contained mistakes serious enough to prevent the individual from obtaining credit.
The credit bureaus -- TransUnion, Equifax and Experian -- dispute the PIRG survey results but say the volume of data they manage makes some mistakes unavoidable. They maintain 210 million files and update 4.5 billion pieces of data per month, says Norm Magnuson, spokesman for the Consumer Data Industry Association, which represents the three credit-reporting agencies.
The CDIA says about 80 percent of disputed credit reports are resolved within 10 days. But complicated errors can take months -- sometimes years -- to erase, Mierzwinski says. They often require dozens of phone calls and letters, and in some cases, lawsuits, to resolve.
Peggy Schmitt, 41, has gone to court to try to prove she isn't dead.
In 2002, her credit card was rejected by a Minneapolis restaurant. In the next few months, her problems spread. She was unable to refinance her mortgage or buy a car. Lenders wouldn't do business with her because her credit reports said she was dead, an error stemming from the death of a woman with a similar name.
Schmitt, of Minneapolis, couldn't convince the credit reporting agencies that she was alive. "It was extremely frustrating," she says.
FICO woes
Not being able to correct a credit report error can cause a host of problems. Among the biggest and most costly: Unresolved errors can hurt a consumer's FICO score, the mathematical model used by lenders to gauge the likelihood a borrower will repay a loan.
The lower a FICO score, the higher the interest rate the borrower will be charged. That means a higher monthly mortgage payment.
Credit-reporting agencies say the use of credit reports and scores has enabled borrowers with good credit histories to obtain low-cost loans, regardless of race, sex or residence. Credit scoring looks "very objectively at your personal credit history, and that objective review eliminates any personal biases" a lender may have, said Rod Griffin, manager of public education for Experian.
But consumers who have had problems with their reports say a serious error can wipe out years of good credit.
The credit reports of Kenith Burdett, 58, of Eufala, Ala., reflect $150,000 in bad student loans taken out by a distant relative who stole his identity. Burdett discovered the fraud in October 2004 when his application for a 5.25 percent fixed-rate mortgage was rejected. He's sent police reports, affidavits and other documents to the credit bureaus.
Meantime, to finance his home purchase, he was forced to get two separate mortgages, an interest-only loan and an adjustable-rate mortgage that has already climbed to more than 10 percent.
Disputed items
The federal Fair Credit Reporting Act requires the credit-
reporting agencies to respond to complaints about inaccuracies within 30 days. All three have systems that allow consumers to dispute information online, by phone or through the mail.
If the lender that provided the information confirms it was inaccurate, the credit bureau will remove the item, attorneys say. But if a mortgage company, bank or other lender says the information is accurate, it will often remain on the individual's credit report, even if the consumer has evidence that proves otherwise, said Evan Hendricks, a privacy expert and author of "Credit Scores & Credit Reports."
Some types of hard-to-kill errors:
# Mistaken identities. For more than two years, Sharon Perkins has been trying to convince a hospital in Laurel, Md., that she wasn't treated in its emergency room.
Her troubles began after a woman with a similar name was treated at the hospital. Perkins, 62, started receiving bills from the hospital at her former home in Maryland, and they followed her when she and her husband moved to Arvada, Colo., last year. She's been contacted by two collection agencies. On several occasions, she's been told the matter was resolved, only to receive more notices and calls about the unpaid bill.
# Identity theft. Sonya Smith-Valentine, an attorney in Greenbelt, Md., is representing an 18-year-old whose father used his Social Security number to open a credit card account years ago. The son has "provided every piece of identification down to his birth certificate to show he was 10 when it was opened up," she says. "Nobody will listen to him."
# Administrative errors. Steve Conzett, 50, of Orlando, believes a mortgage lender's software glitch wrecked his credit score. His problems started with a late payment on his mortgage in November 2003. A month later, he sold his home and included the monthly installment when he paid off the mortgage. But instead of reporting that the balance was paid, the mortgage lender reported it as "past due at payoff," Conzett says.
The error, which implied he still owed money on the loan, caused his credit score to drop from above 700 to about 530, Conzett said. The only home loans he could find required "insane payments." He was forced to buy a smaller house than he had planned, in a neighborhood that wasn't his first choice.
Efforts to alert credit bureaus to the problem "didn't do a bit of good," he says. "The credit bureaus refused to acknowledge the error."
Automation at issue
Leonard Bennett, a Newport News, Va., attorney who specializes in Fair Credit Reporting Act cases, says the credit bureaus' automated systems make it difficult to resolve such cases.
"No human being ever speaks to another human being in the process," he said. "The bureau's sole function is to take the consumer's dispute, no matter how big or how many pages," and reduce it to a two-digit code, he says.
Industry spokesman Magnuson said the automated systems make the process more convenient for consumers because they can report problems at any time of the day or night.
Occasionally, lawsuits against credit bureaus lead to big awards. In 2003, a Portland, Ore., jury ordered TransUnion to pay Judy Thomas of Klamath Falls, Ore., $5.3 million. A federal judge later reduced the award to $1 million. In her lawsuit, Thomas said she spent six years trying to get TransUnion to remove another woman's credit information from her credit report.
Most successful lawsuits result in much smaller awards.
Magnuson said the Federal Trade Commission and state attorneys general can impose sanctions on the credit bureaus if they violate the law.
"My whole life is messed up," says Davis, 41, of Richmond, Va.
Davis, who works nights as a floor technician for Wal-Mart, said he gets at least two calls a day from a debt-collection agency. He's planning to get married in May and would like to buy a house, but he can't get a mortgage.
As of Sept. 1, everyone in the U.S. can get a free credit report from each of the major credit-reporting agencies once a year. Many people are going to find mistakes on their records. But for some, identifying a problem is just the start of a long, hard fight to get the record corrected.
The time-consuming battle can lead to frustration and anger. But beyond that, it can put a hold on a person's life.
Davis says he can prove he never took out the bad student loan on his record, but no one is interested in the evidence.
He "didn't go to the school, he didn't sign the loan, he didn't co-sign the loan," his attorney Jason Krumbein said. "He's largely unable to obtain credit anywhere. Not even a cell phone."
The process of correcting errors on credit reports is "Kafkaesque and Orwellian," says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "Count on it taking a long time."
Problems with credit reports are not uncommon, consumer groups say. A survey last year by the U.S. Public Interest Research Group found that 79 percent of credit reports contained errors, and 25 percent contained mistakes serious enough to prevent the individual from obtaining credit.
The credit bureaus -- TransUnion, Equifax and Experian -- dispute the PIRG survey results but say the volume of data they manage makes some mistakes unavoidable. They maintain 210 million files and update 4.5 billion pieces of data per month, says Norm Magnuson, spokesman for the Consumer Data Industry Association, which represents the three credit-reporting agencies.
The CDIA says about 80 percent of disputed credit reports are resolved within 10 days. But complicated errors can take months -- sometimes years -- to erase, Mierzwinski says. They often require dozens of phone calls and letters, and in some cases, lawsuits, to resolve.
Peggy Schmitt, 41, has gone to court to try to prove she isn't dead.
In 2002, her credit card was rejected by a Minneapolis restaurant. In the next few months, her problems spread. She was unable to refinance her mortgage or buy a car. Lenders wouldn't do business with her because her credit reports said she was dead, an error stemming from the death of a woman with a similar name.
Schmitt, of Minneapolis, couldn't convince the credit reporting agencies that she was alive. "It was extremely frustrating," she says.
FICO woes
Not being able to correct a credit report error can cause a host of problems. Among the biggest and most costly: Unresolved errors can hurt a consumer's FICO score, the mathematical model used by lenders to gauge the likelihood a borrower will repay a loan.
The lower a FICO score, the higher the interest rate the borrower will be charged. That means a higher monthly mortgage payment.
Credit-reporting agencies say the use of credit reports and scores has enabled borrowers with good credit histories to obtain low-cost loans, regardless of race, sex or residence. Credit scoring looks "very objectively at your personal credit history, and that objective review eliminates any personal biases" a lender may have, said Rod Griffin, manager of public education for Experian.
But consumers who have had problems with their reports say a serious error can wipe out years of good credit.
The credit reports of Kenith Burdett, 58, of Eufala, Ala., reflect $150,000 in bad student loans taken out by a distant relative who stole his identity. Burdett discovered the fraud in October 2004 when his application for a 5.25 percent fixed-rate mortgage was rejected. He's sent police reports, affidavits and other documents to the credit bureaus.
Meantime, to finance his home purchase, he was forced to get two separate mortgages, an interest-only loan and an adjustable-rate mortgage that has already climbed to more than 10 percent.
Disputed items
The federal Fair Credit Reporting Act requires the credit-
reporting agencies to respond to complaints about inaccuracies within 30 days. All three have systems that allow consumers to dispute information online, by phone or through the mail.
If the lender that provided the information confirms it was inaccurate, the credit bureau will remove the item, attorneys say. But if a mortgage company, bank or other lender says the information is accurate, it will often remain on the individual's credit report, even if the consumer has evidence that proves otherwise, said Evan Hendricks, a privacy expert and author of "Credit Scores & Credit Reports."
Some types of hard-to-kill errors:
# Mistaken identities. For more than two years, Sharon Perkins has been trying to convince a hospital in Laurel, Md., that she wasn't treated in its emergency room.
Her troubles began after a woman with a similar name was treated at the hospital. Perkins, 62, started receiving bills from the hospital at her former home in Maryland, and they followed her when she and her husband moved to Arvada, Colo., last year. She's been contacted by two collection agencies. On several occasions, she's been told the matter was resolved, only to receive more notices and calls about the unpaid bill.
# Identity theft. Sonya Smith-Valentine, an attorney in Greenbelt, Md., is representing an 18-year-old whose father used his Social Security number to open a credit card account years ago. The son has "provided every piece of identification down to his birth certificate to show he was 10 when it was opened up," she says. "Nobody will listen to him."
# Administrative errors. Steve Conzett, 50, of Orlando, believes a mortgage lender's software glitch wrecked his credit score. His problems started with a late payment on his mortgage in November 2003. A month later, he sold his home and included the monthly installment when he paid off the mortgage. But instead of reporting that the balance was paid, the mortgage lender reported it as "past due at payoff," Conzett says.
The error, which implied he still owed money on the loan, caused his credit score to drop from above 700 to about 530, Conzett said. The only home loans he could find required "insane payments." He was forced to buy a smaller house than he had planned, in a neighborhood that wasn't his first choice.
Efforts to alert credit bureaus to the problem "didn't do a bit of good," he says. "The credit bureaus refused to acknowledge the error."
Automation at issue
Leonard Bennett, a Newport News, Va., attorney who specializes in Fair Credit Reporting Act cases, says the credit bureaus' automated systems make it difficult to resolve such cases.
"No human being ever speaks to another human being in the process," he said. "The bureau's sole function is to take the consumer's dispute, no matter how big or how many pages," and reduce it to a two-digit code, he says.
Industry spokesman Magnuson said the automated systems make the process more convenient for consumers because they can report problems at any time of the day or night.
Occasionally, lawsuits against credit bureaus lead to big awards. In 2003, a Portland, Ore., jury ordered TransUnion to pay Judy Thomas of Klamath Falls, Ore., $5.3 million. A federal judge later reduced the award to $1 million. In her lawsuit, Thomas said she spent six years trying to get TransUnion to remove another woman's credit information from her credit report.
Most successful lawsuits result in much smaller awards.
Magnuson said the Federal Trade Commission and state attorneys general can impose sanctions on the credit bureaus if they violate the law.
