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Why it’s so hard to fix errors on your credit report

A rundown of a crazy system that can put you on the fast track to automation hell

(Andrew Kelly/Reuters)
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I’ve had the hair-pulling experience of trying to correct errors in my credit files. It was a journey to automation hell.

Let’s say a creditor incorrectly reported that you were seriously late on a payment. This information causes your credit score to drop considerably. So you contact the credit bureaus to file a dispute. (If the incorrect information is reported to only one agency, contact that particular bureau.) You provide proof of your financial innocence — copies, never the original.

The credit bureaus send an inquiry to the creditor that reported the incorrect information. The creditor (the industry calls them “data furnishers”) examines its records and sends the same erroneous data back to the bureau. The credit bureaus contact you indicating that the creditor has “verified” the information they have on you is correct. This back and forth goes on for months or, for the truly unfortunate, years.

This is credit-error purgatory.

How to clean up your credit report

Even if you are able to get the error removed, a regular computer update to the credit bureau database could migrate the mistake right back into your files. You begin the process of complaining all over.

Your creditor says fix it with the bureaus. The credit bureaus say it’s often the data furnisher’s fault, arguing they’re just the receiver of the bad info — a point that shouldn’t absolve them of responsibility, considering they are making millions selling our data. The finger-pointing by these companies makes you want to give all of them your middle finger.

So here we are, long past time for the federal government to put an end to this hellish nightmare.

Dare we hope that the Consumer Financial Protection Bureau will bring relief? In a new report, the CFPB found that the three major credit bureaus — Equifax, Experian and TransUnion — habitually failed to resolve consumer complaints about inaccurate information in their credit reports.

The report focused on issues submitted to the CFPB complaint portal. From January 2020 to September 2021, the CFPB received more than 700,000 complaints about the three bureaus. The most common issue involved incorrect information on people’s reports, and communities of color and low-income communities tended to submit complaints at a higher rate, the report said.

In 2021, the credit bureaus provided relief in less than 2 percent of consumer complaints, down from nearly 25 percent in 2019, the CFPB said.

“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” CFPB Director Rohit Chopra said in a release.

Credit bureaus drew more than half of consumer complaints to CFPB in past two years

In response, the Consumer Data Industry Association (CDIA), which represents the credit bureaus, said in an emailed statement: “We are reviewing the CFPB report in detail. We agree that responding to legitimate consumer complaints and getting credit reports right are paramount.”

In 2020, Equifax, Experian and TransUnion stopped providing substantive responses to consumers’ complaints if they suspected the involvement of a third party such as a debt repair company, the CFPB said.

“The CFPB report highlights trends including increased activity by certain credit repair companies, which can inflate complaint numbers and undermine the process of addressing legitimate requests,” the CDIA said.

Consumer advocates protest that consumers have a right to have a third-party company file a complaint on their behalf. The boilerplate responses to the CFPB, with little relief to consumers, are unacceptable, said Ed Mierzwinski, senior director of the U.S. Public Interest Research Group’s federal consumer program.

The credit bureaus “have never considered consumers as their customers,” Mierzwinski said. “They’ve always considered consumers as a nuisance.”

Under the federal Fair Credit Reporting Act, credit bureaus and the companies supplying credit information to them have to correct inaccurate or incomplete information in your files. After you file a dispute, the credit bureau generally has 30 days to investigate.

However, frustrated consumers often turn to credit repair companies, which can make matters much worse. People end up paying hundreds if not thousands of dollars in a desperate attempt to address a credit issue. The credit repair operations frequently bombard the bureaus with complaints, sometimes when there isn’t a legitimate error.

More than one-third of consumers found errors in their credit reports, investigation finds

“If you’re using credit repair, there’s a good chance [the bureaus] aren’t going to deal with your dispute at all,” said Chi Chi Wu, staff attorney at the National Consumer Law Center, which has written several reports about the serious dysfunction and travesty that is the credit bureau dispute system.

An easier dispute system would make it unnecessary for consumers to seek help from shyster credit repair companies.

It’s been close to a decade since a major study from the Federal Trade Commission found that 5 percent of consumer credit files included credit report errors and that the mistakes could have resulted in people paying more for credit products.

When the credit reporting industry maintains files on more than 200 million consumers, that percentage means millions of people are dealing with material mistakes in their credit files, which can affect consumers’ ability to get a credit card, a home or auto loan, an apartment or even a job.

“It is way past time for reform,” Wu said.

And the pandemic has just exacerbated the problems.

“I mailed all three credit bureaus a letter disputing some inaccurate things on my credit report,” one consumer complained to the CFPB. “It has been almost 70 days and I have not received a response. I understand that covid has caused a lot of things to slow down, but this is a bit too long waiting for a response … This has caused me quite a bit of stress especially dealing with the deaths of my friends due to covid. I am asking that these items be removed from my credit report.”

When the information in the databases that are used to rate your creditworthiness is wrong, financial chaos can ensue. Good credit matters for so many of our financial transactions. Fixing this issue needs to be a top priority for the CFPB.