Credit reporting in the United States has been a mess. It seems now for decades we have one revelation after another about how inaccurate your credit reports is. These errors can significantly impact credit scores without knowledge. And they do.
According to the Federal Trade Commission, “five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance.” But the FTC also found only, “one in five consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports.” And nearly 25 percent of consumers identified errors on their credit reports that needed to be fixed.
The major credit bureaus (Experian, Equifax and TransUnion) have tried to deal with the issues of inaccuracies. The big step was the ability for consumers to dispute inaccurate items on their credit reports. And that process quickly turned into a mess as disputes were never properly investigated or dealt with even when supporting documentation was provided.
From a credit bureau point of view they are just reporting information they have been given from creditors and public records. The proverbial garbage in – garbage out process.
In 2015 a 31 state attorney general action against the credit bureaus may have finally managed to get reports turning in the right direction.
As a result of the settlement with the credit bureaus, credit bureaus are not to report any information about non-contractual debts like fines and tickets. They are also not to report medical debts for 180 days after the time the account was created. The thinking behind this is it will give consumers and their medical providers time to resolve insurance payments and other billing issues. And credit reporting agencies must require debt collectors to provide the original creditor’s name and information about the debt before the debt information can be added to a credit report.
The settlement also promised better methods of allowing consumer to dispute inaccurate information and receive a professional response. According to the press release from Ohio, “The credit reporting agencies must implement an escalated process for handling complicated disputes, such as those involving identity theft, fraud, or mixed files (in which one consumer’s information is mixed with another’s).”
But I’ll be happy to give the credit reporting agencies one last attempt to fix the dispute mess. After all, the credit bureaus are promising to focus, “on an enhanced dispute resolution process for consumers that are proven victims of fraud or identity theft, as well as those involved in mixed files – a situation where two consumer files are mistakenly mixed together.”
Along with the new changes, consumers will be able to obtain a second free credit report if a disputed item is corrected.
So again we have taken another step to fix a clearly broken system. While I remain hopeful this will represent a major turning point for consumers, I think it will probably devolve into more of the same. I’m not sure how many times credit bureaus can promise to change and then not really change.
Bigger Changes to Come
The whispers now are that we should expect to see bigger changes to credit reports coming soon by credit bureaus that seem to be willing just to shed and not report information like fines and tickets that can be grossly inaccurate.
But in the same bucket of dubious data are the many local and state public records that are reported. These items have been the source of much contention and create a lot of busy work for the credit bureaus. If they can’t at least be confident in the data gathered from state and local sources, like courts, then reporting those items costs them money instead of making them money.
The anticipation is we should not be surprised if credit bureaus make a change and stop reporting local judgments, court cases, etc.
But other changes are coming as well. Don’t be surprised to see some creditors agreeing to delete information on old accounts. Today, some original creditors are already silently erasing the reporting of the original accounts when they are sold off. The cost of dealing with disputes on those old accounts just isn’t worth reporting them.
Collection companies and debt buyers are talking about altering their reporting of paid off accounts.
For now I’ll hold my breath for these changes to roll out but it looks at least promising that finally some substantive good news is afoot for consumers and their credit reports.
So What Can You Do Now?
For now it might be worth taking a look at your credit score and credit report. The site I recommend is Credit Karma. I really like their score calculator. But if you are interested in credit reports and Credit Karma then this article will be of interest: Credit Karma Free Score: Is It Accurate for Credit Repair?
If you want, you can also go to www.annualcreditreport.com and obtain a free copy of each of your credit reports.
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.