Five Percent of Credit Reports Contain Costly Mistakes
February 13, 2013
The Federal Trade Commission (FTC) says that 5 percent of U.S. consumers have an error on their credit report that could lead to them paying more for products such as auto loans and insurance, says CNBC.com.
- Ordered by Congress in 2003 when it passed the Fair and Accurate Credit Transaction Act, the FTC study is the result of eight years of work that also tracked consumers as they tried to fix or dispute errors in their credit reports.
- The study tracked 1,001 consumers who dealt with inaccuracies on their credit report.
- More than 1 in 10 who tried to fix errors saw their credit score change as a result of their actions.
Consumer groups have responded to the study saying that it indicates the need for reform of the credit reporting industry. The trade group for the nation's credit reporting agencies issued a swift response saying that the FTC report indicates that credit reports are 95 percent accurate.
- Twenty-six percent of consumers in the study indicated a potentially material error and 21 percent were able to correct an error.
- For 52 of the 1,001 individuals, modification of an error resulted in an increase that lowered their credit risk tier, which would likely lower loan rates.
- Of the 262 consumers who said there were inaccuracies on their report, 37 percent said all their concerns were addressed, 42 percent said their report had been modified but there were still errors on their report, and the remaining 21 percent said they were unsuccessful in getting their report modified.
The results indicate that there is a high error rate, affecting millions of Americans. A spokesman for the credit reporting industry trade group claims that the error rate is only 2.2 percent instead of the 5 percent error rate the FTC reports. The FTC says that the 2.2 percent figure is calculated by assessing if the inaccuracy is made on all three major credit reports as opposed to a major error on just one report, which yields the 5 percent figure calculated by the FTC.
Source: Bob Sullivan, "5% of Credit Reports Contain Costly Errors: FTC," CNBC.com, February 11, 2013.
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