Consumer Reports is advising consumers to check their credit reports closely for errors as complaints about mistakes have grown dramatically over the past year.
Complaints about credit reports accounted for more than 50 percent of all consumer complaints to the Consumer Financial Protection Bureau (CFPB) in 2020. Incorrect information on credit reports was the top complaint according to the CFPB.
In response, CR is teaming up with a group of consumer organizations to launch the Credit Checkup project to help consumers review their credit reports and provide advice on what to look for and how to correct errors if they find them. Consumers can sign up for the project at cr.org/creditcheckup
"Credit report errors are all-too-common and can do serious lasting damage to your financial security," said Syed Ejaz, policy analyst for Consumer Reports. "A mistake on your credit report can mean the difference between a high or low interest rate on a loan or even prevent you from being hired for a job or getting an apartment. Credit report errors have long been a problem, but they're particularly harmful now for those struggling financially during the pandemic."
Consumers who sign up to participate in the Credit Checkup will play a key role in a people-powered research project by filling out a brief survey to report on their experience. Consumer Reports will analyze that data and use it to hold the credit bureaus accountable for keeping credit reports accurate. To get the word out about the Credit Checkup, CR is partnering with Americans for Financial Reform, Consumer Action, National Association of Consumer Advocates, National Consumer Law Center, and USPIRG.
Common credit report errors include accounts or loans that have been paid off but appear as unpaid, individual loans listed multiple times, and debts that are incorrectly reported in collections. Even a wrong address or birth date on a credit report can get consumers into trouble. Other mistakes can be particularly serious like "mixed files" - when information from someone else with a similar name or Social Security number appears in the wrong report or when fraudulent accounts are listed in a report as a result of identity theft.
One new problem has arisen because of the way some companies are incorrectly reporting deferrals during the pandemic. The CARES Act, the law passed last March by Congress to provide assistance to those who lost their jobs or income when the economy shut down, requires companies that provide federally-backed mortgages and student loans to offer deferred payments to borrowers. Other financial companies have voluntarily offered deferrals. The CARES Act requires companies to report deferred payments as current to the credit bureaus if the borrower was current before the deferral. Unfortunately, some companies, including Navient, one of the largest student loan servicers, have sometimes incorrectly reported these deferred payments as late.
The financial consequences of credit report errors can be far reaching, especially for those who are already struggling with the economic downturn triggered by the COVID-19 crisis. Mistakes on a credit report can hurt your credit score and prevent you from getting a loan or credit card or trigger a high interest rate to borrow money. Damaged credit scores can also affect whether you get hired for a job or rent an apartment. Cell phone companies and cable operators review credit scores and may require a larger deposit to sign up for service if your score isn't high enough.
Consumers have the legal right to request a free credit report once every year from each of the three major credit bureaus at annualcreditreport.com. In addition, these agencies are providing free weekly online reports until April. If you find mistakes on your credit reports, CR recommends taking the following tips:
* Prepare dispute materials for each bureau: The three major credit bureaus - Experian, Equifax, and TransUnion - don't communicate with one another, so it's smart to contact each one. Filing a dispute with each credit bureau, instead of the lender or bank, offers protections governing how quickly it must be handled. It also provides a legal pathway to sue the credit bureaus and creditors or collectors, if necessary.
* Gather evidence: If you are filing a dispute about debt that's reported incorrectly, include account statements or payment records. Credit bureaus can dismiss claims without enough backup information as "frivolous." And resubmitted claims can be denied if they're considered similar to previous ones.
* Create a paper trail: Write a letter explaining the problem. Avoid using standardized online forms provided by the credit bureaus, which might oversimplify your dispute by requiring you to choose among predetermined check boxes. Plus, by submitting your dispute online, you could unwittingly waive your right to sue as an individual or in a class action.
* Send all materials by certified mail: Keep copies for yourself. This makes it easier to confirm that the credit bureaus follow the lawful timelines. Credit bureaus have five days to get the disputed information to the financial institution or debt collector that supplied the information. If that company doesn't investigate and respond to the dispute in time, the credit bureaus are legally required to delete the information.
* If you lose your dispute, consider working with an experienced attorney: You can sue a credit bureau or financial institution over credit report errors. Find an attorney through the National Association of Consumer Advocates at consumeradvocates.org