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1 in 20 has credit report error

By Janna Herron · Bankrate.com
Monday, February 11, 2013
Posted: 4 pm ET

Round up 20 friends, co-workers or strangers and chances are good that one of you has a credit report error so bad that it could cost you more money on loans or insurance, according to a new government study on credit report accuracy.

The Federal Trade Commission study released Monday showed that 5.2 percent of the 1,001 consumers in the study qualified for a lower interest rate on an auto loan after an error in one of their credit reports was corrected.

Overall, the agency found that 1 in 5 consumers found a "confirmed material error" in one of their credit reports from the three major bureaus -- Experian, Equifax and TransUnion. A confirmed material error was one that resulted in a modification of the consumer's original credit report.

"The most meaningful result from this study is the sheer volume of reports that have potential errors," says John Ulzheimer, president of consumer education at SmartCredit.com. "There are a lot of credit reports that are wrong."

The most common confirmed errors related to account information and collections items, the study found. In all, 2.2 percent of the 2,968 credit reports reviewed in the study contained at least one error that, when corrected, resulted in a higher credit score and lower interest rate for the consumer.

"So, roughly 98 percent are accurate to the extent that the consumer is not getting a less advantageous deal when they apply for a loan, which is pretty good for the industry," Ulzheimer says. "But frankly when someone gets a higher interest rate or denied credit because of an error, it doesn't matter if the rate is 2.2 percent or 40 percent, it's wrong."

There's a silver lining, however. Four out of 5 consumers who filed disputes with a credit reporting bureau over the error had their reports changed, the study showed. Thirty-seven percent had all items corrected as they wanted, while 42 percent had some of the items modified.

"This study suggests there are millions of credit reports out there with errors on them and they won't get corrected until you do something," says Ulzheimer. "Yet, every single year, 96 percent of free credit reports go unclaimed."

Americans are entitled to a free credit report from the three major credit agencies once every 12 months under the Fair Credit Reporting Act. Consumers can claim their reports at AnnualCreditReport.com.

Follow me on Twitter: @JannaHerron

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10 Comments
Randell Terzo
September 24, 2013 at 9:54 am

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Gloria Kauffman
February 18, 2013 at 12:27 am

7 years is way too long!! 5 years is more reasonable. How many years does Washington D.C. have?

These rich banking and corporate companies are sabotaging middle income America; ruining our credit while they are getting bailed out by the government!!! Why in the H>>> can't we get bailed out by the government???

Gloria Kauffman
February 18, 2013 at 12:23 am

they should carry the responsiblity since they hold the deck of cards that determine our fate!!!

Jay Best
February 18, 2013 at 12:11 am

One month to drop your score and a year to rebuild it. Its a scam. I have worked on a issue for years and it is still showing on my report. You are guilty until you prove your innocents. And you get no help from anyone. I have had a lein on my report that was the fault of the State of Michigan and guess what its still there. After 14 months and hundreds of hours on the phone and money spent and proven right its still there. Such B.S. Good people struggle and banks make huge money on intrest but no one cares and its just criminal. Sleep well cause alot of cant thanks to you.

Ethel Harris
February 17, 2013 at 12:27 pm

I have tried twice to get my free credit report. The first response from them was I didn't give my correct address. They sent this message via US Mail. The second response was I had already received my free credit reports and I now needed to pay for them. I have never received my credit reports. These people are confused.

william connelly
February 12, 2013 at 8:58 am

credit reporting agencies should notify people when anything lowers your thier score. They should be responsible for any loss they cause by error reporting.