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CFPB and credit reports, take 2

By Janna Herron · Bankrate.com
Tuesday, October 23, 2012
Posted: 4 pm ET

The federal consumer watchdog's new effort to take and log complaints about credit reports may shed some light on an unanswered question: Just how inaccurate are credit reports?

Right now, it depends on whom you ask.

An oft-cited study from 2004 by the U.S. Public Interest Research Group found that 8 in 10 credit reports had an inaccuracy. A quarter of them contained mistakes that could result in denial of credit.

But a study last year from the Policy and Economic Research Council, or PERC, found that 99 percent of credit files had no material errors. Of course, PERC receives funding from the three credit reporting agencies -- Experian, Equifax and TransUnion -- and the trade group that represents them, the Consumer Data Industry Association. The trade group also helped pay for the study.

Maybe soon there will be clarity. Rumor has it that the Consumer Financial Protection Bureau is conducting its own study to better understand the extent of inaccuracies by the bureaus.

"I would caution them that there really is no other facet of consumer finance that can get as muddy as credit report accuracy," says John Ulzhheimer, president of consumer education at SmartCredit.com. Ulzhheimer says a lot of people will probably file complaints even though there aren't any major errors on their reports. "There will be a lot of false positives."

There are small steps you can take to help reduce credit reporting errors. Always fill out credit applications as completely as possible. Provide middle initials, especially if you have a common name, and name suffixes such as Jr. or III. Family members who share the same names, such as fathers and sons, often have credit reports that get mixed. Include apartment numbers in addresses. And avoid simple boo-boos by writing legibly and proofreading online applications.

It's also a good idea to pull your credit reports free every 12 months from each of the credit reporting bureaus and check for errors. If you have problems resolving those mistakes with the bureaus, you now know where you can go: the CFPB.

What kind of credit report errors have you experienced? Did you get them resolved?

Follow me on Twitter: @JannaHerron.

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