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Credit report data examined

By Marcie Geffner · Bankrate.com
Monday, June 13, 2011
Posted: 12 pm ET

A new study has found that the data in consumers' credit reports is "high quality" and presents "little likelihood" of any adverse material effect on consumers. The accuracy of this data is important because it affects whether consumers are offered credit cards and other financial products, and if so, on what terms.

The findings may be of interest, but first the acknowledgements should be noted; the authors thanked the credit reporting agencies' trade association for a grant as well as the experts at the three major credit bureaus for their insights, guidance and assistance.

The study, "U.S. Consumer Credit Reports: Measuring Accuracy and Dispute Impacts," recruited 2,338 participants, who reviewed their own credit reports and flagged whatever errors they found. Those errors were reviewed, verified and used to measure the error rate and effect on the consumer's credit score -- before and, in most cases, after the error was corrected.

Consumers reported errors in 19.2 percent of the credit reports they examined, according to the study. Of those errors, 37 percent related to "header" data, such as a former street address, which wouldn't affect the consumer's credit score. Approximately 1 percent of the examined reports had one or more errors that were reported and verified and when fixed, resulted in a credit score boost of at least 25 points.

Nineteen percent of the respondents opted not to dispute an error they'd found, even after they'd been offered a $5 incentive. Some consumers said they didn't dispute an error because they believed it was too minor to affect their score or they thought the dispute process seemed too difficult, among other reasons.

The study pointed out that the overall error rate in credit reports is generally less meaningful for consumers than whether a particular error affects that consumer's credit score and if so, by how many points. The answer to that is never completely clear since the credit agencies utilize different scoring models.

The importance of credit reporting not only for consumers, but also for policymakers -- i.e., Congress, which passes laws that govern credit agencies -- was noted as well: "Understanding the credit score and credit risk tier impacts of tradeline modifications has important implications, then, for interpreting the results from a consumer-centric angle, on the one hand, and from a public policy angle, on the other hand."

The study was conducted by the Policy and Economic Research Council, which conducts research for public policy purposes.

Follow me on Twitter: @marciegeff

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1 Comment
Lonye D. Hall
June 28, 2011 at 9:45 pm

Credit cranes are weak!