Credit-report troubles and how to end them

Wednesday, June 30, 2004
NJ.com

Consumer credit reports remain riddled with errors despite regulatory sanctions and consumer lawsuits, an advocacy group contends.

The U.S. Public Interest Research Group says its recent survey found that nearly eight in 10 credit reports contained factual errors -- and about one in four contained errors so serious that they could result in the borrower being denied a loan.

"The credit bureaus don't seem to be improving," said Ed Mierzwinski, the group's consumer program director. "We are recommending that consumers check their credit reports, because both the companies and the regulators are falling down on the job."

Although some credit bureaus maintain the Public Interest Research Group's inaccuracy claims are exaggerated, everyone agrees on one point: Consumers should check their credit records regularly. Checking reports is particularly important for those buying cars or homes, both credit bureaus and consumer advocates note. Not only can credit inaccuracies cost a consumer a loan, but they can significantly raise the cost of credit.

Indeed, a single serious mistake can cut a consumer's credit score by 50 points, said Ryan Sjoblad, a spokesman for Fair Isaac & Co., a Minneapolis-based company that tabulates the so-called FICO credit scores from the information provided by credit bureaus. For someone attempting to secure a $300,000 mortgage, that difference can result in a monthly payment of $2,200 vs. $1,838.

How do consumers check these reports, and what do they look for? Here's a step-by-step guide:

Request reports: Any consumer planning to make a major purchase should get copies of his or her credit report from all three major credit bureaus, Mierzwinski said. That typically costs $8 to $9 per report. Married couples need to get copies of each spouse's reports.

You can request reports by calling the credit bureaus' toll- free service lines.

The numbers are:

Experian: (888) 397-3742.

TransUnion: (800) 888-4213.

Equifax: (800) 685-1111.

Spot signs of identity theft: Credit reports are usually set up in several parts. The first part contains the consumer's personal informa tion, including name, address, birth date and Social Security number. Then there are sections listing credit data; public record informa tion, such as tax liens and court judgments; collection proceedings, and credit inquiries, said Evan Hen dricks, author of "Credit Scores & Credit Reports: How the System Re ally Works, What You Can Do" (Pri vacy Times, 2004).

Hendricks suggests consumers first check their personal data and credit inquiries for signs of identity theft. Identity theft is when a crook uses enough personal information about a consumer to apply for credit in that person's name. The crime has reached epidemic proportions, according to the FTC, which esti mates that 10 million consumers were victimized in 2002, the most recent year for which statistics are available.

The red flags of identity theft in clude inaccurate personal informa tion. ID thieves commonly change your address so they will get the bills for charge cards they have opened and not tip you off to the scam. Another red flag is a "hard inquiry" from an unfamiliar lender.

What's a hard inquiry? It's an in quiry from a lender, such as a bank, credit card company or auto finance firm that is checking your report with the intent of providing credit, and it shows up on your report.

Check credit, collection and public information: The section of the report that shows credit information normally will note when each account or loan was opened, your balance outstanding and your credit limit, as well as whether the loan is in good standing.

Aside from the obvious checks for mistakes -- cards that were closed or that belong to someone else -- Mierzwinski suggests looking for missing information.

One common error the Public Interest Research Group discovered was missing credit limits, Mierzwinski said. These limits are important, because when the credit limit does not appear on the report, credit scoring software assumes the current balance -- or, when noted, the high balance -- related to that card is the credit limit. That can make the consumer appear to be running his or her cards up to their maximums, which lowers the credit score.

Correct mistakes: If there are errors or omissions, Hendricks suggests you send a letter spelling out the mistakes and providing any proof you might have to establish your case.

For instance, if the address on your file is incorrect, you can send a utility bill to establish your correct address. If your file is merged with someone else's ("juniors" are often confused with their namesake fathers, for example), you may have to send a copy of your birth certificate to straighten things out.

Keep records of everything and maintain a calendar, Hendricks says. Credit bureaus are required to investigate inaccurate items within 30 days or erase the disputed information.

Kathy Kristof writes for the Los Angeles Times. She can be reached at kathy.kristof@latimes.com.

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