Credit Report Errors Are Very Common.

1 in 4 reports contain errors serious enough to cause the denial of credit and employment.

Creditors and credit reporting agencies work together to maintain accurate records on consumers, but with millions of updates being made each day, mistakes happen more often than you think. A 2004 US PIRG (Public Interest Research Group) survey found that 79 percent of credit reports contain some kind of error.

The study found that One in four credit reports contains errors serious enough to cause consumers to be denied credit, a loan, an apartment or home loan or even a job. Also, errors often cause consumers to spend weeks -- sometimes years -- calling creditors, writing credit bureaus, and worrying anxiously in an effort to remove the inaccurate information from their record.

U.S. PIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy. Key findings include:

Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;
Seventy-nine percent (79%) of the credit reports contained mistakes of some kind;
Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;
Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.

Credit bureaus collect and compile information about consumer creditworthiness from banks and other creditors and from public record sources such as lawsuits, tax liens and legal judgments.

Common Errors

misspelled demographic identifying information
long-outdated information
information belonged to a stranger
credit accounts that had been closed by the consumer but incorrectly remained listed as open
accounts not reported

Some serious errors include:

accounts that are incorrectly marked "delinquent"
credit reports that contain credit accounts that do not belong to the consumer
reports listing public records or judgements that belong to someone else.

Consumers are harmed by errors of commission and errors of omission.

In December 2002, the Consumer Federation of America and the National Credit Reporting Association released an exhaustive study of the accuracy of credit scores and the credit report information that serves as the foundation for those scores. A detailed analysis of the types of credit reporting errors that occurred revealed that errors of omission (non-reporting of information) and errors of commission (incorrect or inconsistent data included in the report) both occurred at significant levels.

Nearly eight in ten files (78 percent) were missing a revolving account in good standing.
One in three files (33 percent) was missing a mortgage account that had never been late.
Inconsistent reporting by the agencies on whether a consumer was late in making a payment was widespread. Wide disparities existed in reporting 30-day delinquencies (on 43 percent of files), as well as 60-day (29 percent) and 90-day (24 percent) delays.
Reporting on credit limits and balances was almost universally inconsistent (on 96.1 and 82.4 percent of files, respectively). This is significant as the proportion of balances to available credit was one of the most frequently identified factors affecting a consumer’s credit score. One file in six listed the utilization rate as the primary reason for the score.

Why credit report errors occur

The above study found that some of the mistakes on consumer reports are the result of mis-merged file information, when the bureau simply adds one consumer’s account to another’s file. Other mistakes result from fraudulent accounts of identity thieves being mistakenly added to an innocent consumer’s report. Still others result from coding or reporting errors where a consumer’s on-time payments are falsely listed as late. Here are common situations when errors occur:

Creditors often attach a claim to the wrong person.
A credit reporting agency confused this person with someone who had once lived at your address.
You might have a loan mistakenly placed under your name because it resembles that of the real person who has the note.
Someone is using your information to financially elude responsibility
Inaccurate reporting of personal demographic information by a bank or other creditor, such as name, address, or social security number, or a failure of a credit bureau to maintain adequate matching software to link a consumer's information, causing a consumer's accounts in good standing to be lost in the system;
The inaccurate reporting of a consumer's account status by banks, department stores and other furnishers, causing the consumer's account to contain incorrect delinquencies.
Information mixed together by the credit bureau in files containing similar names, either belonging to strangers, housemates, or relatives, especially grossly negative public records such as tax liens and judgements;
Lack of adequate systems for properly purging obsolete information such as paid-off accounts in good standing or accounts that have been transferred (serviced) to other providers continuing to be reported twice.

The Fair Credit Reporting Act and related state laws require that the information contained in credit reports be as accurate as possible, and require that credit bureaus use "reasonable procedures" to ensure that accuracy. In addition, consumers have the right to dispute inaccurate information in their credit report and to have that information removed unless it can be verified.

When it comes to credit report accuracy, your input is crucial. Only you can identify and report certain kinds of inaccuracies, including errors made by your creditors and signs of identity theft. Review your credit reports regularly to check that the information reported is accurate and file disputes when you need to make corrections.