The FACT Act, also called the Fair and Accurate Credit Transactions Act, gives you the right to obtain your credit file free of charge. Under a federal law called the Fair Credit Reporting Act, you also have the right to have erroneous information deleted from your credit report. So, if anything is wrong in your credit file, just write the credit bureaus at the addresses found at the end of this book, and state your dispute. Errors include closed accounts that are still shown as open, data about accounts you did not open, or negative items, such as bankruptcies or liens, possibly from someone else with a similar name or social security number. The credit bureaus have 30 days to investigate your claims. After that, they must remove any information that is found to be inaccurate or that can no longer be verified.
How Accurate Are Credit Reports?
According to a number of consumer groups in the United States, many credit reports are filled with inaccuracies. The Consumer Federation of America (CFA) and the National Credit Reporting Association (NCRA) once released a landmark study that found that millions of Americans were in jeopardy of being denied credit or unnecessarily paying more for loans because of mistakes in their credit files.
The CFA and the NCRA analyzed the credit scores of some 500,000 consumers nationwide. Then they examined dozens of credit files in great detail. Their conclusions were alarming:
- Errors of omission and commission were fairly common (Some 215 million Americans have credit files, and the CFAand NCRA believe that millions of those credit files – perhaps as many as 70% – may contain mistakes)
- 78% of credit files were missing an account that was in good standing (possibly hurting people’s FICO® scores)
- 33% of files were missing a mortgage account that had never been late (more positive, but absent, data)
- If errors in a person’s credit report caused her to pay “sub-prime” rates for a mortgage, those mistakes could cost the consumer dearly. Having a credit score below a cut off mark – namely a FICO® score of 620 points – meant an individual would pay roughly $124,000 more for a $150,000 fixed-rate, 30-year mortgage
- 43% of files had conflicting information from Equifax, Experian and TransUnion concerning how many times a customer was 30 days late on a payment
How Do Mistakes In Your Credit File Occur?
Many errors in your credit report revolve around the fact that the information listed about you is not complete, is not updated, or actually describes someone else. Mistakes in your credit file can happen in any number of ways, but most of them are the result of human error. For instance, you might accidentally give someone the wrong social security number. Or maybe an administrative assistant or salesman read your social security number incorrectly on an application, or typed it in wrong on a computer.
In other cases, errors in your credit file can occur if you apply for credit under different names (i.e. William Johnson, Bill Johnson, etc.) Sometimes family members get their credit histories crisscrossed, as when a Joe Jones Senior finds that his credit file erroneously contains some of Joe Jones Junior’s credit information. “It’s amazing how many times Juniors and Seniors get mixed up,” said Fair Isaac’s Sjoblad, who also used to work for a credit-reporting company, and saw credit file errors first-hand.
Next – Day 8: Dispute Any Inaccuracies In Your Credit File (Part 2)
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