May 07

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Credit Report Errors Can Lead to Increased Cost of Debt

A recent study by the Federal Trade Commission (“FTC”) revealed that 20% of the over 1000 consumers who participated had an error on at least one of their three credit reports.  Even more troubling is that 5% of consumers had errors of such significance that it could cause them to overpay for certain products, such as auto loans and insurance.

Additional findings include the following::

  • “One in four consumers identified errors on their credit reports that might affect their credit scores;
  • One in five consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports;
  • Four out of five consumers who filed disputes experienced some modification to their credit report;    
  • Slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report; and
  • Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.”

The study highlights the need for self-review of credit reports on a regular basis.  Although a copy of a credit report is often provided when requested by a potential lender, such as in connection with a mortgage, the time and effort to correct the error may cause a delay or even a refusal of financing.  Until processes show significant improvement, consumers should be proactive to make sure their reports are accurate before they are relied upon by others.  Consumers have the right to a free copy of each credit file annually, available though www.annualcreditreport.com.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2013/05/credit-report-errors-can-lead-to-increased-cost-of-debt/

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