Serious errors plague one out of three credit files in America.
Or maybe it’s one out of 500.
That’s how far apart the industry and its critics are in answering a key question: How accurate are the nation’s credit reports?
“Riddled with errors,” says the U.S. Public Interest Research Group, which in 1997 asked staff members around the country to order their credit reports and look for mistakes. The group reviewed 133 files and said 29 percent contained serious errors, such as delinquencies and credit accounts that didn’t belong to the consumer.
Years earlier, a survey of 161 reports by Consumers Union found serious mistakes in 19 percent of credit reports and at least a minor error in a whopping 48 percent of files.
But the credit bureaus say that those surveys are far too small to be reliable and that the findings are absurd.
“If that’s true, if they’re saying half of all credit reports have errors, then jeez, these banks are awful lucky. Because there’s no way that they can make money on files where half of them are wrong,” said Norm Magnuson, vice president of public affairs for the Credit Data Industry Association, the leading trade group.
The industry instead clings to a 1991 study of more than 15,000 loans that concludes a mere 0.2 percent of credit files had errors serious enough to result in a denial of credit.
“It’s the only scientifically based, empirical study out there,” Magnuson said.
It was also performed by Arthur Andersen, the now-disgraced and defunct consulting firm. And, every step of the way, the study is tilted in favor of the bureaus.
The report considered a credit file inaccurate only if the consumer requested a copy of his or her credit report (92 percent never did), the consumer subsequently filed a written dispute, the dispute was resolved by the time the study was completed, the bureau found in favor of the consumer and a lender said the change would have been great enough to overturn the decision to deny credit.
Moreover, the study — now 12 years old — was performed before federal law permitted lenders to charge different rates to consumers with better or worse credit. The question is no longer just whether consumers would be turned down for loans, but is instead: How many would be charged unfairly high rates?
The industry can’t say. And while the question is central to the reliability of the nation’s credit system, it’s not clear that the bureaus are particularly interested in knowing the answer.
Although none of the bureaus will give detailed information on their complaint volume, a
TransUnion official acknowledged in a deposition in late 2001 that her company receives 4,000 written disputes a day in its East Coast office, plus thousands more by phone or in the West Coast office. But she said the company maintains no record of how many of those disputes ultimately reveal errors in credit reports.
“They don’t measure that,” said Eileen Little, a group manager in charge of TransUnion consumer-relations department in Crum Lynne, Pa. Little said that because all disputes must be reinvestigated, “it doesn’t make a difference” whether the dispute is accurate, so the company has no reason to track it.
Christopher Kittell, a lawyer in Clarksdale, Miss., isn’t surprised the bureaus haven’t tried to measure their own accuracy.
“They don’t want to do a report that I can get, or another plaintiff’s lawyer like me can get,” he said. “They just do not want to do that.”
Several years ago, Trans-Union looked at how many repeat complaints they get from consumers — which might offer a window on the accuracy of the company’s initial investigation process. Little said about 10 percent to 15 percent of all disputes were repeat disputes, but she couldn’t give details of the study.
And she could not produce the report.
“I don’t know that I would still have that,” she testified. “When we were moving, I got rid of a lot of stuff. I don’t know if I kept that or not.”