For years, Americans have been told that our credit score is the most important number in our financial lives. A good or bad credit score can determine not only whether or not you can get a loan but also whether you can get a job – or even a date.
But a new study by the Federal Trade Commission (FTC) finds that 20% of consumers have errors on their credit reports and 5% of consumers found errors that might affect their credit scores.
“These are eye-opening numbers for American consumers,” Howard Shelanski, director of the FTC’s Bureau of Economics, said in a statement. “The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”
A 60 Minutes story on the FTC report Sunday night seemingly called into question the integrity of the credit reporting industry and suggested industry leaders Equifax, Experian and TransUnion make it extremely difficult to get errors fixed.
But the Congressionally-mandated report also revealed that 20% of consumers had an error that was corrected by a credit reporting agency and 80% of consumers who filed disputes experienced "some modification" to their credit report.
“I think for the most part, for most people [the credit scoring system] works,” says Gerri Detweiler, director of consumer education at Credit.com, an independently owned and operated resource for information about consumer finance. “The vast majority of mistakes are pretty easy to fix” and the industry is generally responsive.
But it’s an incredibly serious and frustrating situation for the relatively small percentage of people with serious errors on their credit reports, Detweiler says. “As you can imagine those are the most frustrated consumers because they can fight for years to try to get something fixed and that can really affect your financial life.”
In the accompanying video, Detweiler joins me to discuss the FTC report and give a step-by-step guide of what to do if you find or suspect an error on your credit report:
- Order current copies of your credit report: “Since these [credit reporting] agencies don’t share information with one another, you can’t assume that the same mistakes — or lack of them — appear on all your reports,” she writes.
- Dispute the mistake: If the error is serious, put your dispute in writing (and send via certified mail) but “keep it short and sweet,” she says.
- Wait for a response.
- Escalate your dispute (if the initial response is unsatisfactory)
- Talk with a consumer law attorney. "The Web site of the National Association of Consumer Advocates is a good place to start," she says.
- Keep records of your dispute.
- Monitor your credit reports: Less than 25% of Americans check their credit report each year, Detweiler notes, citing data from the Consumer Financial Protection Bureau. “That means a lot of people just don’t know.”
And when it comes to your credit report, what you don’t know can hurt you.