A while back, I noted that the FTC was going to conduct a study of credit report errors to see how well the credit bureaus (and creditors) manage the vast amount of consumer financial data.
And just two short years later, we finally have some results from the 1,001 participants who took part.
After combing through 2,968 credit reports (you have three credit reports, one from each major bureau), the FTC found that just five percent of consumers had errors that could result in “less favorable terms for loans.”
While they downplayed the mistakes often cited in media reports, consumers weren’t as forgiving.
One in Four Found a Mistake
Roughly one in four participants (26%) identified errors in their credit reports that they thought might affect their credit scores.
Of course, consumers don’t always seem to know what actually affects their scores.
That’s right; only certain stuff affects your score, though it doesn’t mean that every detail isn’t important.
Other issues, such as incorrect addresses or aliases, could lead to problems if underwriters take a closer took at your credit report and don’t like what they see.
Still, of the 206 consumers that had something modified on their credit report, only 129 participants experienced a change in score as a result.
Additionally, of those who experienced a score change, the maximum change in score for over half was less than 20 points.
Again, this shouldn’t deter you from disputing errors on your credit report. If there’s something reporting in error, you should address it, regardless of whether you think it hurts you or not.
As noted, many people don’t know exactly what affects their score, and even seemingly innocuous items can come back to bite you, especially when applying for more serious loans like auto loans and mortgages.
And four out of five consumers who disputed something received a modification of some sort, so your requests won’t fall on deaf ears!
Looking at the Numbers
– 1,001 participants
– 2,968 credit reports
– 572 credit reports disputed
– 399 credit reports were modified
– 211 credit reports saw a score change
– 29% saw a score increase of 25 points or more
– 61% saw a score increase of 10 points or more
– 31% saw a score increase that moved them to a lower risk classification tier (5.2% of all participants)
That last figure is most important. Of all 1,001 participants, 5.2% who successfully disputed an error saw a meaningful score change that resulted in a lower interest rate being offered on an auto loan.
They used auto loan as an example, but it could translate to a lower mortgage rate, lower credit card APR, a lower insurance premium, and so on.
For the record, the main types of disputes involved tradeline information, followed by collection information, and then errors in header information (such as address, age, or employment).
Keep an Eye on Things for Free
If you want to check your own credit reports for errors, there’s only one place to get a credit report without a credit card or any strings. That’s at AnnualCreditReport.com.
If you want to be thorough, you should download all 3 credit reports at once and comb through each for any errors.
From there, you’ll want to dispute any items on your credit report at the credit bureaus’ websites. It’s actually pretty easy thanks to the Internet.
Going forward, you can also monitor any major changes to your credit history by using free services such as Credit Karma or Credit Sesame.
They’ll give you monthly updates of your credit score, and any major movements will indicate that something needs to be looked at more closely.
This is a great way to keep watch without paying a dime.
Read more: See where your credit score ranks.
(photo: Nick J Webb)
Oh the humanity!