40 Million Credit Report Mistakes: CBS News Investigates the Credit Reporting Agencies

Data collected about us rules our lives. Our driving records, search engine history, online purchases and credit history are bought and sold every day. And, decisions about where we live and where we work are often made based on the information in our credit reports. But, a new report from 60 Minutes indicates that the information about our credit can have significant problems. According to their research, 40 million Americans have errors on their credit reports.

What Kinds of Errors Show Up on Reports?

One in every four consumers has some sort of error in their credit reports. Around five percent of consumers have an error that can reduce their credit scores.

Common serious errors include:

  • Paid accounts appearing as delinquent.
  • Closed accounts showing as open.
  • Bad debts that belong to other people who have similar names or Social Security numbers.

When errors like these show up, they can mean paying a higher percentage rate on your mortgage, auto loan or credit card, being denied a loan or failing to get a job that you are qualified for. If these serious errors exist in your report, the lost opportunities can cost you tens of thousands of dollars over a period of years.

What Happens When You File a Dispute?

When you find an error in your credit report, the current remedy is to file a dispute. And, every year, eight million people file disputes about their credit reports. Usually, you have to do this by either mailing a letter, calling a toll free number or visiting the credit reporting agency’s account. The websites are geared more toward selling products and are not always efficient for disputing reports. When you make a call, you are often connected to a person on another continent who does not have the authority to make the needed changes on your account.

If you dispute an error by mail, your request will often go to an office in India, Chile or the Philippines. Investigative reporters with 60 Minutes interviewed dispute agents who had worked for Experian. The agents said that the processed around 90 disputes per day and that they had few options for investigating disputes. They did not have the power to contact the people involved via email or phone. They could only study the documentation that they had and give it a two digit code for complaints such as “not mine” or “never late.” Those were then sent with a brief summary back to the department store, bank or other creditor who originated the information. In general, these disputes were settled in favor of the creditor.

A number of legal credit experts say that they find these practices lack transparency and may not be in compliance with federal law.

Saving Your Credit from Errors

The first step you can take is checking your credit report regularly. You are entitled to a free report from each of the three major reporting agencies once every 12 months. You should also request your report immediately if you are denied credit. Often, resolving the error can be difficult on your own. If you are having problems, contact us to learn more about how we can put our expertise to work updating and correcting your report to get you the credit you have due.

home insurance.

Home Insurance Costs – How Credit Will Impact them.

Impact of Scores on Home Insurance CostsYou already know how important a good fico score is to getting approved for loans and securing the best interest rates available for them. But you probably didn’t realize the impact it has on your home insurance premiums.

Yes, contrary to what you may have heard elsewhere, your credit score has a direct effect on how much you pay for homeowner’s insurance. For instance, according to PropertyCasualty360:

  • Homeowners with bad credit pay up to 91 percent more in home insurance premiums than those with excellent credit.
  • Homeowners with average or good credit pay almost 30 percent more than those with excellent credit.
  • The FICO score is used by about 85 percent of the nation’s home insurance providers in determining risk.
  • West Virginia, Washington D.C., Ohio and Virginia are where there’s the biggest discrepancy between premium costs for those with poor vs. excellent credit.
  • California, Massachusetts and Maryland are the three states that prohibit insurers from weighing credit scores into home insurance premiums.

Now there are a lot of factors that also determine an insurance premium (i.e. age of the home, proximity to water, crime rates, etc.), but it’s not unreasonable to think that someone with excellent credit could save hundreds of dollars per year compared to someone with poor credit when it comes to home insurance. Say for example that a homeowner with excellent credit pays $1,000 a year for home insurance. That same homeowner with poor credit may pay $1,910 per year – a whooping $910 more just because of their credit score.

So just why is your credit score weighed so significantly when you’re shopping for home insurance? It’s because creditors have found that the credit score is a great predictor of risk. Therefore, it’s implied that those with poor credit are more likely to file a claim than those with excellent or good credit. It doesn’t matter whether it’s fair or not – it’s a fact that your credit score is a big influencer on your insurance policies.

So if your credit score is lacking, you’re likely paying out the nose on your home insurance as well, making debt management and working to repair credit all the more important. Here are some credit tips on how to increase your score – and thereby save:

  • Pay bills on time: This accounts for 35 percent of your FICO score, making on-time payment key.
  • Get finances in order: If you can pay down your debt so that it’s around 30 percent of your total credit allotment, you’ll see your score rise.
  • Check your credit: Get into a habit of occasionally checking your credit report and looking out for any errors. Errors are common and can negatively impact your score,  so if you notice any discrepancies, contact that party and set the record straight.
  • Don’t go crazy: Don’t think that closing a paid off account is the answer to credit repair. In many cases, it won’t. Why? Because when you close an account, you also reduce your total credit allotment. Conversely, opening new accounts to increase your allotment isn’t a great credit repair solution either – especially if you run those amounts up.

As you can see, a good credit score is very important for much more than just qualifying for loans at low interest rates. For additional information feel free to contact our office at 617-265-7900, or schedule a free consultation below.