Financial Privacy & Security News

SEATTLE—One in four credit reports contains errors serious enough to cause consumers to be denied credit, a loan, an apartment or home loan or even a job, according to a new survey released today by the Washington Public Interest Research Group (WashPIRG).

"Most people don't even find out that their credit reports contain errors until it is too late-when they have lost the loan, been denied the mortgage, or been turned down for an apartment," said WashPIRG Executive Director Robert Pregulman.

Three national credit bureaus, Equifax, Experian, and Trans Union, collect and compile information about consumer creditworthiness from banks, creditors and from public records such as lawsuits, tax liens and bankruptcy filings. The so-called "Big Three" each maintain a file on nearly every adult American. The resulting credit report amounts to a consumer's financial résumé. The credit score calculated from this report is a consumer's financial SAT.

Over the last decade, the state PIRGs and other consumer organizations have issued numerous reports showing that sloppy credit bureau practices are at fault for errors in consumer credit reports.

"These Big Three credit bureaus make billions of dollars selling a faulty product that jeopardizes the good names of one in four consumers," said Pregulman. "Their reports could mix you up with a total stranger or fail to report that you've paid off a loan or debt. When that happens, you either pay too much for credit, or get denied credit, insurance, a home or a job."

The survey analyzed 200 surveys collected from adults in 30 states who reviewed their credit reports for accuracy. Key findings include:

- Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;

- Seventy-nine (79%) of the credit reports contained mistakes of some kind;

- Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;

- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.

In December 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACT Act), which included the right to a free annual credit report on request and a number of provisions designed to improve the accuracy of credit reports. On June 4, the Federal Trade Commission finalized its rule for implementing the new consumer right to a free credit report, rolling it out over a nine-month period, beginning on the west coast, including Washington State, in December 2004 and finishing on the east coast in September 2005.

According to the report, the best way for consumers to limit damage to their credit record is to order a copy of their credit report from the three national credit bureaus every year to identify and correct inaccurate information before it causes problems.

"Washington citizen should all mark their calendars now to call the credit bureaus in December to get their free credit reports," advised Pregulman. "That's the best way to see if your credit reports contain any errors and ensure those errors are corrected as quickly as possible."

Consumers who have recently been denied credit, are unemployed or collecting benefits, or believe themselves to be victims of identity theft or fraud may receive a free copy of their report immediately. If you don't want to wait until December, you will pay about nine dollars for a report until the Federal Trade Commission fully implements the new law.

WashPIRG called on the Washington Legislature to go beyond the FACT Act to protect consumers' financial privacy and ensure the accuracy of credit reports. Specifically, WashPIRG asked the Legislature to:

1. Strengthen a consumer's private right of action to seek redress through the courts when a credit bureau or a creditor fails to protect personal information or to comply with an investigation.

2. Limit or prohibit the use of a consumer's Social Security number.

3. Give consumers more control over who has access to their credit reports, including better information about when their reports are accessed or when negative information is added to their reports and the right to control the use of credit scores for insurance purposes.

4. Give identity theft victims more power to clear their names more easily.

"The most common reflection of our reputation as a trustworthy consumer is our credit report, but one in four reports is seriously flawed," said Pregulman. "Consumers have to check up on the credit bureaus to make sure they are telling the truth about us. The Washington Legislature should do everything in its power to make sure these credit reports tell a true story."

WashPIRG is a statewide public interest advocacy organization that has been in Washington since 1976.