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Credit reports – more accurate than you think?

May 6, 2011

It is an article of faith among many consumers and consumer-rights groups that credit reports created by the “big three” credit bureaus (Experian, Equifax, and Trans Union) are rife with errors.  Most news articles that discuss credit reports will at some point claim that a significant percentage of them are seriously inaccurate.  Here is a typical example:  an article which claims that 25% of credit reports have “a serious error”:

http://www.bankrate.com/brm/news/cc/20010906a.asp

The fact that credit reports can be inaccurate is not news.  When Congress passed the FCRA, it recognized that there were a whole host of reasons why credit reports could contain mistakes:  a data entry clerk could mistype something; a wife who takes her husband’s surname might get confused with someone else with her maiden name; fathers and sons who are junior and senior can get mixed; et cetera.  This is why the FCRA does not mandate a certain level of accuracy but instead just requires “maximum possible accuracy.”  15 USC Sec. 1681e(b).

What is news is that while credit reports may contain errors, few of them may in fact contain “serious errors” – far fewer than the 25% claimed in the article above.  A new study – albeit one funded by the credit reporting industry – suggests that only 0.93% of credit reports had an error that would have changed the credit score by 25 points or more:

http://www.mint.com/blog/trends/report-on-credit-report-accuracy-05232011/

If the older claims (that 25%  of reports have serious problems) were true, then the FCRA’s failure to mandate a certain level of accuracy might be seen as harmful to consumers.  But if the new claim (that less than 1% of reports have such problems) is true, then the FCRA’s focus on reasonableness and on “maximum possible accuracy” makes a great deal of sense.

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