How Credit Bureaus Correct, Or Fail To Correct, Errors On Your Report

SmartMoney’s Anne Kadet looked into the process by which the three major credit bureaus—Experian, TransUnion, and Equifax—investigate and correct errors on credit reports. What she found was that the process is “almost entirely automated,” and that “many lenders respond by simply rereporting the erroneous data.” Here’s how it works, and your meager options when something goes wrong.

So how do mistakes show up on your credit report in the first place? Some problems can be attributed to false matches by algorithms, and human error by data entry employees:

If the name or Social Security number on another person’s account partially matches the data on your file, the computer might attach it to your record. The credit bureaus also employ contractors who gather tax lien and bankruptcy data from courthouses and government offices. If these workers transpose a digit or misread a document, their error winds up on your report.

Many of the remaining errors come from mistakes made by lenders or other businesses that report information to the credit bureaus (like a bank that assumes you’re dead, in one real life example used in the article).

Bureaus usually contact lenders whenever there’s a dispute—but to save money, they funnel the disputes through outsourced data processing centers where actual human workers are expected to spend a fraction of an hour on each case:

Here’s where the trouble begins. Rather than call the lender or send it the consumer’s letter and supporting evidence, the bureaus zap the documents to a data processing center run by a third-party contractor. This system yields considerable savings. Equifax reduced its per-dispute cost from $4.50 to 50 cents by outsourcing the work to Costa Rica and the Philippines, for example. But consumer advocates say these workers are under enormous pressure to process disputes and forward them to lenders as quickly as possible. While the bureaus say quality is the overriding factor, employees deposed in civil suits describe a harried pace. One TransUnion manager testified that workers were expected to complete up to 22 cases an hour. An Equifax worker estimated she was allotted four minutes per dispute. To process the letters so rapidly, the workers summarize every complaint with a two-digit code selected from a menu of 26 options. The code “A3,” for example, stands for “belongs to another individual with a similar name.” The worker can also add a single line of commentary. The two-digit code and short comment is the only information the lender receives about the dispute.

Consumer advocates say these summaries omit the background banks need to understand a complaint, and banks agree.

Currently, there are only a couple of ways to get around this broken robot system. The first is to contact your lender directly, which can be hit or miss because they’re only required to investigate the dispute if a credit bureau asks. The second is to try to bump your case up to VIP treatment—where it might actually receive some human oversight—by getting a politician, judge, lawyer, celebrity, or member of the media involved.

We frequently suggest you should read the full linked article when we write about something, but in this case, you really should, because it has so much illuminating, infuriating info about the credit bureaus that will remind you of just why we need to change the laws governing credit reporting.

“Why the Credit Bureaus Can’t Get It Right” [SmartMoney] (Thanks to Chris!)
(Photo: hassan1980)

Comments

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  1. nicemarmot617 says:

    Yep. I have a fraudulent “past due” loan on my credit report. When I disputed it, they just asked the loaner who committed the fraud in the first place if it was real! Gee, how helpful.

  2. sleze69 says:

    This describes exactly how my dispute with Verizon wireless went. I repeatedly disputed an erroneous ETF with all 3 credit bureaus but Verizon kept saying it was valid without providing any evidence.

    Although I can afford to pay it off, it is the principle that drives me. The hit will be off my credit in August.

  3. Coles_Law says:

    “People talking to people? That’s the last thing consumers want,” says Experian’s Maxine Sweet

    No more calls please-we have a winner.

  4. scoosdad says:

    If I take it to Judge Judy, does that count as a judge or a celebrity? :-)

    Seriously though, who takes a credit report dispute to a celebrity? Suggestions? Examples of it being done successfully?

  5. Mistrez_Mish says:

    Persistence + EECB = Problem solved

    It worked for me.

  6. Trotsky says:

    This is the saddest damn thing. I have been fighting this crap since 2006 when the business I was at died and since I had corp cards for business use it was decided that the corp cards are now responsibility of ALL the former employees. Gee, how nice. And of course the CRAs are about as worthless as can be.
    Even lawsuits do not seem to be working as the OC, JDBs, and others sell them off then respond to the court that they have never heard of ANYTHING like that. What a slimey, shitty business these people run.

  7. Goatweed says:

    I have what I consider an “error” on my report – I mistakenly make a mortgage payment to my heloc account (same bank). I caught it two weeks later when the heloc statement came but I guess since it was past the 15 day limit, it was considered late on the mortgage side. I guess I need to contact the bank and see if they’ll correct this, since they got the funds just to the wrong account.

  8. concordia says:

    That picture is emotastic.

  9. Eyebrows McGee (now with double the baby!) says:

    I’m counting down the days until I can check my credit report — I want to give it time to report. My student loan lender didn’t send me a January statement. I went online, and there was no January statement available online. I attempted to contact the lender, who gave me no info. I attempted to make a January payment, but since there was no January statement, it wouldn’t let me.

    Then on the 26th (my usual due date), it marks me delinquent. I manage to get them to let me make a payment by phone and count it for January now that it’s showing delinquent even though there is STILL NO JANUARY STATEMENT. After two days of go-rounds including with an automated e-mail system that just keeps responding to keywords in my e-mails that have nothing to do with the actual question, they finally inform me that there was a “system glitch” and that’s why I received no statement and wasn’t allowed to make a payment, but they will sill be recording it as delinquent.

    I. AM. FURIOUS.

    I’m also pretty sure this means my rate goes up a quarter-point since I’m no longer a “perfect payer.” Nobody seems at all put out that I was NOT ALLOWED to make a payment by their system and that it’s only because of THAT that I was delinquent, that I spent almost two weeks ATTEMPTING to make the payment I knew was due while they kept insisting I couldn’t because the system wouldn’t accept it, and that now everyone is insisting they can’t change the status in the computers because the computers are apparently in charge. They don’t even seem to understand why I’m upset! If it reports to the credit bureaus, I will have a shit-fit.

    • heybtbm says:

      @Eyebrows McGee: I switched from paper statements to automatic withdrawls on my student loans last year. Due to a processing delay, I was late on each loan for the first month (they didn’t withdraw on the date they said they would). When I checked my credit report 6 months later, all payments were marked as being paid on time. In short…don’t worry too much. Not all creditors report back to the credit agencies instantly the day after you’re “late”. Mortgages…probably. Student loans…not so much.

    • oneandone says:

      @Eyebrows McGee: My student loan payment date moved up, and I noticed it 2 days after it was due. I promptly freaked out, paid, and called them. They said they don’t count it as really delinquent until it’s 30 days past due.

      I’m sure practices vary, but I’ve found student loan companies to usually be more forgiving (and human?) than credit card companies.

      HOWEVER, I lost that sweet .25% reduction by missing my first payment, which shouldn’t have been due anyway, since I was in grad school and it was automatically deferred but either my school or their system misprocessed something. Very annoying.

      Hopefully there won’t be any penalties for you because of their error! Student loans and a baby on the way – that’s more than I could handle! (Babies are planned for when the student loans are history. Yay 2010!)

      • Eyebrows McGee (now with double the baby!) says:

        @oneandone: My student loans won’t be history until about when my baby goes to college. Yay law school! LOL

        We paid off the commercial ones and got the federally-subsidized ones down to a manageable level where we felt comfortable with their portion of our income … then we said, “Let’s procreate like bunnies!”

  10. bohemian says:

    I saw how bogus the dispute system was a few years ago. Some sketchy collection agency decided I owed Verizon a couple hundred dollars. Never mind I have only had one account with Verizon, it is still active and in good standing. Verizon swears they never sent anything to the collection agency and has no record of an unpaid account. The credit reporting agency it showed up on claims the debt was verified by the collection agency.
    It is blackmail.

  11. Blueskylaw says:

    Remember the Salem Witch trials?

    Nothing was changed until the Judges family was affected. Then change started to happen.

  12. Donathius says:

    My mother actually ended up with my aunt’s bank info on her credit report. Their first names were vaguely similar while their last names are the same. However there was no address commonality between them. At least that one was easy to clear up.

  13. twophrasebark says:

    The problem are the weak laws the CRAs have lobbied for and gotten.

    The CRAs are under no legal obligation to determine whether or not the information on your credit report is correct. They are simply obligated to ask the source of the information: “Is this correct?”

    So even if you are being reported as having had a mortgage from when you were eight years old, if ABC Mortgage verifies that, then the CRA will report it. The CRA doesn’t care if you have a video from a guy twirling his mustache and saying “Ha ha ha! I report false credit information to the credit bureaus! Bwhahahhahaha.”

    They don’t care.

  14. LawyerontheDL says:

    I had the same problem with Verizon. A false charge off debt that wouldn’t go away. I disputed it several times and every time it was confirmed as accurate. I sent a copy of the cancelled check to Verizon and they wrote back said my account was delinquent…and that they didn’t have to give me any further information —- Whaaat? So, I sued them. The suit is still pending, but it’s pretty pathetic that it had to come to this.

  15. sapere_aude says:

    A year or two ago I checked my credit report and for some reason I had one of my mother’s credit card accounts showing up on my credit report. I believe it was only on the TransUnion report. The funny thing is that the account was opened in 1987 and I was born in 1984. According to them I received my first credit card at age 3. I filed a dispute and they sent back a letter saying that the account was verified and my dispute was rejected. Good to know that they spent a whole $0.50 and approx. 2.7 minutes investigating my claim.

  16. Anonymous says:

    Isn’t erroneous information easiest to clean up as soon as the report is made to the CRAs?

    With this in mind, wouldn’t it be both simple and fair to require them to send a notification to your address (I’m guessing they can figure out where they should send it. Last known? The one associated with the most accounts?).

    The notification shouldn’t reveal anything (i.e., don’t send SSN info, or account numbers, or anything goofy like that); but, they should just be required to *attempt* to notify you that negative information has been received.

    Those who care would take immediate action (which would actually generate *more* revenue for the CRAs). Those who don’t wouldn’t.

    Granted, you can already get free annual copies; but, I’ll bet most errors are easy to clear up 2 weeks after the fact, rather than 10 months later.

  17. oneandone says:

    I have erroneous error on my credit report (2 of them!) that is more comical than frustrating – my aunt is reported as my spouse. (I am female – that makes it extra comical!)

    I currently have no spouse. She co-signed on a student loan for me. I had no idea that makes us married.

    Hopefully this won’t cause trouble for me if I ever do get a spouse…… perhaps they’ll note me down as a polygamist.

  18. NikkiSweet says:

    I have an apartment complex reporting me as owing them 36k in 2 different apartments… except neither of the apartments was the one i lived in, and I legally broke my lease and paid all the fees required to do so. I’ve submitted proof to equifax and experian, transunion won’t even respond to me, and they just reverify the debt with the apartment complex.

    I’ve called the company directly, and tried to work it out with them, they tell me that they’re only reporting one instance, and they’re reporting 2k…. they won’t tell me what that 2k is for, or provide me with any documentation telling me what it’s for, so I refuse to pay it. I figured oh well, it’ll go off my credit in another year, what the hell…

    except now, they’re re-aged it.

    the whole credit rating industry is a farce.

  19. FDCPAGuy says:

    Ok let me offer some advice:
    1) If you have a company reporting erroneous information on your report which you are in good standing with (not a collection company) call them. Ask them to correct it, correct the tape, and push through an AUD/eOSCAR/Bullseye update. Also get a letter from them on letterhead with the account number and date stating what correction action was being taken.

    2) If you have someone else’s information reporting on one specific bureau, for example TransUnion has a ton of accounts for someone else, it’s due to a variance on your file. You’ll need to call them and have them standardize your file. They have dedicated phone numbers for this I have at work and not on me right now.

    3) If you’re working with a lender (like a mortgage lender) they should have a team which deals with credit issues and can order rapid rescores to correct them. They will need your help in getting documentation to go force a bureau update.

  20. meehawl says:

    Near the end of this article it sums up the problem quite nicely: “You have no right to an accurate credit report,” says Lyngklip, the attorney.

    The US is a privacy hostile culture, and favours the rights of corporations over citizens especially when it comes to monitoring and surveillance. In the EU, by comparison, the idea of “data privacy” is a consequence of the idea of a citizen’s right to personal liberty and control over their personal data as an extension of themselves. Hence various statutes exist to help people maintain control over the extent and accuracy of data about them held by corporations and under what conditions this data can be shared. Basically, it’s “opt-in” rather than the US’s “opt-out (as if you could)”.

    It’s not perfect, but it helps when dealing with arseholes like Equifax et al.

    [en.wikipedia.org]

  21. bobert says:

    Having spent many, many hours over the last few years straightening out the fictions in my credit reports, I have two very simple proposals:

    1. There should be an independent government agency to whom you can appeal when you find errors on your credit report. This business of the credit bureaus and their customers being judge, jury, and executioner is crap.

    2. If you dispute an item on your credit report, and the independent agency upholds it, the credit bureau should have to send you some money. It doesn’t have to be a lot – $10 or $20 would suffice. In any one case it wouldn’t be much, but in aggregate it would probably run to hundreds of millions of dollars a year. Then the credit bureaus could try to collect from the folks who reported bogus info.

    I suspect that would provide a lot of incentive for these jokers to get their act together.

  22. Blue says:

    The fact that you cant sue for Liable for this is a travesty of justice!!

  23. Anonymous says:

    My Wachovia student loan was reported twice, thereby doubling my debt. I didn’t have a clue which of the two to dispute, as I caught it before repayment began and the amounts on each were equal. I took a guess, disputed one, and Equifax told me it was the real one. I guess the note I attached to my dispute explaining my situation wasn’t read in the 4 minutes these poor Equifax workers get to process each claim. Once I get the energy I’ll just have to protest the other Wachovia loan, which has to be the fake one. *sigh*

  24. rlee says:

    Sounds familiar. Someone in a distant state apparently had my SSN on his utility account, so TransUnion brilliantly put his name, address, and account information on my records. Repeated calls, letters, web forms got me nowhere; TU simply confirmed that “the information was correct” without so much as telling me why they were convinced we were the same person. I finally wrote the utility company directly (and TU’s CEO). The former quickly acknowledged the error and that finally was the end of that. Thank God, and damn TU.

  25. Swearengen says:

    One of my student loans was through my college, and then they handed the loan over to a processing company. Well, I went to law school and was in deferment, when all of a sudden the loan for my last year of law school was 11% rather than the 6% I had been getting. I pulled my credit report and found that the loan servicer reported me as delinquent on the loan, even though I was in deferrment. It took me about a year and a half to clear this up, but eventually I did. However, I’m still stuck with that 11% loan, which can’t be consolidated. So, I’m still screwed.

    As for fixing the problem. I initiated a report 3 times with Trans Union saying that there was a problem. They came back all three times saying there was nothing wrong. Eventually I had to contact my old school and the loan processor, with copies of all my documentation, to get them to tell Trans Union that there was a mistake. The school and the processor tried to pass the buck between them, but the threat of a lawsuit helped, and eventually trans Union fixed the error.

  26. Anonymous says:

    I’m shocked at how much this automated system can realy mess your life up. I deal with people at Narconon Vista Bay who depend on getting money to pay for rehabilitation services. That will ultimatley save there lives from drug or alcohol addiction. The idea that a robot or cheap unconcerned employee could ruin your chance at a fresh start.