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.