USA Today Fixing errors in credit report is no small task

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By Sandra Block, USA TODAY

Someone used Tyrone Davis' personal information to take out a student loan for a technical school in Baltimore, then defaulted on the loan. Now, Davis can't get his credit record straightened out.
"My whole life is messed up," says Davis, 41, of Richmond, Va.

Davis, who works nights as a floor technician for Wal-Mart, says he gets at least two calls a day from a debt-collection agency. He's planning to get married in May and would like to buy a house, but he can't get a mortgage.

As of Sept. 1, everyone in the USA can get a free credit report from each of the major credit-reporting agencies once a year. Many people are going to find mistakes on their records. But for some, identifying a problem is just the start of a long, hard fight to get the record corrected.

Navigating the credit report correction maze

Under the Federal Credit Reporting Act, credit-reporting agencies and companies that provide information about you are responsible for correcting inaccurate or incomplete information, according to the Federal Trade Commission. Tips on disputing mistakes on your credit report:

Put it in writing. The credit-reporting agencies allow you to dispute errors online, by phone or through the mail. If the error is serious, write a letter and send it via certified mail, says Leonard Bennett, attorney with Consumer Litigation Associates in Newport News, Va. Include copies — not originals -of supporting documents, such as police reports and handwriting samples.

The letter should include your name and address, and identify each item in the report you dispute, according to the Federal Trade Commission. Explain why you dispute the information and request that it be removed or corrected, the FTC says. You might want to include a copy of your report with the items in question circled.

Send a letter to the lender or business that provided the inaccurate information to the credit bureaus. Include copies of documents that support your position.

Keep good records. Create a folder for each of the credit-reporting agencies, says Evan Hendricks, author of Credit Scores & Credit Reports. Keep a log of all communications. This can be time-consuming but will help ensure the credit bureaus meet their deadlines for investigating complaints, Hendricks says.

If you're unable to resolve the dispute, you can ask that a statement be included in your file and future credit reports. However, if the error has reduced your credit score, the dispute letter won't change it, Hendricks says.

If a credit bureau refuses to remove inaccurate information from your file, the Fair Credit Reporting Act gives you the right to sue. Look for an attorney with experience in bringing Fair Credit Reporting Act cases. You can search for attorneys through the National Center for Consumer Advocates, www.naca.net, or the National Consumer Law Center, www.nclc.org.

Beware of "credit repair" businesses that claim they can remove negative information from your report that is true. Only time can erase such blots from your report. A credit bureau is permitted to leave negative information, such as late payments, on your report for seven years, according to the FTC. A bankruptcy filing will remain on your report for 10 years.

By Sandra Block





The time-consuming battle can lead to frustration and anger. But beyond that, it can put a hold on a person's life.

Davis says he can prove he never took out the bad student loan on his record, but no one is interested in the evidence.

He "didn't go to the school, he didn't sign the loan, he didn't co-sign the loan," his attorney, Jason Krumbein, says. "He's largely unable to obtain credit anywhere. Not even a cellphone."

The process of correcting errors on credit reports is "Kafkaesque and Orwellian," says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "Count on it taking a long time."

Problems with credit reports are not uncommon, consumer groups say. A survey last year by the U.S. Public Interest Research Group found that 79% of credit reports contained errors, and 25% contained mistakes serious enough to prevent the individual from obtaining credit.

The credit bureaus — TransUnion, Equifax and Experian — dispute the PIRG survey results but say the volume of data they manage makes some mistakes unavoidable. They maintain 210 million files and update 4.5 billion pieces of data per month, says Norm Magnuson, spokesman for the Consumer Data Industry Association, which represents the three credit-reporting agencies.

The CDIA says about 80% of disputed credit reports are resolved within 10 days. But complicated errors can take months — sometimes years — to erase, Mierzwinski says. They often require dozens of phone calls and letters, and in some cases, lawsuits, to resolve.

Peggy Schmitt, 41, has gone to court to try to prove she isn't dead.

In 2002, her credit card was rejected by a Minneapolis restaurant. In the next few months, her problems spread. She was unable to refinance her mortgage or buy a car. Lenders wouldn't do business with her because her credit reports said she was dead, an error stemming from the death of a woman with a similar name.

Schmitt, of Minneapolis, couldn't convince the credit reporting agencies that she was alive. "It was extremely frustrating," she says.

FICO woes

Not being able to correct a credit report error can cause a host of problems. Among the biggest and most costly: Unresolved errors can hurt a consumer's FICO score, the mathematical model used by lenders to gauge the likelihood a borrower will repay a loan.

The lower a FICO score, the higher the interest rate the borrower will be charged. That means a higher monthly mortgage payment.

On a $150,000 fixed-rate mortgage, the average interest rate for a borrower with a FICO score of 760 or higher is 5.48% according to Fair Isaac, which developed the FICO score. For a borrower with a FICO score of between 620 and 639, that average interest rate climbs to 7.07%. That translates to a mortgage payment that is $155 a month higher for the low-score borrower.

Credit-reporting agencies say the use of credit reports and scores has enabled borrowers with good credit histories to obtain low-cost loans, regardless of race, gender or residence. Credit scoring looks "very objectively at your personal credit history, and that objective review eliminates any personal biases" a lender may have, says Rod Griffin, manager of public education for Experian. The system has "made credit more widely available and at lower cost than anywhere else in the world," he says.

But consumers who have had problems with their reports say a serious error can wipe out years of good credit.

The credit reports of Kenith Burdett, 58, of Eufala, Ala., reflect $150,000 in bad student loans taken out by a distant relative who stole his identity. Burdett discovered the fraud last October when his application for a 5.25% fixed-rate mortgage was rejected. He's sent police reports, affidavits and other documents to the credit bureaus.

Meantime, to finance his home purchase, he was forced to get two separate mortgages, an interest-only loan and an adjustable-rate mortgage that has already climbed to more than 10%.

The federal Fair Credit Reporting Act requires the credit-reporting agencies to respond to complaints about inaccuracies within 30 days. All three have systems that allow consumers to dispute information online, by phone or through the mail.

If the lender that provided the information confirms it was inaccurate, the credit bureau will remove the item, attorneys say. But if a mortgage company, bank or other lender says the information is accurate, it will often remain on the individual's credit report, even if the consumer has evidence proving otherwise, says Evan Hendricks, a privacy expert and author of Credit Scores & Credit Reports.

Griffin says credit bureaus have no choice but to rely on the information provided by lenders and other businesses that provide credit information. "We're telling the story as its presented to us," he says. "We don't make up the information. We're the messenger, which puts us sometimes in a difficult position."

Some types of hard-to-kill errors:

•Mistaken identities. For more than two years, Sharon Perkins has been trying to convince a hospital in Laurel, Md., that she wasn't treated in its emergency room.

Her troubles began after a woman with a similar name was treated at the hospital. Perkins, 62, started receiving bills from the hospital at her former home in Maryland, and they followed her when she and her husband moved to Arvada, Colo., last year. She's been contacted by two collection agencies. On several occasions, she's been told the matter was resolved, only to receive more notices and calls about the unpaid bill.

"You get to the place where you're ready to pull your hair out because nobody is listening to you," she says. "I wouldn't mind it so much if somebody believed me. It's been terribly frustrating and embarrassing."

•Identity theft. Sonya Smith-Valentine, an attorney in Greenbelt, Md., is representing an 18-year-old whose father used his Social Security number to open a credit card account years ago. The son has "provided every piece of identification down to his birth certificate to show he was 10 when it was opened up," she says. "Nobody will listen to him."

•Administrative errors. Steve Conzett, 50, of Orlando, believes a mortgage lender's software glitch wrecked his credit score. His problems started with a late payment on his mortgage in November 2003. A month later, he sold his home and included the monthly installment when he paid off the mortgage. But instead of reporting that the balance was paid, the mortgage lender reported it as "past due at payoff," Conzett says.

The error, which implied he still owed money on the loan, caused his credit score to drop from above 700 to around 530, Conzett says. The only home loans he could find required "insane payments." He was forced to buy a smaller house than he had planned, in a neighborhood that wasn't his first choice.

Efforts to alert credit bureaus to the problem "didn't do a bit of good," he says. "The credit bureaus refused to acknowledge the error."

Automation at issue

Leonard Bennett, a Newport News, Va., attorney who specializes in Fair Credit Reporting Act cases, says the credit bureaus' automated systems make it difficult to resolve such cases. "No human being ever speaks to another human being in the process," he says. "The bureau's sole function is to take the consumer's dispute, no matter how big or how many pages," and reduce it to a two-digit code, he says.

Industry spokesman Magnuson says the automated systems make the process more convenient for consumers because they can report problems at any time of the day or night.

Under the federal Fair Credit Reporting Act, consumers who are unable to resolve errors can ask the credit bureau to include a statement about the dispute in their file. But a dispute letter won't raise an individual's credit score, and "it's widely disregarded by creditors," privacy expert Hendricks says.

That leaves frustrated consumers with only one other alternative: to go to court.

Occasionally, lawsuits against credit bureaus lead to big awards. In 2003, a Portland, Ore., jury ordered TransUnion to pay Judy Thomas of Klamath Falls, Ore., $5.3 million. A federal judge later reduced the award to $1 million. In her lawsuit, Thomas said she spent six years trying to get TransUnion to remove another woman's credit information from her credit report.

Most successful lawsuits result in much smaller awards. Many cases are settled out of court for less than $25,000, Hendricks says. For the credit bureaus, settling cases is less expensive than improving their procedures, he says.

Magnuson says the Federal Trade Commission and state attorneys general can impose sanctions on the credit bureaus if they violate the law.

Besides, flouting the law "doesn't make good economic sense, and it doesn't make good business sense," he says.

Peggy Schmitt disagrees. A U.S. district court judge recently dismissed her lawsuit against TransUnion, but her attorney plans to appeal. Schmitt thinks credit bureaus lack the checks and balances necessary to correct mistakes. Dealing with them "was a very big struggle," she says. "I don't have faith in the system."