It has been said that human beings occasionally stumble over the truth, but most of the time they just pick themselves up and swagger on. To me, that’s a fair description of the consumer-credit-reporting services.
Over the years, case after unhappy case has come to the industry’s attention, where errors in personal-credit reports have ruined hopes and sometimes lives. Yet the credit bureaus didn’t pay much attention because the overall system functioned well.
Creditworthy Americans can almost certainly thank automated credit reporting for their easy access to bank cards and loans. Still, when the system fails-and it does far more often than the industry concedes-it is people, not printouts, who suffer the consequences. Last April, Paul K. Jacques in Wyoming won a $290,000 judgment against TRW, one of the largest credit bureaus, which mixed up his credit history with that of his father and cost him a car loan. That decision is still being contested. TRW has also been hauled into court by 11 states which charge-among other things-that it persistently fails to fix bad consumer files. Denying all charges, TRW has countersued.
James Williams of Consolidated Information Services in Flanders, N.J., who double-checks credit-bureau information for mortgage companies, says he’s sitting on a pile of consumer-credit reports that he found errors in. In a group of 1,500 credit files, Williams says, 647 mortgage applications were delayed while mistakes were investigated.
One common problem is for information from one person’s file to land on someone else’s credit report. That happens, in part, because of the way that computers work. Millions of bits of information, belonging to millions of different people, are always swirling around in the system. When someone asks for a file on Jane Bryant Quinn, all the Quinn bits rush to the screen like iron filings to a magnet and compose themselves into a report.
But records from unrelated Quinns may rush there, too. Should a doppelganger named “Jayne Quin” have an address that resembles mine, the computer might conclude that we’re one and the same. That’s because credit bureaus can’t afford to be letter perfect. Their computers have to allow for the chance that one’s legitimate creditors might misspell your name or address. So they look for a predetermined number of matches and disregard other discrepancies. Result: people with good credit histories sometimes find themselves joined at the hip with a deadbeat who shares nothing but their name and hometown.
You probably thought, as I did, that like-named people can easily be separated by their social-security numbers. But that’s not always so. Credit bureaus might give those numbers short shrift, just in case they were entered wrong.
That used to be Equifax’s philosophy. But since March, says Equifax’s John Ford, the bureau’s new, improved identification system makes social-security numbers just as important as name, address, former address and several other personal identifiers. This change has cut down tremendously on the number of mismatched files, Ford says. Consumers can help by using only one form of their name when applying for credit: always “Robert G. Smith,” say, not a mixture of Robert, R. G. and Bob.
Incorrect credit reports aren’t always fatal. If you’re wrongly denied a credit card, you can clear up the record and apply again. But the damage is painful and permanent when an error denies you a job.
If you’re hunting for work, it may not cross your mind that employers are pulling your credit report. They do it to check out your character. Legally, you’re supposed to be told if that report talked someone out of hiring you. But many companies aren’t obeying the law. The Federal Trade Commission recently extracted a consent agreement from Electronic Data Services, a subsidiary of General Motors, which, it charged, had been keeping mum about its use of credit reports. Jean Noonan, who has pursued this issue for the FTC, says that more such cases are coming up.
The percentage of errors on credit reports is in dispute. Credit bureaus cite rates under 1 percent; some consumer groups charge that it’s 30 to 40 percent. One widely used number, by consumers and industry alike: around one third of the people who ask for their credit reports find something missing or wrong. That’s pretty high. You should, by all means, see if errors exist in your own credit record before applying for a loan, starting a business, buying a house or looking for work. Potential landlords may also check your credit report before renting you an apartment. A loophole in the law lets them turn you down without telling you that the report was to blame.
In Congress, reform proposals are on the boil. To defuse them, credit bureaus are frantically correcting their systems. Among the proposed improvements tardily coming your way: (1) Free reports from all three major bureaus TRW, Equifax and Trans Union-if you’re turned down for credit based on a report from one of them. Right now, only the first report would be free; the rest would cost anywhere from $2 to $20. (2) Ways of sharing corrections, so that once you’ve spent months straightening out your Trans Union report, you won’t have to start again with Equifax. (3) Nationwide 800 numbers, announced by TRW and Equifax but still in the planning stage at Trans Union. Equifax is also working on a whole new system for treating consumers better, which will start in December.
Still, Congress should act-first, by giving consumers a free look at what the credit bureaus are saying about them. As it stands, a married couple might have to pay as much as $90 to $120 to see if their histories are clean, and another $90 to $120 to find out if the errors were erased.
Just as important, the fair-credit-reporting laws should be further extended to banks, stores and other creditors. Today only credit bureaus are required to correct errors speedily. Yet many of these mistakes originate with the credit granters, who can be rude, recalcitrant and disbelieving when consumers go to them to complain. The FTC tells of one woman who canceled a bank card in order to avoid a $20 fee. In the regular billing cycle she was charged $20 anyway. When she didn’t pay, the bank reported her in arrears. There’s definitely gotta be a law.
