More consumers are complaining about errors on credit reports; here are some answers to questions about credit reports
Add that to the financial fallout from the pandemic: More and more consumers are complaining about errors on their credit reports, and many are frustrated when they try to correct the errors, according to federal complaints data.
In 2020, consumers filed more than 280,000 complaints about credit issues – more than half of all complaints received by the Consumer Financial Protection Bureau last year, said Syed Ejaz, policy analyst for Consumer Reports.
The number of credit report complaints more than doubled from 2019, according to the agency online complaints database.
“They’ve definitely swelled over the last year,” Ejaz said.
Credit report errors have long been a problem for American consumers. Accuracy is important because the content of your credit report helps you determine if you may qualify for loans and credit cards and the interest rate you will pay.
Common mistakes include loans that have been repaid but appear to be unpaid; debts wrongly declared to be in collection; incorrect personal information and addresses; and “mixed” files, in which information from a different person appears in your credit report.
But mistakes are an even bigger concern during the pandemic, when many families are struggling and may not have time to negotiate fixes, said Chi Chi Wu, an attorney at the National Consumer Law Center.
Some of the errors are linked to the pandemic. The federal government’s relief program has allowed a pause in the repayment of some loans – including federally guaranteed mortgages and federal student loans. Borrowers’ credit reports are supposed to show that loans are current, even if payments are interrupted, to avoid damaging their credit while they are in dire financial straits, Wu said.
It didn’t always work as expected, according to complaints filed with the consumer office.
Typically, credit bureaus must respond to complaints within 30 to 45 days, but at the onset of the pandemic, the government gave them more flexibility within that time frame. “The disputes have not been answered or have taken too long,” Wu said.
A credit report is a summary of your debt and payment history, as reported by lenders to three major credit bureaus: Equifax, Experian, and TransUnion. Bureaus use a formula – created by another company, usually FICO or VantageScore – to reduce the information to a three-digit credit score. About twenty 700 or more is generally considered “good”.
Lenders use the score to determine if you are likely to repay a loan. Scores can also be checked when you apply for a job or apartment lease. The higher the score, the better. Paying bills on time and keeping credit card balances low helps boost scores.
Due to the complexity of the credit reporting system, consumers may feel stuck when they discover an error and attempt to correct it.
A student borrower in California, for example, complained in December of a drop of 200 credit points due to “incorrect” information reported by a student loan manager. The manager said he was not reporting incorrect information and referred the borrower to the credit bureaus. The decline in the credit rating prevented the borrower from taking actions like moving and buying a car, but “no one seemed to be helping to solve the problem,” the borrower wrote. “My credit rating continues to drop after trying so hard to rebuild it.”
A similar situation is subject to trial, cited by Consumer Reports, that a New Jersey woman filed against Equifax, TransUnion and VantageScore in US District Court last summer. The complaint says her student loan manager Navient mistakenly reported her late payments, even though they should have been reported as routine under the federal relief program. The mistake caused her credit rating to drop nearly 100 points, according to the complaint.
Navient, who is not a defendant in the lawsuit, corrected the error, but the credit bureaus did not update his credit rating to reflect the change, the lawsuit says.
The lawsuit claims that “thousands” of borrowers are in a similar situation, although an attorney for the borrower, Philip L. Fraietta of Bursor & Fisher in New York, said that number was an estimate.
Navient spokesperson Paul Hartwick declined to comment on the lawsuit.
During the pandemic, Navient is reporting the status of student loan payments in accordance with instructions from the federal education ministry, he said. “If you have questions about a specific credit score, please contact the company that issued it,” Navient advised borrowers.
TransUnion declined to comment on the suit. Equifax and VantageScore did not respond to email and telephone inquiries.
Student loan managers said borrowers were not always sure if they were eligible for the federal payment relief offered during the pandemic. Some borrowers may have missed payments before protections such as suspension of payments went into effect, and their scores fell as a result; others may have private student loans, which are not eligible for assistance.
Credit scores are usually updated automatically as soon as the credit report is updated, said Francis Creighton, president and CEO of the Consumer Data Industry Association, which represents credit bureaus and other companies. of data. How quickly a report is updated depends on how often a lender provides information to the credit bureau.
Creighton also said that there are many factors that influence a consumer’s credit score, so it’s difficult to attribute a change in score to just one item on a credit report.
He said much of the increase in complaints came from bogus complaints filed by unscrupulous credit “repair” companies on behalf of their customers. These companies charge a fee and promise consumers that they will improve their credit by removing negative but specific items from their credit reports, such as late payments and bankruptcies, he said.
If the sharp increase in federal complaints reflected a real increase in reporting errors, Creighton said, banks and lenders would have noticed. “It’s not real,” he says. “We don’t see a lot of new litigation leading to action.”
The Consumer Financial Protection Bureau has taken legal action against some credit repair companies and advised consumers to be wary of companies that charge fees to remove negative but current data from credit reports. “No one can do that,” the office said in a Notice 2019.
Asked about Creighton’s comments on the bogus complaints, the office said companies can flag suspicious complaints for further investigation through an “administrative response” process and that these complaints are not published in the database. In 2020, the bureau said, businesses used the administrative response option for 3% of the consumer credit or report complaints sent to them for response.
There are signs that consumer credit has generally performed well during the pandemic. The average FICO score rose to 711 in October from 708 in the spring, as borrowers slashed spending, using government stimulus checks to pay bills and availing themselves of help from lenders, a spokesperson for the Lender said. FICO, Greg Jawski.
“The accommodations that lenders have made for borrowers have been very helpful,” Jawski said.
Here are some questions and answers about credit reports:
Q: How long can loan repayments be suspended during the pandemic?
A: The Biden administration has extended the suspension of federal student loans until September 30. Borrowers with federal student loans will continue to have suspended payments without penalty and will have their interest rate fixed at 0%. (Private student loan borrowers are not automatically entitled to the suspension.)
The administration also gave homeowners the option until June 30 to enroll in a program to suspend federally guaranteed mortgage payments.
Generally, if you were up to date with payments when they were suspended, loans should be reported as current to the credit bureaus.
Any suspension or postponement of credit card payments is at the discretion of the card issuing bank, so consumers should contact the issuer directly to discuss options.
Q: How can I check my credit report?
A: Generally, you can view the reports for free once a year at annualcreditreport.com, but major credit bureaus allow consumers to view them for free every week until April. It’s unclear if weekly access will be extended, so it’s best to take advantage of the extra availability while you can. You will need to verify your identity, usually by answering questions that only you are likely to know, such as your mortgage amount or an address where you lived 10 years ago. It helps to have financial records on hand when you apply.
Q: What’s the best way to dispute an error on my credit report?
A: You can file a complaint online, but Consumer Reports’ Ejaz recommends that you file your complaint in writing, to avoid missteps. Letter templates are available on the Office of Consumer Affairs website. Keep copies and mail your letter by certified mail. It is helpful to include copies of documents to support your complaint, such as payment statements. It’s best to dispute the error with all three bureaus, he said.