Credit Reporting Agencies
The ability to obtain credit is an important facet of American life. The ability of companies to grant an extension of credit drives a major portion of the economy, and much of that economy is based on businesses being able to extend credit to consumers. The ability to safely extend credit to consumers is based primarily on accurate information provided by the major credit reporting agencies – Experian, TransUnion, and Equifax. Yet, based on a study conducted by the Federal Trade Commission,
“26 percent of consumers reported a potential material error on one or more of their three reports and filed a dispute with at least one credit reporting agency (CRA) and half of these consumers experienced a change in their credit score.” (Federal Trade Commission, 2013)
This all begs the question – how can the information that credit reporting agencies provide be so inaccurate?
The reporting of credit information begins when an individual either applies for credit, or a business reports credit-based information to one of the credit bureaus. If credit is granted by the business to that individual, then the history of how well they make payments on the credit, and the amount of credit granted and used becomes a part of that individual’s credit history. However, issues can arise because the credit system is imperfect. Although most credit reporting agencies use social security numbers as an identification number, probably the most common error is the reporting of information on one individual’s credit report based on someone else with the same name. Other common errors include reporting information past the legal reporting time limit, reporting account statuses and balances incorrectly, and finally data processing errors.
Because of the importance of the information within a credit report file, it is important that the average consumer check to make sure that their credit file reflects their true credit history. In order for consumers to review their credit file on regular basis, Congress passed the Fair and Accurate Credit Transactions Act (FACTA) in 2003. Consumers have the right to access their credit reports from the major credit reporting agencies for free on an annual basis. They can access their credit report by either accessing the website www.annualcreditreport.com, or they can send the credit bureaus a request in writing.
If a consumer finds incorrect information on one of their credit reports, they have the right to dispute the information. The Fair Credit Reporting Act (FCRA) maintains that consumers have the right to dispute information on their credit report. After receiving the dispute, the credit reporting agency has 30 days from the receipt of the dispute to either correct the dispute, or explain to the consumer why the information is valid. Incorrect information found on a credit report can be disputed to all three credit reporting agencies either online or via mail.
Because of the vast amount of information that credit reporting agencies deal with, errors such as misplaced information, or information applied incorrectly is likely more often than not to occur. Ultimately, it is the responsibility of individual consumers to check their credit reports on a regular basis to make sure that the information on their credit report is valid.
Federal Trade Commission. (2013, May 7). FTC Testifies on Credit Reporting Accuracy Study, FCRA Enforcement, Credit Education. Retrieved from https://www.ftc.gov/news-events/press-releases/2013/05/ftc-testifies-credit-reporting-accuracy-study-fcra-enforcement
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.