What Credit Report Errors Cause Consumers Higher Interest Rates?

After filing bankruptcy people are often interested in trying to rebuild their credit, and a Chapter 7 or Chapter 13 bankruptcy can be a good first step to repairing your credit. The information contained in your credit report is important and that information must be accurate. Credit reporting agencies (CRA) such as Experian, Equifax and Transunion are the gate keepers between you and potential lenders.

In a world where credit is king, and credit ratings are used for decisions about whether a consumer can get a credit card, a car loan, or even insurance. That is why a recent report from the Federal Trade Commission (FTC) finding that the credit data collected by the three major credit reporting agencies (CRA), Experian, Equifax and Transunion, has an error rate of five percent.

In the study, participants used the dispute process set forth in the Fair Credit Reporting Act (FCRA) to resolve errors in their credit report errors. The FTC study revealed the following:

• 1 in 4 consumers found errors on their credit reports;
• 1 in 5 consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed;
• 4 out of 5 consumers who filed disputes had some aspect of their credit report modified;
• About 1 in 10 consumers saw a change in their credit score after the CRAs modified their credit report;
• Approximately 1 in 20 consumers had a maximum score change of 25 points or more; and,
• 1 in 250 consumers had a maximum score change of more than 100 points.

Errors on a credit report can have a major adverse impact on a consumer. Some of the known adverse effects are:

• Being rejected for credit
• Getting credit, but at less than favorable terms, such as a higher interest rate
• Being rejected for an apartment lease
• Being rejected for employment
• Being rejected for insurance or having to pay higher premiums for insurance
• Losing a security clearance

Since your credit report is so important, you should review it from time to time, but it is not necessary to pay to review your report. The CRAs were required a number of years ago to set up a website where you can go to obtain a free credit report from each of the big three each year. This site is known as www.annualcreditreport.com.

While you can get all three reports at once, you might want to consider getting one report from a different CRA every 4 months since all 3 credit reporting agencies generally have the same basic information. Also, remember that if you apply for credit and are rejected, you are entitled to receive a free credit report from the CRA that was used to deny credit.