Nov 162009

For Brandon and Amanda Mendelson, it had all the elements of a paperback thriller: the innocent newlyweds, the mysterious account held by an obscure bank in Boca Raton, the faceless corporation controlling everything behind the scenes. But when the Mendelsons discovered the strange overdue loan mistakenly listed on Amanda’s credit report, they weren’t exactly thrilled. The Glens Falls, N.Y., couple had never done business with that bank, and the error spoiled Amanda’s credit history. Making matters worse, their call to a national credit bureau yielded nothing more than a form letter stating that the accuracy of the entry had been “investigated” and “verified.” Now they can’t help but wonder: investigated how? Verified by whom? Brandon studied organizational leadership in school, but even he can’t imagine how the bureau failed to fix such an obvious mistake. “Maybe it fell through the cracks,” he says.

Or maybe the process worked pretty much as it was designed to. Although they generally decline to discuss specific cases, the three major credit bureaus – Experian, Equifax and TransUnion—each attest to their commitment to accuracy and accountability in their record keeping. But while consumers might assume that each bureau employs an army of dedicated sleuths who carefully investigate and correct errors, all the bureaus actually process most disputes using a system that’s almost entirely automated—and where human beings are involved, they’re often working at a harried pace. The bureaus say the system, dubbed with the Muppety acronym e-OSCAR, is the most efficient way to handle the more than 20,000 disputes a day they receive. In practice, most complaints are electronically zapped straight to the lender, and according to consumer advocates, many lenders respond by simply re-reporting the erroneous data.

Credit-report accuracy is profoundly important now, because an error can wreak more havoc than ever on your financial life. Before the nation heard the words credit crisis, just about anyone with a pulse could get a loan. Now many banks are refusing credit to anyone who looks remotely risky. And as legions of anxious job hunters know, a growing number of employers routinely check credit reports before they make a hire. It’s no wonder, then, that the National Foundation for Credit Counseling says call volume is up 31 percent in the past 12 months. “Credit is on consumers’ minds more than ever before,” says Curtis Arnold, CEO of

But according to a 2007 survey by pollster Zogby, 37 percent of consumers who obtain their credit reports find errors, and half of those said they could not easily correct the mistakes. An earlier study by the U.S. Public Interest Research Group, a nonprofit consumer advocacy organization, found that one in four reports contained “serious errors.” For its part, the Consumer Data Industry Association, the industry’s trade group, says only 11 percent of consumers who get their credit report file a dispute and just 5 percent of those challenge the results. “That’s an excellent satisfaction rate,” says the group’s president, Stuart Pratt. Still, even some industry insiders say there’s a problem. Testifying before Congress, one CEO of an independent Arizona credit bureau likened the dispute process to “having an IRS audit, brain surgery, getting a tooth pulled or going to your own funeral.”

And when the dispute process fails, consumers say they are left feeling powerless. Martha Soto, a 63-year-old Antioch, Calif., shipping manager, says she couldn’t get the mortgage she needed last fall because Experian listed her as the defendant in an unpaid court judgment. She says she’s faxed records proving that she’s actually the plaintiff; Experian says they’re the wrong records, and the dispute is still unresolved, leaving Soto increasingly frustrated. “They’re defaming you, and you can’t do anything about it,” says Soto. “It’s scary to think an agency like that can control your life.”

From: SmartMoney Magazine by Anne Kadet – Feb.2, 2009

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