Credit Information Can Cost You Dearly
study released in December 2002 by the Consumer Federation of America (CFA) and
the National Credit Reporting Association (NCRA) entitled Credit Score Accuracy
and Implications for Consumers indicates that millions of Americans could pay
more for or be denied credit, insurance or utilities based on inaccurate
What Is A Credit Score?
credit score is a single number, based on an analysis of information contained
in an individuals credit report that provides an indication of how likely
they are to repay his or her debts. A score is derived from several types of information
including payment history; amount of debt owed and types of credit used. It has
become common place to base consumer access to credit, housing, insurance, basic
utility services and even employment using these scores and/or credit reports.
growing use of credit scores has increased the speed that many credit decisions
are made. Almost all credit granted using online applications and instant credit
offers are based on credit scoring. However, in consumer lending, inaccurate scores
can result in unfair treatment of borrowers who are denied or charged high prices
Errors of Omission and Commission
analysis of 51 representative files for consistencies and inconsistencies revealed
reasons for these differences in scores. Common errors of omission were the failure
to report a negative event for example, a delinquency or charge off
or a positive event for example, payments on an account. Seventy eight
percent of files were missing a revolving account in good standing, while 33 percent
of files were missing a mortgage account that had never been late.
serious errors of commission appeared in a significant portion of files. In 43
percent of the files, reports on the same accounts conflicted in regard to how
often consumers had been late by 30 days. In 29 percent of the files, there was
conflicting information about how many times the consumer had been 60 days late.
And in 24 percent of the files, conflicts existed about 90-day delinquencies.
Reported delinquencies have a large effect on credit scores.
and Timely Information Missing
The study found that consumers
who are informed about the reasons for their credit score are not given useful
and timely information. Nearly seventy percent of the 1,704 credit reports examined
indicate that the primary factors contributing to the score were "serious
delinquency, derogatory public record, or collection filed" or some combination
of these factors. Consumers were not provided with information about which specific
accounts were responsible for the low scores. And in many cases, it is not even
clear whether a delinquency, public record or collection was responsible for the
The research found that certain information in credit
reports has the potential to cause breaches in consumer medical privacy. Many
credit report entries regarding medical collections contained enough information
to infer medical details about consumers, such as the type of treatment they had
received. The ability to discern from a credit report that a consumer may have
received treatment from a neonatal clinic, fertility clinic, mental health provider
or AIDS clinic could potentially facilitate discriminatory treatment.
continued at http://www.pacreditunions.com/commoncents2003/inaccurateinfo.htm