Study finds credit report errors less prevalent than claimed by consumer advocates, still occur

(Photo via Flickr/401(K) 2013)

A multi-year study recently completed by researchers in the Center for Business and Industrial Studies at the University of Missouri–St. Louis found that credit bureau data are sufficiently accurate to support institutions in issuing and managing credit, but a small percentage of individual consumers can be harmed significantly by errors in their files. The $1.13 million study, commissioned by the U.S. Federal Trade Commission, to record the accuracy of information maintained by the major U.S. credit reporting agencies, was conducted by L. Douglas Smith, director of the Center for Business and Industrial Studies and professor of management science at UMSL; Thomas Eyssell, associate dean and director of the College of Business Administration’s registered Financial Planning program; Maureen Karig, senior research associate with the Center for Business and Industrial Studies at UMSL;  Mike Staten, professor at University of Arizona in Tucson; graduate researchers at UMSL and UA, and professionals and senior economists at Fair Isaac Corporation.

“Surveys suggest that consumers don’t check their credit reports as frequently as they should,” Eyssell said. “As a result, erroneous information may be factored into their credit scores and individuals may incur higher borrowing or insurance costs or unnecessary difficulty in obtaining a lease or employment. Consumers can protect themselves and help maintain the integrity of the reporting system by checking their reports regularly and reporting any errors to the bureaus.”

The researchers engaged 1,001 consumers nationwide in intensive reviews of their credit reports to estimate the frequency and severity of alleged errors in the data maintained by the three major U.S. credit bureaus. A significant number of study participants, 26 percent, claimed to find at least one potentially material error in one or more of their credit reports and filed formal disputes with the relevant bureau or bureaus. Most errors were not enough to affect the credit scores significantly, but 21 percent of those who disputed bureau information (5.5 percent of study participants overall) saw a significant increase in at least one of their credit scores.

“Our study provides objective and substantive evidence for intelligent discourse on this controversial topic,” Smith said. “It seems that adherence to the Fair and Accurate Credit Transactions Act of 2003 has improved the accuracy of credit bureau data and provided useful mechanisms for consumers to intervene when reporting errors occur. We expect that our detailed findings will be helpful to businesses, consumers and regulators as they strive for best practices in credit reporting and management.”

In cases where consumers found inaccurate information on their reports, the research team altered the files to remove the errors, generated new credit scores, and helped to prepare the paperwork for filing disputes with the credit bureaus. After sufficient time to allow the dispute process to run its course, new credit reports were drawn to determine the actual results.  This unique research methodology thus removed the variability in credit ratings due to other consumer activity while the dispute was under investigation. It also enabled the researchers to assess what the impact would have been on the credit score if all requested changes had been imposed instead.

“Considering the impact credit reports can have on consumers’ lives we were surprised to learn from the vast majority of study participants that this was the first time they had checked their credit reports in depth,” Karig said. “They were extremely grateful for what they learned in the process and it seemed that, for many who were in financial distress, the in-depth review of their credit records provided new insight on how best to approach their financial difficulties.”

The study findings were posted by the Federal Trade Commission in the 2012 report to Congress at Consumers can take advantage of the free service at to examine their credit reports and use formal dispute processes with the bureaus to correct any errors found.


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