Fixing Credit Score Errors – Good for Your Fiscal Future

Can Errors on Your Credit Score Affect Your Financial Health?

When clients come to our office they are looking for debt relief. This may mean stopping a foreclosure, removing a lien, or going through a Chapter 7 or Chapter 11 bankruptcy. Our clients often want to improve their credit, but there may be more factors affecting their credit scores than missed loan payments.

In a recent study by the FTC (Federal Trade Commission) from December 2012, the findings state that one in four credit reports have errors. So along with the other best practices we share our clients to ensure fiscal health and responsibility, we also support keeping a close watch on the information used by credit agencies to make their scores about you.

Why keep a close watch on these agencies? Because the validity of credit scores has recently come under fire. A woman in Oregon was awarded over $18 million in punitive damages this year from Equifax, one of the three U.S. credit reporting agencies. The case, number 3:11-cv-01231 in the District Court for the District of Oregon, Portland Division, once again put the spotlight on credit agencies and their ability to cause serious harm with unintended errors and misinformation. The FTC study further supports this claim; one in four American consumers have errors on their credit reports, while around one out of 20 have mistakes serious enough to negatively affect their ability to get fair loans or insurance. This can cause permanent, perhaps severe damage to a person’s finances.

The implications of these errors are serious; people need to know to check not only their credit scores, but also the facts and figures used to create them. Mistakes on these reports are common, and unfortunately they are not so simple to fix. A New York Times article published August 2, 2013 explains that consumer reporting agencies (called CRAs) handle credit report disputes using automation and not on an individual basis. But errors are often a case of mistaken identity; for example, two people with the same name can end up having mixed files that affect their scores. But automation can exacerbate these errors instead of fix them, causing more stress and hassle to consumers.

One options is to contact the Consumer Financial Protection Bureau (CFPB) with issues involving credit report errors. The CFPB oversees the nation’s CRAs and can provide new guidelines and rules that they must follow in order to protect the safety of consumers. Reporting issues to the CFPB increases the voice of consumers and the collective power they can have when it comes to governing these large agencies.

Credit scores are just one part of the bankruptcy process in Queens, and our team believes that consumers should keep their fingers on the pulse of their three major scores just like they would other parts of their financial profile. Consider your credit score to be just another number to stay on top of, like your blood pressure numbers or your income tax bracket.