Credit Errors Found in a Third of Credit Reports

A recent study conducted by the Consumer Federation of America (CFA) found that more than one third of files were missing a mortgage account that had never been late, depressing a FICO score to levels some financial institutions would consider "poor".

Stephen Brodbeck, executive director of the consumer’s federation found that over the life of a 30-year, $150,000 mortgage, a borrower incorrectly charged a subprime rate of 9.84% instead of a prime rate of 6.56% would pay $124,067 more in interest!

FICI (Fair, Isaac and Co.) scores go from a low of 350 to a high of 850. A score of about 620 is called a borderline score. If you score above you are in good standing. If score below, you are in a bit of a tight spot. A score of 620 is a  "cutoff point" for loans that can be funded by Fannie Mae or Freddie Mac. Below that, and you're usually off into the private "sub-prime" market, where rates are higher. Most consumers score somewhere between 650-780. The very best credit rating is usually considered to start at about 700.

FICO scores are maintained and reported by three repositories: Equifax, Experian, Trans Union. According to Equifax, each bureau has its own guidelines about what information its collects, how it is collected, and the duration that the information is retained. This can lead to a wide discrepancy between consumers’ scores from each bureau.

The exact value of this score is very important because almost all lenders use this score to determine how big of a credit risk you are to them. The CFA reports that credit scores, and the credit reports on which they are based, increasingly influence consumer access to credit, housing, insurance, basic utility services, and even employment.

The Consumer Federation of America and the National Credit Reporting Association recommend that all consumers review your credit frequently by purchasing reports from each repository yearly and before applying for mortgage loans.

To correct errors and discrepancies contact the respective repository:

Equifax (800) 685-1111 or www.equifax.com

Experian (888) EXPERIAN or www.experian.com

Trans Union (800) 888-4213 or www.transunion.com

Merritt & Hagen has developed step-by-step instructions on how to review and correct your credit report. This information is available for sale to the general public, but available to clients and alumni free of charge. Look for the publication "Financial Planning and Credit Repair" on this site.