Years ago, I watched the 2013 report by 60 Minutes on credit reporting agencies, and the reported “40 million mistakes” on personal credit reports at the three major US credit reporting companies: Equifax, Transunion and Experian. The gist of the report was that the agencies did not do enough to help consumers remove incorrect information from their credit reports. The show focuses on one lady whose identity had been stolen, and despite years of phone calls and letters was unable to get her credit report corrected. Finally, she hired an attorney and sued the credit agencies. Her credit file was finally corrected, and the suit was settled for an undisclosed amount. https://www.youtube.com/watch?v=1vQxc3I2Li4
As a counter to the 60 Minutes report, Experian posted a response in which it reported, amongst other information, that according to the Federal Trade Commission’s “98% of credit reports are materially accurate.” It further defended the process and system by which credit disputes are managed by Experian. https://www.experian.com/blogs/news/2013/02/11/60-minutes/
All of that was years ago and a lot of things have changed. At least two major changes occurred. First, technological advancements have allowed for more efficient dispute resolution, whereby disputes can be logged online on all three major credit reporting agencies. Second, the credit reporting agencies discovered they could make money from consumers, not just from lenders wanting to check credit scores. Today many consumers actively monitor their credit by purchasing a subscription to one or more of the credit reporting agencies.
I have an Experian subscription. It costs me $24.99 per month, and for that I can see what is on my credit report at any time, dispute mistakes, make corrections to information and once per month get my credit score from all three agencies. I get email notifications to my personal email account of any changes to my credit report and credit score. It seems to me the credit reporting industry has come a long way from that 60 Minutes report back in 2013.
However, despite the advances made by the credit bureaus, the system still doesn’t seem to work the way it should. How do I know? From personal experience.
In 2005 I purchased a condo in Long Beach, California. I lived there a short while, then rented out the property. In 2019 I decided to sell the property. At the time of sale, it had two mortgages. The second mortgage was held/serviced by a company called Specialized Loan Servicing LLC (“SLS”). The amount of the loan was approximately $14,000. The sale closed in early August 2019 and the mortgage was paid off. In fifteen years, no payment was ever missed on the mortgage, and no late payment was ever reported.
In late September, SLS reported the September payment on the mortgage was late. My credit score on Experian immediately dropped. I was confused because how could there be a late payment in September, when the mortgage had been paid in full in August. So, I got on the phone.
The person I spoke with at SLS said that this was a mistake on the part of the credit reporting agencies. SLS had nothing to do with it. Fair enough.
I went to my Experian account and disputed the late charge. In about a week’s time the late report came off my report. I did the same with Equifax. With Equifax it took a couple of weeks, and the late report came off my report. I also disputed the late report with Transunion. The late report did not come off my report, and Transunion came back stating the dispute had been resolved in favor of the SLS.
Between the beginning of October 2019 and the end of December 2019, I had at least seven or eight calls with SLS and Transunion. SLS blamed the problem on Transunion. One person I spoke with said, “SLS did not report the loan late, it was a result of an internal process of Transunion.” SLS denied it was their problem, blamed it on me for disputing the charge with Transunion (claiming that once a charge is disputed SLS cannot update any records for 60 days), refused to contact Transunion to get the error corrected and refused to give me a physical address so that I could send a complaint letter by UPS.
Transunion, on its part, said that the problem was all SLS. I submitted a second dispute with Transunion (this time over the phone). Again, the dispute was resolved in the favor of SLS.
In 2020 I decided to refinance my personal residence. I explained to the loan broker the situation and she said she didn’t think it would make a difference, so on March 3, 2020 she ran my credit report through all three reporting agencies. She then submitted my file to the loan underwriter. She called me back with the bad news. The news was that because of the negative report by SLS on my credit report, my interest rate would be higher than she had otherwise indicated.
She sent me a copy of the report she had pulled. Here is what the credit reporting agencies reported. Transunion reported: Serious Delinquency. This I understood as my copy of the Transunion report showed a late payment on the SLS loan for the month of December, even though the loan had been paid off in August. Equifax reported: Serious delinquency. This I did not understand as my copy of the Equifax report showed no delinquencies. Experian reported: Time since delinquency is too recent. This I also did not understand as my copy of the Experian report showed no delinquencies. The report included that my payment to SLS was 90 days past due!
I was so frustrated at this point I sat down and drank half a bottle of scotch. Then the lightbulb came on. I needed to take this complaint to a higher level. As a member of LinkedIn, I searched for the executives of SLS and sure enough, I found a few of them. I sent out invitations to connect, and a couple of them accepted my invitation. As soon as I connected, I sent a message explaining the situation.
The very next day I received a call from SLS. The person I spoke with was very apologetic and assured me the information on my credit report would be corrected. She even sent me out a letter dated April 3, 2020 retracting the negative report. That letter also indicated SLS made a “manual update” to my credit report, something SLS had previously refused to do. The letter indicated it could take “90 days” for the credit agencies to correct their records.
In about ten days my credit score on Experian jumped 50 points, from around 775 to 825. Finally, after seven months, close to twenty phone calls, filing disputes multiple times, seeking out senior executives at the lender, and dozens of hours of my time, my credit report was corrected. And if I had not thought to use LinkedIn as a resource, it probably still would not be correct.
As I began this article, I stated that a lot has changed since that 60 Minutes report in 2013, but it appears a lot has stayed the same. Here is what needs to change:
1) The credit reporting agencies include information on the reports they send to lenders that is not disclosed on reports they sell to consumers. That is not right. In my case two of the credit agencies stated to me I had no delinquencies, but they reported delinquencies to my loan broker.
2) Why should it take “90 days” for errors to be corrected? If a lender runs my report, it appears on my credit report with 24 hours. If I take out a loan, it can appear on your credit report within days. Why does it take 90 days to post a correction?
3) Both the credit reporting agencies and the lenders (in this case SLS) seem to have issues and problems being managed by people who either have no authority to fix the problem, or no incentive to fix the problem. Something that could have been fixed in five minutes took seven months. The information on our credit reports affects our ability to purchase a house, rent an apartment, buy a car and even get a job. Those responsible for mistakes on credit reports need to be penalized (how about a $10,000 fine if a lender reports something on someone’s credit report incorrectly).
4) The credit reporting agencies need to take responsibility for what they report. They should not just be able to blame the lenders. In my case it was so simple – the loan was paid off in August, the payment being reported late was in September. It was reported late again in October, November and December. A junior accounting clerk could tell you that if a loan is paid off in August, then the December payment cannot be late because there is no December payment.
I am an educated professional who has served as a financial consultant, capital strategist, part time CFO or Controller to over 100 companies. I have the perseverance and tenacity to grind away at the administrative bureaucracy of large corporations, even if it takes seven months. But I wonder how many of my fellow Americans, the backbone of our economy, the people who work construction jobs, who work on the factory floor, who drive trucks and who serve in restaurants are overwhelmed by this system, and are currently paying more on credit cards, car loans and mortgages than they should be?
We need credit reporting agencies. They serve a purpose. It is important for those who grant credit to know the credit worthiness of people applying for credit. At the same time, incorrect information on a credit report can be costly and even worse, could affect that person’s ability to earn a living and find a home.
I am not in favor of more government watchdogs to control the credit reporting agencies. I think we have watchdogs enough. But I do think our credit reporting agencies can do a better job and I think my experience proves that. I encourage people who work in the credit industry, both lenders and credit reporting agencies, to spend some of your energy and profits on developing a system where is doesn’t take seven months to fix a mistake that should take five minutes to fix. I think you owe that to the people who use, rely on you, and pay for your services.