Privacy & Information Security Law Blog

On February 11, 2013, the Federal Trade Commission announced that a congressionally-mandated study of the U.S. credit reporting industry found that 26 percent of consumers identified at least one error that might affect their credit score. The study reported that 5 percent of consumers had errors on their credit reports that could result in less favorable terms for loans and insurance.

Congress directed the FTC to conduct a study of credit report accuracy and provide interim reports every two years, beginning in 2004. A final report will be issued in 2014. The study surveyed 1,001 voluntary participants who reviewed their credit reports from the three major credit reporting agencies. With help from a study associate, the participants identified incorrect information and were encouraged to use the dispute process under the Fair Credit Reporting Act to challenge errors that might have a material effect on their credit score. A provisional credit score was generated for the study participants on the assumption that their allegations were correct. After completing the dispute process, study participants were provided with new credit reports and credit scores.

Of the 1,001 participants, 262 consumers reported at least one material error in their credit reports, and 206 of these consumers had their credit report modified by a credit reporting agency. For 129 of these individuals, the reported errors were enough to change their credit score. While most of the positive score changes were moderate, some were significant. The errors reported by 52 participants resulted in a score change that decreased their credit risk tier, which could make them more likely to be offered auto loans at lower rates. Furthermore, 27 participants had at least one of their three credit scores increase by more than 50 points. The study notes that, because the study used self-selected participants, the results underestimated credit report errors.

Nonetheless, the study concluded that, although a considerable percentage of consumers may have inaccuracies on their credit reports, the impact of these errors is generally moderate. For a notable few, however, the impact is significant, and the FTC encouraged consumers to check their credit reports regularly.