Author: Mindy Leisure, Advantage Credit, Manager of Rescoring Services
Inaccuracies on credit reports are an ongoing problem and a source of great frustration for consumers. Many of the inaccuracies are accounts those consumers believe belong to another person, or that they may have been a victim of identity theft. A lot of consumers feel they don’t have the time or fortitude to address the matter themselves, so they reach out to third party “credit repair” agencies for help.
Per the Fair Credit Reporting Act (FCRA) any complaint submitted to Experian, Trans Union or Equifax must be investigated and responded to within 30-45 days. But according to the CFPB between January of 2020 and September of 2021 they received more than 700,000 complaints about Experian, Trans Union, and Equifax regarding their lack of responses to disputes files with the individual bureaus. Per analysis done by the CFPB, complaints by consumers in 2021 were satisfactorily responded to only 2% of the time as opposed to 25% in 2019.
One of the biggest reasons for this is that the bureaus have “stopped providing substantive responses to consumer complaints if they suspect that a third party participated in submitting the complaint.” The most common example of this being credit repair agencies.
Credit repair agencies bombard the bureaus with hundreds of disputes daily. Their hope being that with this kind of volume the bureaus won’t have the kind of manpower or time to investigate all of them in the required time frame. A lot of these agencies will dispute every late payment, collection or charged off account on a credit report whether it’s accurate or not. Another issue with credit repair agencies is that many of them charge up-front fees which is a violation of the Credit Repair Organizations Act (CROA). They try to disguise these fees as setup fees, review fees, audit fees, etc., but they are all in violation of the CROA which states specifically that no fees can be collected “before the service is fully performed.”
While the bureaus are obligated to investigate any dispute submitted to them, according to the CFPB only half of the complaints they submitted to the bureaus on behalf of borrowers in 2021 were investigated because the bureaus suspected the original dispute came from a third party. Per FCRA 1022.43 disputes that are deemed frivolous need not be investigated.
While handling misinformation on a credit report can be time consuming and frustrating, it is something the borrower can easily do on their own. Submitting a dispute is a fairly simple process. A consumer can go to www.annualcreditreport.com where they can obtain a free copy of their personal reports from all three major bureaus. From there they will be instructed on how to dispute any inaccuracies right from their online report. There is no middleman, thus a better chance of the bureaus taking the dispute seriously and conducting a thorough investigation of the dispute.
Credit report inaccuracies can be devastating for the consumer in that they can severely limit the opportunities for the consumer and increase the cost of reaching their goals. Whether that be purchasing a home, a car or even opening a business. While the bureaus claim they are overhauling their processes for handling consumer disputes, the results could be a while in coming. While credit repair companies may be tempting to use, in the long run they can make the dispute process more frustrating, and more often than not, do more damage than good.