Former FDIC Official Sheila Bair Discovers How a Small Credit Reporting Error Can Have a Big Impact
By Consumers Union on Thursday, November 14th, 2013
An inaccurate credit score can be costly. Former FDIC head Sheila Bair recently shared a credit-reporting problem she experienced on CNN Money, and her story shows how a small mistake can result in real damage to credit scores.
Bair explains that last year, after writing a check to cover a store credit card bill, the credit card company’s computer misinterpreted her handwriting. It registered that she had written a 7 instead of a 9. As a result, the company sent her a bill for $2 the next month. She ignored the charge for a month, and she was levied a $10 late fee. After a few months, she finally just paid the $12.
During the course of a loan application, Bair, who had previously enjoyed an excellent credit history, was shocked to find from her lender that her credit score had sunk to almost sub-prime level – all because of the $2 misunderstanding with the credit card company. Even with her husband’s high credit score, the couple was not offered a prime interest rate.
Luckily for Bair, the credit card company agreed to correct the misunderstanding with the credit reporting agency, and eventually, the credit bureau changed her report. Still, Bair was stunned that such a small error could affect her ability to get a loan at a fair interest rate.
Bair is not the only consumer who has been hurt by mistakes or misunderstandings over a credit history. Over 40 million people have mistakes on their credit reports, according to the FTC, and 5 percent of them had errors that could hurt their creditworthiness.
That’s why it’s so important for consumers to review their credit reports for possible errors. Consumers have the right to check their credit reports for free once yearly through annualcreditreport.com. But there’s more work to be done. Consumers Union has urged the Consumer Financial Protection Bureau to use its regulatory authority to require credit bureaus to do a better job of fixing errors on credit reports. We’re also urging Congress to pass legislation that would provide a credit score along with each of their annual credit reports to consumers, scores that lenders actually consult in evaluating them. Consumers deserve to know their credit scores for free before they visit their lender.
You can help us support federal legislation that would ensure credit reports are accurate and guarantee consumers the right to their free credit scores. Please ask Congress to back credit report reform!
This post has been edited to correct an error in the earlier version regarding the FTC’s findings on credit report mistakes.