Lax Reporting by Debt Collectors Can Trigger Credit Reporting Errors
By Consumers Union on Wednesday, May 14th, 2014
As creditors increasingly rely on debt collectors to resolve outstanding debts, consumers should pay careful attention to the information reported about them to credit bureaus.
That’s especially true since credit reporting errors are incredibly common, as our recent report on the subject noted. One in five, or an estimated 40 million consumers have errors on one or more of their three credit reports. By far the most common tradelines in dispute are bills in collections. The Consumer Financial Protection Bureau (CFPB) reveals that almost 40% of consumer accuracy disputes filed with the big three credit reporting agencies, Experian, Equifax, and TransUnion, have to do with bills in collections.
Often, debt collectors will report to credit bureaus the date they received a debt, rather than the “date of delinquency.” This practice, known as “re-aging,” has the effect of keeping a bill on a credit report for longer than allowed by law. Most negative information is removed from a credit report after 7 years, though there are exceptions, and bankruptcies may be reported for 10 years. Debts in collections have a dramatic impact on consumers’ credit ratings – they can cause one’s FICO score to fall 100 points.
Richard, from Swanton, Ohio, has had “re-aged” debt, and told us:
“I have fought with the big three credit reporting agencies for almost 20 years, continuously attempting to correct mistakes. This experience has so jaded me, that I no longer attempt to resolve these issues. . . . I have had (recently) continuous re-listing of debts from 2000 on my current reports, because legal collectors refile them as NEW debts, and the agencies DO NOT remove them. I have sent literally an average of one or more letters a year to each agency expressing my disappointment. Their inaccuracies have cost me business loans, personal loans, and ruined our credit from the 1990s to present.”
That’s why consumers need the Stop Errors in Credit Use and Reporting (SECURE) Act, currently pending in the Senate. The bill would help consumers to effectively challenge errors like re-aged debt by requiring credit bureaus to forward, and creditors to consider, all supporting documentation and evidence submitted to them by consumers. The SECURE Act would also improve consumers’ understanding of their creditworthiness by providing them the right to a free, reliable credit score along with their free credit reports.
You can help Consumers Union as we fight for credit reporting reform by telling us about your experiences. Please share your credit reporting stories here!