Aug 30, 2013 Sean Albert
Credit reports have become far more critical documents in recent years, especially because of the increased need for loans, mortgages and other financial assistance in the wake of the economic fall out. However, traditional credit scores started to become more scrutinized because of a growing number of lawsuits regarding inaccuracies and a complete lack of oversight.
For this reason, alternative credit scores are beginning to gain traction, with consumers and businesses alike using these services to get a more accurate portrayal of their financial standings. Now, several scathing studies have hit the mass media that seem to indicate traditional credit scorers need to make serious adjustments to policies.
Investigative report on credit scores
CBS News' "60 Minutes" recently ran a story regarding the estimated 40 million consumers who have mistakes on their credit reports. While some may believe that this is not necessarily a big issue, inaccurate credit scores can cost individuals money on future loans, block them from receiving new liens or financing options, get turned down from jobs and more.
According to the news provider, studies indicate that of the 40 million reports which have errors, roughly half have significant mistakes that dramatically effect the victim. Advocates are calling upon the biggest credit reporting bureaus to expedite correction processes in light of these issues, while alternative scorers are becoming more popular.
The source explained that the biggest problem currently is the complete lack of transparency, despite the fact that these firms affect more than 200 million Americans. The Federal Trade Commission and Consumer Financial Protection Bureau are beginning to step into the fight against these problems.
Steve Kroft of "60 Minutes" noted that the 20 percent error rate in the industry is simply unacceptable, and that many of these inaccuracies go directly against the Fair Credit Reporting Act.
Credit reporting mistakes to avoid
The New York Times recently reported that a consumer sued one of the largest credit reporting companies and ended up getting more than $18 million for punitive damages. The woman had tried to get the bureau to remove errors from her report for more than two years, though the mistakes remained.
This is a clear indication that credit reporters need to ensure that all information is accurate and that mistakes are corrected as quickly as possible. With traditional channels coming under fire, alternative credit scores might be the best options for businesses, risk managers and consumers today.