Rest easy about the potential for errors on your credit report, just so long as you aren’t lulled into a false sense of security about keeping tabs on your credit report.
A new study by the Policy & Economic Research Council (PERC), “U.S. Consumer Credit Reports: Measuring Accuracy and Dispute Impacts” says your credit report is a lot less likely, than has been previously reported, to have errors that will negatively effect your credit worthiness.
What’s more, correcting any errors you may discover on your credit report isn’t going to substantially raise your credit score or improve your credit.
The findings could shed new light on the need, or lack thereof, for credit monitoring and credit repair services.
Based on the new study’s findings:
• Fee-based credit monitoring services and credit repair services are even less valuable if there’s little or nothing for them to find or repair.
You may, however, still need to take steps to more closely monitor your credit report and financial account activity to prevent identity (ID) theft or reduce the impact of ID theft.
Here’s the scoop.
PERC’s study engaged more than 2,000 consumers to examine their credit report entries (maintained by Equifax, Experian and TransUnion), to spot potential inaccuracies, to file disputes as necessary, and to candidly discuss their satisfaction with the outcome.
The PERC study found:
• Less than one percent, 0.93 percent, of all credit reports examined prompted a dispute that resulted in a credit score correction and an increase of a credit score of 25 points or greater.
• After the dispute process ran its course, one-half of one percent (0.50 percent) of all credit reports examined by consumers had credit scores that moved to a higher “credit risk tier” as a result of a consumer dispute.
• Nearly all, 95 percent of all consumers who participated in the dispute process were satisfied with the outcome.
“The facts are that credit report errors are relatively infrequent, and that errors that negatively impact credit worthiness are significantly lower than one may suspect,” said Dr. Michael Turner, President and CEO of PERC.
The findings are in stark contrast with previous studies, among the most notable, the 2004 “Mistakes Do Happen: A Look at Errors in Consumer Credit Reports,” by U.S. PRIG, the federation of state Public Interest Research Groups (PIRGs).
U.S. PRIG found one in four or 25 percent of the credit reports it surveyed “contained serious errors that could result in the denial of credit, such as false delinquencies or accounts that did not belong to the consumer.”
What’s the big deal?
Your credit report is a sort of fiscal fitness report for your credit habits. It typically names your credit accounts, identifies them by type and tracks balances, credit limits, available credit, open-or-closed status and payments all to reveal how well or how poorly you pay each account. Your credit report is used to establish a credit score, a numerical rendition of your credit report used by mortgage lenders, banks, credit card issuers, insurance companies, even employers to allow you to pass “Go” — or not.
Fee-based credit report monitoring and credit repair services often hawk their services based on studies that have revealed higher incidences of credit report errors.
Consumer advocates have long advised using your federal rights to see and dispute your credit report information for free, rather than paid monitoring and repair services, is the first and best line of defense against incorrect credit report information. PERC’s study enhances that advice.
“We wanted to get past the headlines, rumors and myths and, for the first time, find meaningful information that regulators, policymakers and advocates can rely on,” said Turner.