Every time a consumer applies for a mortgage or car loan – and, in many cases, signs up to rent an apartment or applies for a new job – a major factor in the decision to accept or reject the application is their credit report.
But one recent study estimated that one or more of the credit reports for one of every five American consumers has errors. And those mistakes, says U.S. Sen. Claire McCaskill, D-Mo., chairman of the consumer protection subcommittee, can affect loan rates or career advancement for people whose credit records are unfairly reported.
“Given the huge impact that credit reports can have, it is imperative that credit reports are accurate and, if they aren’t, that consumers can easily and successfully dispute errors in their credit reports,” McCaskill told a Senate Commerce Committee panel on Tuesday.
“Errors can mean the difference between obtaining a car loan or not, or paying a higher price for a mortgage. Errors can result in credit issuers, like a small town bank, declining credit to a potentially valuable customer, or issuing credit to a riskier customer than intended.”
The hearing by the Subcommittee on Consumer Protection, Product Safety and Insurance – which McCaskill chairs — featured testimony by credit industry officials, a victim of credit reporting errors, and federal regulators.
It also was a platform for McCaskill and two other senators to report inaccuracies in their own credits reports over the years. The Missouri senator, said that when she applied for a refinancing in December, the credit report mentioned a problem. “It turned out that it was somebody in Houston” who was confused with her, McCaskill said.
Another committee member, U.S. Sen. Bill Nelson, D-Fla., told the panel that he and his wife had been victims of an erroneous credit report that threatened to hold up their home mortgage. “If this is happening to me, what does it do to the average citizen on the street?” Nelson asked.
The ranking Republican on the panel, U.S. Sen. Dean Heller, R-Nv., said that credit reporting firms are performing an important service but emphasized that “ensuring that this information is accurate is needed.” U.S. Sen. Amy Klobuchar, D-Minn., said her office had received many complains about inaccurate credit scores and the time it can take to correct the problem.
“It’s a ridiculous situation,” said Klobuchar, citing years of delays in correcting minor credit information.