Learn Your Rights, Fight Erroneous Credit Reporting

When I check credit as part of the mortgage application process I always review the report with the client. I do this because I have found credit reports to be notoriously inaccurate.  I know Congress passed a bill a few years ago to address this issue. However, I’m still not convinced the system is accurate enough.

I pull anywhere between 150 and 250 credit reports a year and from my experience I have found that the error rate is astonishingly high. I am currently dealing with a friend whose credit report still shows a tax lien he paid off in 1999. Now, the frustrating part is that when he did a purchase transaction back in 2002 or something the tax lien was not on the report (which it shouldn’t). However, now that he’s thinking about buying again the tax lien has magically re-appeared. He has since contacted the IRS and obtained proof that he has paid off the tax lien. He will be faxing it over to the credit bureaus to get this corrected.

Despite efforts by Congress, consumers need to put pressure on the creditors who do the reporting and the credit bureaus who collect the information. A California couple took it a step further and sued a creditor. After repeatedly asking Wells Fargo to correct its erroneous reporting, this couple finally had enough:

As a result of the violations, Reed and Mary Ann Fisher, of Oceanside, Calif. suffered from a two-year uncorrected series of false and inaccurate credit reporting that resulted in damaged credit scores and credit denials, according to their suit and a jury decision, said their attorney, Robert F. Brennan, of La Crescenta, Calif.

And this week, this couple was awarded a $1 million settlement:

Wells Fargo Home Mortgage, as a mortgage servicer, has been ordered by a California Superior Court judge to pay more than $1 million for violations of the federal Fair Credit Reporting Act and the California Consumer Credit Reporting Agencies Act.

I am happy for this couple, because errors on your credit report can end up costing you big. A 30-40 point difference can be worth thousands of dollars in extra interest payments. Sometimes just a few points could end up hurting you. So, it is absolutely imperative that you monitor your credit report on an annual basis. You are entitled to a free credit report every twelve months.

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