Add this to the financial fallout from the pandemic: More consumers are complaining about errors on their credit reports, and many are frustrated when trying to fix the mistakes, according to federal complaint data.
In 2020, consumers filed more than 280,000 complaints about credit reporting issues — more than half of all complaints received last year by the Consumer Financial Protection Bureau, said Syed Ejaz, a policy analyst for Consumer Reports.
The number of credit-reporting complaints more than doubled from 2019, according to the agency’s online complaint database.
“They certainly have ballooned over the past year,” Ejaz said.
Credit report errors have long been a problem for American consumers. Accuracy matters because the contents of your credit report help determine whether you can qualify for loans and credit cards, and what interest rate you will pay.
Common mistakes include loans that have been repaid but appear as unpaid; debts incorrectly reported as being in collection; incorrect personal information and addresses; and “mixed” files, in which information from a different person appears in your credit report.
But mistakes are an even bigger worry during the pandemic, when many families are struggling and may not have time to negotiate corrections, said Chi Chi Wu, a lawyer with the National Consumer Law Center.
Some of the mistakes are pandemic-related. The federal government’s relief program allowed a pause in the repayment of certain loans — including federally backed mortgages and federal student loans. Borrowers’ credit reports are supposed to show the loans as current, even though payments are on hiatus, to avoid damaging their credit while they are in financial straits, Wu said.
That has not always worked as planned, according to complaints filed with the consumer bureau.
Typically, credit bureaus must respond to complaints within 30 to 45 days, but early in the pandemic the government gave them more flexibility on that deadline. “Disputes have not been responded to, or have taken an excessive amount of time,” Wu said.
A credit report is a summary of your debts and payment history, as reported by lenders to three big credit bureaus: Equifax, Experian and TransUnion. The bureaus apply a formula — created by another company, typically FICO or VantageScore — to boil down the information to a three-digit credit score. A score of 700 or above is generally considered “good.”
Lenders use the score as a snapshot of whether you are likely to repay a loan. Scores may also be checked when you apply for a job or an apartment lease. The higher the score, the better. Paying bills on time and keeping credit card balances low help boost scores.
Because of the complexity of the credit reporting system, consumers may feel stymied when they find an error and try to fix it.
A student borrower in California, for instance, complained in December about a 200-point credit score drop because of “incorrect” information reported by a student loan servicer. The servicer said it was not reporting flawed information and referred the borrower to the credit bureaus. The drop in the credit score prevented the borrower from taking steps like moving and buying a car, but “no one seems to help fix it,” the borrower wrote. “My credit score continues to drop after I’ve tried so hard to rebuild it.”
A similar situation is the subject of a lawsuit, cited by Consumer Reports, that a New Jersey woman filed against Equifax, TransUnion and VantageScore in U.S. District Court last summer. The complaint says her student loan servicer, Navient, mistakenly reported her payments as late, even though they should have been reported as current under the federal relief program. The error caused her credit score to drop by almost 100 points, the complaint says.
Navient, which is not a defendant in the suit, corrected the mistake, but the credit bureaus did not update her credit score to reflect the change, the suit says.
The complaint claims that “thousands” of borrowers are in a similar situation, though a lawyer for the borrower, Philip L. Fraietta of Bursor & Fisher in New York, said that number was an estimate.
A spokesperson for Navient, Paul Hartwick, declined to comment on the lawsuit.
During the pandemic, Navient is reporting the payment status of student loans as instructed by the federal Education Department, he said. “If you have questions about a specific credit score, please contact the company that issued it,” Navient has advised borrowers.
TransUnion declined to comment on the suit. Equifax and VantageScore did not respond to email and phone inquiries.
Student loan servicers have said borrowers are sometimes confused about whether they are eligible for federal payment relief offered during the pandemic. Some borrowers may have missed payments before protections like pausing payments kicked in, and had their scores drop as a result; others may have private student loans, which are ineligible for the help.
Credit scores are typically updated automatically as soon as the credit report is updated, said Francis Creighton, president and chief executive officer of the Consumer Data Industry Association, which represents credit bureaus and other data companies. How quickly a report is updated depends on how often a lender reports information to the credit bureau.
Creighton also said many factors influence a consumer’s credit score, so it is difficult to attribute a change in a score to a single item in a credit report.
He said much of the increase in complaints was from bogus complaints filed by unscrupulous credit “repair” companies on behalf of their clients. Those companies charge fees and promise consumers that they will improve poor credit by having negative, but accurate, items like late payments and bankruptcies removed from their credit report, he said.
If the sharp rise in federal complaints reflected a true increase in reporting errors, Creighton said, banks and lenders would have noticed. “It’s not real,” he said. “We’re not seeing big numbers of new, actionable disputes.”
The Consumer Financial Protection Bureau has taken legal action against some credit repair firms and advised consumers to be wary of companies charging fees to scrub negative but current data from credit reports. “No one can do that,” the bureau said in a 2019 advisory.
Asked about Creighton’s comments on bogus complaints, the bureau said that companies can flag suspicious complaints for further review through an “administrative response” process and that those complaints are not published in the database. In 2020, the bureau said, companies used the administrative response option for 3% of credit or consumer reporting complaints sent to them for response.
There are signs that consumer credit has generally fared well during the pandemic. The average FICO score rose to 711 in October from 708 in the spring as borrowers dialed back spending, used government stimulus checks to pay bills and availed themselves of help from lenders, said a FICO spokesperson, Greg Jawski.
“The accommodations lenders have made to borrowers have been really helpful,” Jawski said.
Here are some questions and answers about credit reporting:
Q: How long can loan payments be suspended during the pandemic?
A: The Biden administration has extended the suspension of federal student loans through Sept. 30. Borrowers with federally owned student loans will continue to have payments suspended without penalty and will have their interest rate set at 0%. (Borrowers of private student loans are not automatically entitled to the suspension.)
The administration also gave homeowners through June 30 to enroll in a program to seek a pause in federally backed mortgage payments.
Generally, if you were up to date with payments when they were paused, the loans must be reported as current to the credit bureaus.
Any suspension or deferral of credit card payments is at the discretion of the bank issuing the card, so consumers should contact the issuer directly to discuss options.
Q: How can I check my credit report?
A: Typically you can check reports free of charge once a year at annualcreditreport.com, but the big credit bureaus are allowing consumers to check them free weekly, through April. It is unclear if the weekly access will be extended, so it is best to make use of the extra availability while you can. You will need to verify your identity, typically by answering questions that only you are likely to know, like the amount of your mortgage or an address you lived at 10 years ago. It helps to have financial records handy when you make the request.
Q: What is the best way to dispute an error on my credit report?
A: You can submit a complaint online, but Ejaz of Consumer Reports recommends filing your request in writing, to avoid missteps. Letter templates are available on the consumer bureau’s website. Keep copies and mail your letter by certified mail. It helps to include copies of documents that support your complaint, like payment records. It is best to dispute the error with all three bureaus, he said.