HARTFORD, CONN.—Susan Crandall thought she had stellar credit, until computers at one of the nation's powerful credit reporting agencies decided she had serious money troubles.
Crandall lived 50 miles from a woman who had filed for bankruptcy. They had similar names. Their street addresses were nearly identical. But they lived in different towns, with different birth dates, different middle names and different Social Security numbers.
And every step of the way, the system worked exactly as it was designed to.
A four-month investigation by The Courant has found that the nation's credit reporting business is built on a system so seriously flawed that costly errors are inevitable. A much-heralded congressional reform effort seven years ago has done little to repair the broken system or to hold credit bureaus accountable, the investigation found.
It is a system that forces hundreds of thousands of consumers to overpay for mortgages, credit cards and even car and property insurance. And it rewards the industry for its own mistakes, delivering millions in profits from selling credit reports to nervous consumers.
Errors seep into the system at every level.
Banks, credit card companies and department stores might send incorrect or outdated account information to the massive credit bureaus. When bureaus assemble credit reports, they rely on inexact computer matches that can easily mix consumers' records.
"Too many credit reports are a ticking time bomb of inaccurate information," said Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group in Washington, D.C. "Consumers pay the price for the mistakes of the credit bureaus."
That price can be high. Beyond the thousands who are cut off from credit completely, millions more risk drastically overpaying for loans without knowing it.
A borrower wrongly saddled with a blemished credit report could be forced to pay a mortgage nearly 3 percentage points higher than a borrower with a clean credit record. Over the life of a 30-year, $150,000 mortgage, that would grow to a $100,000 mistake.
And attempting to correct those mistakes can put consumers in a frustrating maze of telephone call centers, where they are at the mercy of low-paid clerks, some burdened by a quota system that requires them to handle a grueling 10 complaints every hour.
The credit reporting industry is dominated by three behemoths - Equifax, Experian and TransUnion - which churn out 2 million credit reports a day.
The industry has been under assault from legislators and consumer advocates for years. But the credit bureaus say their systems are the envy of the world, saving American consumers billions of dollars in interest charges every year by allowing lenders to better evaluate risk.
They acknowledge that their matching system isn't perfect, but say it reflects a balance between providing a complete picture of a consumer's payment history and avoiding a credit report that merges the histories of two consumers.
The bureaus also argue that they have spent millions to refine their computer programs and that they remain committed to eliminating errors. Anything else, they say, would cost them the confidence of the credit industry - and ultimately, sales.
"This is our lifeblood, this is our business, this is what we do, and this is what we've been doing for 104 years," said John Ford, chief privacy officer at Atlanta-based Equifax. "We're very, very concerned about the accuracy and reliability of our database."
Don't tell that to Melinda Hightower.