Red tape of getting credit record fixed can give a consumer the blues


DETROIT -- Thomas Moran ran up $100 in long-distance phone bills scrambling to correct his credit record so he could buy a house near Ann Arbor, Mich.

Charlie Mae and Otis Cothron of Detroit can't get their credit limit on a charge card raised a year after a Sears account mix-up was straightened out.

Cynthia-Denise Farley of Detroit was hounded by harassing phone calls at work and at home from a Texas collection agency. She ordered a copy of her credit report "and was completely devastated to find out my history report extended to be eight pages long." She says it included reports of delinquent accounts that "I know were not mine."

Welcome to a corner of the Twilight Zone called credit reporting, where people have slashed through red tape to kill mistakes in their credit reports, only to see them come back to haunt them.

Credit reports, though not lethal, can determine whether a person gets a job, a credit card, a car loan, a house, an apartment or anything on credit at a store.

Often these decisions -- by lenders, employers and others -- are made with information that is inaccurate or belongs to someone else. A survey by Consumers Union, publisher of Consumer Reports magazine, found errors in nearly half the reports it checked and major mistakes in nearly one in five. A June study by the U.S. Public Interest Research Group found that it often takes up to six months to fix errors.

Complaints about credit bureaus have increased 50 percent -- to 9,000 -- during the past year, officials of the Federal Trade Commission testified in June before a House of Representatives subcommittee. Credit bureau problems are the main cause of complaints to the FTC. By the time consumers contact the government agency, they already have complained to the credit bureaus for an average of 23 weeks, the FTC said.

Cleveland-based TRW Inc. is one of three major national credit reporting agencies; the others are Equifax of Atlanta and Trans Union of Chicago. All operate like libraries: Stores, banks, insurance companies, landlords, finance companies and others put information on the agencies' computer shelves and read it to decide if you're a deadbeat. Every month they send the agencies lists of people with bad debts -- even if those people insist "the check's in the mail" or otherwise dispute a debt.

Credit reporting agencies also put on those computer library shelves information about judgments, liens against property and bankruptcy filings culled from courts and city halls.

To companies that grant credit, the system seems to work well.

"On a percentage basis, the records of these credit reporting firms are outstanding," says Daniel Smith, vice president of Republic Bancorp Mortgage Inc. of Plymouth, Mich. "Turnaround time on these adjustments is usually a direct result of volume and not the unwillingness of the agencies to cooperate."

The mistakes have many causes -- not all of them are the credit reporting agencies' fault. People don't write their names the same way every time they apply for credit. A store billing clerk may garble a Social Security number. Or a person may have moved several times, accumulating chapters in his or her credit history in each place.

That's why the reporting agencies pull information off shelves that they feel is close enough, if not always a perfect match.

If a file was limited to information that was a perfect match, right down to the middle initial, there might not be enough information to grant credit, particularly to low-income people who might not have an extensive credit history, Martin Abrams, a TRW spokesman, said.

A TRW spokeswoman, Susan Murdy, said that when a name, address, Social Security number or other information from different people is similar, all the credit information will be spit out on one report.

Worse, credit grantors sometimes send outdated or incorrect information to the reporting agency shelves after it's been fixed.

Such problems and mistakes led Michigan and 12 other states to sue or seek to join a suit against credit reporting industry giant TRW, charging it has damaged the credit reputations and invaded the privacy of consumers.

Major points of the states' case against TRW:

* Files are riddled with errors, from misspelled names to merged credit information of more than one person.

* TRW believes the credit grantor, not the consumer, in almost every dispute.

* Making corrections takes a long time, and the process is confusing.

* Deleted or corrected information can be changed back without the consumer's knowledge.

* TRW sells lists of consumers to direct-mail marketers.

The suit was filed after the Texas attorney general could not reach an agreement in negotiations there.

In response, TRW said in a statement: "The attorneys general really don't seem to understand how this business operates; TRW is already doing most of the actions suggested by the Texas attorney general."

In addition, TRW says:

* It asks sources of bad information to certify they won't put that information back on the shelves.

* In cases of disputed items, reinvestigations are done in 30 days. Each side gets to state its case.

* Selling lists of names to direct-mail marketers is allowed under the Fair Credit Reporting Act.

All three agencies say they are improving customer service, though not directly because of the suit.

In October, TRW will offer an 800 number so people denied credit can get a copy of their reports more easily. Consumers can still visit or call the agencies' local offices.

By December, Equifax's 24-hour toll-free information center will be in full swing. And Equifax announced Aug. 8 that it would stop selling direct marketing lists derived from consumer credit files. The companies may be required to do more. Several congressional proposals would give consumers more rights and hold credit reporting companies accountable for correcting mistakes.

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