The Texas attorney general, along with 30 other attorneys general, has reached a $6 million settlement with the three big credit-reporting agencies that will help make reports more accurate.
Equifax, Experian and TransUnion must make widespread changes to the way they address errors on credit reports, including how negative information is added, such as tickets, fines and medical debt.
“This settlement elevates standards placed on credit reporting agencies, which will provide greater protections for consumers in Texas and nationwide,” Attorney General Ken Paxton said in a statement Thursday.
“A good credit rating is an increasingly important piece of people’s lives, and the results of this effort will give consumers greater assurance that their score is a fair and accurate reflection of their financial health.”
Errors on credit reports can come from various sources, including identity theft, fraud or mismatched information because of similar names or other identifying information provided by data furnishers. The credit information of one consumer can become “mixed” into the file of another.
According to a 2013 study by the Federal Trade Commission, 1 in 4 participants found at least one error that might affect a credit score. Thirteen percent of participants saw their credit scores rise after information was corrected.
“We’ve come a long way in the last five to 10 years in consumer protections, but obviously there is still room for improvement,” said Curtis Arnold, founder of CardRatings.com, an online service that helps consumers find the best credit card offers. “This settlement is a significant step in the right direction.”
The multistate investigation, started in 2012 by Ohio Attorney General Mike DeWine, focused on four areas: consumer disputes on credit report errors, monitoring and disciplining of credit report information providers, accuracy in credit reports, and the marketing of credit-monitoring products to consumers when they call agencies to dispute their reports.
“This agreement addresses some of the most egregious problems in credit reporting that consumer advocates have complained about for many years,” Chi Chi Wu, staff attorney at the National Consumer Law Center, said in a statement.
Under the settlement, the credit-reporting agencies must:
▪ Increase monitoring of data furnishers, including maintaining information about those that cause errors.
▪ Use a better system to share data among agencies and notify other agencies if one finds a mixed report.
▪ Not sell credit-monitoring services until after the dispute portion of the call has ended.
▪ Make consumers aware that the service is not required to fix an error.
▪ Send the consumer’s supporting documents in a dispute to the original data furnisher.
▪ Provide an additional free credit report if the disputed information is changed.
▪ Prohibit information about fines and tickets from being included in credit reports.
▪ Provide a link to each bureau’s online dispute website at www.annualcreditreport.com. The credit-reporting agency’s dispute website must be free of ads and marketing offers.
▪ Not place medical debt on a report until 180 days after the account is reported to the agency, giving consumers time to work out issues with their insurers.
The last requirement is particularly significant because 43 million Americans have overdue medical debt on their credit reports, accounting for half of overdue debt, according to a study by the Consumer Financial Protection Bureau.
The changes will be implemented in three phases so the reporting agencies will have time to update their systems and procedures. All changes must be completed within three years and 90 days of the settlement’s effective date.
Despite the added protections, Arnold recommends that consumers remain vigilant in reviewing all three credit reports each year, as well as using services that provide free credit scores.
“We still as consumers need to be proactive,” he said. “Ultimately, we ourselves are our best protection for our credit reports.”
Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net
Watch your credit
▪ Check your three credit reports for free at www.annualcreditreport.com or call 877-322-8228. You will need your Social Security number.
▪ For free credit scores, go to www.CreditKarma.com, www.WisePiggy.com or www.Credit.com. Some credit card companies, like Discover, also include a free FICO credit score on their monthly bills. Chase and Bank of America are rolling out such a service this year.