Errors on credit reports are an 'epidemic' - but nearly 25% of Americans can't access their credit reports to check for mistakes, consumer advocates say

By Zoe Han

Credit reports are supposed to be available for free every week, but many consumers can't get to their data, a Consumer Reports study found

Are you paying more for your mortgage or car insurance because of a mistake on your credit report that lowered your credit score? A sizable share of Americans can't find out the answer to that question, because they can't check their credit data online.

Almost a quarter of people said they could not access their credit report, according to a recent study by Consumer Reports and WorkMoney, a national nonprofit group that says its mission is to help members improve their financial well-being. The study asked participants to review their credit reports and check them for errors - a problem that the Consumer Financial Protection Bureau received over 430,000 complaints about in 2023.

More than 4,300 Americans signed up to participate in the study, but an "alarming" amount - nearly 25% of them - could not access their credit report in the first place.

The finding comes as it's supposed to be easier than ever for consumers to see their credit data. The three major credit-reporting bureaus - Equifax (EFX), Experian (UK:EXPN) and TransUnion (TRU) - started providing consumers with a free copy of their credit report every week in 2020. Prior to that, consumers could only get a free copy of their report once a year.

"Having access to your credit report is just the first step in being able to stay on top of your financial health," said Ryan Reynolds, a policy analyst with the Financial Fairness team at Consumer Reports. "So much in the financial system, and other parts of life, [is] dictated by the information that's on your credit reports," he said.

A credit report is essentially a track record of all the information that determines your credit score. Ranging from 300 to 850, that score determines many aspects of a person's financial life - such as the interest rate they'll pay when they take out an auto loan or mortgage, whether they're eligible for certain credit cards, and how much their car insurance costs. Credit history can also affect whether a tenant can rent an apartment, as well as one's eligibility for certain jobs. Credit bureaus look at information such as how often you pay your bills on time and how much of your available credit you use to come up with a score.

People should check their credit reports at least once a year, and especially when they are about to make a big purchase such as a house, a car or a piece of furniture, "just so that there's no surprises," Reynolds said.

Also read: What is a good credit score - and how can you improve yours?

Credit reports have errors - and they're common

Among the people who were able to check their credit data as part of the Consumer Reports study, almost half of them found at least one error on their report.

Sometimes, it was the wrong mailing address or the wrong birth date - but in other cases, reports incorrectly stated that consumers had missed a payment on a loan, or erroneously said that a person had taken on debt when they had not. Such errors could hurt a person's credit score, and eventually lead to them paying higher interest rates on loans.

"We have a credit-report error epidemic," said Carrie Joy Grimes, the founder and chief executive of WorkMoney. The errors can cost people "thousands of dollars" in higher interest rates or fees, or prevent them from opening up new credit accounts such as a credit card or a personal loan, she noted.

I can't get to my free credit report. Why is that?

Consumers can find free electronic copies of their credit reports on AnnualCreditReport.com - a website operated jointly by Experian, TransUnion and Equifax, and the only government-authorized website where consumers can get credit reports.

People in the Consumer Reports survey who couldn't access their credit data said that in some cases, they received error messages when they logged onto the site. Reynolds was one of them, no matter which computer or web browser he tried.

People also get "tripped up" by the security questions that AnnualCreditReport.com uses to verify their identity, said Chi Chi Wu, senior attorney with the National Consumer Law Center, a consumer-advocacy group.

Those questions can be confusing, she noted. For example, the site sometimes asks a person to choose the correct amount of their monthly mortgage payment - but for most people, the amount they are familiar with differs from the one on file with the bureaus, because it has insurance and taxes included.

People can also have problems accessing their credit reports because of errors in the data, Wu added. For example, the website could ask the person to choose an address they've lived at from three possible options to verify their identity, "but maybe you never lived in any of those," she said.

A spokesperson from the Consumer Data Industry Association, a trade group representing the three credit bureaus, told MarketWatch in an email that the industry has the same goal as consumers, advocates and regulators to make credit reports "accurate and complete."

More than 90% of consumers are eligible for a one-time code via text or email to receive their free credit report, the spokesperson said, noting that the authentication questions are for those who are not eligible. People can also submit a request to receive their report by mail, which takes about a week.

Still, consumer advocates say the current state of affairs is not good enough.

"In this day and age, there's no excuse for them to keep that information from us," WorkMoney's Grimes said.

-Zoe Han

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05-04-24 0933ET

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