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Accuracy, Completeness, Timeliness, and Consistency of Personal Credit Report |
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Personal credit reporting agencies receive
their information basically from reporters and they use several techniques and editing procedures to process this information in order to verify its
authenticity, totality, timeliness and consistency. In case of any suspicion of inaccuracy, the data is returned to the reporter for rectification. Thereafter the agency processes the rectified data and incorporates it into an individual's credit report. However, the likelihood of errors is always there, as data reporting is voluntary and agencies can enforce standards only to a certain limit. The common areas of error emanate from the same identifying information such as the same name which might be associated with different individuals. Moreover, a social security number might be missing or it might be reported incorrectly leading to the reported item getting associated with the wrong person. The ambit of personal credit report agencies' data is not exhaustive as small retailers, mortgage and finance companies, many individuals, employers, insurance companies and foreign entities do not report all information on credit accounts and the loans granted. Student loans are also not reported. Incomplete or out-of-date information reporting is also common in relation to timely payments by consumers or for those with serious delinquencies, particularly accounts with no change in status. Moreover, credit cards are not always reported or updated in personal credit report. Information about an account's closure, transfer, or change to a new payment status, and delinquent payments that are fewer than 30 or 60 days past due is also not reported by creditors. Any of the above can lead to problems of data incompleteness and loss of data integrity, and each has the potential to compromise the evaluation of an individual's creditworthiness. Timeliness of the reporting of information is very important as a credit account reported the day after a creditor has posted a payment to the account will show a smaller balance than will the same account reported the day before the posting. Similarly the payment status reflected in a personal credit report is also sensitive to timing as the record on an account may indicate no late payment problems on a given day but may show a delinquency if reported to the agency one or two days later. Apart from the above, consistency of information about an individual across different agencies is very vital. The reasons for the variances are: different rules regarding processing of information; posting of information at different times by the personal credit report agencies; the failure of the reporters to provide information to all the three agencies; and changes made to disputed information in personal credit report may be reflected only in the credit records of the agency that received the disputed claim. The extent to which consumer personal credit reports are accurate, complete, timely, or consistent across agencies, is a debatable point. The extent to which data errors and omissions affect credit history scores is also in dispute. Some studies have been conducted to address the issues of accuracy and importance. A 2002 joint study by the Consumer Federation of America and the National Personal Credit Reporting Association found evidence that the information included in the personal credit reports of any given individual can differ widely across agencies. Irrespective of whether an individual has a generally good or a generally bad credit history, credit history scores based on data from the personal credit report agencies can vary substantially. The conclusion of the study was that millions of consumers are at risk of being penalized by inaccurate personal credit report information and inaccurate credit scores. Errors and omissions also occur within the personal credit reports of a single agency. An investigation by a consumer organization estimated that up to 79% of personal credit reports may contain some type of error and that about 25% of all consumer personal credit reports may contain errors that can result in the denial of access to credit. Only a small proportion of the individuals who disputed information in their personal credit reports after being denied credit, were denied credit because of inaccurate information in their personal credit reports, as per the findings of a study by Arthur Andersen and Company. |
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