Equifax, TransUnion and Experian — the big three of credit reporting agencies — announced this week that they’re going to continue allowing consumers to receive free weekly credit reports for one more year until April 20, 2022.
You must go through annualcreditreport.com to get those free weekly reports.
The news comes right after troubling headlines indicating that consumers are frustrated with how their credit is being handled by those very same agencies.
“Consumer complaints about financial grievances spiked during the pandemic year of 2020, eclipsing 2019, the previous record year,” according to report released Monday by the U.S. PIRG Education Fund, a nonprofit consumer advocacy group.
The report reviewed the public database of complaints filed with the Consumer Financial Protection Bureau.
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A positive, accurate credit report paves the way for low-cost loans
Your credit report is the blueprint for building your credit score. Companies like FICO and VantageScore use the information, such as late payments and credit usage, on your credit reports to come up with your three-digit credit score.
The higher your score, the better your odds of receiving a low interest rate on a car loan, mortgage, credit card or other loan.
COVID-19 relief rolled out a variety of ways that financially strapped consumers could delay payments on credit cards, auto loans, mortgages and other major loans after losing a job or facing other hardships during the pandemic. Many times, consumers had to reach out to lenders for help.
Why some credit reports include errors
Increasingly, consumer watchdogs are spotting problems, though, including some missed payments that have wrongly showed up on credit reports during deferral periods.
I reported in June about a man in Flint Township, Michigan, for example, who struggled for nearly a year to drive his credit score up from a grim 527 to pretty good 682. Then in a matter of days, his score unexpectedly tumbled by 91 points in May.
He apparently didn’t do anything wrong to drive that score back below 600. He simply was caught in a COVID-19-related glitch connected to some student loans.
Some mistakes found on credit reports can be attributed to banks mishandling the reporting of a variety of payment accommodations, consumers misunderstanding the exact changes offered and the credit reporting agencies themselves making mistakes.
“As soon as the pandemic hit, a large number of lenders began recognizing that their loan portfolios would be going into default and that isn’t good for anyone,” said Ian Lyngklip, an attorney at Lyngklip & Associates Consumer Law Center.
“A lot of disputes are happening because consumers don’t understand exactly the nature of what is being done,” Lyngklip said.
How to ask for help
Consumers who face financial troubles must ask a lender to send a letter or email to confirm of the exact terms of any adjustments or changes in payment terms on a mortgage or other loan.
A wide range of accommodations were granted on a temporary, and often individual basis. And you want to make sure you know what the lender offered you.
“When you have a lot of customized work being done, you have a high probability of errors falling in,” Lyngklip said.
Many times, he said, consumers would call requesting a way to avoid making payments for a month or two on a bill. But they really didn’t get documentation of what was being offered by a lender and so they may not actually know the terms of the accommodation that the creditor provided.
“They really don’t understand the legal arrangement that has been made,” Lyngklip said. “Their concern is what do I have to pay and when do I have to pay it.”
Did the bank waive payments? Extend the loan? Offer a deferment? Or forbearance? These are the correct questions to ask a lender, he said, about what is being offered by way of loan accommodation.
Lyngklip’s website has a new tool for consumers to obtain an automated letter to order credit reports. The site also has fillable forms to request background check reports. The free tool does not collect any data from consumers. See: https://www.consumerlawyers.com/fillable-credit-report-request-letters for information.
Many consumers have had their requests for reports rejected because the bureaus claim that they cannot properly identify the consumers, and they may need to write a letter and include identification, Lyngklip said.
Also some consumers are using the online order requests located on the bureau websites, he said, but those sites may require the consumers to agree to the terms of the “pop-ups.”
The letters that his site generates should help the consumer get the correct report without having the request kicked back due to insufficient information.
Complaints about credit reports skyrocket
Last year, consumers were shocked by errors that appeared on their credit reports, as complaints about credit reporting skyrocketed to the top of the list at the Consumer Financial Protection Bureau.
Overall, there were 282,000 complaints about credit reporting issues in 2020 — more than double the 136,000 credit reporting complaints from 2019 in the federal consumer watchdog’s database. Credit reporting complaints accounted for 63% of all complaints submitted in 2020.
The three biggest reported problems: incorrect information on credit reports, problems with a credit bureau’s investigation into a problem on a credit report, and debt collection companies attempting to collect debt not owed.
Experian, TransUnion and Equifax — the big three credit reporting bureaus — ranked as the top three most complained about companies in the Consumer Financial Protection Bureau database.
Ed Mierzwinski, senior director of the federal consumer program for U.S. PIRG, blames the pandemic to a degree, noting that the economic upheaval intensified the financial fears that many people already had been experiencing.
Consumer watchdogs pushed an unsuccessful attempt at banning negative credit reporting during the natural disasters and the pandemic, arguing that the COVID-19 emergency has led to job losses and meant that many people aren’t able to pay their bills. What’s going on, they say, isn’t a real reflection of someone’s creditworthiness.
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But Mierzwinski also is extremely critical of how many mistakes credit reporting agencies make even when there isn’t an emergency. He notes that consumer complaints were at record levels relating to credit reports in 2019 — before the pandemic hit — too.
The top complaint month was December 2020 when there were 48,558 complaints — more than double the number of complaints in December 2019.
The goal of credit reporting agencies, Mierzwinski said, is to provide lenders with information about consumers as quickly, and inexpensively, as possible.
“Consumers, they’re our product, not our customer,” Mierzwinski said.
The credit industry disagrees with the consumer watchdogs.
Francis Creighton, president and CEO of the Consumer Data Industry Association, offered this statement: “Getting credit reports right for consumers is one of our most important jobs and that’s reflected by a 97% accuracy rate. The industry’s internal data indicates there is no evidence that complaint activity reflects a problem with credit reporting.”
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Instead, he blamed credit repair companies that “take advantage of consumers by promising they can take negative but accurate information off of credit reports for a fee. Additionally, these same companies are abusing the CFPB complaint portal with numerous and repeated frivolous disputes. “
While disputes are required to be resolved within 30 days, he said, the majority are resolved within two weeks. If the dispute extends beyond that time frame, the law requires that the disputed information must be removed from the credit report.
The best bet for consumers: Pay down debts so that your outstanding balances are less than 30% of your overall credit limits. Pay bills on time. Check your credit report before you shop for a loan. Dispute errors.
Federal law allows you to request one free copy of your credit report every 12 months from each national credit bureau. After the COVID-19 pandemic hit, though, free weekly reports were offered but that has been extended one year now until April 20, 2022.