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5 Things to Know About Mixed Credit Files

For better and worse, extensive consumer credit reporting has become a feature of modern life. Essentially every form of legal debt- mortgages, auto loans, student loans, credit cards, revolving credit lines, etc.- appears on a given borrower’s credit reports. These reports are compiled by consumer reporting agencies (“CRAs”), which are large businesses dedicated to tracking, and scoring, the credit history and creditworthiness of many millions of consumers.

The best-known CRAs are Equifax, Experian, and Trans Union – these are the three major CRAs. As you may well already know, the credit scores generated by the CRAs are used to assess the creditworthiness and risk of a given consumer, which in turn influences whether that consumer can borrow and at what interest rate. Therefore, credit scores have a massive financial impact on our debt-laden economy. Further, even though the major CRAs are sizeable businesses that specialize in what they do, they consistently make mistakes that can prove costly to consumers. This article is about one particular kind of mistake- mixed files- and how to protect yourself from them.

  1. Mixed Credit Files Are More Common Than You Would Probably Think

Credit reporting errors can be caused by humans and computers. Furnishers- all those businesses that report credit information to the CRAs- can make various kinds of reporting errors. A specific kind of error is a mixed file – the subject of this piece. A mixed file is when credit information for two or more people is erroneously put into a given consumer’s report. Given that consumers have unique Social Security numbers, you would think mixed files would rarely, if ever, happen, but they do. Common reasons for mixed files include people, particularly family members, with similar names and/or addresses. Sometimes, people with similar names and Social Security numbers will become victims of mixed files. When this happens, information will be wrongly attributed to a given consumer.

  1. You Should Consistently Check Your Credit Reports

This is generally true. With specific regard to mixed files, you should look for any names, addresses, Social Security numbers, accounts, and any other information that has never belonged to you. Many people have accounts at major institutions like Bank of America, JPMorgan Chase, Citibank, etc.- don’t just look at the name of the furnisher, also make sure that the balance and account dates are accurate. You can get free credit reports from the three major CRAs once per year through this website. You can request hard copies of your credit reports at any time by following the steps here.

  1. Mixed Files Can Be Costly

Horror stories abound in this regard. See, for example, this “60 Minutes” spot. It’s not difficult to imagine why. Even if, for example, you’ve been the victim of a mixed file but still have a strong credit score, your overall debt levels may appear unmanageable and, therefore, risky. For example, an extra mortgage, or more, may be wrongly attributed to you. If your credit file happens to be mixed with someone who has a poor credit score, then this can prove quite costly as you will likely not just be rejected by some creditors, but also have to pay higher interest rates for your credit. Mixed files can easily become costly, as well as extremely stressful.

  1. Mixed Files Require Action

If you believe you’ve been the victim of a mixed file, or other credit reporting error, you need to take steps. Sometimes, credit reporting errors will be promptly fixed after a phone call, but this is often not the case. You should send formal dispute letters, with all relevant information (a specific explanation of the problem, your personal information, any erroneous information, and an attached copy of a credit report depicting this incorrect information), separately to every CRA that is reporting incorrect information. Document and save everything you can: keeping evidence such as credit reports, dispute letters, phone records, credit rejection letters, and anything else relevant in this regard can greatly bolster your case. CRAs are required to make recordings of all customer calls; it would be smart of you to, if you call a CRA to notify them of an inaccuracy, note the time, duration, topic, name of the agent, and any other relevant information pertaining to the call. Continue to monitor the situation – don’t assume that because someone, such as a CRA employee, said the problem will be fixed, that it has actually been fixed! The CRAs can be notoriously difficult to work with. If you suspect you’ve been the victim of a mixed file, strongly consider contacting an attorney who specializes in consumer protection, such as those at Bell Law (https://bell-law-kc.com/). DO NOT sit back and hope your credit reporting issue will work itself out, because it almost certainly won’t.

  1. Consumers Are Protected by the Fair Credit Reporting Act

Fortunately, consumers are protected by federal law when it comes to credit reporting errors, particularly through the Fair Credit Reporting Act (“FCRA”). The FCRA dictates that involved parties, such as the CRAs, furnishers, and debt collectors, must take steps to correct known errors in a reasonable amount of time. Sometimes, CRAs do correct mistakes quickly and without too much hassle. Other times, they drag their feet for years or even decades. This is one reason why it’s so important to document your interactions when correcting credit reporting errors: if a CRA or furnisher doesn’t act with some urgency after learning of a mistake, then consumers who are affected are often entitled to damages under the FCRA.

 

If you’d like to read in greater depth about this topic, please continue below….

We’ve established that credit reporting errors are both common and costly, and that consumers possess fairly robust rights in this regard under the national Fair Credit Reporting Act (“FCRA”), as well as some other statutes. Here, we will delve more specifically into types of credit reporting errors, how to spot them, and how to go about getting them fixed so as to avoid unnecessary cost and annoyance.

Errors are Common- and Costly- in Credit Reporting!

It is crucial to understand that errors are common in credit reporting.This fact impacts millions of Americans and costs them some unknown, but undoubtedly substantial, amount of money year after year. While the major CRAs are large companies that specialize in collecting consumer information and compiling credit scores, they are far from perfect. One reason for this is that they rely on furnishers- mortgage lenders, student loan providers, credit card companies, auto lenders, etc.- to provide them accurate information. Given that millions of consumers and many furnishers, ranging from huge to small businesses, are involved in this process, plenty of mistakes are made.

Here, we’ll introduce a fictional consumer named Sally Smith; while Sally’s a fictional character, she nonetheless will be used to illustrate very real situations that impact ordinary consumers. Let’s say, for example, that Sally is a responsible person who keeps one credit card with a balance that’s reasonable given her income, has made perfectly timely payments on the card for over five years, and also purchased a car with financing from a local car dealership. While Sally isn’t wealthy and doesn’t possess a very long credit history with many accounts, she nonetheless has done enough to earn a solid FICO score. In fact, Sally is counting on her solid credit score to secure good financing terms for a first mortgage.

After filling out a mortgage application at a housing lender, however, Sally discovers that she wasn’t even approved for a home loan. The lender tells her that her FICO score wasn’t high enough, which surprises her. She then requests, for the first time, a copy of her credit report. She sees the report and learns that the local car dealership, to whom she’s made perfect, timely payments since purchasing her car, has been reporting her delinquent for months! How could this happen? She calls the car dealership and, after talking to several people, learns that there’s another Sally Smith who also borrowed there to buy a car and it’s that Sally Smith who’s been delinquent on her car payments for months; someone in collections made a mistake in the computer system, the dealership apologizes and promises to get it sorted out.

Be Smart About Your Credit-Related Rights

End of story? It shouldn’t be. Firstly, Sally will need to confirm- likely spending a good amount of time making annoying calls- that the dealership’s credit reporting is actually being fixed and that the mistake has been corrected at the CRAs to which she’s been reported (here, the car dealership is a furnisher). Secondly, Sally should become more familiar with her rights under the FCRA. The Fair Credit Reporting Act was passed in 1970 and, among other things, established that credit bureaus must adhere to a standard of “reasonable procedures to assure maximum possible accuracy”. More recently, federal regulators established that furnishers (such as Sally’s car dealer) must maintain high standards to ensure accurate reporting.

Legally, the CRAs must conduct a “reasonable reinvestigation” with regard to reported errors and must correct any mistakes within a limited time period. If such standards aren’t met, then credit bureaus and furnishers can be held liable for financial damages. Therefore, rather than simply absorbing the costs of a mistake made by someone else, Sally should understand that she possesses a certain set of relatively strong consumer rights. It would, as stated above, also be smart of Sally to keep a careful record- phone calls, e-mails, letters, recordings, etc.- of all her interactions with the car dealer and the credit bureaus should she need them for legal purposes.

Common Credit Reporting Errors and Their Causes

Sally was frustrated in getting a mortgage because an auto dealership made an error and confused her with another Sally Smith who happened to have poor credit. This type of mistake is called the sort of mixed file described previously and is disturbingly common. This is a seemingly simple kind of error that can be surprisingly difficult to get corrected at times. As you might imagine, there are a number of ways that a mixed file can occur, though they typically revolve around similar names. You would probably think that something like this wouldn’t occur because of differing social security numbers and birth dates, but it still does. Information furnished to the consumer reporting agencies (“CRA”s) by many different lenders is still prone to human error. The CRAs also have different reporting standards for consumers and lenders, so lenders are sometimes given subpar information. These simple mistakes can lead to costly, persistent problems.

Other ways that in which credit reporting errors are commonly made involve medical billing and debt collection. With regard to reporting by debt collectors, a common abuse involves the “re-aging” of erstwhile debts. The FCRA mandates that most delinquent consumer debts be discharged from a credit report seven years after the date of delinquency, which itself is set at 180 days after the first missed payment for accounts that are charged-off or sent to collections. Re-aging means that purchasers of delinquent debt- often aggressive collectors that frequently employ illegal tactics- will illegally reset the date of delinquency so that an obsolete debt continues to be reported. This practice has resulted in horror stories in which debts long since expired continue to appear on credit reports, dragging scores down.

Finally, and as you certainly know, identity theft is rampant in this online age. Naturally, identity theft can also lead to credit reporting errors. This occurs when someone- almost always online, though it could still happen in traditional ways (dumpster diving, lost wallet, etc.)- obtains enough of your personal information to fraudulently open accounts and/or spend money in your name. To avoid this, you should obviously take the usual precautions: shred documents, such as credit card offers, that contain sensitive information, scan your devices for viruses, use long and varied passwords, don’t open spam messages, avoid phishing sites, and so forth.

It’s crucial to note here that, in keeping with what we’ve been saying throughout this series, one of the biggest issues when it comes to identity theft and credit reporting is that most consumers don’t check their credit reports frequently enough to know that an account has been fraudulently opened in their name. It’s often months before someone who’s been the victim of such identity theft learns about it, which means lots of time in which money can be fraudulently spent and attributed to the victim as a debt on a credit report.

Fighting the Machine

Unfortunately, few adults in this country haven’t had the awful experience of wasting time on the phone trying to get some mistake, which wasn’t their fault in the first place, corrected. If spotting credit-related mistakes and getting them fixed were as easy as getting a credit report and making a call to a CRA, there wouldn’t be much need for this series of articles or attorneys who specialize in consumer protection- but that’s certainly not the case. Unsurprisingly, any number of lenders, as well as the giant, bureaucratic CRAs, are often in no hurry to fix mistakes they’ve made.

There is often a sense among consumers that they’re being tested by a giant, faceless machine that simply wants them to go away; callers will be put on hold or redirected, and they may well be assured of something by some unknown voice on the phone that never comes to fruition. As stated, purchasers of delinquent debt can also be particularly aggressive and employ illegal tactics. Indeed, an entire industry has been set up such that consumers with a legitimate complaint frequently become so frustrated that they give up. A very useful article on these problems of “automated injustice” can be found here.

While there have been countless horror stories that have arisen because of abuses in the consumer reporting business, we’ve emphasized in this series that you have a strong set of rights, particularly under the FCRA. Businesses- CRAs, lenders, debt collectors- can be held liable and made to pay damages for such abuses. Sometimes, even if you report inaccuracies and keep records, you’ll find that not enough, or maybe nothing at all, is being done to remedy your situation. In that case, you may want to contact a lawyer who specializes in such cases.

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