Adverse bad credit home loan

It's a safe bet that few people you know have ever seen their credit reports. Only about 1 in 100 credit users a year asks to peek at the running files kept on his or her every twitch in the murky world of loan applications and monthly payments. The other 99 don't know they can ask - or don't care.

They should. Recent attacks by federal and state regulators and by consumer groups make it clear that in this world of prolific plastic, routinely vacuuming glitches from your credit file is advisable. The industry claims 99.5 percent of credit reports are accurate. That's debatable. "More than 2 out of 5 people have some erroneous information on their consumer-credit reports," says James Williams, president of Consolidated Information Services, a mortgage-credit reporting firm in Flanders, N.J., that found errors in 43 percent of the 1,500 credit reports it reviewed during a 1989 study. A study by Consumers Union last year showed a similar mistake rate.

Armed with thousands of consumer complaints, the Federal Trade Commission and 19 state attorneys general last year sued TRW - one of three national credit-reporting agencies, or credit bureaus-for sloppy record keeping and lack of diligence in investigating mistakes. TRW settled the suits last month by agreeing to improve the accuracy of its credit reports and to resolve complaints more efficiently. And Vermont's attorney general sued TRW after a contractor hired by the firm branded all Norwich's taxpayers as tax delinquents by copying names from the wrong tax file. That suit is pending.

Credit bureaus like TRW-along with two other major players, Equifax and Trans Union-are consumer-credit clearinghouses. Each of the three maintains about 150 million individual files, or reports, on credit-using Americans. Each working day, countless bits of data reflecting each loan, credit-card payment and job change pour into the bureaus' computers from banks, retailers and credit-card issuers across the country, and then into individuals' files. In turn, creditors can tap into the reports to decide whether an individual is a good risk for a mortgage, new credit card or other credit. The bureaus also cull public records for items that affect creditworthiness, like tax liens and bankruptcies.

A no-account error. A mere misplaced letter or digit can stamp you as a deadbeat. "Thirty days late may not be a big deal if the rest of your credit is good," says Ed Mierzwinski, a consumer advocate with the U.S. Public Interest Research Group. But if the credit bureau reports an account was closed by the creditor for nonpayment or you didn't pay your taxes, there goes your credit'

Running a complete credit check on yourself is fairly cheap (see box, Page 67) and is about to get cheaper. As of April 30, TRW will provide one free credit report a year, and Equifax plans to lower its price soon.

Secret codes. First-timers won't find their credit reports an easy browse. The Equifax report is by far the easiest to understand, with no more than one line per entry. And it uses codes and symbols minimally, while TRW and Trans Union reports bristle with them.

The legal actions-and bad publicity in their wake - have inspired overhauls. Besides TRW's promised free credit reports and other changes, Equifax and Trans Union pledge better accuracy and faster corrections. Equifax will send anyone ever denied credit a report free, and it provides toll-free access to people with questions. And all the bureaus plan to simplify reports. But even in an avowedly better-run world of credit reporting, mistakes will happen. Here's how to unearth them and then undo them.

* Get reports from all three bureaus. TRW, Equifax and Trans Union operate independently, so records have to be cleaned up with all three. Most Americans are ensconced in the computers of at least two, and probably three. Marriage partners have to request individual reports, even if both use the same credit cards and pay on joint accounts.

Most errors occur when files from different people get jumbled. Family members with the same names and address, or people with common names, are the likeliest victims. An ex-spouse may also surface. And a misspelled name, wrong address or wrong digit in a Social Security number can easily drag data from someone else's file into yours. Duplicate accounts, and closed accounts that are listed as open, can lead a creditor to believe your available credit is too high. And account information may not be current, or entries that should have been expunged may still be on file. By law, adverse credit information can only be reported for seven years, except for bankruptcy entries, which stay on the books for 10 years.

* Get it in writing. While you can call the credit bureaus to discuss mistakes, it's better to explain your complaint in writing. The bureau will ask the creditor who supplied the questionable data to verify it. Federal law doesn't specify how fast the credit bureaus have to do that and get back to you with an answer, but the industry claims most investigations are completed in less than 30 days. The credit bureau must correct the mistake if the creditor cannot confirm it.

You may want to first check directly with the creditor if the incorrect entry concerns payment on an account that is indisputably yours. Any proof you can send the credit bureau will speed the investigation, particularly with TRW, which will now accept creditor or public-record documentation directly from the consumer. A letter from a credit-card issuer addressed to you that says your account is not delinquent will get TRW to change its records.

* Enlist your state attorney general. Consumer-protection lawyers in the office of your state's attorney general know how credit bureaus work and have the clout to get quick results. City or county consumer-protection offices or local Better Business Bureaus also may be valuable allies.

* Run a repeat check. The credit bureau may cleanse its records, but the creditor that sent erroneous data to the bureau might not do likewise - and could send the same glitch back to the bureau and into your credit report, says attorney Michelle Meier of Consumers Union. Equifax and Trans Union will automatically send you a corrected version of your report free, and TRW will do so at your request. Federal law entities you to have a corrected version of the report sent to any creditor who queried the bureau within the last six months and to any employer within the last two years - but again, you have to ask to have this done.

* Put an explanation in your credit file. If a credit bureau refuses to change your report, federal law entitles you to insert a statement of up to 100 words explaining the disputed entry. With most credit applications read by computer now, such a note may be overlooked or given little weight. But it could explain one or two negative entries to a potential creditor.

At some point, it may be time to haul out the big guns. In 1989, Ruth Wessels of Cypress, Calif., dutifully warned TRW, Equifax and Trans Union in writing that a family member whose negative credit information had been cropping up in her report had filed for bankruptcy and that the entry had better not appear in her file. When it happened anyway, she sued all three agencies. So far, Equifax and Trans Union have agreed to remove the bankruptcy notation and to send Wessels periodic copies of her credit reports. The TRW suit is still pending.

Beating a credit bureau in court requires proof that the bureau acted negligently, which is hard to come by. But a law firm's letterhead might work, too. "Sometimes just having a lawyer write on your behalf helps grab the attention of the reporting agency and gets a correction," says Willard Ogburn, executive director of the nonprofit National Consumer Law Center. Give lawyers a little credit.

The errors of their ways

The recent publicity about problems with credit bureaus made one U.S. News reporter curious about the integrity of her own file so she ordered credit reports from Equifax, TRW and Trans Union, the industry's Big Three.

Her fears were confirmed: All three reports included accounts and numbers that didn't belong. The thorough jumbling was impressive., if inconsistent. Her mother, who shares the reporter's first and last names, was a constant presence; her mother's mortgage and home-equity loans appeared in every file. Trans Union also listed her mother's defunct Sears account, along with personal and car loans. TRW sprinkled four different Social Security numbers through its report: the reporter's, her mother's, her deceased father's and one differing from her mother's by one digit, thus an error compounded. (TRW also added 10 years to the reporter's age, which she found particularly irksome.) And Equifax listed a job the reporter left in 1987 as her current employment.