	Information on Frequency, Type, and Cause of Credit Report Errors Is Limited; Industry Data and Available Studies Disagree on Frequency of Errors

Available studies and credit reporting industry data disagree on the extent  of errors in credit reports. The limited literature on credit report accuracy  indicated high rates of errors in credit report data. Both the literature and the data provided by the credit industry had  serious limitations that restricted our ability to assess the overall level  credit reporting accuracy. The credit industry has developed and implemented procedures  to help ensure accuracy of credit report data, although no one has  assessed the efficacy of these procedures. Both Literature and Industry Identified Similar Types and Causes of Errors

While both the literature and credit industry representatives cited similar  types and causes of errors, neither the literature nor the credit industry  data identified one particular type or cause of error as the most common. For example,  collection agencies and public records on bankruptcies, tax liens, and  judgments were cited as major sources of errors. FTC Has Taken Enforcement Actions Related to the Accuracy of Credit Reports Since 1996 FCRA Amendments

FTC has taken eight formal enforcement actions since the passage of the  1996 FCRA amendments against CRAs, data furnishers, and resellers that  directly or indirectly relate to credit report accuracy. Impact of 1996 FCRA Amendments on Credit Report Accuracy and the Potential Effects of Errors on Consumers Is Not Fully Known

To date, no comprehensive assessments have addressed the impact of the  1996 FCRA credit report accuracy amendments or the potential effects  inaccuracies have had on consumers. FTC staff could not say what the trend in the frequency of errors in credit  reports has been since the 1996 amendments because that data is not  available. The  Federal Reserve Bulletin article previously mentioned also concluded that  limitations in consumer reporting agency records have the potential to  both help and hurt individual consumers. Impact of Errors May Be Influenced by Other Factors in a Credit File

Industry officials and the literature we reviewed suggested that the impact  of an error in a consumer’s credit report was dependent on the specific  circumstance of the information contained in a credit file. Fully  understanding the impact of errors on consumer’s credit scores would  require access to consumer credit reports, discussions with consumers to  identify errors, and discussions with data furnishers to determine what  impact, if any, correction of errors might have on decisions made based on  the content of a credit report. Because of the importance of  accurate credit reports to the fairness of our national credit system, it  would be useful to perform an independent assessment of the accuracy of  credit reports.
Why GAO Did This Study

Accurate credit reports are critical to the credit process--for consumers attempting to obtain credit and to lending institutions making decisions about extending credit. In today's sophisticated and highly calibrated credit markets, credit report errors can have significant monetary implications to consumers and credit granters. In recognition of the importance of this issue, the Senate Committee on Banking, Housing, and Urban Affairs asked GAO to (1) provide information on the frequency, type, and cause of credit report errors, and (2) describe the impact of the 1996 amendments to the Fair Credit Reporting Act (FCRA) on credit report accuracy and potential implications of reporting errors for consumers.

What GAO Found

Information on the frequency, type, and cause of credit report errors is limited to the point that a comprehensive assessment of overall credit report accuracy using currently available information is not possible. Moreover, available literature and the credit reporting industry strongly disagree about the frequency of errors in consumer credit reports, and lack a common definition for "inaccuracy." The literature and industry do identify similar types of errors and similar causes of errors. Specifically, several officials and reports cited collection agencies and governmental agencies that provide information on bankruptcies, liens, collections, and other actions noted in public records as major sources of errors. Because credit report accuracy is essential to the business activities of consumer reporting agencies and credit granters, the credit industry has developed and implemented procedures to help ensure accuracy. However, no study has measured the extent to which these procedures have improved accuracy. While the Federal Trade Commission (FTC) tracks consumer complaints on FCRA violations, these data are not a reliable measure of credit report accuracy. Additionally, FTC has taken eight formal enforcement actions directly or indirectly related to credit report accuracy since Congress enacted the 1996 FCRA amendments. Neither the impact of the 1996 FCRA amendments on credit report accuracy nor the potential implications of errors for consumers is known. Specifically, because comprehensive or statistically valid data on credit report errors before and after the passage of the 1996 FCRA amendments have not been collected, GAO could not identify a trend associated with error rates. Industry officials and studies indicated that credit report errors could either help or hurt individual consumers depending on the nature of the error and the consumer's personal circumstances. To adequately assess the impact of errors in consumer reports would require access to the consumer's credit score and the ability to determine how changes in the score affected the decision to extend credit or the terms of the credit granted. Ultimately, a meaningful independent review in cooperation with the credit industry would be necessary to assess the frequency of errors and the implications of errors for individual consumers.