You’ve no doubt heard the advice many times: “Check your credit reports at least once a year to make sure they are accurate.” It’s good, solid advice worth heeding. But what happens when your credit information gets mixed up with someone else’s – and you can’t seem to separate it? Or worse yet, if you check your credit reports and find no problems, but still get turned down for credit due to negative information?

The phenomenon is called “mixed files,” and it can be very difficult to straighten out.

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To learn more, I spoke with Jill Riepenhoff, a reporter for the Columbus Dispatch. Along with her colleague Mike Wagner, she recently conducted an in-depth investigation into credit report complaints. Following is an edited excerpt from my interview with Riepenhoff on Talk Credit Radio:

Who’s Complaining?

This project had really organic beginnings for us though. A colleague of ours in the newsroom has had a long-time problem since 1994 trying to correct her credit report. She has been mixed with somebody who has a similar name and it’s just year after year of frustration. When I heard this, I thought, “That is crazy. That doesn’t happen.”

The first thing that I did was go to the Ohio Attorney General’s consumer website and I just put in the search terms of the big three credit reporting agencies. Immediately, I saw hundreds of complaints, and I thought there’s probably something here. So that was really how this began, it was just a personal story from someone in our newsroom, and wondering whether it was an isolated case.

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We sent public record requests to the Attorney General of all 50 states and then we also did a Freedom of Information Act request at the Federal Trade Commission which was the full regulator of the credit reporting agencies until last July when the new Consumer Financial Protection Bureau took over.

From the AGs, we were able to get complaints from about half the states. The others either wanted to charge us too much money or they weren’t public records. A couple of states just completely ignored us.

Ignored and Frustrated

The number one theme that jumped out right off the bat was that these consumers, by the time that they were contacting the AG’s office or the FTC, their concern was long ignored by the credit reporting agencies. Whatever the issue was, they could not get it corrected nor could they get anyone on the telephone at the credit reporting agency to help them.

I must say that these complaints (at least the ones from the FTC) were unverified. We don’t know what happened. We can’t say with 100% certainty that this was a legitimate complaint. But when you read the narratives of these, you just knew that there was something in there. Elderly people that were complaining because they didn’t know how to use a computer, they wanted to get their credit reports, they couldn’t get anybody on the phone to help them navigate the system. That’s a credible narrative in my mind.

Mixed and Mismatched

(To understand how this happens), I kind of picture it a little bit like a library. It’s not like there is a report that they picked out of the file cabinets that says “Jill Riepenhoff.” What they do, is when a creditor orders a report it kind of searches through all the library shelves and looks in all the books and finds all the ones that look like they belong to Jill Riepenhoff.

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Well when I order my credit report, they’re pulling the books, if you will, that have my exact name, my exact address, my exact Social Security number, my exact date of birth, and typically they ask something about my account information: what’s your mortgage payments or who’s your car loan with or something like that. So, when the computer goes to pull the books off the shelf, they’re only finding those accounts that exactly match the needed information.

When creditors do that, they have much looser standards. They don’t have to ask for all that information, they can pull off the shelf based on a partial Social Security number or a partial name. So, like, we found situations where it was close enough. Myra could easily include information from somebody named Maria, for example. So the computers go in and pull all those books that look kind of close enough. Then, boom! You have a mixed report because you have Maria and Myra on the same report now. But that consumer won’t see that because it’s only going to pull the things that exactly match.

Your Worst Nightmare

One of the stories that we highlight in the series is the woman who went to buy a car in Colorado. And the week before she went to buy the car, she checked her credit report to make sure everything was in order. It was fine, she had a wonderful credit score. She even paid for the score to make sure that everything was above board.

She goes into the dealership. She even goes on her lunch break, thinking this is going to take that little amount of time. The next thing she knows, she’s practically in custody in the car dealership because when the car dealership ran her credit report, the matching formula used said was on a terrorist watch list from the federal government.

It took her about six years (to straighten it out) and she had to file a lawsuit in order to make the damage go away. On her own, she could not convince the credit reporting agency that she was not the international drug trafficker who the alert was up against.

Learn More

To listen to the full interview with Riepenhoff: Download the interview here; play the interview online here; or get the podcast on iTunes.

Learn how to correct mistakes on your credit report here.

Image: Omad, via Flickr

The rate at which consumers are behind on their mortgage payments by 30 days or more slipped in March to the lowest levels seen in more than three years.

The total value of all mortgage payments that were at least 30 days delinquent slipped to less than $500 billion in March, a level not seen since January 2009, and there were 49.5 million outstanding first mortgages during the month, according to the latest statistics from the credit reporting agency Equifax and Moody’s Analytics. The latter number was a drop of close to 11 percent from the more than 55 million observed in March 2008.

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“The residual effect from the recession and housing bust continues to be an obstacle for both lenders and borrowers in the housing market,” said Equifax chief economist Amy Crews Cutts. “We’re seeing effects of the economic recovery within existing accounts in the form of fewer delinquencies and foreclosures, but not a substantial amount of new activity as home sales and resulting new home financing fail to keep pace with payoffs and foreclosures.”

In all, mortgage balances were 3.5 percent less than they were during the same month last year, and the nation has seen year-over-year declines in these balances for each month in the last three years, the report said. Currently, 71 percent of all delinquent first mortgages are on loans that were taken out between 2005 and 2007.

Meanwhile, fewer consumers are falling behind on their mortgages for the first time than at any point in the last several years, the report said. For instance, the number of loans that transitioned to delinquency from being current in March slipped to the lowest level seen since June 2007. Similarly, the number of mortgages that shifted from 60 to 90 days past due—indicating severe financial difficulties for homeowners—is at the lowest level observed in nearly five years. Loans that are 90 days or more past due, or which have entered the foreclosure process, have fallen steadily in each of the last 24 months.

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In the last year or so, millions of consumers have found themselves on more sound financial footing and are therefore in position to begin making more on-time payments into not only their mortgages, but also their credit cards and other outstanding bills as well.

Image: Joe Wolf, via Flickr

The rate at which consumers are behind on their mortgage payments by 30 days or more slipped in March to the lowest levels seen in more than three years.

The total value of all mortgage payments that were at least 30 days delinquent slipped to less than $500 billion in March, a level not seen since January 2009, and there were 49.5 million outstanding first mortgages during the month, according to the latest statistics from the credit reporting agency Equifax and Moody’s Analytics. The latter number was a drop of close to 11 percent from the more than 55 million observed in March 2008.

[Credit Calculator: Use Credit.com's Free Credit Report Card]

“The residual effect from the recession and housing bust continues to be an obstacle for both lenders and borrowers in the housing market,” said Equifax chief economist Amy Crews Cutts. “We’re seeing effects of the economic recovery within existing accounts in the form of fewer delinquencies and foreclosures, but not a substantial amount of new activity as home sales and resulting new home financing fail to keep pace with payoffs and foreclosures.”

In all, mortgage balances were 3.5 percent less than they were during the same month last year, and the nation has seen year-over-year declines in these balances for each month in the last three years, the report said. Currently, 71 percent of all delinquent first mortgages are on loans that were taken out between 2005 and 2007.

Meanwhile, fewer consumers are falling behind on their mortgages for the first time than at any point in the last several years, the report said. For instance, the number of loans that transitioned to delinquency from being current in March slipped to the lowest level seen since June 2007. Similarly, the number of mortgages that shifted from 60 to 90 days past due – indicating severe financial difficulties for homeowners – is at the lowest level observed in nearly five years. Loans that are 90 days or more past due, or which have entered the foreclosure process, have fallen steadily in each of the last 24 months.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

In the last year or so, millions of consumers have found themselves on more sound financial footing and are therefore in position to begin making more on-time payments into not only their mortgages, but also their credit cards and other outstanding bills as well.

Image: Joe Wolf, via Flickr

When you find a mistake on your credit report, the advice is always the same: dispute it. It is your right under federal law to dispute incorrect or incomplete information with both the credit reporting agency (or agencies) reporting the data, as well as with the furnisher—the issuing credit card company, auto lender or debt collector, for example. Typically, the furnisher must investigate and respond within thirty days.

But just because an item is disputed doesn’t mean it will be fixed. In written testimony submitted to the House Financial Services committee in 2007, Stuart K. Pratt of the industry group the Consumer Data Industry Association (CDIA), said that out of 52 million credit file disclosures reviewed by consumers, only 1.98% resulted in a dispute where data was deleted. Here are five reasons why credit report disputes don’t always get results.

The human touch is missing. At least that’s the take of the National Consumer Law Center. In its 2009 report, Automated Injustice: How A Mechanized Dispute System Frustrates Consumers Seeking To Fix Errors In Their Credit Reports, NCLC explains that the system for handling disputes is highly automated.

Here is how it works: When you dispute an item, it is coded using a two- or three-digit code corresponding to the reason for the dispute (“account not mine,” for example). While this can be done online, if you choose to mail in your dispute, the person processing it will code it. The consumer reporting agencies’ computer then “talks” to the furnisher’s computer. If the item is “confirmed” as correct, you’ll be told that. If the furnisher does not respond, it will be removed. If the furnisher confirms there is an error, it will be corrected.

While this system can be highly efficient, the NCLC believes it also creates problems for consumers trying to get items corrected. They point to a couple of specific problems:

• Failure (by the CRA) to send supporting documentation to creditors and other information providers (furnishers) as required by the FCRA.
• Limited role of employees who handle disputes (or of foreign workers employed by their offshore vendors) to little more than selecting these two- or three digit codes. Workers do not examine documents, contact consumers by phone or email, or exercise any form of human discretion in resolving a dispute.

In other words, what consumers normally expect of an investigation—someone thoroughly reviewing documents, making phone calls, asking questions, etc.—is not likely to happen.

It’s the creditor’s word against yours. At least that’s the perception. The reality is that in the highly automated dispute process just described, no one is siding with or against the consumer—computers are simply communicating. Still, unless the furnisher agrees the information is wrong, or the consumer proves it’s inaccurate (and can get someone to pay attention to that proof), it may continue to be deemed “accurate.”

Norm Magnuson, CDIA Vice President of Public Affairs, believes that consumers have more leverage than they realize. “I don’t buy that argument that lenders don’t really care. I think they do. But none of us are infallible,” he insists. “The creditor is probably predisposed to work with its customers. Creditors know their customers can take their business elsewhere.”

You’re mixed up with someone else. According to the NCLC’s report, “mixed files occur largely because the credit bureaus’ computers do not use sufficiently rigorous criteria to match consumer data precisely, even when such unique identifiers as SSNs are present.” Mixed files can be a persistent problem for someone with a common name, or someone who has a relative by the same name (Jr., Sr., for example).

Evan Hendricks, founder of Privacy Times and author of Credit Scores and Credit Reports: How The System Really Works, What You Can Do (3^rd edition), says that when you dispute an item because you don’t believe it belongs to you, the credit reporting agency may “soft delete” or “cloak” the item. It’s not removed from the system, but is flagged to help prevent it from reappearing on your report. “Mixed files continue to be a problem,” he says. But “we don’t have the research we need (to determine the extent).”

What you think is a mistake isn’t. Over the years I’ve spoken with many people who have misconceptions about how the credit reporting system works. For example, they think that an account that was paid off years ago should not be on their credit reports. (Not true. As long as information is not negative, it may be reported indefinitely, and those older accounts may be helpful.)  Another example: expecting up-to-the moment balances on credit cards. (In reality there may be a lag between the time when you pay a credit card bill and the balance is updated with the credit reporting agencies.)

In written testimony submitted to the House Financial Services committee in 2007, Stuart K. Pratt of the CDIA asserted that “Many disputes, perhaps as much as 55 percent, are in reality a request for an update of accurate data.

Your dispute is flagged for fraud. Credit reporting agencies say that as many as a third of all disputes come from credit repair clinics that flood them with challenges to accurate, but unfavorable, information. Under the FCRA, they are allowed to refuse to investigate disputes of “frivolous” information.

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Tips for Disputing Credit Report Mistakes—and Getting Results »