WASHINGTON -- About one in 20 consumers had significant errors on their credit reports that could cause them to pay more for auto loans and other financial products, according to a Federal Trade Commission report released Monday.
The study also found that about 26% of the approximately 200 million people covered by the U.S. credit reporting industry had at least one "potentially material error" on one of their three credit reports.
And four out of five people who took steps to fix errors with one of the three major credit reporting companies -- Experian Information Solutions Inc., Equifax Inc. and TransUnion -- got their credit report changed.
The findings show that consumers need to closely monitor their credit reports, the agency said.
“These are eye-opening numbers for American consumers,” said Howard Shelanski, director of the agency's economics bureau. “The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”
Agency officials noted that federal law allows consumers to get a free credit report once every year from the three major firms. The website to obtain the reports is www.annualcreditreport.com.
“Your credit report has information about your finances and your bill-paying history, so it’s important to make sure it’s accurate,” said Charles Harwood, acting director of the agency's consumer protection bureau.
This study was the first time the agency has taken a comprehensive look at all aspects of the credit-reporting process, including consumers, lenders and large credit reporting companies. It studied 1,001 randomly selected consumers and their credit reports and helped them identify potential errors.
While the 26% error rate was high, not all of the errors resulted in changes in credit scores that would cost consumers money, the study said. Of the 2,968 credit reports studied -- about three for each consumer -- about 2.2% had errors that were likely to change their credit score enough to cause them to pay higher rates for loans and other products.
The Consumer Data Industry Assn., a trade group representing credit reporting companies, cited that 2.2% figure in touting the accuracy of credit reports.
"Confirmation that credit reports are accurate is a good thing, but all consumers should be aware that checking credit reports every year is fundamental to accuracy," said Stuart Pratt, the group's president.
The Consumer Financial Protection Bureau, which shares oversight of the industry with the Federal Trade Commission, reported in December that less than one in five consumers obtain copies of their credit reports each year.