- The Washington Times - Wednesday, December 18, 2002

ASSOCIATED PRESS
Discrepancies in credit reports of more than one-third of consumers could make it harder for them to obtain loans or force them to pay higher interest rates to get loans, a study released yesterday by advocacy groups suggests.
Common discrepancies included omissions of revolving accounts in good standing and mortgage payments that were never late. On the negative side, omissions included failure to report delinquencies or charge-offs, said the study, conducted by the Consumer Federation of America and the National Credit Reporting Association.
Credit scores and reports are increasingly being used, not only by banks and lenders but also by insurance companies, employers and service providers, such as utilities, to help determine an applicant's likelihood of repaying debts.
The FICO score, developed by Fair, Isaac & Co., is a number between 300 and 850 that more than 70 percent of the largest financial institution lenders use to determine credit risk. Scores are based on payment history, debt owed and types of credit used. The higher the score, the better the consumer's credit rating.
All of that appears on credit reports.
For consumers with scores near 620, considered the dividing line between bad and good credit, discrepancies and omissions can affect whether a person gets approved for a mortgage at the best interest rate, the study said.
Officials at Atlanta-based Equi-fax, one of three credit repositories, say each agency has its own guidelines about what it collects and how long it retains the information. Timing also is an issue, said John Ford, Equifax's privacy officer. Information can vary from each repository, depending on when a report is requested. No law requires creditors to report to all three.
"One of the major flaws that we see in the study is this notion that if the three credit-reporting agencies don't all have exactly the same data, then that's an error," Mr. Ford said. "Nothing could be further from the truth. There are lots of reasons why."
The study estimated that of consumers with scores between 575 and 630, a fifth would be harmed and another fifth would benefit from score inaccuracies if they tried to obtain mortgage loans.
"The allocation of credit should not be based on a lottery system," said Stephen Brobeck, executive director of the consumer federation.
Falling below the 620 cutoff can impose significant costs on mortgage borrowers, he said. Over the life of a 30-year, $150,000 mortgage, a borrower incorrectly charged a subprime rate of 9.84 percent instead of a prime rate of 6.56 percent would pay $124,067 more in interest.
The groups analyzed the credit scores of more than 500,000 consumers. A more extensive investigation was conducted on complete credit files of more than 1,700 consumers. No personal information that could be used to identify an individual was recorded during the study, the groups said.
They are recommending policy changes to help improve fairness, including urging government agencies such as the Department of Housing and Urban Development and the Federal Trade Commission to evaluate credit-scoring systems regularly, including automated mortgage and insurance underwriting systems and tenant- and employee-screening systems.
Other recommendations include:
Requiring creditors to provide consumers free copies of their credit reports immediately after they are denied loans or receive higher interest rates, and quick reconsideration if errors are discovered.
Urging consumers to review credit history regularly, especially before applying for a mortgage loan, and correct any errors or discrepancies.

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