May 5 (Bloomberg) -- Less than one percent of consumer credit reports contain errors that lead to a significant change in the score, according to a study commissioned by the three largest credit-reporting companies.
“We found that a vast majority of credit reports are accurate and that it is rare for a credit report error to materially impact a consumer’s access to credit,” said Michael Turner, the head of the Durham, North Carolina-based Policy and Economic Research Council, which conducted the study.
The council said it surveyed 2,338 people from February to May 2010 and examined their credit reports. David Musto, a professor of finance at the Wharton School of the University of Pennsylvania who was hired by the council to review the examination, called it “a well-executed study, in that the sample is large and appears to be representative.”
The U.S. credit reporting business is dominated by Equifax Inc. of Atlanta, Chicago-based TransUnion LLC and Dublin-based Experian Plc.
The Consumer Financial Protection Bureau, which is scheduled to begin work on July 21, will have jurisdiction over consumer credit firms. Under the law that created it, the bureau has to produce a study by then on the differences between reports provided to creditors and those given to consumers who are the subject of the reports.
Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group, said in an interview that the industry study may have underestimated the error rate by overestimating the number of consumers who were satisfied by the bureaus’ dispute resolution process. Other reports, he said, have shown an error rate closer to 25 percent.
The planned CFPB report is “the holy grail that we have been looking for but have not gotten access to,” Mierzwinski said. “That is the study we need.”
Elizabeth Warren, the White House and Treasury adviser charged with setting up the new agency, met in March with Bobby Mehta, the chief executive officer of TransUnion, her appointment calendar shows.
The council’s study found that 0.93 percent of the consumers surveyed had disputes with credit-reporting firms that led to their FICO credit scores rising by 25 points or more. Also, 0.5 percent of those surveyed had a dispute that led to their scores changing enough to affect their access to credit.
FICO scores can range between 300 and 850. Generally speaking, a score lower than 620 can make it difficult for consumers to get credit, while a score above 650 signals good credit. The report also discusses credit scores in terms of VantageScore, a similar system developed by the major credit firms.
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