From March 17 through April 6, a "coding error hurt millions” of Americans’ credit scores.
Equifax, one of the largest credit reporting agencies, had a glitch that miscalculated 12 percent of credit reports. “Millions” of those scores were sent to lenders during a three-week period.
Lenders make decisions on loan and credit card applications based on those credit scores. If someone’s score was reported as significantly higher or lower than it really was, the lender may have given them an unfair interest rate or denied their loan completely.
Millions of consumers were affected by the error. About 300,000 saw their score change by at least 25 points, according to Equifax. The bigger the difference is in points, the more likely it is that a lender will have to alter any loan agreements.
In May, Equifax began reaching out to lenders to tell them about the credit errors, according to the National Mortgage Professional. Equifax officials said that the error was the result of a coding error that has since been resolved. Officials also said the error happened because data is being transferred to the Equifax Cloud – the agency plans to have everything transferred to this new digital software by the end of the year.
Although Equifax began talking to lenders about the issue in May and they released a public statement on Aug. 2.
“We do not take this issue lightly,” Equifax says. “The issue has been fixed, we are working closely with lenders, and we are accelerating the migration of this environment to the Equifax Cloud, which will provide additional controls and monitoring that will help to detect and prevent similar issues in the future.”
The agency’s CEO, Mark Begor, made a comment at a June conference, however, that rubbed people the wrong way.
“We think the impact is really going to be quite small, not something that is meaningful to Equifax,” Begor said.
The public statement from Equifax acknowledges Begor’s comment and says that it lacked context. According to the statement, Begor was saying that the coding error wouldn’t significantly affect the agency’s finances.
But the error will definitely affect consumers and their finances.
In June, 42 percent of Americans were denied a loan or credit card because of their credit score, according to a new study from LendingTree. The same was true for three-quarters of all Americans with poor credit.
And many don’t think that judgment was fair – 40 percent of consumers don’t feel like their score accurately reflects their financial responsibility.
If they’re one of the thousands of people who had their scores altered this spring, that could be true.
“The truth is that the basics of credit comes down to three things: paying your bills on time every single time, keeping your balances low and not applying for too much credit too often,” says Matt Schulz, LendingTree’s chief credit analyst.
The people most likely to believe there’s a difference between their score and their actual responsibility had a score ranging between 300 and 579. In their case, it’s unlikely that Equifax’s error caused any of their financial applications to get denied.
Find out: Your Guide to Affective Credit Report Disputes
Whether or not you suspect you’re credit score was inaccurately reported, it’s a good idea to check your credit report.
Consumers get a free copy of their credit report every year. After the free copy, the report is still available for a fee. Checking your score regularly can help you catch identity theft. You can see not only your credit score but also details on why your score is what it is. If your credit score is lower than you expected, you can use the report to see what could be causing that, like late payments or frozen accounts.
If there aren’t any red flags in your report that could be causing your low score, reach out to your lenders about the issue. Mistakes on credit reports happen.
“That’s a big reason why it’s so important to regularly check your credit reports from all three credit bureaus (Equifax, Experian, and TransUnion),” Schulz says. “Having a good credit score is hard enough. The last thing you want is for someone else’s goof-up to keep you from having one.”
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Published by Debt.com, LLC