Last week the credit bureau Equifax admitted that a "coding error” caused them to send millions of inaccurate credit scores to lenders.
The error took place between March 17th and April 6th of this year, and scores were incorrectly raised or lowered by more than 20 points.
If you or your customers were denied loans or given very high-interest rates earlier this year, the credit bureau EQUIFAX might have been at fault!
In this week’s Podcast, I explain how this error happened, who is at fault, who was affected, and what you can do about it!
According to a press release from Equifax, the error occurred between March 17th and April 6th of this year, and “the issue was fixed on April 6th.”
The Wall Street Journal reported that incorrect scores were sent to Ally Financial, JPMorgan, Wells Fargo, and other lenders. And during that three-week window, people went from having no credit score at all to a score in the 700s or vice-versa.
Equifax claims that "less than 300,000 consumers experienced a score shift of 25 points or more," and scores have since been readjusted.
They added, "While the score may have shifted, a score shift does not necessarily mean that a consumer's credit decision was negatively impacted."
But the reality is they don’t know how it affected people yet, and they’re already starting to feel the public’s justifiable anger.
Senators Elizabeth Warren, Mark Warner, and Representative Raja Krishnamoorthi are demanding Equifax be held accountable, stating in a letter to CEO Mark Begor, "Your company owes the public a clear and transparent explanation for why and how it made such grievous errors, the scope of the errors, and why you have failed to notify affected consumers of these errors.”
So, what does this mean for us?
While some people saw their score shift up, those that saw a drop of 25 points or more could have received higher interest rates or been denied financial services, car loans, home mortgages, as well as credit cards, etc.
Equifax claims that "initial analysis indicates that only a small number of them may have received a different credit decision.”
But that would require them to investigate the details of every single credit decision made during that three-week window.
For example, a lawsuit has already been filed stating that a Florida resident, Nydia Jenkins, was pre-approved for a car loan in January, but her loan was denied in early April because the Equifax credit score was off by 130 points. Since she was denied, Jenkins was forced to buy a car from a different dealership with a much higher interest rate.
Under the initial loan, Jenkins would have paid $350 a month, but now she’s paying $272 every two weeks. The lawsuit demands compensation for the disparity and damages after the fact.
This situation is clearly the fault of Equifax, and it’s their obligation to make it right. Still, I worry it might end up being the responsibility of individual consumers and credit professionals to spread awareness and investigate who was harmed by the error.
The thing to remember is…
This isn’t the first time a credit bureau technical issue impacted all of us. The problem goes back decades!
The non-profit organization Public Interest Research Group has been reporting credit bureau failures and abuses since 1990.
In 2004 they published a study that found 79% of credit reports surveyed contained either serious errors or other mistakes of some kind.
In 2013, the year we launched Credit Repair Cloud, 60 Minutes aired a story called "40 Million Mistakes" about the 40 million people who had errors on their credit reports.
In that 60 Minutes story, Ohio Attorney General Mike DeWine stated: “The problem is not that they make mistakes. It's that they won't fix the mistakes. It literally is like this-- you know, guy behind the curtain in "The Wizard of Oz." You really don't know what he's doing. It really is a secret operation.”
And it doesn’t seem like much has changed.
In 2017, Equifax was hacked, and more than 147 million Americans had their personal data, social security numbers, and addresses exposed online. I was one of those people.
Because of that hack, I experienced several types of identity theft. Criminals opened new accounts under my name and forced me to freeze all my credit bureau accounts.
It was horrifying and a huge hassle that will follow me forever because now, every time someone needs to do a credit check on me, I have to unfreeze the accounts, tell them to pull my information quickly and refreeze them as fast as possible, so no new identity theft takes place.
A colossal nightmare all because they were careless with OUR data!
Thankfully TransUnion created a page that makes it easier to freeze and unfreeze your reports for all three bureaus, and you can find that page at: www.transunion.com/credit-freeze
But it’s been five years since that hack, and consumers have another bureau error to deal with and it likely won’t be the last one.
Here’s why this is important…
According to Equifax, the error occurred while the company was transitioning to a mostly online model platform, “which will provide additional controls and monitoring that will help to detect and prevent similar issues in the future.”
But they’re only 50% of the way through that transition, and they only expect to be at 80% done by the end of the year.
This was all made worse by the fact that Equifax released these statements FOUR MONTHS after the error was fixed but notified lenders of the issue back in May that about 12% of all credit scores were affected.
It’s also unclear if Equifax plans to even notify the people they know were directly affected.
So fixing this problem, the same way I have to freeze and unfreeze my own accounts will probably fall on all of our shoulders.
Here’s what you need to know…
If between March 17th and April 6th of this year, you or any of your customers were denied a credit card, car loan, mortgage, or another line of credit -- it may have been a result of Equifax's mistake.
If you or your customers believe they might have been impacted by the error, Equifax suggests people reach out to the lender who denied them and ask for more information.
If it’s determined that the score was incorrect because of the coding error, you can file a complaint with the lender and the CFPB, as well as your state's Attorney General's office.
If the victim of the error is still seeking a loan, they should cite the error and request that one of the other credit bureaus be used to make the decision.
Now, if, between March 17th and April 6th of this year, you or your customers were approved for a line of credit, the interest rate might have been incorrectly tabulated.
So, contact the lender and ask how they determined the interest rate. If it was using an incorrect Equifax score, you could be eligible for an interest rate adjustment and receive retroactive credit for the interest you already paid based on your current rate.
If you or your customers believe you were affected by the error in any way, review the Credit Reports during the window between March 17th and April 6th of this year.
The error itself won’t be obvious on the Equifax report. It was a programming error communicated between Equifax and the lenders. But if, for example, there was a hard inquiry during that three-week window, the error may have impacted your situation relating to the inquiry, just like it did with Nydia Jenkins and her car loan.
So what’s next?
According to The Wall Street Journal, about 2.5 million credit scores were requested by mortgage lenders during that three-week error window, but because all three credit bureau reports are factored into lending decisions, it's hard to know how much impact the Equifax error had.
To add insult to injury, Equifax recommends people pay close attention to their credit scores, even reminding consumers that they offer credit monitoring, as though they didn’t cause this problem.
I don’t know about you but I keep wondering what’s the point of having credit reporting agencies if they can’t be trusted to collect data, protect data, or provide data?
Ultimately, the CFPB said it best when they warned consumers in January that the three credit bureaus have a dangerous “oligopoly” (a state of limited competition) and have shown a pattern of inadequately responding when consumers complained of errors.
In other words, they agree, this is an unfair system, and it’s been forced on us. All we can do is fight back and demand change.
So please send this episode to anyone you think needs to hear it.
CRC is here to help. You are not alone.
A key reason the 1970 Fair Credit Reporting Act was made law was because people complained about the Retail Credit Company’s abusive investigations of consumers.
In 1975 the Retail Credit Company changed its name to Equifax.
If you believe you may have been affected by the Equifax error, you can also try calling their customer service at 1-888-378-4329.
I’ll end by saying…
If you don’t already have a Credit Repair Cloud account, check it out. It’s the software that most Credit Repair businesses in America run on. Just sign up for a 30-Day Free Trial at CreditRepairCloud.com/freetrial
And If you’d like me to hold you by the hand as you launch your own credit repair business, check out our Credit Hero Challenge!
It’s an amazing program where you’ll learn the processes that have made millionaires, and it costs less than you'll spend taking your family to McDonald’s for dinner.
We’ve got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
Until then, remember, keep the facts on your side…
And keep changing lives!
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