Equifax, one of the three largest credit reporting agencies, recently confirmed that a coding error has led to incorrectly-reported credit scores for millions of consumers. According to the company, credit scores reported from March 17 through April 6 of 2022 were incorrectly calculated due to a coding error that occurred during a service change to one of the company’s servers. For approximately 300,000 consumers, the error caused a significant miscalculation in credit scores by at least 25 points, which likely led to thousands of consumers being wrongfully denied credit.
The confirmation followed an in-depth Wall Street Journal article detailing how consumer credit scores have been erroneously reported by Equifax. Housing agency Freddie Mac sounded the alarm earlier in the year, issuing an alert to customers stating approximately 12 percent of all credit scores released by Equifax appeared to be incorrect. Around the same time, the National Mortgage Professional trade journal reported that Equifax was actively warning lenders to the possibility of incorrectly-reported credit scores, along with a statement to the journal explaining that coding errors were responsible. As of yet, Equifax has not directly communicated with any consumers regarding the credit score errors.
This is not the first time Equifax has suffered data concerns: the company reported a major data breach in 2017 that compromised the personal information for roughly 150 million consumers. Equifax agreed to the largest data-related settlement in American history, requiring the company pay $700 million to federal and state regulators to settle probes into the incident.
Equifax, along with credit reporting agencies Experian and TransUnion, track the credit history of more than 200 million Americans and generates monthly reports detailing credit activity, payment history, loans, and credit limits, along with public and legal records. Each month, the agencies sell the credit reports to lenders and other industries to establish whether an applicant is creditworthy. In addition to banks and other credit lenders, the reports are also utilized by landlords and employers regarding applicants for housing or employment.
Negative information on credit reports, along with low credit scores, affects consumers’ ability to establish lines of credit, securing housing, and even employment. The longer negative information remains on credit reports, the more credit scores lower, further damaging an individual’s creditworthiness.
How Are Credit Scores Determined?
Two companies generate all consumer credit scores, the Fair Isaac Corporation (FICO) and VantageScore, based on the data supplied by credit reporting agencies. Scores can differ widely with each company, depending on how each weighs the data, which agency supplied the information, and whether or not a consumer’s lender provides data to all three credit reporting agencies.
Scores change monthly based on consumers’ payment history and credit activity during the preceding month, which determines the strength of creditworthiness. Based on this calculation, scores are then generated and assigned to one of the five levels of creditworthiness, which are:
- Exceptional: Scores ranging from 800 to 850
- Very good: Scores ranging from 740 to 799
- Good: Scores ranging from 670 to 739
- Fair: Scores ranging from 580 to 669
- Poor: Scores ranging from 300 to 579
The lower an individual’s score, the less likely they are to be approved for a loan, credit card, housing, or employment. Additionally, consumers with low credit scores are subject to much higher interest rates than those with higher scores, if they are able to secure credit at all.
How Can I Tell if My Score Was Affected?
If you were denied credit, housing, or employment during the affected timeframe, review the documents from the transaction for your FICO score, which would have been provided by the lender in disclosure forms. For the majority of loans, lenders typically only request your report from one of the three credit reporting agencies. If Equifax is not listed in your documents, your score was not affected.
While Equifax is not directly communicating with consumers, lenders are working with the company to establish which of their customers were affected by the errors and you should hear from your financial institutions or potential lenders if you applied for, and were denied, a loan during the period in question. If you confirm that your score was incorrectly reported, you have the guaranteed right to dispute any inaccurate information in your credit report, including the score, under the Fair Credit Reporting Act.
Philadelphia Consumer Fraud Lawyers at Francis Mailman Soumilas, P.C. Advocate for Clients Disputing Incorrect Information in Consumer Credit Reports
Negative information in your credit report can lower your credit score and affect your ability to obtain credit, secure housing, or even find employment. Experiencing the effects of negative credit reports can be especially frustrating if the information is incorrect or generated inaccurately. If you believe the information in your credit report is incorrect, the experienced Philadelphia consumer fraud lawyers at Francis Mailman Soumilas, P.C. are available to help. Call us at 215-735-8600 or contact us online to schedule a free consultation. Located in Philadelphia and cities throughout the country, we serve clients nationwide.