NEW YORK -- Next time you're sitting around with your friends, ask if they've had any trouble with credit reports. Those are the reports that keep track of whether you pay your bills on time and whether anyone has sued you to collect.
I popped the question at a picnic last week and got an earful. Practically everyone had a story to tell.
This, from an editor: "I canceled a bank card a few years ago because it added an annual fee and I didn't want to pay. The bank ignored my cancellation letter and billed me for the fee.
"Now, I'm always reported as being in arrears. Every time I apply for a loan, I have to write a letter explaining it."
This, from a writer: "I canceled three credit cards that were too expensive and applied for a cheaper one. I got turned down, because I supposedly had too many cards. When I looked at my credit report, those canceled cards were still shown as open.
"I've been trying for a year to get them reported as closed."
This, from a real-estate agent: "I was turned down for a mortgage last year because of bad debts on my credit report. But they weren't mine. My credit record had been merged with the record of someone with a similar name.
"The bank eventually sorted out my credit from hers. But the credit bureau wouldn't accept the bank's evidence. I'm still trying to get my original credit report straightened out."
There were many more stories, but you get the gist.
The major credit bureaus like to claim that only 0.67 percent of their 450 million credit reports are ever questioned. But that's a misleading statistic.
Here's the little that we do know about credit-bureau errors:
(1) Of nine million people who ask to see their credit reports each year, three million find what they think are mistakes and ask the bureaus to recheck. Some of those items will turn out to be correct. On the other hand, some of those people never get around to reporting the errors they found.
(2) In a group of 1,500 credit files, 647 mortgage applications (43 percent) were delayed while errors were investigated. That study comes from James Williams of Consolidated Information Services in Flanders, N.J., who double-checks credit-bureau information for mortgage companies.
(3) Out of 161 credit reports looked at by employees of Consumers Union and their friends, 48 percent contained inaccuracies, large and small. The inaccuracies were identified by the consumers and not double-checked. But even allowing for some misunderstandings, the number is high.
The credit bureaus retort that an error here and there doesn't matter, as long as you still have access to credit.
But who knows what will hurt your chances? My own credit record shows two open credit lines that I canceled years ago. Nevertheless, I recently applied for and got a credit card with a low interest rate. That same error on the credit record of my writer friend, mentioned above, cost him a bank card.
Elgie Holstein, head of the Bankcard Holders of America, thinks the known error rate would be much higher if:
(1) Credit reports were cheaper to get. Today, it costs $2 to $20 for a report, depending on your state, and you have to check each of the three major credit bureaus: TRW, Trans Union and Equifax. Many people feel they can't afford to order all those reports, which cuts down on the number of files in dispute. Credit reports are free only if you've been denied credit based on something in them.
(2) Credit reports were easier to read. Parts of my own reports are so confusing that it's hard to tell whether they're right or not.
I suspect that many readers just give up.
(3) Credit reports were easier to correct. Credit bureaus generally don't take your word about errors, even if accompanied by canceled checks. You have to go back to the bank or store that made the mistake. And instead of really checking, they may merely reverify the mistake they already have in their files.
Proposals in Congress would give you free access to your credit report once a year and force creditors to be more responsible about fixing mistakes.
If everyone who has errors on his or her credit report wrote to Washington to support of these bills, the floor of Congress' mailroom might collapse.