THE COLOR OF MONEY
Consumers owe it to themselves to learn about credit reporting system

By Michelle Singletary

I find it amazing that the credit reporting and scoring system is a mystery to many.

Credit agencies hold the financial histories on millions of people. The information is used to create a score — from a low of 300 to a high of 850 — that determines how much you pay in interest for a mortgage, car loan or credit card. Bad scores can result in your losing your job or the cancellation of your auto insurance or homeowner's policy.

And yet, according to a study by the Consumer Federation of America, only 3 percent of Americans could, unprompted, name the three main credit bureaus. Can you? They certainly know who you are, and they've got your credit number.

So what should you do to become more informed?

To start, I suggest you read Evan Hendricks' book "Credit Scores & Credit Reports: How the System Really Works, What Can You Do" (Privacy Times, $19.95).

Hendricks tells a scary tale of how vulnerable we all are when it comes to our credit lives.

"The credit scoring and credit reporting system is a work in progress," Hendricks writes. "It would be inaccurate to characterize the system as totally or always unfair. But it clearly cannot be depicted as totally or always fair either."

To be honest, I didn't think this book was appropriate for the average consumer. At more than 300 pages, "Credit Scores & Credit Reports" is an extensive manual that includes just about everything you will ever want to know about the system and then some.

But you know what?

Ignorance is not bliss. Ignorance can cost money.

In an interview, Hendricks said he wanted his book to inspire more consumers to "educate themselves about this big, complex system and the money and power involved."

This book clearly has a bias and that's fine with me. For years, Hendricks — editor, publisher and founder of the newsletter Privacy Times — has been testifying before Congress trying to protect the credit rights of consumers.

As Hendricks points out, when the credit reporting system breaks down, the impact on individuals and their families can range from inconvenience to financial devastation.

Hendricks recounts how one consumer spent two years trying to persuade the credit bureaus and creditors that he was not his deceased mother.

He writes about a young consumer whose new credit file was mixed up with an older man with the same name. Nobody seemed to care that it was impossible for this young man to have had delinquent credit accounts when he was just 14.

In fact, one in four credit reports contains errors serious enough to cause consumers to be denied credit, an apartment or a home loan, according to a new survey released recently by U.S. PIRG, the national lobbying office for state Public Interest Research Groups.

U.S. PIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy. Here's what the survey found:

• Seventy-nine percent of the credit reports had a mistake.
• Fifty-four percent had information that was either outdated or belonged to a stranger.
• Thirty percent of the credit reports contained credit accounts that had been closed by the consumer but were still being reported as open.

In "Credit Scores & Credit Reports" you get information based on advice from top consumer attorneys on how to dispute errors, and you learn what happens when credit bureaus investigate consumer claims of inaccuracies. Actual court testimony from officials in the credit industry will make you shudder.