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Doesn’t Add Up: Mistakes On Credit Scores Multiply During The Pandemic

Credit-report errors can limit financial access to those who desperately need it.

The economic fallout from the pandemic is increasingly personal.

As growing numbers of Americans face job losses and economic insecurity during the pandemic, more people report errors on their credit scores. These mistakes worsen an already precarious financial situation, says an analysis by the nonprofit organization Consumer Reports.

The study — which includes references to the U.S. Public Interest Research Group, a consumer policy and advocacy organization — notes that complaints about credit errors to the Consumer Financial Protection Bureau have reached record levels.

The pandemic has led to confusion about credit extensions. *** La pandemia ha provocado confusión respecto a las extensiones en el crédito. (Avery Evans/Unsplash)

Complaints are up 50 percent over the same five-month period (March-July 2020) in 2019, according to U.S. PIRG and the Frontier Group.

These mistakes were already a problem for consumers before the pandemic, but the COVID-19 crisis has exacerbated the situation, said Syed Ejaz, a financial policy analyst at Consumer Reports. “Itt has become more damaging and urgent because it limits access to affordable credit and financing to people economically impacted by COVID-19.”

Chi Chi Wu, a senior policy adviser at the nonprofit National Consumer Law Center, said part of the problem stems inadvertently from the CARES Act, which Congress passed in March to help people struggling during the pandemic.

The CARES Act requires that companies offering mortgages and federally backed student loans allow deferred payments when reporting them as current, to ease consumers’ financial pressure.

Some businesses, including credit-card companies and auto lenders, have voluntarily offered deferrals, but some have reported deferred payments as late. Others have granted forbearances on loans, which is a different type of temporary pause in debts. However, they have also reported late payments, according to Consumer Reports.

Another problem is that credit bureaus don’t have to respond to consumer disputes as quickly as they did in the past, Wu said.

Before COVID-19, the law established that credit bureaus had a 30-day term to respond. In April 2020, the government’s financial protection agency relaxed the rule without providing an alternative time frame, saying only that the office had to make a good faith effort to answer promptly.

“Consumers filed more than 13,000 complaints in the last six months, saying their disputes were not addressed in 30 days,” said Ejaz. This number compares to just 2,000 similar complaints in 2019.

“The victims of this pandemic are not the companies that the Bureau is letting go of,” said Ed Mierzwinski, senior director of the U.S. Federal Consumer Program. “It is real people who face the risk of getting sick while having trouble paying their bills.”

The federal agency said that by 2020, credit report complaints represented more than 50% of the total. Many requests focused on incorrect information on credit reports. Troubles with the credit bureau’s investigations of existing problems were the second-most-common issue.

How to avoid this problem?

It is crucial to detect any errors in the credit report sooner rather than later. One must review it frequently, especially when making new agreements with credit-card companies or other lenders.

To request a free credit record from the three largest bureaus, visit annualcreditreport.com. The website will offer free online reports through April 2021.

Credit Karma is also a helpful resource to track one’s credit score.

(Translated and edited by Gabriela Olmos; edited by Fern Siegel.) 

La pandemia podría perjudicar tu puntaje de crédito was first published in Negocios Now.