Credit reporting agencies create a consumer credit file when banks, credit card companies, collection agencies, etc. (“furnishers” as defined by the Fair Credit Reporting Act) provide credit information about their experiences with a consumer.  These experiences can be credit inquiries, on-time payments, late payments, or charge-offs.  Furnishers typically provide this information to the credit reporting agencies in the industry standard Metro 2 Format.

The Metro 2 Format is an electronic mechanism so that credit reporting agencies have a standardized system to receive and report credit data in electronic form.  As part of the format, credit information such as account type, account status, account balance, and account history is converted into Metro 2 codes that can be associated and reported with the identifying information for an individual consumer.  The organization and maintenance of this information results in what the consumer refers to as their respective “credit file.”  Conceptually the credit data information maintained on a consumer is more like data in a cloud that can result in a different credit file for a consumer depending upon the information input in the inquiry process as part of a credit application.  Most consumers are surprised to learn that credit reporting agencies do not keep copies of the credit reports that are issued when a consumer applies for credit.  The credit reporting agencies use matching algorithms that are programmed to place certain information in specific places and provide a credit report.  These reports are organic in the sense that the information reported can change depending on the time and circumstances.  When a credit reporting agency receives Metro 2 data from a new furnisher regarding a consumer, the credit reporting agency attempts to match that new information with the best possible match of credit data already in possession of the credit reporting agency.

Credit report errors of mismatched or mixed credit information occur when the data received by the credit reporting agency is associated with the file of a different consumer.  Mixed credit information can be the result of the incomplete or inaccurate information being associated with the wrong consumer.  For example, a furnisher could transpose the social security number digits on an account that would result in the information being associated with the wrong consumer.  Similar names or similar social security numbers for individuals that live at the same addresses can cause data to be mixed inaccurately and lead to a credit report error.  The end result can be catastrophic if the inaccurate credit information is placed on a consumer’s credit report just as the consumer needs to use their credit to obtain a mortgage or buy a car.

When a credit report error happens, the consumer should dispute the inaccurate information immediately with the credit reporting agency.  Please see my previous post with helpful information on how a consumer can dispute inaccurate information on their credit report.  If you would like to speak to me about inaccurate information in your credit report or a credit report error about an employment related credit report, please contact my office at (703) 390-2905.