TIME: Almanac 1993/TIME Almanac 1993.iso/time/040990/0409208.000

Text File | 1992-08-28 | 6.4 KB | 142 lines

                                                                                BUSINESS, Page 62

Sorry, Your Card Is No Good


A nightmarish tale from the realm of consumer credit ratings

By MICHAEL G. RILEY -- With reporting by Theodore P. Roth/New
York


    Who could resist the temptation? The ever solicitous
Citibank dangled before me in the autumn mail an offer of a
preapproved Visa card that would grant one frequent-flyer mile
on American Airlines for each dollar charged. The lure of these
two American obsessions -- credit and free travel -- proved
irresistible, so I mailed the form and soon received cards for
my wife and me. A month later, after we had rung up more than
$4,200 in charges (about 20% of what would  be needed for a free
round-trip domestic ticket), my wife pulled out the card to
purchase a blouse. "Sorry," said the clerk after running the
card through the computer three times. "Your card is no good.
I have to take it."

    A call to Citibank produced a perplexing explanation:
"Sorry, you have a derogatory credit statement," intoned the
clerk. Pursuing it further, I was connected to a Mr. Thomas,
who put matters even more bluntly: "This is one of the worst
credit reports I've seen," he declared. A repossessed car,
about $70,000 in tax liens, a bankruptcy adjustment plan and
scads of debts unpaid. "That can't be me," I protested,
explaining that I was a paragon of fiscal responsibility. He
was unpersuaded.

    Suddenly, the credit-travel enticement had turned into a
Kafkaesque nightmare of mistaken identities, computer screw-ups
and human errors, all spilling out of the vast and powerful
credit-reporting system that tries to keep tabs on $720 billion
in total U.S. consumer debt. But this was not just one person's
bad dream. While the credit industry claims that errors are
discovered in fewer than 0.5% of individual credit records,
some analysts believe glitches are more common. According to
a study by James Williams of Consolidated Information Services,
a New Jersey credit bureau, 40% of the 150 million people with
credit histories on file with the three largest repositories
-- TRW in Orange, Calif., Trans Union in Chicago and Equifax
in Atlanta -- have one or more errors in their files.

    While most of the errors are trivial or benign, others can
wreak havoc. For the most part, people remain blissfully
unaware of the problems until, like me, they are mysteriously
stripped of a credit card or rejected for a loan. Says M.E.
Buckner, president of Informative Research, a
mortgage-credit-reporting company in Anaheim, Calif.: "There
are mistakes in the system, and we have mechanisms to correct
them, but you correct the system only when a consumer
complains."

    In mid-argument with Mr. Thomas, a light clicked on in my
head. Three years ago, the Internal Revenue Service had snooped
around my neighborhood asking about a Michael G. Riley and his
horrendous credit history. After many phone calls, the IRS
admitted it had the wrong man. Perhaps my deadbeat namesake had
returned to haunt my credit rating. Hearing this tale, Mr.
Thomas softened a bit and told me to send him some identifying
papers. Then he dropped another bombshell: Citibank, he said,
had discovered a "death alert" filed on my Social Security
number in 1981. So not only was my credit a disaster, I was also
officially dead.

    Straightening out the mess took nearly four weeks, a dozen
phone calls and a visit to the local Social Security office,
where I had to sign an affidavit attesting, "I am indeed alive
and well . . ." As it turned out, I had fallen victim to the
single most common credit-record error: cross-merged files. In
such cases, which according to Williams afflict as many as one
of every eight credit consumers, people with similar names or
addresses have their credit histories mixed together. Often
this occurs when a John Doe Sr. and Jr. live at the same
address. Another common variation on the theme occurs when the
credit histories of ex-spouses remain linked long after the
divorce.

    Mistaken identity is not the only brand of credit nightmare.
Other glitches include out-of-date information, as when loan
payments have been made but not yet recorded, and erroneous or
inaccurate information supplied by creditors or consumers.
Student-loan providers are notorious for incorrectly reporting
that people have missed payments.

    For their part, the major credit agencies contend that
Williams overstates the importance of minor inaccuracies in
consumer records. The agencies maintain that somewhat
out-of-date or incomplete information does not necessarily hurt
a consumer's chances of getting a loan. "A credit report is
just a snapshot," says Barry Connelly, senior vice president of
Associated Credit Bureaus, an industry group. "What consumers
fail to understand is that credit is based on history, not on
how you are this moment, this day."

    The credit agencies point out that banks, credit-card
companies and other consumer lenders sometimes fail to report
promptly on the status of their accounts. Another problem in
the industry is that federal law prohibits the credit
repositories from sharing information, so that updated
information that reaches one databank may still be missing from
others.

    Although Citibank finally reopened my Visa credit line, it
has not returned my wife's card. But it did mail me an R.S.V.P.
certificate to apply for another Citibank-American Airlines
frequent-flyer credit card. And this one offers a free
round-trip companion plane ticket. Wonder if I should apply.


____________________________________________________________ HOW
TO PROTECT YOURSELF


    -- The first step in discovering errors is to get hold of
your personal credit report. Credit reporting agencies, listed
in the Yellow Pages, will send a copy for about $15 (or free
for anyone who has been denied credit in the previous 30 days).

    -- If you find an error, notify the credit bureau, which
under law must investigate and correct any mistakes. If the
matter remains disputed, you can tell your side of the story
in a 100-word statement that the credit bureau must attach to
your report.

    -- Always peek at your credit profile before applying for
a big loan, and try to check it once a year. Contact each of
the three major agencies, since they do not share information.
And tell a potential lender up front about any credit woes in
your past.