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How Credit Reporting Agencies Work

Errors and Identity Theft

Stealing an identity could be as easy as going through someone's trash and fiding personal information.
Stealing an identity could be as easy as going through someone's trash and fiding personal information.
2002 HowStuffWorks

In 2004, the Public Interest Research Group (PIRG) studied nearly 200 credit reports and found that 79 percent of them contained mistakes, many of them serious [source: MSNBC]. With over 4.5 billion pieces of data collected each month by credit reporting agencies, there's a lot of room for error [source: PBS].

Here are some of the most common credit report errors, according to PIRG:


  • Different credit reports associated with different addresses. They both use your name, but only contain partial information.
  • Your report contains information on someone else with your same name.
  • Information is reported twice, either positive or negative credit events.
  • Public record information is wrong. They include court records and bankruptcy reports that are wrongfully associated with you.
  • Your credit card company fails to report your credit limit. When that happens, the credit reporting agency uses your highest reported balance as your credit card limit. How does this hurt you? Your balance looks high as a percentage of your credit limit, when in fact it might be much lower.
  • Erroneous information caused by identity theft.

[source: PIRG]

Identity theft is one of the most common and costly crimes in America. Although individual instances of identity theft have actually gone down in recent years -- 9.3 million in 2005 to 8.4 million in 2007 -- all it takes is one case to destroy your credit for years [source: Privacy Rights]. For more information, read our article on How Identity Theft Works.

Credit reports are one of the best tools for discovering identity theft. Many people don't know they've been victims of identity theft until they find suspicious activity on their credit reports. That's why it's recommended that you request a credit report at least every six months. Here are some things to look for:

  • Account names and numbers you don't recognize
  • Loan applications you don't remember filling out
  • Addresses where you haven't lived
  • Soft inquiries by employers or landlords you don't recognize

[source: Federal Reserve Bank of Boston]

To combat identity theft, some credit reporting agencies offer a paid service called credit monitoring. With this service, the CRA notifies you immediately of any inquiries or changes to your credit report, while keeping an eye out for any suspicious activity. Another technique is to monitor your credit yourself by requesting a free copy of your credit report every four months from one of the Big Three CRAs.

If you find a mistake on a credit report, notify each of the Big Three CRAs immediately.

We hope this article has helped you understand the importance and influence of credit reporting agencies. For more information on credit reporting agencies, debt and related topics, check out the links on the following page.

Related HowStuffWorks Articles

More Great Links


  • "All About Credit Reports, Credit Scores and Credit Bureaus." PIRG.
  • "Credit Reporting 101." True Credit.
  • "Credit Scores: What You Should Know About Your Own." PBS Frontline.
  • "Equifax ordered to pay nearly $3 million in identity mix-up." Associated Press. December 4, 2007.
  • "Fair Credit Reporting Act."
  • "How Many ID Thefts Are There? What's the Impact on Victims?" Privacy Rights Clearinghouse.
  • "Identity Theft." Federal Reserve Bank of Boston.
  • "Links." Computer Data Industry Association.
  • "One in four credit reports has serious errors." Associated Press. June 14, 2004.
  • "Second Report on and Related Issues." World Privacy Forum.
  • "Stolen Innocence: Child Identity Theft."
  • "U.S. Population Clock" U.S. Census Bureau.
  • "Who Made America?: Lewis Tappan." They Made America.