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Your Credit may be Better than it Looks

A study by the Federal Trade Commission proves that a high percentage of credit reports contain errors which could cause even buyers with damaged credit to get charged more for everything from car loans to auto insurance

What we know

Borrowers with deficient credit sometimes often don’t understand that checking their credit reports before applying for an auto loan could save them money.

Here at Auto Credit Express we know this is true because we’ve spent the past two decades helping car buyers with bad credit looking for online car loans locate those dealers that can offer them their best chances for car loan approvals.

According to the FTC, some applicants that were turned down might’ve been approved while buyers that were approved might have received a better interest rate if they had taken the time to first correct the mistakes in their credit reports.

Recent FTC study

The study which was mandated by congress and conducted by the Federal Trade Commission (FTC), “found that one in five consumers had an error on at least one of their three credit reports.”

“These are eye-opening numbers for American consumers,” said Howard Shelanski, Director of the FTC’s Bureau of Economics.  “The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly.  If they don’t, they are potentially putting their pocketbooks at risk.”

As part of the study, participants were “encouraged to use the Fair Credit Reporting Act (FCRA) process to resolve any potential credit report errors.”

The FTC also found that:

• One in four consumers identified errors on their credit reports that might affect their credit scores;
• One in five consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports;
• Four out of five consumers who filed disputes experienced some modification to their credit report;   
• Slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report; and
• Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.  
• It should be pointed out that while a number of credit repair companies mention this specific report in sales pitches to prospective clients, its relatively miniscule sample size (only 30 states and just 200 surveys) hardly make it a reliable measurement of the credit reporting industry.

Past studies

Among the studies conducted to measure the overall percentage of credit report errors, the most notable, done in 2003 by U.S. PIRG, involved just 200 participants in 30 states.

The FTC report was based on a much larger base of consumers – 1,001 participants who reviewed 2,968 credit reports with a study associate that helped them identify and correct possible errors on their credit reports.

In addition, the participants were selected “to match the demographic and credit score information of the general public.” They were also “encouraged to dispute errors that could affect their credit standing.”

The reports that contained potential errors were then sent to FICO for rescoring. Once the dispute process was completed, participants were provided with updated credit reports and credit scores. On all reports where changes were made, the impact that these had on credit scores was then measured.

Preliminary findings

It should be noted that these findings are based on an interim report. Congress has directed that the FTC provide an interim report every two years beginning in 2004 and continuing through 2012. The final report is due in 2014.

Subprime auto loans

Although they’re taken into consideration, high risk lenders typically look past credit scores and base their credit decisions on an applicant’s credit habits. This is done, in part, by studying the information contained in their credit reports. But inaccurate information when combined with poor FICO scores could result in either a higher interest rate or even a denial of credit for an auto loan.

The Bottom Line

The results of the current FTC report only reinforce the fact that all borrowers – but especially those with past credit issues – should carefully check their credit reports well in advance of applying for any type of loan.

Another tip: if after viewing and correcting your credit reports you still find that your FICO scores fall below 640, you should know that Auto Credit Express matches consumers that have experienced car credit issues with dealers that can offer them their best chances for approved car loans.

So if you’re ready to establish your auto credit, you can begin now by filling out our online car loan application.

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