Credit report errors are hurting Canadians’ chances of getting out of debt amid rising personal insolvency filings, experts warn.
Credit reports in Canada are produced by for-profit credit bureaus Equifax and TransUnion. They show a person’s credit history and serve as gateways to most financial transactions today, often being required by lenders to rent an apartment, take out a loan, and obtain insurance, a phone plan and utilities.
A simple error in a report can therefore mean missing out on a better mortgage rate or even the opportunity to buy a home altogether.
And while it’s difficult to know the exact rate of inaccuracies in reports, as Equifax and TransUnion do not publicly disclose data on disputes by customers, insolvency trustees and other financial experts interviewed by the Star are sounding the alarm based on the sheer frequency of errors they come across every day.
“Out of the (reports) I look at, I would say almost all of them have something wrong on them,” said Doug Hoyes, a licensed insolvency trustee with Hoyes, Michalos & Associates.
Indeed, Borrowell, a Canadian company that provides free Equifax credit scores and reports to more than three million users, says it gets a few hundred inquiries regarding errors each month.
The responsibility over ensuring reports are accurate ultimately falls on consumers, but many aren’t aware of mistakes until the need to access credit is most urgent. Those facing insolvency especially rely on their ability to borrow to stay afloat.
The dispute process can be long and difficult, and most borrowers can’t afford to wait, Hoyes added.
“If I’m being ’renovicted’ from my apartment and I have to find a new one, then all of a sudden my credit score becomes pretty important,” he said.
“It’s the more vulnerable who are impacted by this issue.”
A consumer right or responsibility?
Errors are prone to occur in Canada’s complex credit environment, in which credit bureaus receive information from various data providers, including banks and other financial institutions, courthouses and the Office of the Superintendent of Bankruptcy, according to Cristián Bravo Roman, a professor at Western University and Canada research chair in banking and insurance analytics.
He believes that the responsibility over accuracy gets “diluted” as information is passed along institutions until it lands on the consumer.
“That seems to be the reality right now,” said Bravo Roman, “and I’d rather recommend people that they keep an eye on it, even though most likely that’s not the optimal solution for society in general.”
In a statement, a TransUnion spokesperson said the company is “committed to data accuracy across all our businesses and (is) likewise committed to helping consumers address inaccurate information in their files.”
Similarly, an Equifax spokesperson said the bureau takes concerns very seriously and believes that data accuracy on credit reports is a “consumer right.”
Both spokespeople emphasized that some mistakes are beyond the bureaus’ control.
“As with any large technical system transmitting data between multiple parties, there can be processing errors at any point along the chain, including unintentionally inaccurate data transmitted to Equifax from data furnishers,” added the Equifax spokesperson.
The Canadian Bankers Association, the industry’s trade group, said it is “committed to ensuring the accuracy of the information provided to credit bureaus,” while the bureaus are responsible for maintaining the accuracy of the reports themselves, it added.
Common errors
Eva Wong, chief operating officer at Borrowell, thinks the actual percentage of inaccuracies Borrowell receives is higher, because it isn’t always informed of mistakes in reports as consumers must file complaints directly with the credit bureaus.
The majority of complaints Borrowell gets — 60 per cent — dispute accounts with a lender or financial institution, including duplicate or missing accounts, accounts that don’t belong to the user, and those showing “open” when they should be “closed” and vice versa.
Another 30 per cent dispute inquiries that either don’t belong to the user or appear even when they were told by a lender that there would be none.
And 10 per cent dispute collections, including those that the user doesn’t recognize, duplicate collections and collections showing as unpaid when they have been paid.
“Because it can have such a big impact, it’s really important for consumers to be checking and tracking their credit reports to make sure that there aren’t errors,” Wong said.
Trustees call for efficiency
Once a consumer requests an investigation, TransUnion says it generally responds within 30 days, as it needs to verify the details with their creditor.
Francisco Remolino, licensed insolvency trustee at Remolino & Associates, thinks the process of disputing errors needs to be “more efficient” and “transparent for everybody.”
“Most people file for a proposal or bankruptcy because they need it as soon as possible,” said Remolino. “Trying to clarify the issue with the credit bureaus prior to the insolvency process may delay that.”
Sometimes, he said, his clients prefer to just assume debt that they don’t recognize as theirs rather than filing a dispute prior to bankruptcy.
In a statement, the Equifax spokesperson said the company has taken steps to reduce dispute processing timelines and has achieved “substantial progress.”
“Financial institutions are always looking to your credit report to give you new credit or extend the existing credit,” said Remolino. “So it is very important that the credit bureaus understand how critical their job is in terms of the information they reflect.”
