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A temporary error in calculating credit scores may have affected millions of consumers this spring.
Equifax, one of the nation’s three major consumer credit bureaus, says it issued inaccurate credit scores to lenders for a three-week period from March 17 to April 6, 2022, due to what the company describes as a coding problem.
While the bureau says the issue was resolved on April 6, millions of mortgage, auto loan and credit card applications may have been negatively affected.
So far, Equifax has not offered a clear solution to those involved, although the bureau said in a statement that it was “working transparently” with its customers and will bring in a third party to review the situation. independently.
While consumers wait for more information, they can take steps to confirm whether they’ve been affected and potentially minimize their losses.
How do Equifax credit score errors affect consumers?
It remains to be determined how many consumers were affected and how much the error cost them.
In the statement released by Equifax on Aug. 2, nearly four months after the company quietly corrected the coding error, the company said fewer than 300,000 consumers experienced a score change of 25 points or more. .
But according to a class action lawsuit filed against the company, the actual number of people affected is potentially in the millions. Mortgage lenders removed about 2.5 million credit scores from national credit bureaus during the three-week period Equifax scores were affected, according to an estimate obtained by The Wall Street Journal.
The lawsuit also alleges that credit scores were altered by up to 130 points, including the Equifax score of the lead plaintiff in the complaint, Nydia Jenkins. But consumers who have been anchored to just 20 points may still have suffered fallout, including:
- Applications refused: Qualified applicants may have been turned down for new credit cards or new loans.
- Borrow more expensive: Financing may have been approved, but with higher interest rates and monthly payments than the applicant would otherwise have received.
- Additional requests: Consumers who were turned down or received unfavorable terms may have submitted additional loan or credit card applications seeking better financing. According to FICO scoring models, these repeated applications can potentially reduce consumer scores by a few points.
Although the coding error would have resulted in incorrect weighting of credit information for scoring, Equifax says consumer credit report information was not changed during the incident. (Credit scores are usually calculated based on information in your credit reports.)
This is not the first major event to test public confidence in Equifax. In 2019, the company agreed to a $700 million settlement after being accused of negligent security practices that led to a massive data breach involving the addresses, social security numbers and birth dates of approximately 147 million consumers.
How do I know if I’ve been affected by Equifax credit score errors?
According to a National Credit Union Administration (NCUA) spokesperson, many consumers may not yet realize they have been affected by the problem. If you applied for a credit card or loan between March 17 and April 6, 2022, there are several ways to find out.
“Consumers should take a look at documents related to any mortgage, credit card, auto or personal loan applied for in March or April of this year,” says Jason Kellogg, civil litigation attorney and partner at Levine Kellogg Lehman Schneider + Grossmann.
If your application was denied based on your credit score, you should have received an “Adverse Action Notice” which includes your score and the issuing credit bureau. You can also check other notices or documents related to the creditors’ decision to see if a score from Equifax is benchmarked or is significantly lower than other scores that have been drawn.
If you cannot find your documents or have received a verbal response from the creditor, Kellogg advises you to contact the creditor to request documents.
What can I do if I’ve been hit?
Equifax says it will work with lenders to resolve the issue, but did not offer direct consumer support. The company declined Forbes Advisor’s request for additional comment.
If you think you have been impacted, here are some options to consider:
Contact the creditor
Your creditor may offer support, but it’s not entirely clear what that might look like.
Forbes Advisor has contacted the banks that have been publicly named in the incident for comment. While JP Morgan Chase and Wells Fargo did not immediately respond, Ally Financial provided the following statement:
“We are aware of Equifax’s reporting errors. If a current customer has any related questions or concerns, we encourage them to contact Ally Customer Service, either by phone (888-925-2559) or by logging into their account and using the chat feature, and we will work directly with customers. ”
Your lender’s solution may include reconsidering your terms or approving your application. You may need to reapply or be encouraged to refinance, which could take longer and have another temporary impact on your credit scores. So far, creditors have not pledged to honor the rates that were in place in March or April.
If you think an inaccurate credit score influenced your financing decision at a credit union, you can go further and file a complaint with the NCUA.
The NCUA spokesperson says the regulator can work to facilitate a resolution between the credit union and the consumer. “If the parties are unable to resolve the issue, the NCUA will investigate the complaint to determine whether the credit union’s actions are inconsistent with a consumer financial protection law,” he said.
Consult a lawyer
For those who have evidence that an incorrect Equifax score impacted their loan or credit card decision, Kellogg suggests seeking legal advice.
“If consumers are convinced of what happened and wish to file a claim against Equifax (whether an individual or a group), they should contact an experienced class action attorney to assess the case and determine the best way to proceed,” he recommends.
Jason Doss, attorney and founding partner of Doss Firm, says whether you pursue an individual or class action depends on the specifics of your case. If the damages are minimal, a class action lawsuit might be the best way to avoid losing more money.
If you’re suing, Kellogg says an individual lawsuit will likely take longer than a class action, but it’s impossible to predict the outcome of either.
Consumers could be compensated in several ways, Kellogg says, including paying for financial damages. According to Doss, a class action lawsuit could also lead to “significant changes in business practices.”
In Equifax’s 2017 breach settlement, plaintiffs were able to seek reimbursement for time spent and money lost. They could also access repair services related to the data breach, which included up to four years of free credit monitoring from Equifax and up to seven years of free assisted identity restoration services.