Kiplinger Staff: Retirement: Has Equifax Botched Your Credit Score? | Economic news
QUESTION: I heard that Equifax sent bad credit ratings to lenders. How do I know if I was affected by this error?
ANSWER: Equifax, one of the top three credit reporting companies, released a statement in early August indicating that a coding error led consumers to poor credit scores. The algorithm issue took place between March 17 and April 6, 2022, with approximately 300,000 consumers being raised or lowered by 25 points.
The most pressing question on the minds of many consumers is whether they have been affected. And, unfortunately, the answer is not as clear and dry as one might think.
“There’s absolutely no way a consumer would know if their scores were higher or lower during that three-week period because of the scheduling issue,” says credit expert John Ulzheimer, author of “The Smart Consumer’s Guide to Good Credit”. You should be familiar with scoring models and know exactly how Equifax misprogrammed your credit report, he adds.
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However, there is a roundabout way of trying to figure it out. And it starts by asking yourself: have you applied for credit? Credit here means you applied for a new rewards card, mortgage, home refinance, or car loan within that three-week period.
If your answer is yes, the next thing you need to ask yourself is: was your application denied or approved at higher interest rates than you expected?
Next, check either your “Adverse Action Notice” or your “Risk-Based Pricing Notice”, which details the terms and conditions to which you have been approved. Both notices must state which report was pulled by the lender to determine your eligibility for the loan.
If your Equifax report was pulled, contact the lender and ask if your request was affected by the coding issue.
Remember, this is a programming problem, Ulzheimer says. The information in your Equifax – as well as reports from the other two major reporting companies Experian and TransUnion – has not been affected and should be accurate.
Indeed, if your “adverse action notice” or “risk-based pricing notice” indicated that your request was determined using your Experian or TransUnion report, the lender may legitimately consider you a risk.
In this case, you need to increase your credit score through healthy credit habits. This includes paying your credit card and other loans on time, as well as keeping your credit utilization ratio – the amount of available credit you use – below 30%.
Emma Patch is an editor at Kiplinger’s Personal Finance magazine. To learn more about this and similar money-related topics, visit Kiplinger.com.