Separating Credit Reports of Dad and Son
Mismerged files happens when credit information about one customer is filed away with another customer’s data, creating false depictions of the credit history of both consumers.
Errors like this commonly occurs when the two customers have similar sounding names, social security numbers (SSNs), or other similar identifiers (such as the information for a John A. Jones being filed with John J. Jones).
These errors are a bigger problem than you might expect.
One study into the matter showed that 44% of all credit reporting complaints received by the FTC involved these types files.
Of those complaints, 64% of people had information from total strangers combined with theirs, with the others involving relatives and former spouses.
Another study showed that one in ten files had between one and three additional credit reports in with it.
It’s common for these additional reports to contain some credit information that belongs to the person requesting the report and some information that doesn’t.
Combined files have led to lawsuits and debt collection harassment against completely innocent people. One of the first steps that collection attorneys take when they receive an assigned file is to have a skip trace performed by a national credit bureau.
These reports are typically the broadest matched files provided by a bureau. It’s common for a collection attorney to be given an incorrectly matched report, which leads to them suing the wrong consumer as a result.
One of the primary reasons for these files is that the computers at the credit bureau don’t use rigorous enough criteria to precisely match consumer data, even when there are unique identifiers present, such as SSNs.
For example, a credit bureau includes information in a consumer file even though the SSNs don’t match, but other information in the file appears to be a match. This leads to combined files when consumers have similar names and their social security numbers have the same number of digits - which happens a great deal with brothers and sisters (even more with twins). Regardless why you have an account that doesn't belong to you, it's still a major problem.
These errors can be prevented by requiring a credit bureau to use strict matching criteria when putting information into a credit report.
The most important reform would be to require an exact social security number match. Credit bureaus could rectify the problem just by requiring a perfect match of social security numbers and flagging when the numbers don’t match.
However, these same credit unions have chosen to be unreasonably over-inclusive because, as the FTC noted in a 2004 report mandated by the Fair and Accurate Transactions Act of 2003: “lenders may prefer to see all potentially derogatory information about a potential borrower, even if it cannot all be matched to the borrower with certainty.
This preference could give the credit bureaus an incentive to design algorithms that are tolerant of these files.
After all, a low credit score – even one given in error – could mean the furnisher makes more profit with their credit loans.
Credit bureaus have been aware of these errors for decades now. In the early-to-mid 1990s, the FTC issued consent orders with credit bureaus that required them to improve procedures to prevent these problems.
It’s been over a decade since then and these files are still a massive issue.