Proper Credit, Part IV: Readers Relate Horror Stories

Readers sound off on fixing reports, and credit-reporting agencies' accountability.
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Many people have cross words for surly waiters,

IRS

auditors and meter maids.

But those sentiments are valentines compared to what some readers have to say about credit-reporting agencies.

A series of columns last week covered how to

get your credit report, how to

read it and how to

fix it.

Some consumers turn hostile at the mere mention of trying to correct an inaccurate credit report. The message: Expect to be treated with the same disdain as a sweat-suit-clad tourist traveling through France.

"I've been through it -- stolen identity. And it's as bad as you describe," writes reader

George Banks

. "The credit-reporting agencies are legally bound to investigate and correct errors reported to them. When the agencies neglected to correct their reports following retractions by the original claimants, I brought suit against them. Suits get their attention and they'll settle. Been there, done that!"

A few readers are appalled by the way these big institutions are allowed to behave.

"You think there will ever come a time when these credit-information companies will be treated the same way we employees are treated?" asks

Bruce Allen

. "After all, if I screw up, my boss lets me know in no uncertain terms that I blew it and that sort of job performance will not be tolerated. Wouldn't that be a kick in the @&* if these agencies were treated the same way?"

Jack Kennedy

, another reader, conveys the same contempt. "Isn't capitalism cool? The credit-reporting industry has no financial incentive to police the accuracy of its own database. The business customers that use this information don't care about the

acceptable losses

, those consumers victimized by inaccurate data. And our government lets this go on, year after year. Where's the outrage?"

Evidently, the outrage is living and breathing among people who've been wronged.

But if you've experienced problems with a particular lender or credit card company, you can at least take your business elsewhere.

Reader

Mark Nixon

did.

"I had two cards with

a particular bank, and I left one card inadvertently at an airport car-parking facility and reported it lost to the next day. Then, without my knowledge and no notification after the fact,

the card company put the balance on my lost card on the other credit card, causing that card to be suddenly over limit. So I got a nasty-gram "over-limit letter," which is how I found out there was something amiss. ... So I canceled both cards. When I ran my credit report several months later, one of the card accounts still showed open, and I wrote a letter and got it closed," Nixon writes.

"I'll tell my kids not to mess around with credit."

At least this consumer got an inaccuracy cleared up with little trouble. Let's hope small errors can be taken care of with a simple call to the creditor at issue.

The greater problem lies in the general haziness of the credit-reporting business. For years, consumers were kept in the dark about what goes into evaluating creditworthiness. Even now, those details are still pretty murky. That dreaded triple-digit credit score is part of the problem.

"Lenders may love the simplicity of a simple credit score in underwriting new debt but the simple fact is

nobody knows how it works

," writes

Ric Kennedy

, who says he owned a mortgage credit-reporting company with his wife for nearly 20 years.

"The score cannot be checked for an inaccuracy. Different scores show up for the same person on each credit repository. ... Run the same credit report twice and come up with different scores. All anyone will tell you is it is a magic algorithm and you have to trust the magician. Wrong!" Ric Kennedy writes.

"People are denied loans because computers generate a number and other computers decide that number is insufficient to grant a loan. When applicants inquire about why they were denied the loan or credit, all anybody can tell them is their score was too low," he says.

Fair, Isaac & Co.

, whose FICO score is used in making more than 75% of new mortgages every year, has said it's developing a Web-based service that will explain individual scores.

You'll just have to wait and see if those explanations actually tell you anything.

Send your questions and comments to

deardagen@thestreet.com, and please include your full name.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.