Loan Applications Rejected After Equifax Misreports Credit Scores
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Here's your money briefing for Thursday, August 4th. I'm J.R. Whalen for The Wall Street Journal. Millions of Americans' applications for auto loans, mortgages, and credit cards earlier this year were put at risk when the credit reporting company Equifax sent erroneous credit score data to lenders.
We've heard stories that people, because of this error, they crossed a line, a 620 credit score line, which is the threshold by which some people don't get loans.
So how does something like that happen? And what should you do if data on your own credit report doesn't look right? Reporter Andrew Ackerman broke this story for the WSJ. He'll go into the details for us after the break.
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Lots of Americans pay close attention to their credit score. It can mean the difference between securing a mortgage or a credit card or being denied. And many got a shock earlier this year when their loan applications were rejected, not because they had mismanaged their finances, but because the credit reporting company Equifax misreported their scores by as much as 20 points. Andrew Ackerman reported on this exclusively for The Wall Street Journal, and he joins us with more. Hey, Andrew, thank you for being with us. Thanks for having me. So, Andrew, how could something like this happen? What did Equifax say caused the error and who was affected?
Equifax said they had a technology coding issue.
What happened when Equifax misreported credit scores to lenders?
People affected were those applying for auto loans, mortgages and credit cards during a three-week period in March and April of this year. People who are applying for credit basically from banks and non-banks, lenders big and small. Equifax has said that they fixed the error.
Now, you report that the error caused some people's scores to be off by 20 points or more in either direction. How could a discrepancy like that affect someone's finances?
It was enough to alter the interest rate consumers were offered or to result in their applications being rejected altogether. We've heard stories that people... Because of this error, they crossed a line, a 620 credit score line, which is the threshold by which some people don't get loans. We don't know the total number of people who didn't get loans or were affected to such an extent that it changed their interest rates. But Equifax did say that the glitch didn't alter the information in consumers' credit reports. It just affected the way their scores were calculated.
OK, but where does that leave consumers who are denied credit or offered a higher or lower interest rate than they deserved? What are the lenders doing about that?
They're considering repricing loans and giving rejected applicants an opportunity to reapply. That can get complicated because of recent interest rate increases. But basically, consumers are going to have to contact their lenders if they haven't heard from them already. You know, mortgage lenders sought about 2.5 million credit scores in March and April when the error occurred.
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