WASHINGTON — Families in majority Black and Hispanic communities, younger consumers, and those with low credit scores have a higher likelihood of disputes appearing on their credit reports, the Consumer Financial Protection Bureau said.
The agency analyzed credit data from 2012 to 2019 and found that families living in majority Black and Hispanic census tracts were more likely to file disputes with credit bureaus over inaccurate information than families in white neighborhoods.
Left uncorrected, mistakes in a borrower’s credit report can limit opportunities for financial access. Consumer advocates have complained for years that the process to fix credit records is
“Error-ridden credit reports are far too prevalent and may be undermining an equitable recovery,” CFPB Director Rohit Chopra said in a press release.
The CFPB found that families in majority Black census tracts were twice as likely as those in white census tracts to have credit disputes in their files across every credit category the agency reviewed, including credit cards, retail cards, auto loans and student loans.
According to the report, just 0.8% of auto loans in majority white census tracts went to borrowers with a credit file dispute, compared to 2.8% of auto loans in majority Black census tracts. For credit cards, 2.5% of loans in white neighborhoods went to accounts with a dispute, while 4.7% of accounts contained a dispute in Black neighborhoods.
Meanwhile, 1.3% of student loans made in majority Hispanic census tracts went to borrowers whose file contained a dispute, compared to 0.9% of loans in white census tracts.
The CFPB also found that disputes were more common for younger borrowers and those with lower credit scores. Among auto loan borrowers with disputes on file, 41% were between the ages 30 and 44, compared with just 7% that were 62 and older.
The U.S. has three companies that act as private credit reporting agencies — Equifax, TransUnion and Experian — which use lending data used to calculate a borrower’s credit score, which in turn impact the cost and availability of credit.
Under the Fair Credit Reporting Act, U.S. consumers have a legal right to challenge inaccuracies found in the records maintained by the nation’s credit bureaus.
“When credit reporting is sloppy or rife with errors, this can limit fair and equitable access to individuals and families nationwide,” the agency said in its press release.
