What’s the Worst that Can Happen?
Lender errors can transform consumers with perfect credit to questionable borrowers in record time. Just last month, the nation’s leading provider of student loans incorrectly coded as many as one million accounts on a file it downloaded to a major credit reporting agency.

The error by Reston, VA-based Sallie Mae made it seem as if borrowers with graduated loan repayment schedules were behind on their payments, even when they had made all their payments as scheduled.

New York University graduate Corinne Rivera said her credit score fell more than 100 points overnight, from a healthy 755 to a low 600. Credit scores range from 300 to 850. The higher the score, the better your chances of getting a loan, mortgage or credit card at the best possible interest rate.

Rivera was stunned by the inexplicable drop in her score. Since she was in the process of applying for a mortgage, she worried the drop in her score would, at best, boost her interest rate and, at worst, cause the lender to deny her application for credit.

Sallie Mae found the error four days after it transferred the inaccurate information to Equifax—too late to keep it from temporarily tarnishing the credit of former students like Rivera. And while it has since corrected the mistake, it raises an important issue for consumers: specifically, how important it is to monitor your credit, especially before you apply for credit for mortgages or car loans.

Sallie Mae isn’t the first lender to make a mistake. In December, Cincinnati-based Fifth Third Bank made a computer error that spilled false information into “several thousand” customer accounts, in some cases generating credit-history errors and incorrect credit scores.

A 2004 study by the U.S. Public Interest Research Group found that 25 percent of credit reports have mistakes serious enough to cause a denial of credit. To protect yourself, make sure your reports are accurate.

You can get credit reports free from each national credit reporting agency once every 12 months at AnnualCreditReport.com or by calling 1-877-322-8228. This is the only authorized way to get your free reports from Equifax, Experian, and TransUnion.

You can get all three all at once, or stagger your requests through the year by getting one from each credit reporting agency every four months.

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