Even Small Debt Errors Can Have Big Consequences

The Houston Chronicle ran a story on Christmas about how a paid $40 debt showing up as delinquent can have big consequences:

Three years ago, James Rohn discovered that he owed a $40 gas bill to CenterPoint Energy, and promptly paid it. The Houston resident thought that was that — until he applied for job at a bank in March.

The bank did a credit check and found that the long-paid bill was still being reported on a credit report as a delinquency. Rohn not only failed to get the job, but has had to keep fighting to clean up his credit report. Rohn recently sued the Houston utility CenterPoint Energy and the Chicago consumer credit reporting agency TransUnion in federal court in Houston, alleging that by continuing to report the delinquency, the companies prevented him from getting a job and may have cost him more in interest when he bought a car, took out personal loans and credit cards.

The story goes on to explain the problem and what consumers can do:

The problem is that credit scoring is a secret formula so it’s difficult to say whether one $40 debt is enough to throw someone into a higher risk category, said Houston consumer lawyer Dana Karni. But errors in credit reports are common. A study by the Federal Trade Commission found that one in four consumers found at least one potentially significant error on at least one of their credit reports.

That’s why consumers need to periodically check their reports with the three major credit reporting agencies, which include Equifax and Experian, in addition to TransUnion, Karni said. The federal government requires the reporting agencies to provide the reports free once a year. The reports can be obtained at AnnualCreditReport.com.