Fair Credit Reporting Act News
An examination of how errors in reporting approved users could compromise financial security and credit ratings
Thursday, October 10, 2024 - Adding authorized users to credit accounts has grown in popularity recently as a means of helping people--especially young adults or those with low credit history--build their credit profiles. But with major ramifications for the main account holder as well as the authorized user, the misreporting of approved users by credit bureaus or financial institutions has grown to be a rising issue. The way credit reporting companies handle authorized user data drives the core of the problem. Consumers are protected, however, under the Fair Credit Reporting Act (FCRA), which forces lenders and credit bureaus to immediately correct credit reporting mistakes.
Errors in reporting this status, however, can have major negative effects including inaccurate information showing on both parties' credit records. One of the main problems is authorized user accounts being wrongly represented as joint accounts or even as main account holder responsibility. This can falsely increase the debt load of the approved user, therefore reducing their credit score and compromising their eligibility for credit cards, loans, or even rental applications. For those trying to build credit, this type of mistake can be especially damaging since they might be wrongly seen as financially reckless.
Conversely, mistakes in reporting could also affect the main account holder negatively. Sometimes misreporting causes credit bureaus to remove the authorized user from the account completely. Should the main account holder add the authorized user especially to enable credit building, this could compromise their goals and weaken confidence in financial institutions. Moreover, there have been instances whereby the credit score of a main account holder suffers if the credit reporting system mistakenly links the financial activity of an authorized user to their account. Many people overlook these mistakes until a loan application is turned down or a credit report is closely examined for an unrelated purpose. Small coding or data input mistakes can have disproportionately big consequences as financial institutions and credit bureaus mostly depend on automated processes to process and report data. Correcting these mistakes can unfortunately take time and usually calls for constant work by both the authorized user and the main account holder to fix.
Numerous complaints about the misreporting of authorized users have been received by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), which have led to calls for stricter rules and control of credit reporting agency handling of this data. Although there are already systems in place to challenge erroneous credit report information, for customers who are unfairly impacted by such errors the procedure can be taxing and aggravating. Customers who add authorized users to their accounts should routinely check their credit reports and quickly challenge any disparities. This guarantees that authorized users are not unintentionally punished for misreporting, therefore preserving their financial situation. To guarantee they are getting the expected advantages from their status without unanticipated drawbacks, financial professionals also advise authorized users themselves to keep an eye on their credit behavior. The problem of misreporting authorized users reminds us of the need for openness and accuracy in financial data management as credit reporting systems develop.
