Equifax error results in declined loans and higher interest rates

Over a three-week period this year, Equifax, one of the nation’s three major credit bureaus, provided inaccurate credit scores to lenders on millions of consumers looking for credit cards, loans mortgages and car loans, according to the Wall Street Journal.

The issue, described as a “technology coding issue” by Equifax, reportedly resulted in loans being refused or loans being approved with higher than guaranteed interest rates. In a statement, Equifax said, “As part of a thorough analysis, we determined that there was no change in the vast majority of scores during the three-week period of the issue. For consumers who experienced a score change, initial analysis indicates that only a small number may have received a different credit decision.”

Key points to remember

  • The Equifax credit bureau sent bad credit scores on millions of consumers to lenders for three weeks, from mid-March to early April 2022.
  • In a statement, Equifax described the issue as a “technology coding issue” when migrating consumer data to the “Equifax CloudMT Infrastructure.”
  • According The Wall Street Journalpeople familiar with the errors said scores were sometimes off by 20 points or more in either direction.
  • Equifax, which said the issue was resolved on April 6, 2022, also said the vast majority of scores were unaffected and only a small number received a “different credit decision.”
  • Equifax was previously implicated in a data breach in 2017 that exposed sensitive information of nearly 150 million Americans and resulted in Equifax paying $700 million in fines and restitution after the breach.

Issue described as a ‘technology coding’ issue

In a statement, Equifax described an coding issue in on-premises servers in the United States that need to be migrated to new cloud infrastructure. The company says the issue was in place “over a few weeks between March 17 and April 6,” leading to potential miscalculations. The company noted that credit reports were not changed as a result of this issue.

Equifax confirmed the issue has been resolved and said it determined there were no changes in the vast majority of scores over the three-week period. The company insisted that, for consumers who experienced a score change, only a small number received a different credit decision than they otherwise would have.

Reports of declined loans and higher interest rates

Regarding the extent of the problem, a June alert from real estate agency Freddie Mac said Equifax had told the agency that 12% of all credit scores published from March 17 to April 6 were possibly in error. .

300,000

According to Equifax, the number of consumers experienced a change in credit score of 25 points or more.

Although Equifax said the data showed “fewer than 300,000 consumers experienced a score change of 25 points or more,” reports by The Wall Street Journal and others suggest that some people may have been denied loans or faced higher interest rates than should have been the case.

Equifax said it is working with its customers to determine the impact on consumers saying, “Again, we do not take this issue lightly. The issue has been resolved, we are working closely with lenders and accelerating the migration of this environment to Equifax Cloud, which will provide additional controls and monitoring that will help detect and prevent similar issues in the future. »

Not the first time for Equifax

This latest issue is a reminder that Equifax is no stranger to data issues. In 2017, after it was revealed that 150 million people had sensitive information compromised due to a hacker attack, Equifax had to pay up to $700 million to state and federal regulators, the biggest never paid for a data breach.

News of Equifax’s coding issue came shortly after the Consumer Financial Protection Bureau (CFPB) penalized automaker Hyundai for “repeatedly providing inaccurate information to national credit reporting companies and for failing to take appropriate steps to address inaccurate information once identified between 2016 and 2020.” The $19 million settlement makes it the biggest case the CFPB has ever brought under the Fair Credit Reporting Act against an automaker.

The essential

Equifax maintains credit information for more than 240 million US consumers, which it sells to lenders. This information is used to compile credit scores, one of the most important financial pieces of information available to consumers. Credit scores are a major factor used by lenders to determine whether an applicant should receive a loan and how much (interest) to charge if the loan is approved.

The importance of credit scores – and the fact that there are only three major credit reporting agencies (Experian and Transunion are the other two) – is reason enough for government agencies, journalists and others are diligent in tracking and reporting violations. and other issues that may affect credit data.

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