The credit reporting system is relied upon by 200 million American consumers to provide accurate credit histories and ratings to run an economy reliant on financing. This allows everyone to afford items that are otherwise unattainable without the proper financing offers that are determined by one’s credit scores.

Unfortunately, the latest study by the Federal Trade Commission saw errors in the system that, although not perfect, is marred by unacceptable and costly mistakes. These mistakes could affect anyone, including those that are looking for alternative debt relief programs -- like those thinking of acquiring a new loan to consolidate debts.

According to the FTC, 26 percent of the over 1,000 participants surveyed in a comprehensive study identified at least one potentially material error. When the error was disputed and modified, only 13 percent of participants saw a change to their credit score.

Research determined that 88 percent of errors were because of inaccuracies reported by lending companies. Sources clarified that not all errors were significant, but at least 5.2 percent of the participants have errors serious enough to make them riskier. 

The added risk could easily result in consumers having to pay more for products and services that check into credit histories.

The country’s three major credit bureaus – Equifax, Experian and TransUnion – rely on the FICO credit scoring system that ranges from 300 to 850 with a higher score beyond 700 considered to be better as it poses the lowest credit risk. 

The system bases the scoring on a borrower’s income and debts, and how well the person eliminates these debts through timely payments and repayments, in some cases. Basically, the system wants to know how well a borrower is paying down their debts.

The federal Fair Credit Reporting Act gives consumers rights to dispute inaccuracies in their credit report. The FTC concluded that although a majority of credit reports are free of errors, the dispute process often doesn’t favor consumers.