When you look at your credit scores and your credit report do you assume it is correct? Do you also think that your credit score is the same with each of the three major credit reporting agencies? Think again,” said Paul Richard, a registered financial consultant (RFC) and executive director of the nonprofit Institute of Consumer Financial Education (ICFE), a San Diego based nonprofit group helping people correct credit file mistakes and also improve their spending habits, increase their savings and use credit more wisely.

According to a joint report issued by the Consumer Federation of America (CFA) and the National Credit Reporting Association (NCRA); “Millions of Americans are put in jeopardy by inaccurate credit scores and they may have to pay more - or worse, be denied for credit, utilities or insurance because of inaccurate credit scores.”

Research for the study, conducted during the summer of 2002, analyzed the credit scores of more than 500,000 consumers, and extensively reviewed the files of more than 1,700 individuals, maintained by the three major credit repositories - Equifax, Experian, and Trans Union. Nearly 200 million Americans have credit files. The analysis of the scores in 502,623 merged credit files reveals that 29 percent of these consumers had scores with a range of at least 50 points, while four percent of the consumers had score ranges of at least 100 points. The average range of the three scores was 41 points, and the median range was 35 points. Credit scores range from approximately 400 to 800,” the joint CFA-NCRA report said.

“The analysis of credit files for consistencies and inconsistencies revealed reasons for these differences in scores. Common errors of omission were the failure to report a negative event - (a delinquency or charge off) - or a positive event - (payments on an account). 78 percent of files were missing a revolving account in good standing while one-third (33 percent) of files were missing a mortgage account that had never been late. More serious errors of commission appeared in a significant portion of files. In 43 percent of the files, reports on the same accounts conflicted in regard to how often consumers had been late by 30 days. In 29 percent of the files, there was conflicting information about how many times the consumer had been 60 days late. And in 24 percent of the files, conflicts existed about 90-day delinquencies. Reported delinquencies have a large effect on credit scores,” the report also revealed.

"While the sample of 51 is too small to generalize reliably to all credit files, the frequency of errors in these files strongly suggests that errors of omission and commission exist in the credit files of millions of consumers," said Terry W. Clemans, NCRA Executive Director.

Consumers, and especially first-time home buyers, shopping for a mortgage may have the greatest risk, according to the study, because a score of 620 is necessary to qualify for a prime loan at conventional rates. Consumers with lowers scores will be charged more or denied. Falling below the 620 cutoff point can impose significant costs on mortgage borrowers. Over the life of a 30-year, $150,000 mortgage, for example, a borrower incorrectly charged a sub-prime rate of 9.84 percent instead of a prime rate of 6.56 percent would pay $317,517 in interest instead of only $193,450 in interest - a difference of $124,067 in interest payments, according to the study’s conclusions.

People can reduce the negative affects of mistakes in their credit files and the variance of credit scores by checking their credit reports at least once a year. Active credit seekers and users should probably check their reports every six months,” says the ICFE, which makes free ‘Credit File Request Forms’ available on its Web site. “If you are denied credit or told you may be a bad credit risk, ask for more details, so you will know what to look for when you check your reports. If you are denied credit, you are entitled to a free copy of your credit report,” the ICFE said.