(PresidentialHill.com)- Equifax, one of the major U.S. credit reporting agencies, sent lenders inaccurate credit scores for millions of consumers who were seeking to obtain new loans this spring.
The mistake came from a coding issue that the company said resulted in them providing incorrect credit scores on customers to lenders. The inaccurate reporting occurred between March 17 through April 6 of this year.
Equifax said that many of the affected scores didn’t experience any material difference, but around 300,000 people saw a difference of at least 25 points on their credit score as a result of their error. A shift of that magnitude could cause a lender to make a different decision than they otherwise would — or result in them extending a much higher interest rate than normal.
In announcing the errors, Equifax said it was working with its customers, which are the lenders in the case, the determine the “actual impact to customers.”
U.S. consumers who believe that a loan decision or loan details could’ve been impacted by this error are being advised to reach out to the specific lender in question.
It’s a potentially huge mistake that could dramatically have impacted hundreds of thousands of people in the U.S.
Al Bingham, who’s a mortgage loan officer and credit expert who works for Momentum Loans, explained to CNBC that most mortgage and auto loans fall within a 20-point range. All scores that fall within that range generally receive the same loan decision and interest rate.
If the Equifax error didn’t cause your credit score to fall outside of your normal “band,” then there would be no issue. However, if it did cause your score to drop down a band or two, there could be a big problem.
Bingham said such a situation could become “an issue for rates and fees.” In these cases, some consumers may have been rejected for a loan application. Others may have been extended worse loan terms than they should’ve been — which could cost them thousands of dollars in interest and fees over the life of the loan.
With such a monumental potential impact to consumer finances, a law firm in Florida has already filed a class-action lawsuit against Equifax in U.S. District Court in North Carolina. The suit is asking for a jury trial that would ultimately award damages to any consumer who suffered as a result of the Equifax error.
The lead plaintiff in the class-action law suit is Jacksonville resident Nydia Jenkins. According to the official compliant, she applied for an auto loan in early April but was denied. Her credit score changed by 130 points suddenly, and it caused her to seek out a much more expensive loan to finance her auto purchase.
According to the suit:
“[Jenkins] was forced to apply for another loan from a ‘buy now’ dealership and received a loan with much less favorable rates.”
The suit also says that Jenkins was originally pre-approved for an auto loan in January, which would have been for a monthly payment of about $350. After she was forced to take the worse loan due to the credit reporting erorr, her actual payment increased to $503 per month, with a $252 bi-weekly payment.