Debtor beware // Examine credit reports periodically for accuracy

Do you have an uneasy feeling that Big Brother has his eye onyou? That's not paranoia.

More than 2,000 credit bureaus across the country make a livingby reporting on people's financial virtues and vices. Stored intheir computers is information about you that can be exchanged amonglenders at the push of a button.

Remember the dispute you had over car repair work three yearsago? The garage finally agreed you didn't need to pay it. But nowthat you're applying for a mortgage you discover you've beendowngraded by the credit bureau for stiffing the garage for a $257bill. The bank says it's a blotch on your credit rating. Banksdon't like to back losers.

Few would quarrel with lenders' claim that afinancial-background check is a price that consumers must pay for theconvenience of credit.

But critics contend that many reports include a dismayingquantity of inaccurate or outdated information. There's also a riskof being refused credit where skimpy reports understate creditexperience.

For these reasons and more, consumer advocates say people shouldexamine their reports for accuracy once in a while - especially acouple of months before applying for a major loan.

As far as lenders are concerned, your credit report is the bestnonfiction reading outside the New York Times best-seller list.Let's say this: It's not the end and all. But on the point-scoringsystem that banks use, credit reports carry high value (other points:stability, occupation, income, age).

So it's a good idea to sneak a peek at your own report, and findout what your creditors are saying about your bill-paying habits.

There's nothing complicated about it. Under the Fair CreditReporting Act of 1977, credit bureaus must inform consumers about the"nature and substance" of data in their reports. For a fee(generally $5 to $15) you'll receive a copy of your computer printout- warts and all - so that you can know what your creditors know.

You may be surprised at what's listed there - and what isn't: Department stores report after each billing cycle. An entrytypically includes the amount owed, credit limit and promptness ofpayment. Mortgages usually don't appear. If a consumer is going to skippaying a bill, it's not going to be his mortgage. He'd rather go badon something else. Banks that have lent you money report. But checking-account bouncedchecks don't show up on your report. Generally not reported are most oil company credit cards, utilitiesand charge accounts at small stores. Legal judgments, tax liens and bankruptcy filings are sure to be inyour file. Divorces may find their way there, as may criminalconvictions, though they're not supposed to. Visa and MasterCard report in, but until recently American Express,Diners Club and Carte Blanche have not, on the premise that theyrepresent a private membership that shouldn't be exposed to publicscrutiny.

Some of this is due for a change, though. Big Brother will soonbe getting more help.

An explosion of newly launched credit cards (Sears Discover andVisa Premier, for example) undoubtedly will cause credit bureau filesto become fatter. Expanded uses for oil company credit cards willfind them feeding into the system, too.

And now American Express Co., traditionally aloof, has quietlybegun reporting data, with plans to start providing full files tocredit firms later this year.

Even the government is joining in. Lenders servicing its FannieMae mortgage loans have been asked to report any 90-day delinquenciesand foreclosures to the big credit bureaus. The Army, Navy and AirForce also are giving the credit industry data on deadbeats.

Recently the United States began reporting data ongovernment-backed credit such as student and small business loans, amove that makes some people nervous. And delinquent dads who don'tkeep up child-support payments are under fire by state agencies.

All these sins will remain on your record for seven years,except bankruptcy, which lingers for 10 years.

A consumer's awareness of his credit profile usually starts withsomeone denying credit, because everyone who uses a credit report isobliged to tell the consumer it was used.

Then the reporting bureau must furnish (if requested within 30days of being turned down) a copy of the credit record, free ofcharge. Those it can't corroborate within a reasonable time must beexpunged. Generally, entries more than seven years old (exceptbankruptcies) also must be removed at your request.

When a bureau affirms, rather than removes, a questionable item,a person can present a 100-word explanation that must be placed inthe file. And whenever an adverse item is deleted or an explanatorystatement added, a consumer may request the credit bureau to informevery credit grantor who received a report within the last sixmonths.

Most credit reports are based on information stored in thecomputerized data bases of TRW Information Services, Trans UnionCredit Information Co. and three other lesser industry giants.

They say the vast majority of information is accurate. TRW saysonly 2 percent of reports issued result in some kind of consumerinquiry, and one-third of those result in a revision of the file.

What is not made clear, of course, is whether that figure mightnot suddenly rise if consumers made it a point to investigate theirown credit files.

Consumers may be excused if they harbor another concern - thesecurity and integrity of the system. Isn't information that can bepicked up by thousands of subscribers also vulnerable tocomputer-wise Peeping Toms?

Credit reporting companies assert that only "legitimate" creditgrantors can get access and only after they promise that theinformation will be used in connection with credit transactions (ifthat can truly be policed).

As for outright theft of file information, they assert there islittle crime advantage to getting at the data base. Still, in a 1982case, a Southern California detective agency filched some 4,000credit reports from computers before being caught and fined. Thegumshoes specialized in tracking down people and their attachableassets for debt collectors.

Federal law imposes stiff penalties on anyone convicted ofobtaining credit bureau data under false pretenses, but it'sdifficult to trace free-lance offenders who've cadged a subscriber'ssecurity password. In 1984 TRW officials confirmed that an accountpassword had been filched from a subscriber and posted on so-calledelectronic boards that can be hooked into by any computer enthusiast.The potential damage was immense.

Credit bureaus do not keep information of a subjective nature -your morals, marital life and drinking habits - that are gleaned frominterviews with neighbors or landlords.

However, now under intense attack are "investigative reports"for insurance companies and potential employers that go far beyondbasic data about finances. A vindictive neighbor, for example, cando a lot of damage, depending on how much reliance is placed on theinformation he or she supplies.

Not surprisingly, since few things bedevil consumers more than apoor credit rating (especially when unfounded), a new breed ofentrepreneur has arrived on the scene to help the luckless debtor -for a price.

In recent years more than 1,000 "credit clinics" have sprung upacross the country, charging up to $2,000 to help consumers disputeand remove erroneous data from credit files.

Unfortunately, in their exuberance to get clients, the so-calledclinics sometimes imply they can correct files when information iserroneous or alter them when it is not. The mounting criticism overcredit clinics has led to legislation in some states to regulatetheir advertising and business practices.

Television viewers also may have noticed another attempt topersuade them to check out their credit file. Peter Graves, thebrainy operative in many a "Mission Impossible" drama, appears onscreen for TRW and asks, "Do you know what's in your credit report?Call now, and take control of your credit."

His pitch implores you to subscribe to TRW's "Credentials"program, which for $35 gives you "unlimited access to your credit" -that is, the ability to get your credit report as often as you want.You also would be notified, the commercials say, whenever someonelooks at your report, and you are automatically assured of anelectronic loanapplication form that can be sent out with the press of a button.

Whether these services are worthwhile is up for question, sinceyou can get a copy of your report any time for a few dollars, andthat report shows who's been sent a copy. Nevertheless, more than300,000 consumers have signed up.

And thus, the poor consumer, already weary of monitoringeverything that happens to him, is now charged with theresponsibility of policing his own credit.

On another point, there is a real irony in the reliance oncredit bureau reports as gospel, because it favors applicants wholive on credit, discriminating against those with little debt or nodebt.

Is there no longer room for the philosophy of Longfellow'svillage blacksmith, who proudly proclaimed as he stood under thespreading chestnut tree, "And I owe not any man"?