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Consumer credit report complaints hit record levels during pandemic—here's what you need to know

CNBC Select breaks down why your credit report matters and when you need to file a complaint.

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During the pandemic, a record number of consumers have filed complaints to the Consumer Financial Protection Bureau (CFPB) mostly about incorrect information found on their credit reports.

A recent analysis conducted by U.S. Public Interest Research Group (U.S. PIRG) and the Frontier Group found that there's been a surge in consumer complaints to the CFPB, the governmental agency created in response to the 2008 financial crisis to protect consumers' personal finances from unfair banking practices.

According to the August 2020 report, there were 38,712 complaints as of July 2020, a 50% increase when compared to the same five-month period in 2019 (March to July). This surge was driven largely by credit report complaints, up by 86% during the pandemic period (March to July 2020) and accounting for 65% of the total complaint volume in July 2020.

Credit reporting complaints are typically the most common recorded to the CFPB, the report indicates, but the 86% jump is notable. According to the report, incorrect information made up the majority of credit report complaints while "nearly three out of four of these complaints allege that information on a consumer's credit report belongs to someone else."

Below, CNBC Select breaks down why your credit report matters, how to know if you need to file your own complaint to the CFPB and how to do it.

Why your credit report matters

Accuracy is important when it comes to your credit report because it's a crucial document when determining your eligibility for things like loans, credit cards and housing. When you apply for credit, lenders or issuers pull your credit report to see if you meet their qualifications and help them decide what terms/interest rates to give you.

Mistakes on your credit report — such as bills incorrectly listed as past due, incorrect balances or accounts in your name that you never opened — can have a negative impact when you apply for credit. It might prevent you from getting a credit card or loan, or make the terms more expensive. It might also indicate that you're a victim of identity theft. During a time when many Americans are already facing unprecedented financial challenges, credit report errors have the potential to really set you back.

"Misinformation on credit reports can have lasting ramifications for consumers and their financial well-being," Rachel Gittleman, financial services and membership outreach manager at the Consumer Federation of America (CFA), tells CNBC Select.

The CFA, along with other advocacy groups, have been fighting to include more consumer protections in any potential future coronavirus relief packages, including a temporary moratorium on negative credit reporting (which is any information that would damage a consumer's credit score).

"We are hoping that a new administration would refocus on consumers and prioritize the desperate need for further consumer protections in the financial marketplace as evidenced by drastically rising complaint volumes," Gittleman says.

Learn more: How will Biden’s economic policies impact your credit score? Here’s what 4 experts say to expect

How to know if you need to file your own complaint to the CFPB

With rising consumer complaints during the pandemic, it's more important than ever to look over your own credit report to make sure your information is correct and up-to-date.

Previously, you were entitled to one free credit report from each of the three major credit bureaus (Experian, Equifax and TransUnion) per year, but with the pandemic, consumers can now receive a free report from each bureau weekly through April 2021.

Pulls your credit report for free at AnnualCreditReport.com.

After you have pulled your credit report, you need to know what red flags to look our for. According to the CFPB, common mistakes you may find in your credit report include:

  • Loans and credit accounts in your name that you have never opened
  • A misspelled name, incorrect Social Security number, wrong address or phone number
  • Accounts wrongly listed as late, incorrect balances or credit limits, closed accounts listed as open, incorrect delinquency dates or duplicate accounts
  • Accounts not correctly listed as "current" when payments were subject to relief during the coronavirus pandemic

According to the CFPB website, consumers can file a credit report complaint with the CFPB if they have issues with any of the following:

  • Incorrect information on a credit report
  • A consumer reporting agency's investigation
  • The improper use of a credit report
  • Being unable to get a copy of a credit score or file
  • Problems with credit monitoring or identify protection services

"Consumers should complain both to the furnisher (bank, other lender or debt collector) and the CRA and demand a reinvestigation of disputed information," Ed Mierzwinski, who oversees U.S. PIRG's federal consumer program and led the research effort for the August 2020 report, tells CNBC Select.

"Consumers should also file a complaint at the CFPB, which while it does not conduct investigations, does contact the complained about company, which gets their attention."

Keep an eye on your credit report and stay alert of any real-time changes by signing up for a free credit monitoring service, like CreditWise® from Capital One and Experian free credit monitoring.

How to file a complaint

Consumers can file credit reporting complaints online, by phone, fax or mail. Here are the details:

  • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
  • Fax the CFPB at 1-855-237-2392
  • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244

More information about submitting a complaint to the CFPB can be found here.

The CFPB did not immediately respond to CNBC Select's request for comment on the August 2020 report.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.