Sorry, Your Card Is No Good

By MICHAEL G. RILEY

Who could resist the temptation? The ever solicitous Citibank dangled before me in the autumn mail an offer of a preapproved Visa card that would grant one frequent-flyer mile on American Airlines for each dollar charged. The lure of these two American obsessions -- credit and free travel -- proved irresistible, so I mailed the form and soon received cards for my wife and me. A month later, after we had rung up more than $4,200 in charges (about 20% of what would be needed for a free round-trip domestic ticket), my wife pulled out the card to purchase a blouse. "Sorry," said the clerk after running the card through the computer three times. "Your card is no good. I have to take it."

A call to Citibank produced a perplexing explanation: "Sorry, you have a derogatory credit statement," intoned the clerk. Pursuing it further, I was connected to a Mr. Thomas, who put matters even more bluntly: "This is one of the worst credit reports I've seen," he declared. A repossessed car, about $70,000 in tax liens, a bankruptcy adjustment plan and scads of debts unpaid. "That can't be me," I protested, explaining that I was a paragon of fiscal responsibility. He was unpersuaded.

Suddenly, the credit-travel enticement had turned into a Kafkaesque nightmare of mistaken identities, computer screw-ups and human errors, all spilling out of the vast and powerful credit-reporting system that tries to keep tabs on $720 billion in total U.S. consumer debt. But this was not just one person's bad dream. While the credit industry claims that errors are discovered in fewer than 0.5% of individual credit records, some analysts believe glitches are more common. According to a study by James Williams of Consolidated Information Services, a New Jersey credit bureau, 40% of the 150 million people with credit histories on file with the three largest repositories -- TRW in Orange, Calif., Trans Union in Chicago and Equifax in Atlanta -- have one or more errors in their files.

While most of the errors are trivial or benign, others can wreak havoc. For the most part, people remain blissfully unaware of the problems until, like $ me, they are mysteriously stripped of a credit card or rejected for a loan. Says M.E. Buckner, president of Informative Research, a mortgage-credit- reporting company in Anaheim, Calif.: "There are mistakes in the system, and we have mechanisms to correct them, but you correct the system only when a consumer complains."

In mid-argument with Mr. Thomas, a light clicked on in my head. Three years ago, the Internal Revenue Service had snooped around my neighborhood asking about a Michael G. Riley and his horrendous credit history. After many phone calls, the IRS admitted it had the wrong man. Perhaps my deadbeat namesake had returned to haunt my credit rating. Hearing this tale, Mr. Thomas softened a bit and told me to send him some identifying papers. Then he dropped another bombshell: Citibank, he said, had discovered a "death alert" filed on my Social Security number in 1981. So not only was my credit a disaster, I was also officially dead.

Straightening out the mess took nearly four weeks, a dozen phone calls and a visit to the local Social Security office, where I had to sign an affidavit attesting, "I am indeed alive and well . . ." As it turned out, I had fallen victim to the single most common credit-record error: cross-merged files. In such cases, which according to Williams afflict as many as one of every eight credit consumers, people with similar names or addresses have their credit histories mixed together. Often this occurs when a John Doe Sr. and Jr. live at the same address. Another common variation on the theme occurs when the credit histories of ex-spouses remain linked long after the divorce.

Mistaken identity is not the only brand of credit nightmare. Other glitches include out-of-date information, as when loan payments have been made but not yet recorded, and erroneous or inaccurate information supplied by creditors or consumers. Student-loan providers are notorious for incorrectly reporting that people have missed payments.

For their part, the major credit agencies contend that Williams overstates the importance of minor inaccuracies in consumer records. The agencies maintain that somewhat out-of-date or incomplete information does not necessarily hurt a consumer's chances of getting a loan. "A credit report is just a snapshot," says Barry Connelly, senior vice president of Associated Credit Bureaus, an industry group. "What consumers fail to understand is that credit is based on history, not on how you are this moment, this day."

) The credit agencies point out that banks, credit-card companies and other consumer lenders sometimes fail to report promptly on the status of their accounts. Another problem in the industry is that federal law prohibits the credit repositories from sharing information, so that updated information that reaches one databank may still be missing from others.

Although Citibank finally reopened my Visa credit line, it has not returned my wife's card. But it did mail me an R.S.V.P. certificate to apply for another Citibank-American Airlines frequent-flyer credit card. And this one offers a free round-trip companion plane ticket. Wonder if I should apply.

With reporting by Theodore P. Roth/New York