WASHINGTON (MarketWatch) -- If you've got an error on your credit report, you're not alone. And if you've had trouble fixing that mistake, you also have plenty of company. But Congress wants to see new rules that would make correcting credit errors easier for consumers.
"There needs to be some way that consumers in a reasonable way can document the error," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, at a Tuesday hearing covering credit reporting.
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"We want people when they buy things to have a sense of confidence," Frank said. "We want people to be able to shop online, use credit cards...without any sense that they could be disadvantaged."
Both Democratic and Republican lawmakers at the hearing called for the Federal Reserve and the Federal Trade Commission to enact rules under the Fair and Accurate Credit Transactions Act of 2003 that would address the accuracy of information used by credit-reporting agencies as well as the adequacy of the dispute-resolution process.
In a 2004 survey, one out of every four credit reports contained serious errors that could result in the denial of credit, according to U.S. Public Interest Research Group. Lawmakers are concerned that the trouble consumers have cleaning up their reports compounds credit-error problems. 
Watch these tips for fixing credit-report errors.
Watch these tips for fixing credit-report errors. "Being denied credit based on erroneous information impairs your future chances of getting credit and makes it harder to overcome the error," said Rep. Carolyn Maloney, D-N.Y. "So mistakes mushroom into very serious problems."
Why is it so hard to clean up a wrongly tarnished report?
Some observers criticize consumer-reporting agencies; Equifax, Experian and TransUnion are the three major bureaus. The agencies are "uninterested... in ensuring accuracy or responding to consumers," because they get paid by providing reports to customers, such as credit grantors, employers and landlords, rather than individual consumers, said Chi Chi Wu, a staff attorney with the National Consumer Law Center.
"The risk of an occasional lawsuit appears not to have overcome these economic incentives," she said. "The result is persistent inaccuracies in credit reports, which harms both consumers and creditors. Until the failure to conduct a real investigation becomes more expensive than not conducting a real investigation, the current system will remain broken."
The bible on you
Credit reports contain information about where you live, how you pay your bills and whether you've been sued, arrested or filed for bankruptcy. Some causes of errors in the reports are: the mixing the identities of consumers, creditors providing inaccurate information and the fallout from identity theft.
Those plagued by credit-report errors can have trouble buying necessities such as housing, and getting hold of common conveniences such as a car or credit card.
Experts urge consumers to take advantage of rights such as accessing free annual credit reports in order to monitor their information. Here's how the FTC recommends consumers dispute errors on credit reports:
- Send the credit-reporting company a letter about the information you think is inaccurate. Clearly identify each disputed item and why you dispute the information.
- Include copies of documents that support your position.
- Request that the disputed information be removed or corrected.
- Send your letter by certified mail.
- Tell the creditor or other information provider that you dispute an item. Include copies of documents that support your position.
- Keep copies of the letters and other documents.
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