Credit Report Errors Can Take Weeks to Fix, Impacting Loan Eligibility

Errors in Israeli credit reports, such as loans mistakenly listed as open, can significantly impact a borrower's ability to secure new loans, including mortgages. These inaccuracies can artificially inflate a borrower's calculated monthly debt, reducing the amount a bank is willing to lend. Banks typically limit debt-to-income ratios to 33-40% of disposable income, even with a regulatory ceiling of 50%, and each reported debt factors into this calculation. A closed loan with a 1,500 shekel monthly payment, if incorrectly shown as active, can reduce a borrower's perceived repayment capacity, potentially costing hundreds of thousands of shekels in a mortgage approval.

Borrowers have two primary avenues to correct errors, as outlined in Section 56 of the law. They can appeal directly to the credit provider (bank, credit card company, or non-bank lender) or file a complaint with the Bank of Israel. Direct appeals leverage the provider's immediate access to documentation, while appealing to the Bank of Israel initiates a regulated timeline. Under directive 502, credit providers must respond to the Bank of Israel within 14 business days of a referral. Complex cases, accounting for up to 5% of inquiries, allow an additional seven business days, capping the investigation at 21 business days. The law originally stipulated seven days, but the supervisor expanded this timeframe.

If a credit provider discovers an error independently, they must report it to the Bank of Israel within seven days. When a correction is made following a customer's direct request, the provider must notify the customer within seven business days of updating the data. Disagreements between a customer and the provider can lead to a note being added to the credit report by the Bank of Israel, flagging the dispute for other institutions viewing the data. Common errors include unupdated bankruptcy orders, open debt settlement files, closed enforcement proceedings still listed, and expired transactions that were not removed.

Correcting an error in the Bank of Israel's database does not automatically update a borrower's credit rating. A separate appeal to the credit bureau is necessary for the rating to be adjusted. Directive 304 mandates that credit bureaus publish their appeal procedures and maximum response times, and they must notify the customer and any entity that received the rating in the preceding 60 days if the rating changes. Complaints about the credit bureau's conduct are handled under directive 306, requiring a final response within 30 days, extendable by 15 days in exceptional circumstances. Credit bureaus must also respond to the supervisor regarding credit data sharing within 21 days and publish their public inquiry officer details.