Sophisticated credit-scoring technology has made it easier for lenders to measure a borrower's risk, fueling the growth of the subprime market.

Unfortunately, the information used to calculate credit scores is often inaccurate, incomplete or fraudulent, consumer groups say.

The U.S. Public Interest Research Group recently asked members in 30 states to review their credit reports for accuracy. The result: 25 percent of the 200 reports surveyed contained mistakes that could lead to denial of credit or higher interest rates, says Ed Mierzwinski, consumer director for the group.

Credit-reporting agencies said the results were exaggerated and questioned the consumer group's definition of serious errors. But given the enormous amount of information processed by credit- reporting agencies, some mistakes are inevitable.

Sometimes, for example, credit-reporting agencies inadvertently merge files of consumers with similar names. In 2002, a federal grand jury in Portland, Ore., ordered TransUnion, one of the three largest credit reporting agencies, to pay $5.3 million to a woman who said her credit record contained bad debts incurred by someone else. The two women shared similar names and birth years; their Social Security numbers differed by one digit.

Identity theft can also hurt a borrower's credit score. Some victims spend years trying to get fraudulent accounts and unpaid bills removed from their reports.

Many consumers have been pushed into subprime territory because their health insurer failed to pay a claim, says Evan Hendricks, author of "Credit Scores & Credit Reports: How the System Really Works." When that happens, health care providers often send the unpaid bills to a collection agency, which can cause serious damage to an individual's credit score. "It's a major reason why people should check their credit reports," he says.

In the past, consumers who wanted to check their credit reports for errors had to pay for the report unless they had been denied credit, were unemployed or lived in a state that mandates free credit reports. But since Dec. 1, residents of the West Coast can order their credit reports from all three agencies for free. The rollout, mandated by the 2003 Fair and Accurate Credit Transactions Act, will continue until September 2005, when all consumers will be able to get a free copy of their credit reports once a year.

Consumers who want their credit scores will still have to pay for them. The 2003 federal law allows credit-reporting agencies to charge a reasonable fee for credit scores. The Federal Trade Commission hasn't yet decided what constitutes a reasonable fee.

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