First I’d like to give you some history on the credit bureaus and how they got their start. In the beginning the credit bureaus operated in secrecy, they were local not national and of course the information gathered was in a paper file. Department stores and finance companies shared information initially forming small local credit bureaus. The local credit bureaus developed a file. They developed these files by using the good old Welcome Wagon.
Anyone remember a couple nice ladies coming to your door after moving into a new home and bringing baked goods and asking a lot of questions. They were on a mission to find any information they could on you to put in your credit file. They noted your income by your car, furniture and home. Your race, age and dependants and well anything else of interest. And here you thought they were just welcoming you to the neighborhood with a smile and baked goods. Most of these women were employees of the local credit bureaus.
In 1906 the Associated Credit Bureaus (ACB) was formed. The sharing of information create synergies at all agencies across the country and laid the foundation for the 3 bureaus of today. As you can imagine complaints of discrimination on many levels but housing and home loans were at the top of the list. With the federal government regulating the banking industry they enacted “Fair Credit Report Act” in 1971.
There are two scoring platform used today, FICO and Vantage. The 3 bureaus are Experian, Transunion and Equifax and I’d like to tell you how the credit bureaus make money. First and foremost they SELL data, yes YOUR data. This data comes from all kinds of furnishers like credit card companies, collection agencies, banks, student loan providers, utility companies, public record and the country, state, and federal courts and IRS. Staying within the principles of the “Fair Credit Report Act” (FCRA) they are allow to report for periods of 7, 10 to 15 years.
They have to report 100% accurate information and 100% verifiable information. This is Key to any credit REPAIR. And YES credit repair is legal. Thankfully it is your right! It's reported that over 80% of Americans have errors on their credit report.
You also contribute to your credit report every time you apply for credit, the manner in which you pay your debts, your habits like moving, buying and your employment is all tracked with information you provide. So you can see how valuable your information could be to certain groups. All this information is now collected electronically through automation, lenders report to the bureaus electronically and no human ever touches or has contact with your file. The data is then SOLD as consumer credit report data and direct marketing data. The “lower” your Fico the more money they make, YES so you see, they have no incentive to help you clear up your credit. BUT they also make money when you are disputing your report. Which is why disputes, if you are not familiar with the process can take several tries before they are resolved. Unfortunately most people give up, which is their motive. So you see they profit 10 fold from credit reporting errors.
I will continue my report on your credit report in my next blog, stay tuned for more gripping details………the saga continues