Credit bureaus are privately held, billion dollar companies whose main purpose is to make money, that’s what for-profit companies do right? They store data that lenders furnish them – whether accurate or inaccurate – about our credit relationship with them and sell it. Simple right? This simple business model generates over $4 Billion a year!
One source of income for them comes from selling the information on our credit reports to other lenders, employers, insurance companies, credit card companies – and whoever else you authorize to view your credit information. Not only do they provide them with raw data; but they also sell them different ways of analyzing the data to determine the risk of extending credit to us. In addition to selling our information to lenders they also sell our information to us – credit scores, credit monitoring services, fraud protection, identity theft prevention – interestingly enough this area has quickly become one of their biggest sources of income. And those pre-approved offers in our mailbox every week; or junk mail? Yep, they got our information from the credit bureaus too. Companies subscribe to a service provided by the three credit bureaus that sell them a list of consumer’s credit information that fit a pre-determined criteria.
Now, contrary to popular belief, credit bureaus do not have any input on whether you should be approved for a loan or not; that is purely based on the credit criteria of the lender you’re working with. However, by using all of the information that has been placed on your credit report (payment history, personal information, and credit habits) and FICO’s method of scoring that data, they do provide them with how creditworthy you are.
This is why it’s so important to ensure that the information they are reporting is accurate. It would be nice if they would do their job according to the Fair Credit Reporting Act and make sure they have proof that the information they are storing is true and up-to-date – after all those inaccuracies could cost you $1,000s – but that won’t happen. Thus the burden of ensuring accuracy is on YOU. You are responsible for catching errors; they could care less if it’s wrong and they hate it even more when we challenge this inaccurate information by disputing it. Why? Because it’s time consuming and time is money. Remember, I said they’re main purpose is to make money? Credit bureaus store more than 200 million files on consumers; do you know how much money (time) it would take to ensure that everything is accurate and to store proof of accuracy?
We’ve seen the statistics; I have 2 videos that show proof of consumers having inaccurate information on their reports, the credit reporting agencies knowing this and still refusing to correct it! The latest statistic shows that more than 40,000,000 Million Americans are walking around with errors on their credit reports right now. I personally think this number is off; I’ve honestly never seen a credit report that was 100% accurate; like NEVER. Now you may say, well you work with people with bad credit so of course you see the worst of the worst, right? WRONG! I’ve been a Realtor for 12 years and I’ve seen people with great credit have errors as well. What’s my point? Hmm, how can I put this?