Who owns your credit score? Not you

This data boils down to a number between 350 and 800, which measures the risk of lending money to someone. He can determine the interest rates they pay and whether they get a loan at all.

So, who owns your credit score and all the detailed personal data that goes into it?

You may be surprised to find that it is not you. You may be even more surprised to find that the data is often incorrect, especially since the pandemic, and that it is being used in more places for more purposes than ever before.

This spring, the credit giant Equifax (EPC) sent out incorrect credit ratings for banks and other lenders for potentially hundreds of thousands of customers, the company said last week. Equifax said a significant number — fewer than 300,000 people — had their credit score changed by 25 points or more due to the error. This is more than enough for some people to be denied the loan they were supposed to make.

This infuriated Massachusetts Senator Elizabeth Warren, who has long been a critic of the banking industry. In a statement to CNN Business, Warren called the errors “scandalous. Equifax needs to be clear about who is affected and how it happened, and the company needs to help deceived consumers.”

Equifax uncovered the most recent bug after Wall Street Journal investigation earlier this month and about issues reported by National Mortgage Professional magazine.

If the company’s name sounds familiar, Equifax reported in September 2017 that hackers had exploited a security vulnerability to gain access to the company’s customer data. The data covered 145 million people, or about half of America’s adult population.

Oops.

Now, some critics argue that the entire national credit reporting system is simply broken.
Equifax is one of the three major publicly traded credit agencies in the United States. TransAmerica (AEMTH)as well as Experian, (EXPGF) that collect consumer behavior data and sell it to financial institutions.

But more than 50 small specialized agencies have sprung up to provide such data to potential workers, tenants and utility customers.

Credit data is being used in a broader sense than originally intended, consumer watch groups warn, sometimes rather casually. The rental agency is often given details of multiple people with the same name.

Mistakes

Between January 2020 and September 2021, the Consumer Financial Protection Department received 700,000 complaints against the three largest credit institutions.

Over 60% of all complaints in 2021 were related to consumers reporting incorrect information in their report.

Mistakes are so common that in 2019 current Equifax CEO Marc Begor told The New York Times that when he first checked his own Equifax credit report, he showed that he bought a vacuum cleaner he didn’t own, a mobile phone service he didn’t subscribe to, and a credit card he didn’t have.
He was not alone: ​​last year Consumer Reports asked. nearly 6,000 consumers to check their credit scores and report back. Just over a third said they found at least one bug.

For these reasons, some experts are suggesting increased regulation or a public lending agency that does not attempt to profit from personal data.

“Mission Creep”

In a study of credit reports and their use for non-credit purposes, Chi Chi Wu, an attorney for the National Consumer Advocacy Center, warns that there is a “mission crisis” in how widely the data is used.

Some essential services, such as gas, water, or electricity, use credit scores to determine if a customer is required to provide collateral, for example.

Credit scores can predict consumer behavior when it comes to shopping, but can be misleading about whether people will be good renters or pay important bills like utilities on time.

“Credit scores are increasingly being used as a measure of character, although sometimes it’s just luck,” Wu said.

The pandemic has called into question the validity of the data. Credit scores often don’t tell the whole story, says Michael Pugh, president and chief executive officer of Carver Bank, a New York city bank headquartered in Harlem.

Just before the start of the pandemic, Carver Bank provided a loan to an equipment repair business that decided to expand into an installation business, he said.

“They had already hired new employees and purchased additional equipment when they suddenly had to close the business. [because of Covid]” Pugh wrote in an email.

Over time, the company’s credit score declined as it drained its savings, increased its use of credit cards, and took longer to pay bills. Carver continued to extend credit and accept late payments. “They came out the other side stronger,” he said, but the credit report could take considerable time to catch up. The installation business was lucky that its bank was flexible, unlike many other businesses.

According to Wu, credit reports are being used more often now because some people think they eliminate discrimination — “thinking it’s a number, it’s just a computer program — but [discrimination] baked into the algorithm,” Wu said.

And there are major differences in credit score by race. An Urban Institute report analyzing 2016 Freddie Mac data found that more than 50% of white households have a credit score above 700, compared to just 21% of black households. The gap has narrowed in the five years since the Institute’s recent study, but for Native American groups in particular, the gap remains significant.

You can’t refuse

How can a system with such flaws be so powerful?

There is no legal way to refuse the powerful numerical image of you that credit agencies paint. In 2017, an Equifax executive testified before the Senate Commerce Committee that Equifax owns consumer data and analysis, and “it’s part of how the economy works.”

But, Wu said, “one of the reasons [errors] what happens all the time is that they get away with it – they are an oligopoly, you can’t choose between them like you can with mobile operators. If you need a loan, you will have to deal with these three agencies.

Regarding the recent incorrect data published by Equifax, if you did not apply for a loan, credit card, or other financial products between March 17 and April 6 when there were coding errors on the server, it is difficult to know if you have been affected by the Equifax Valuation Error. Already.

What rights do consumers have? The right to know what’s in their case. All consumers are entitled to free annual disclosure upon request from each nationwide credit bureau, the CFPB said in a statement. If there are errors, challenge them both by phone and in writing, but be aware that there is a backlog in handling these complaints.

At the same time, while consumers may have limited rights associated with the data itself, there are ways to improve their credit score. Consumer advocates advise always paying bills on time – particularly mortgages and credit cards – because banks and home lenders immediately report to credit agencies.

And don’t forget to check your report on a vacuum cleaner you never bought.

Leave a Reply

Your email address will not be published. Required fields are marked *