The Credit Bureaus: Breaking Down Consumer Myths
If you’re one of the 200+ million active consumers in America, you’re most likely familiar with the term “Credit Bureau”. Unfortunately, most consumers have little to no information on exactly what they are, or what they do. We’re here to help change that.
A Credit Bureau is defined as “a company that collects information relating to the credit ratings of individuals and makes it available to credit card companies, financial institutions, etc.”.
A more accurate definition would be to change “makes it available to credit card companies, financial institution, etc.” to “sells your personal financial information to credit card companies, lending institutions, utility companies, insurance companies, medical companies, property management companies, employers, and the government”. Ever since you were in your teens, a financial big brother has been tracking financial decisions and selling that information.
Before the 1970’s, the credit bureaus were largely unchecked. I’d highly recommend reading The Long, Twisted History of Your Credit Score by Sean Trainor to get a better understanding of how small investigative companies rose to power through espionage and the hunger for consumer data. Fast forward to 2019, and you’ll find that the data mined by the credit bureaus can be found just about anywhere.
Myth #1: Your data is private.
The three main credit bureaus track an amazing amount of information on consumers. TransUnion individually tracks over 800 million consumers world wide. However, the three main credit bureaus (Equifax, Experian, and TransUnion) aren’t the only players in this line of work. There are 40+ different credit bureaus that track everything from your auto loan payments to how often you move as a tenant. This information can determine everything from home loan approvals to hold times with customer service centers. Your personal data is leveraged and sold to a variety of different companies, making you the product of the credit bureaus, not the customer.
Myth #2: The Credit Bureaus are (in some way) part of the government.
Nope. The credit bureaus are for-profit, private companies. Not only are they not part of the government, they are loosely regulated. In 2017, half of the country had their identities stolen through the Equifax data hack. Since the hack in 2017, congress has done little to reinforce protections for consumers (and children), or hold Equifax accountable for the massive breach. Instead, selling data to the government makes up approximately 5% ($155,000,000) of the annual revenue for Equifax, and a $7 million dollar contract is still on the table with the IRS for data authentication.
Myth #3: The Credit Bureaus are responsible for keeping accurate information.
Per the Fair Credit Reporting Act, 100% of the information on your credit profile must be fair and accurate. This statement can be misleading because ultimately the proof is on you, as a consumer, to ensure the accuracy of the information on your credit profile. If incorrect information is reported to the credit bureaus, it will most likely remain until investigated or disputed by the consumer. This issue impacts millions, leaving more than 1/4 of all consumers with errors or inaccuracies that negatively impact their credit worthiness.
The credit bureaus play a key role in your ability to leverage credit. It’s important to know your rights, and we recommend you learn more about them. If you understand how the credit bureaus work, and how you can hold them accountable for providing a fair and accurate risk profile, you’ll be more successful in navigating big (and small) purchases in the future.
We hope this helped clear up some consumer myths about the credit bureaus, and their role in your financial future. If you’re not sure what is on your credit report, click here to pull a consumer credit report. If you are dealing with misinformation, click here to learn more about what you can do to get it resolved.