New Progress Toward Credit Accuracy and Transparency
By Maureen Mahoney, Consumers Union
The last couple of weeks have seen a whirlwind of activity relating to credit reports and scores. Significantly, Rep. Maxine Waters (D-CA) introduced legislation that would go a long way to improve credit reporting accuracy – and would guarantee consumers a free credit score!
Having free, reliable, and comprehensive information about your credit history is important. It’s even used by auto and homeowners insurance companies in many states when setting your monthly rates – something Consumer Reports has long fought against. Errors in your credit history could lead to a big drop in your credit scores, and make you pay more for a loan – or even get turned down for it. It could also make you lose out on a job or apartment, and could lead to a big increase in auto and homeowners’ insurance premiums.
We’ve made some real headway in improving credit reporting accuracy and access to reliable credit scores over the last couple of years. For example, a major settlement between the top three credit bureaus and 30-some states required the credit bureaus to improve their processes for maintaining accuracy in those states. And since 2013, FICO’s Open Access program has allowed banks, credit card companies, and others to extend free, reliable FICO scores to millions of their customers. Recently, Discover announced that they are offering free FICO scores even to people who don’t have a Discover card (you do have to sign up for an account and hand over personal information to Discover, however).
Still, the Consumer Financial Protection Bureau (CFPB) receives thousands of complaints a month about credit reporting. Since October 2012, they’ve received about 143,700 complaints about credit reports – that’s the third largest cause of complaint, behind debt collection and mortgages. Credit bureaus Experian, Equifax, and TransUnion are the most-complained about companies to the CFPB.
Rep. Waters’s bill promises to address many of these concerns. It requires the credit bureaus and data furnishers to take certain steps to main accuracy, for example, furnishers must maintain records to back up the information they report. And, it guarantees disclosure of a FREE, accurate credit score at several important points: when a consumer gets their free annual credit report at annualcreditreport.com, and before they sign the contract on a mortgage, auto, or private student loan. These are much-needed reforms that Consumers Union fought hard to have included in the bill.
The bill also tries to limit the impact of unexpected financial problems – and unfair corporate practices – on consumers’ credit reports. It limits the amount of time most adverse information can appear on a credit report to 3 years (down from seven years); requires that paid or settled debt (including medical debt) is quickly removed from credit reports; and requires that information related to defaulted or delinquent private student loans from fraudulent for-profit colleges be removed.
We encourage you to support this consumer-friendly legislation – click here to find your representatives’ information and ask them to sign on. And, we invite you help us push for fairness in pricing auto insurance by helping to make sure credit information isn’t a factor in your rates. Click here to ask state insurance regulators to “Price me by how I drive, not by who you think I am!”