New legislation hopes to shake up the credit reporting industry and help consumers.

U.S. consumers may be getting a valuable ally when it comes to correctly reporting their credit scores if newly introduced legislation gets passed.  A bill sponsored by U.S. Senators Sherrod Brown (D-OH) and Brian Schatz (D-HI,) among others, would call for accuracy and accountability from the credit bureaus when it comes to reporting consumers’ credit.  The Stop Errors in Credit Use and Reporting (SECURE) Act of 2014 would give the public an avenue for transparency in reporting, a way to access free credit reports, and a way to dispute and correct inaccuracies under protection of the law.  

Errors aren’t harmless since lenders, banks, and employers base their rates, premiums, and hiring decisions, on consumers' credit score.  The Federal Trade Commission (FTC) recently released a study that said up to 40 million Americans have error(s) on their credit reports.  At least 10 million of these errors would result in higher interest rates on loans or put them at other financial detriment.  Errors can take the form of duplicates, misreporting, identity errors and mix-ups, and outdated items. 

Under the current system, Credit Reporting Agencies (CRA’s) put very little man-hours or resources into fixing inaccuracies and errors, and there’s no minimum standard for to accurately match and report data.  However under the new act, there would be new procedures that CRA’s were legally mandated to follow, protecting consumers.

S. 2224 dovetails on a proposal by Senator Bernie Sanders (I-VT) which calls for free, verifiable credit reports and scores to all consumers one a year.  That differs from the current system where CRA’s provide a free report that is almost valueless.  They sell “educational” scores and reports to consumers that are rarely used by lenders.  Too often, consumers start by requesting a free copy of their credit score and end up duped into paid credit monitoring services.

The Act would:

“Ensure that agencies send consumers’ disputes and supporting documents to the creditor when there is an error on a report, so that they can thoroughly review the consumer’s claim.

Make it easier for consumers to spot errors in their credit reports by requiring that consumers receive a free copy of their credit report if anyone makes an unfavorable decision based on the report.

Give consumers the ability to request a free credit score along with their annual free credit report to see what credit they might be eligible for.

Give courts the ability to stop a credit reporting agency from reporting inaccurate information and provide the Federal Trade Commission with new authority to stop sloppy practices.”  

For instance, if a consumer filed a legitimate complaint for an error on their report, the CRA would only have 14 days to provide evidence of the reporting.  This would include debt collection agencies affiliated with the CRA’s. 

The SECURE Act is cosponsored by Senator Sanders as well as Elizabeth Warren (D-MA) and Richard Blumenthal (D-CT).  It’s also endorsed by the Consumers Union, the National Consumer Law Center, the National Association of Consumer Advocates, Consumer Action, and U.S. PIRG. 

The bill has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.  You can read the complete Act here.

How many credit reporting agencies are there? If you said 'three,' you're way off!

If we asked most Americans how many credit bureaus there were, their answer would almost always be, “three.”  A good number of people could probably even name them as Experian, Equifax, and Transunion, and feel proud of their knowledge of the credit industry.  But very few people realize that there are actually a multitude of credit bureaus reporting your every mortgage, credit card, and occasional late payment, more than 35+ lesser-known ones at last count. 

Why are there so many?  Some of them replicate the scoring models and functionality of the big three, while others serve specific esoteric niches in the financial market.  It’s estimated that up to 50 million Americans have little or no data reporting with the major credit bureaus, so alternate reporting services help credit-light borrowers to qualify for basic loans or services, like utilities, cell phones, and rental housing.  Business loans, employment hiring decisions, and insurance coverage are all affected by what’s on your credit report, but better served by alternate reporting agencies.

For instance, payment information from your medical records is a totally separate form of credit, and businesses have their own commercial credit score.  Bank accounts, bankruptcies, liens, rent-to-own companies, pay-day lenders, subprime auto loans, check fraud, courthouse information, day care payments, and billing from club memberships are even documented by alternative credit reporting agencies. 

For most people, three reporting agencies keeping tabs on their every financial move is more than enough, but if you have an issue with something more than just mortgages, credit cards, and installment loans, you might want to check into what these alternate reporting agencies are saying about you.  Just like with traditional credit score, there’s usually a process for disputing incorrect items or engaging in certain responsible financial behaviors to raise your score. 

Here’s a rundown of some of the alternative credit reporting agencies.  They are under headings but any of these agencies offer reporting on several and overlapping types of reporting, so contact us if you need clarification or need help. 

Banking and Check History CRAs: 


ChexSystems

Certegy Check Services

Telecheck 


Payday Lending Reporting Agencies: 


Factor Trust 


Clarity Services 


CL Verify Microbilt

CoreLogicTeletrack

DataX 


Auto and Property Insurance Reporting Agencies: 


Insurance Services Office (ISO) (A Plus Property Reports)

Insurance Information Exchange

L.N. (Clue Personal Property Report)

L.N. (Clue Auto Report) 


Supplementary/Alternative Credit Reporting Agencies:  CoreScore Credit Report

L2C

Pay Rent Build Credit (PRBC)/Microbilt

ID Analytics

Innovis

Lexis Nexis Screening Solutions. Inc. 


Fico Expansion Score

Utility Credit Reporting Agencies: 


National Consumer Telecom and Utilities Exchange 


Rental Reporting Agencies:

Core Logic SafeRent 


LexisNexis Screening Solutions Inc. Resident History Report

Leasing Desk (Real Page)

Tenant Data Services and Medical Reporting Agencies: 


Medical Information Bureau

MillimanIntelliScript 


Employment Reporting Agencies: 


Accurate Background

Contemporary Information Corp. 


Early Warning Services 


EmployeeScreenIQ 


First Advantage

GIS

HireRight

Infocubic

Intellicorp

Pre-Employ.com

Trak 1 Technology

Verifications Inc.

The Work Number

Ask the experts: The top 5 questions about credit score.

Why are credit scores so confusing?

Credit scores may seem confusing but once you understand what it is and what parties are involved the role they play, it all becomes clear.  Your credit score shows your history of using credit, including accounts you have opened and closed, credit limits, payment history amounts owed, and defaults.  A credit score is tallied based on these factors and more, so your credit history determines your credit score.

Your credit score is determined by an algorithm developed by the Fair Issue Corporation (hence its other name of FICO score). Three corporations, called “credit bureaus”, specialize in collecting and reporting on financial histories. Those three companies are Equifax, Experian and TransUnion.  While their calculations are secret, we do know that the basic building blocks of your credit score are founded on: Inquiries, Mix of Credit, Age of Credit, Debt Ratio, and Delinquencies. 

How do you get your FICO scores?

www.myfico.com is the only way for consumers to actually get their FICO scores.  All other sites will be "educational credit scores".  Currently costing about $20 per score.

Most of us have been charged to pull our credit report at some time, or go onto one of those “free” sites, only to be hit with a $15 hidden fee to see the full report.  But according to the Fair and Accurate Credit Transactions Act (the FACT Act), you are eligible to receive a free copy of your credit report once each year from each of the three major credit bureaus by going to www.annualcreditreport.com.  This will show your credit history, not your score, but at least you’ll be able to monitor your credit activity and make sure you’re on track.  You can also receive a copy of your credit report through a company like Blue Water Credit or a mortgage lender when applying for a loan.

What does your credit score predict?

A credit score is the statistical prediction of one's likelihood to pay late over the next two years. The higher the score, the less likely one is to have a late payment. The bank then uses this number to assess the amount of risk involved with lending someone money. Banks are a lot like casinos in a sense, they like to place bets where they feel they will win.  Credit scores are trying to predict the same basic thing: the likelihood of a consumer being 90 days late on any payment within the next 24 months.  Credit score isn’t only used for mortgage loans anymore, now insurance companies utility companies, and even employers look at credit as an indicator of timely payments and responsible behaviors.

Why are all three credit scores different?

Determining a credit score is a tricky business since there are many credit scoring models in use, each fitting a consumer into their particular model. Some of the credit scores in these models go up to 990. While there are multiple formulas for calculating credit scores, the formulas introduced by the Fair Isaac Corporation (FICO) are the most widely used. This score ranges from 300-850.

How many credit bureaus are there?

There is actually 5 bureaus now: Equifax, TransUnion, Experian  are the big 3 we all know of.  Innovis and CoreLogic are attempting to compete but are not recognized by FICO.  Equifax, TransUnion and Experian are the three independent bureaus that each report a consumer’s credit separately and which FICO looks at to create a score.  People often see all three bureaus reported on one report, so they don’t realize it’s not all the same.  Since the bureaus each formulate a FICO score differently, your scores can vary based on credit bureau.

 

Why are all three credit scores different?

You have three different credit scores because there are three major credit bureaus and they each have different algorithms for calculating your credit score.  There are usually similarities but each bureau reports independently so it’s important to monitor and manage each one.  Equifax may have something reported incorrectly while TransUnion has it right, so your scores will vary based on errors, duplicates, and their formulas. Credit bureaus like Experian, TransUnion, and Equifax don’t ever make decisions about if you get credit.  They do, however, collect data about your use of debt and compile a credit score to share that with banks, lenders, or retailers who are considering lending you money so they can better gauge risk.