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Who owns your credit score? You do not

2022-08-15T08:34:10.292Z

Your credit score data is often inaccurate, especially post-covid, and is used now more than ever by a host of industries far beyond banks.



Equifax sends millions of incorrect credit scores 1:03

New York (CNN Business) --

Credit bureaus know a lot about Americans.

The agencies collect information such as Social Security numbers, birthdays, how much savings people have, how much debt they have and how late they pay their bills.

That data is reduced to a number ranging between 350-800 that estimates the risk of lending someone money.

You can determine the interest rates they pay and whether they get credit.

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

You will be surprised to discover that it is not you.

You may be even more surprised to discover that data is often wrong, especially since the pandemic, and used in more places for more purposes than ever before.

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Equifax Errors

This spring, credit scoring giant Equifax sent bad credit scores to banks and other lenders for potentially hundreds of thousands of customers, the company revealed last week.

Equifax said a sizeable number -- fewer than 300,000 people -- saw their credit scores change by 25 points or more because of the error.

That's more than enough for some people to be denied a loan they should have been given.

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This has angered Massachusetts Senator Elizabeth Warren, who has long been critical of the banking industry.

In a statement to CNN Business, Warren called the mistakes "outrageous. Equifax needs to clearly explain who was affected and how it happened, and the company needs to help consumers who were scammed."

Equifax revealed the latest bug after a Wall Street Journal investigation earlier this month and problems reported by National Mortgage Professional magazine.

If the company name sounds familiar, in September 2017, Equifax revealed that hackers had exploited a security flaw in its system to gain access to the company's customer data.

The data was for up to 145 million people, or about half of the adults in the United States.

Oops.

Now, some critics argue that the entire national credit reporting system simply doesn't work.

Equifax is one of three large publicly traded credit reporting agencies in the United States, the others being TransAmerica and Experian that collect data on consumer behavior and sell it to financial institutions.

But more than 50 smaller specialized agencies have sprung up, providing such data for potential employees, renters and utility customers.

Credit data is being used in broader ways than initially intended, consumer watchdog groups warn, sometimes quite carelessly.

The details of several people with the same name are often provided to a rental agency.

Equifax: fined US$ 700 million for data leak 2:21

Mistakes

The Consumer Financial Protection Board received 700,000 complaints against the three largest credit bureaus between January 2020 and September 2021.

More than 60% of all complaints in 2021 related to consumers reporting incorrect information on their report.

Mistakes abound so much that, in 2019, current Equifax CEO Mark Begor told The New York Times that when he first checked his own Equifax credit report, it showed he bought a vacuum cleaner he didn't have, a mobile phone service had not been registered and a credit card that he did not have.

He wasn't alone: ​​Last year, Consumer Reports magazine 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 suggest more regulation or a public credit agency that does not try to profit from personal data.

'Mission Expansion'

In a study on credit reports and their use for non-credit purposes, Chi Chi Wu, an attorney at the National Center for Consumer Law, warns that there has been a 'Mission Broadening' in the extent to which the data is used.

Some vital services like gas, water, or electric utilities use credit scores to determine if a security deposit is required from a customer, for example.

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

"Credit scores are increasingly being used as a measure of character, when sometimes it's just luck," Wu said.

The pandemic has called into question the reliability of the data.

Credit scores often don't tell a person's whole story, said Michael Pugh, president and CEO of Carver Bank, a Harlem-based New York City bank.

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Just before the pandemic started, he said, Carver Bank had made a loan to an equipment repair business that had decided to expand into the installation business.

“They had already hired new employees and purchased additional equipment when they suddenly had to go out of business [due to Covid],” Pugh said in an email.

Over time, the company's credit rating sank as it depleted its savings, increased credit card use and took longer to pay its bills.

Carver continued to extend credit and accept late payments.

"They've come out the other side stronger," he said, but a credit report could take a long time to catch up.

The installation business was lucky that his bank was flexible;

many other businesses were not.

Credit reports are being used more now, Wu said, because some people believe they remove discrimination: "Think of it as a number, it's just a computer program, but [discrimination] is built into the algorithm," Wu said. .

And there are serious credit score disparities by race.

An Urban Institute report that analyzed Freddie Mac data from 2016 found that more than 50% of white households had credit scores above 700, compared to just 21% of black households.

That gap has narrowed in the five years since that study the Institute recently reported, but for Native American groups in particular, the disparity remains wide.

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How does the credit score work?

4:58

How can such a flawed system be so powerful?

There is no legal way to exclude yourself from the powerful numerical picture that the credit bureaus paint.

An Equifax executive testified before the Senate Commerce Committee in 2017 that Equifax owned consumer data and analytics and that "this is part of the way the economy works."

But, Wu said, "one of the reasons [mistakes] keep happening is that they can get away with it: they're an oligopoly, you can't choose between them, like you can with mobile carriers. If you want credit ", you have to deal with these three agencies.

As for the recent incorrect data released by Equifax, unless you applied for a loan, credit card, or other financial products in a window from March 17 to April 6, when they had coding errors on a server, it's hard to find out if you were affected by Equifax punctuation errors.

Up to this point.

What rights do consumers have?

The right to know what is in your file.

All consumers are entitled to one free annual disclosure upon request from each of the credit bureaus nationwide, says the CFPB.

If there are errors, discuss them both over the phone and in writing, but be aware that there is a delay in handling those complaints.

In the meantime, while consumers may have limited rights related to the data itself, there are ways to improve your credit score.

Consumer advocates advise always paying bills on time, particularly mortgages and credit cards, because banks and home lenders report them to the credit bureaus right away.

And be sure to check your report on a vacuum cleaner you never bought.

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Source: cnnespanol

All news articles on 2022-08-15

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