What you get out of credit reporting oversight
(Reuters) - The federal Consumer Financial Protection Bureau (CFPB) is about to start supervising credit reporting bureaus, specifically, the companies that collect information about your borrowing and payment history.
Consumers have a lot at stake when it comes to the information contained in the reports they assemble. What's in them can determine whether you will be approved, for instance, for a mortgage. And the information will be used to factor your credit score, which helps lenders determine your credit worthiness and what interest rate you qualify for. It could also impact getting an apartment or a job.
"Mistakes in credit reports, or fraud caused by identity theft, can make borrowing more expensive or prevent consumers from getting credit," the CFPB says.
The involvement of the government in regulating this industry highlights what's at stake for consumers, particularly when problems they run into are caused by errors (see link.reuters.com/ryn49s). And it serves as a reminder to people to pay attention to their reports.
"Errors happen in any industry," says John Ulzheimer, president of consumer education for Smartcredit.com, and a former credit bureau employee. "The difference is when someone makes an error on my credit report, it can cost me money or a job."
Consumers should have some peace of mind that the government will be policing the industry, Ulzheimer says, but the CFPB's involvement should also signal a wake-up for consumers to be more vigilant.
Here are answers to some common questions about credit reporting.
1. When you see ads for free credit reports, is that what the government means when they suggest I get my free report every year?
No. Most of those ads are for credit monitoring services - something consumer advocates say most people don't need. You need not buy credit monitoring to get a free report. The only official site that allows consumers access to the credit reports produced by the largest three credit bureaus - Equifax, Experian EXPNF.UL and TransUnion - is AnnualCreditReport.com (annualcreditreport.com).
Too few people take advantage of this free service, Ulzheimer says, noting that only 4 percent of those available are reviewed. You are entitled to get one free report from each a year and many credit experts suggest you stagger that - requesting a different one every four months so you can have the best chance at spotting errors or someone using your identity.
2. What is in these reports?
The reports basically tell your financial story, says Bill Hardekopf, who runs the site LowCards.com. People are often surprised when they see just how much detail is there and, Hardekopf notes, even more can be listed than just the basic credit card and loan details, including when you've been taken to collection, whether you've been late paying homeowners association dues or whether you've applied for a payday loan. In short, he says, you have a good reason to pay attention to whether information in them is accurate.
3. What can happen if I leave incorrect information in my report?
It can take a while to fix a report, so getting an error addressed should be a priority. Many companies use credit reports as a screening tool for potential employees. So, the stakes can stretch beyond just loan applications. The CFPB notes that some 400 companies buy, augment and then sell credit reporting data. That means an error can get distributed over and over again.
4. If I get my report, what should I look for?
Be sure that what's in the report is about you, suggests the CFPB. Verify that all the addresses that are included were places you lived or were associated with. Also, look for items that should not be there such as a bankruptcy that is more than 10 years old, or any duplicated information.
5. What if I find mistakes?
Every credit report should have contact information for the credit reporting agency and a means to dispute what is included. It should also include information that explains how to dispute information you believe to be inaccurate.
6. Does getting a free credit report mean I can also get a free credit score?
No. Credit scoring is something consumers typically have to pay for. But the CFPB says it is more important to pay attention to the contents and accuracy of your credit report than your score.
"The information in your credit report influences your credit score," according to the CFPB. "Even if you do buy your credit score, it is likely that the score the lender buys will be different from the score that you buy. If you decide to purchase your credit score, you are not required to purchase credit protection, identity theft monitoring or other services that may be offered at the same time."
(This version of the story has been corrected to clarify that John Ulzheimer worked at a credit bureau but was not an executive, paragraph 5)
(Follow us @ReutersMoney or here. Editing by Beth Pinsker Gladstone; Desking by Andrew Hay)
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