The Credit Reporting System: A CFPB Report
by: Michael Creditfirm
A few Days ago, the CFPB (Consumer Financial Protection Bureau) released a detailed study of the credit reporting industry. Here is a summary of their findings.
Each of the 3 largest National Credit Reporting Agencies (Experian, Equifax, and TransUnion) maintains credit files on over 200,000,000 adults and receives information from approximately 10,000 data furnishers. On a monthly basis, these furnishers provide information on over 1.3 billion consumer credit accounts or “trade lines.”
The 10 largest data furnishers account for more than half of all accounts reflected in consumers’ credit files.
Credit cards account for nearly 60% of all trade lines.
Furnishers provide consumer credit information electronically to one or more NCRAs using a standardized format called Metro 2. When data files are received, the NCRAs also perform quality checks prior to adding the data to credit files.
Inaccuracies frequently occur in Credit Reports through a number of ways.
- Inaccuracies can occur if consumers provide inaccurate data when applying for a loan or if the creditor who furnishes data to the credit bureau inputs consumer information to its systems inaccurately.
- Inaccuracies can occur when the bureaus match information about a consumer from a particular data furnisher to the wrong individual consumer’s file.
- Inaccuracies can also come from errors or the lack of identifying information in government records.
- Inaccuracies can occur when consumers have become victims of identity fraud or identity theft.
The CFPB estimates that only 20% of all consumers with credit files (40,000,000 consumers) obtain a copy of their credit file from one or more of the NCRAs annually.
At present, the NCRAs generally do not forward documentation that consumers submit with mailed investigation requests or provide a mechanism for consumers to forward supporting documents when investigating accounts online or via phone.
The NCRAs resolve an average of 15% of trade line investigations internally and refer the remaining 85% of the investigations they receive from consumers concerning trade lines to data furnishers.
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