New government agency finds potential problems with the credit report system

Estimated reading time: 2 mins

Have you ever taken a moment to consider the accuracy of your credit score report?

Dozens of companies specialize in offering consumers up-to-date credit reports that purportedly reflect their financial standing. Most credit reporting companies ask that you pay a fee to see your current credit report, while others offer a free credit report (you’ve seen the commercials) that supposedly shows the same information as those from their competitors.

Some credit scores are not created equally

It turns out that a customer might get a different credit score reports, depending on who’s asking for it. A recent story from Reuters explains that the credit report a consumer purchases from a private company might not match the one that a lender sees when they’re reviewing that same consumer’s credit history. It might even be the case that a lender sees a credit score that’s markedly worse than the one a consumer is familiar with.

According to the article, this news was brought to light by the Consumer Protection Bureau, a government agency formed thanks to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Part of the agency’s responsibility is to ensure that credit companies treat consumers fairly so that they don’t get in over their heads with mortgages, credit cards, accruing debt, and so on.

An investigation by the Consumer Protection Bureau into the practice of creating credit scores led them to uncover some practices that appear on the surface to be skewed against consumers. Oftentimes they found that banks, lenders, and financial management firms came up with credit reports and credit scores with differing information. In the worst cases, the difference between scores could mean the difference in a bank granting a business owner an important loan, or allowing a new homeowner to get a mortgage. While it wasn’t always the case, it occasionally seemed like people in the financial industry and consumer that sought their help were working with completely different sets of data.

Making sense of the discrepencies

So how does something like this happen?

The fact of the matter is that most companies that determine a consumer’s credit score do so based on their own formulas and algorithms. Though they all might be working with the same or similar information based on a consumer’s financial history, the way that they arrive at a final credit score can vary wildly. No matter what a credit company’s calculus might be, it seems strange that they would arrive at different numbers for a consumer’s credit score. It’s slightly unnerving to think that a person could ask for their credit score from several companies and expect to get different answers from each of them.

The Consumer Protection Bureau is also concerned about the discrepancy between credit scores, and as the Reuters article points out the agency is taking steps to monitor the practices of credit companies going forward. Hopefully the agency will help ensure that consumers get fair and matching scores across the board so they can be confident about their financial situation.

Your input

What’s your take on this story and credit scores in general? I’d love to hear from you!

Stella Walker is a freelance finance and marketing blogger for Stella’s main fields of interest are personal finance, online personal finance platforms, and the business of web marketing. Feel free to send her some comments!

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This post is part 8 of 16 in the series Working & Living

About the author /

Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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