How do the credit bureaus manage your personal data anyway? Part 1

Learn more about credit bureaus, credit reporting and how your personal data is managed.

Michigan State University Extension holds that our credit continues to be increasingly important. Credit can not only be used in times of emergencies, but can be more convenient than carrying large amounts of cash and allow you to make a large purchase and pay for it over time. Most financial institutions use the information contained in your credit report to make decisions about whether or not to offer you a loan. Credit reports and your credit score are also used to help businesses make decisions about your eligibility for rental housing, setting premiums for auto and homeowners insurance and in some cases, to determine whether to hire you.

As part of its responsibility for the supervision of large banks, the Consumer Financial Protection Bureau (CFPB) has already started examining the processes that business and others use to assure accuracy when furnishing information to the Nationwide Consumer Reporting Agencies (NCRA), including the three major credit reporting agencies, and when responding to consumer disputes about information contained in their credit reports.

The report is intended as a public service to provide basic descriptions of, and statistics regarding, the underlying processes about how individual consumer data is reported, matched to consumer files and reviewed when consumers dispute an inaccuracy.

Key learnings from the Consumer Financial Protect Bureau:

  • The U.S. credit reporting system is made up a very large amount of information about individual consumers. The CPFB reports that each NCRA maintains credit files on over 200,000,000 adults and receives information from approximately 10,000 furnishers of consumer credit data.
  • It’s a big job for financial institutions and retailers to furnish credit information to the NCRAs.
  • There are processes that have been developed by the NCRAs to standardize, automate, and perform quality controls on consumer date that gets reported to the credit bureaus. The CFPB says that before accepting information from data furnishers, NCRAs perform certain background and quality control checks on would-be-furnishers.
  • There is a “matching” process that assigns individual consumer data to consumer-specific credit files that allows for the creation of credit reports on consumers. It’s a challenge to accurately match data that is reported to the appropriate individual consumer.
  • Inaccuracies can enter into credit reports in a number of ways. They can occur from consumers, financial institutions and retail stores, from identity fraud and theft, from mistakes within the credit bureaus as well as from errors or the lack of identifying information in government records.
  • The amount of inaccurate information in credit reports is not really known.

For more detailed information, visit the CFPB’s report, which is available online.

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