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They wield tremendous power over your life - as well as the lives of every other American adult who cares about their credit. But what do you actually know about the credit bureaus? Friend or foe? Fact or fiction?
Surveys suggest the average American knows very little about consumer reporting agencies other than that they control their credit reports - and as a consequence, their purchasing power. And that is exactly how these credit reporting agencies want it, argues Dr. Randy Padawer, a clinical psychologist whose research into consumer credit has been featured in Smart Money Magazine and the bestselling FICO 850 seminar for The Motley Fool.
"The three major credit bureaus truly want consumers to believe that they've each been blessed with an officially sanctioned franchise," says Padawer, who has consulted for Lexington Law, a consumer advocacy law firm that helps consumers dispute errors and other questionable negative information from their credit reports.
The less you know about the credit bureaus, the more difficult it will be to resolve a problem when one shows up on your credit file. And odds are an error will appear. Nearly 80 of credit reports contain errors, and one out of every four contains errors serious enough to cause significant problems for consumers, according to research by the National Association of State Public Interest Research Groups.
Here are some credit bureau fictions and the real facts behind the fiction:
Fiction 1: There are only three "official" consumer reporting agencies.
Fact: Many companies are in the business of collecting, compiling and processing credit information.
Fiction 2: The three major credit bureaus are official government entities.
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Fact: "There are no official bureaus," Padawer says. "While most Americans perceive their credit reports to have at least the same legal standing as their driving records, the truth is that the government had no role in establishing the for-profit companies which produce them."
Fiction 3: The three major credit bureaus all have the same credit information.
Fact: Different creditors often report to different credit bureaus. In fact, there is no law that requires them to report to any of the big three bureaus at all. Consumer reporting agencies do not share information either, so if there is an error on your report from all three agencies, correcting it with one of them does not mean the error will come off the other two credit reports .
Fiction 4: Consumer reporting agencies will act promptly to help me fix an error or remove inaccurate negative listings from my credit reports.
Fact: Federal law requires Equifax, Experian, TransUnion, and all consumer reporting agencies to complete an investigation into a consumer complaint within 30 days of when it was first made. The bureau may decide the disputed item remains on the credit report as is, update but not delete the information, delete the listing, or deem the complaint frivolous. Given that the easiest option is to simply deem your complaint as frivolous, many consumers find that their legitimate complaints get dismissed.
Increasingly, frustrated and fed up consumers are turning to credit repair professionals like Lexington Law to help them resolve credit reporting problems. Anyone who has disputed an item on their credit reports knows the process can be long, frustrating and perhaps without results. Involving a professional can achieve faster, better results.
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