Annually, eight million people file complaints about their credit scores. Forty million Americans’ reports have errors on them, created by a small monopoly of companies (including Experian, TransUnion and Equifax).
These reports can cost you a job, apartment, derail a mortgage application and result in higher interest rates on car loans, credit cards, auto insurance and student loans, among other things.
Surprisingly, the news this week, generated by a recent 60 Minutes report, has been about correcting credit score errors, not why three main companies have enormous power and control over the financial and professional well-being of average Americans.
Nor is there any serious discussion why someone doesn’t lose their job for incompetence or penalties aren’t levied against companies for making errors with the potential to cost you a job, mortgage, apartment, or higher interest rates.
It has been estimated that a poor credit score costs the consumer $201,712 in a lifetime. Congress has failed to reign in FICO. The oil industry has more oversight.
Credit bureaus use a computer generated formula by the Fair, Isaac and Company (FICO), a corporation traded on the New York Stock Exchange, to determine credit scores. FICO, started by Bill Fair, an engineer, and Earl Isaac, a mathematician, in 1956, provides the information to credit bureaus.
Credit bureaus argue FICO can determine, among other things, whether you will be a good employee. Ironically, the bankers who derailed the national economy with illegal, unethical and immoral business practices had sterling credit scores.
Maintaining a good FICO score is a game. Paying all your bills in a timely manner doesn’t necessarily give you a high or higher score. Nor will making timely payments to a collection agency help. Opening a new account, even if you close another, can hurt your score.
No one chooses to have a FICO score based on the company’s analytics assigned to them that can indefinitely impact their life. No one chooses to be without recourse to challenge FICO or its self-described analytics that is a mystery to average Americans.
Ultimately, getting credit scores corrected isn’t the issue. It’s about why FICO and credit bureaus are allowed sweeping power and control over the daily lives of Americans.
Paul Jesep is author of “Credit Card Usury and the Christian Failure to Stop It”.