The Credit Report Conspiracy

Seventy percent of all credit reports contain at least one error.

Nine million people a year are victims of identity theft. It is the fastest growing crime in America.

Credit inaccuracies, and the failure of the Credit Reporting Agencies to correct them, are the number one complaint received by the Federal Trade Commission.

The Fair Credit Reporting Act requires that Credit Reporting Agencies conduct a “reasonable investigation” when a consumer disputes an entry in their credit file. What is tricky is how those investigations are conducted.

When you dispute an item on your credit report, the Credit Reporting Agency sends an electronic message to the entity that reported the item, and the entity responds back that the item is verified or not. Frequently, the “investigation” is automated at both ends, and no person actually checks anything. That is it- investigation complete. Once completed, any future requests for investigation of that disputed item can be declared “frivolous” and ignored by the Credit Reporting Agency. At least one, Experian, does so as a matter of policy.

The reason it is done this way is simple: money. Your credit record directly affects your credit score. Your credit score determines how much you will pay for almost everything. Your car insurance, the amount of the deposit on your utilities, credit card rates and fees, and whether or not you get that job you were hoping for is all dependent on your score.

With all of that money available, creditors are going to use reports from the credit reporting agency that lets them charge the highest rates, that is the one that has the most “dirt” on you. So, the creditors, being the customer, are shopping for the best product- your bad credit- and will patronize the agency that delivers the goods. Therefore, it is in the best interests of the Credit Reporting Agency to NOT investigate, thus keeping your score negative.

Spurring most of this is the rapidly expanding sub prime market, and the lucrative debt purchasing market. Every major bank in the United States has a “sub prime” credit division. It is extremely profitable.

I can tell you from my own experience, and others I have spoken to, that there is another component to this- if you raise a fuss and dispute negative items, positive credit items mysteriously disappear from your credit in what appears to be retaliation.

Complaining to the FTC does little- they rarely go after lenders and collection agencies, and almost never go after Credit Reporting Agencies. Despite losing lawsuits in the million dollar range, the policies of these companies do not change- there is just too much money to be made.

It is time that congress does something. Perhaps they could take a look at this.