Credit reporting

The Federal Housing Finance Agency also is offering more opportunities for public dialogue as stakeholders debate how fast the process should move forward.

Credit bureaus should know better than to include "impossible" data, such as someone defaulting on a loan before they were born, says Consumer Financial Protection Bureau Director Rohit Chopra.

Millions of Americans have trouble accessing low-cost loans because they have thin or problematic credit histories. That could change as fintech innovations and new self-reporting tools give lenders troves of new data.

The agency issued an advisory opinion warning that credit reporting bureaus and other entities using credit checks can no longer use disclaimers to bypass privacy protections.

The use of rent data in credit models is allowing people with low credit scores or thin credit files to get loans. But consumer advocates warn the use of that data could harm the very people it’s supposed to help. 

Klarna will begin reporting the use of buy now/pay later products to U.K. credit reference agencies, which could see the increasingly popular mode of financing impact users' credit ratings.

The data from these transactions could help millions of borrowers with thin or nonexistent credit files. But how the credit reporting industry collects and treats the data may matter more than the data itself.

Esusu, a financial technology company that aims to help bridge the racial wealth gap by reporting rent payments to credit agencies, has become one of only a few Black-owned startups to reach a valuation of $1 billion after closing a Series B round led by SoftBank Vision Fund 2.

In a letter to the agency’s new director, top Senate Democrats recommended policy steps intended to limit mistakes in consumers’ credit files that they said “can ruin lives.”

Companies using only a person’s name and not other identifiers to screen job and tenant applications can produce inaccurate information, according to the bureau. The agency's advisory opinion said such practices violate the Fair Credit Reporting Act.

A report by the agency found that consumers in majority Black neighborhoods were more than twice as likely as those in white neighborhoods to lodge complaints with the credit bureaus over information in their files. Meanwhile, disputes were less common among older borrowers.

Tens of millions of consumers diligently pay their rent, utilities and other bills every month yet have no credit history. Supplementing traditional credit scoring with such data will promote equity and upward economic mobility, says the CEO of Experian North America.

Kikoff, whose investors include Golden State Warriors' star Stephen Curry, provides applicants with a no-fee $500 revolving line of credit they can use to purchase personal finance books and courses from its online store. The company then reports this payment activity to some credit bureaus.

Democrats are pushing for a public-sector alternative to the three main credit bureaus, but Republicans argue that the government is ill-equipped to safely handle consumer data and produce accurate reports.

In a 5-4 ruling, the Supreme Court said that a majority of plaintiffs in a class action were not entitled to damages because the credit reporting company did not share faulty information with banks, landlords or other third parties.

Policymakers need to stop attacking credit bureaus and take action against credit repair firms that use dubious tactics to wipe bad debt from consumers' credit reports. Such schemes both impair banks' ability to accurately underwrite loans and further hurt real victims of identity theft.

Some say Equifax, Experian and TransUnion are too slow to investigate grievances, prompting more complaints to the Consumer Financial Protection Bureau. But the big three say other forces are at work.

Complaints to the Consumer Financial Protection Bureau jumped 54% to 542,300 in 2020. Concerns about credit reports have long outnumbered those in other categories and jumped significantly as a share of the total from 2019.

The bill introduced by Rep. Patrick McHenry, the top Republican on the Financial Services Committee, would expand CFPB authority to the credit reporting industry and require that certain adverse information be removed from a consumer’s credit history.