Credit scores are used in many sectors of our economy. The score can have a direct impact on the types of loans you qualify for, but not everyone is happy with the current system.
“I’m not a big fan of the credit bureaus,” said Ira Rheingold, lawyer and executive director of the National Association of Consumer Advocates. “Your financial information, your personal information, becoming a commodity that they make money on is really wrong.”
NBC 7 reported that errors can be very common on credit reports. This is one of the reasons financial experts say you should check your credit regularly. The finance people say that because they follow your accounts for years, there is more risk of errors.
âIf there are errors in the credit reports and that feeds into the credit score, we want to correct that,â said Doug Wright, CFO of Mission Federal Credit Union. “It’s a process that’s easier now, it’s gotten better over the years, but it can still be a tedious process.”
These mistakes can hurt your chances of receiving certain loans or offers. Wright says credit scores aren’t the only factor used to approve loans, but they are useful.
âThis allows us to speed up the application and approval process,â Wright said. “Lenders use scores as part of their decision-making process to make credit available to consumers.”
Wright says the current system is frustrated because of errors, data breaches, or because the process is unclear. That’s why Rheingold says it’s time to look for alternatives to the big three credit bureaus: Equifax, Experian, and TransUnion.
In a policy proposal presented during the campaign, Biden’s team proposed the creation of a public credit bureau. It’s an idea that Rheingold says could help.
âI think it’s a good idea,â Rheingold said. “Do I think we’re close to what’s going on? No, I don’t think so.”
One of the reasons is that it would take a lot of work to get a program like this up and running. Another is that it’s a new idea that still raises a lot of questions.
âThe idea of ââabolishing credit bureaus and creating a government-run entity is relatively new,â Wright said. “We just don’t have enough details on how they would propose to change the process, or do it differently, to assess whether it’s going to be an improvement or not.”
Rheingold says it is imperative to make changes to the current system. He says it’s hard for consumers to defend themselves.
âIt’s really hard for the average consumer to fix or change something,â Rheingold said. âIf you want to apply for an apartment, if you want a mortgage, you should be the person who says, ‘This is my information’. It is not necessary for companies to examine and stare at you without your consent. “
Wright says it’s not possible for financial institutions to perform their own individual credit checks that are as comprehensive as current credit reports.
âIt would definitely slow down credit decisions,â Wright said. “It would probably also limit the amount of credit we could extend to consumers.”
Instead of abolishing the agencies, Wright says he expects further changes and reforms to be made to the process through the Consumer Financial Protection Bureau. However, Rheingold says the ultimate protection would be to completely change the system.
âIf we’re going to get back to respecting people’s privacy, giving them control over their private financial information, then you’re really going to have to create some kind of public utility,â Rheingold said.