The text discusses the importance and impact of credit reports in everyday life. It highlights how credit reports are used by businesses, including banks, landlords, insurers, and employers, to make decisions about lending money, renting properties, setting insurance rates, and hiring employees. The text emphasizes the fact that 47% of employers conduct credit checks on potential hires, which is legal if the applicant gives permission.
The text also discusses the role of credit reporting firms such as Equifax, Experian, and TransUnion, which aggressively market their products beyond lending. It mentions that these firms state that credit reports help employers make decisions quickly and easily when deciding on potential candidates.
The text then discusses the potential errors in credit reports. A government study found that about 25% of consumers have an error in one of their credit reports, and about 1 in 20 has significant errors that could cause them to pay more for a car loan or a mortgage. It also mentions a case where a woman named Judy Thomas was repeatedly turned down for loans until she discovered errors on her credit report.
The text also discusses the problem of background check companies. These companies provide broader background checks, which may bundle credit information with things like criminal or driving records. The text mentions that these companies are not regulated, and they may not be as accurate as credit reporting firms. It also mentions a case where a man named Samuel Jackson was confused with three different sex offenders because of errors in a background check.
Finally, the text mentions that under the Fair Credit Reporting Act, the big three credit firms are required to give consumers a copy of their credit report once a year. However, if a consumer spots an error, it can be challenging to get it corrected. The text concludes by suggesting that the industry needs to improve its dispute resolution process.
Here are the key facts extracted from the text:
1. Credit reports are the basis for a person's credit score, a three-digit number that affects their financial life.
2. Millions of people use credit to buy things that improve their living standards.
3. To earn good credit, one needs to develop their character, have the capacity to pay bills, and have some capital.
4. The three big credit reporting firms are Equifax, Experian, and TransUnion.
5. These firms aggressively market their products for uses beyond lending, such as background checks for employers.
6. Experian claims that a person's credit may reflect their future job performance.
7. However, a TransUnion representative admitted that there is no evidence of a correlation between credit reports and job performance.
8. Over half of the debt on credit reports comes from medical expenses.
9. Credit reports can contain errors, with a new government study finding that about 25% of consumers have an error in one of their credit reports.
10. About 1 in 20 consumers have significant errors that could cause them to pay more for a car loan or mortgage.
11. Judy Thomas, a woman, was mistakenly listed as deceased on her credit report, which caused her to be denied loans.
12. Amit Patel, a man, was mistakenly flagged as a terrorist on his credit report, which caused him to be denied an apartment.
13. Samuel Jackson, a man, was mistakenly confused with three different sex offenders, including one who was convicted of a crime when Jackson was just three years old.
14. Background check companies can confuse people with others who have similar names, causing errors on their reports.
15. The Fair Credit Reporting Act requires the big three credit firms to give consumers a copy of their credit report once a year.
16. The Consumer Financial Protection Bureau (CFPB) has received many complaints about the three big credit bureaus.
17. A settlement agreement in March required the credit bureaus to improve their dispute resolution process.
18. However, the industry has claimed for decades that they are always improving their accuracy, despite persistent problems.
19. Background check companies are not required to keep files on all consumers and may not give consumers a copy of their report.
20. The Federal Trade Commission (FTC) does not have a national list of background check companies.
21. An FTC study found that one in twenty credit reports had serious errors.
22. An industry trade group claimed that the FTC report showed that credit reports are accurate, despite the 5% error rate affecting 10 million people.
23. The error rate of 5% affects a group equivalent to the entire population of Sweden.