Three quarters of all Americans are reliant on credit in one form or another and credit bureaus have an enormous impact on people’s lives, to a far greater extent than in other countries. The pervasive influence of the main credit bureaus has managed to have an economic and social stranglehold on people, far out of proportion to anything originally intended. Americans have allowed the credit bureaus to exercise this control. They constantly feed the business by jumping through the required hoops and paying for the privilege.
Each of the three main credit bureaus, Equifax, Experian and TransUnion are in competition with each other. They each report to the Fair Isaacs Corporation which produces the all important Fico score by selling their reports. In turn the Fico score determines whether you are a consumer worth pandering too or a risky bet who should be charged the highest interest rates.
As Fair Isaacs introduce new technologies and more accurate assessment tools, the bureaus are obligated to pay more by incorporating them. In a backlash against Fico the three main bureaus came together in a joint venture to produce the Vantage score, hoping to break the almost monopolistic power of Fair Isaacs. Although each individual bureau works with Fair Isaacs and competes against one another, they are now also a joint venture hoping to topple Fair Isaacs.
However the introduction of a new credit score which can threaten the power of Fico will be a long process. Although some banks are testing out the Vantage score they do so against the existing Fico model to determine which will be the least expensive yet most effective scoring model.
In the meantime the average consumer is becoming increasingly aware of the issues centering on their credit scores, and begin to understand the importance of having a high score. A drop in numbers can result in higher interest rates and higher insurance premiums.
Separate from the Fico score the bureaus can sell their credit reports onto employers who can check them and make a final decision about a job applicant based on the information in the reports. This latter use of bureau reports is highly contested and an Act is waiting to be voted on which may outlaw this practice except in cases of employers needing to know this information, such as companies in the finance field.
Consumer awareness of the importance of credit scores has led to a growth industry in credit repair specialists which charge a fortune for basically doing what the average consumer can do themselves. It has led to a growth in reliance on credit score tracker systems, some of which are sold by the bureaus themselves. It has led to expensive credit reports being requested far more than necessitated as each consumer is entitled to one free annual report.
The willingness of consumers to allow themselves to become so obsessed with their credit reports and score has seen them parting with hundreds of dollars each year for these services thus leading the credit bureau businesses to produce even more spin off products. The more consumers play along, the more the credit reporting business will suck them dry, taking more of their time, and more of their dollars.
All this is patently ridiculous when Fico score algorithms are now well known and everyone can access the information on the MyFico site to know how to obtain an excellent credit score. It isn’t exactly rocket science.
Still, twenty five percent of Americans use no credit at all, yet many will need to at some stage. They are waiting targets to be sucked into the game, as without a credit history they need to establish one.
If the Act is passed across the states which hope to revoke non essential employer credit report checks then the bureaus will lose a large slice of their income. If this happens they will obviously look to recoup their costs so don’t be surprised if yet another area of ones life becomes dependant on credit reports in the near future. After all the credit bureaus business is to keep both an economic and social stranglehold on consumers to make their profits.