CFPB: Credit Cards Dominate Consumer Reports

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CFPB

CFPB

How much do you know about credit reports and scores?

Test your knowledge with these questions.

Q: Do you know what kind of information appears the most on a credit report?

A: Credit card history dominates the most information

Q: What items generate the highest rate of disputes?

A: Debt collection items

The Consumer Financial Protection Bureau (CFPB) released a report today answering those exact questions. It’s called Key Dimensions and Processes in the U.S. Credit Reporting System: A review of how the nation’s largest credit bureaus manage consumer data.

The report focuses on consumer experience with the three largest nationwide credit reporting companies: Equifax Information Services, LLC; Experian Information Solutions Inc.; and TransUnion LLC.

The CFPB is calling it one of the most comprehensive studies of credit reporting to date.

“Today’s study is another step toward bringing more clarity to the confusing world of credit reports,” said CFPB Director Richard Cordray. “If consumers know how these companies handle their credit histories, they can make better decisions on how to handle their financial lives.”

Credit reports are highly important because many decisions to grant credit and set interest rates for loans are made using information contained in credit reports as a key decision factor, according to the bureau.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Here’s the CFPB’s breakdown of the report:

  • More than half of the trade lines in the credit bureau databases are supplied by the credit card industry: Credit reporting companies get their information from a variety of industries but more than half of the account information is supplied by credit card companies. Specifically, 40 percent comes from bank cards, such as general credit cards, and 18 percent comes from retail credit cards. Only 7 percent comes from mortgage lenders or servicers, and only 4 percent comes from auto lenders.
  • More than a third of disputes have to do with collections: In 2011, consumers reached out to the credit reporting companies roughly 8 million times, resulting in disputes of 32 to 38 million items in their credit files. Almost 40 percent of the disputes relate to debt in collections, and debt in collections is five times more likely to be disputed than mortgage information. According to the industry, some of this may have to do with consumers’ incentive to dispute any negative information on their reports.
  • Fewer than one in five people obtain copies of their credit report each year: The most effective way for consumers to identify errors in their reports is to obtain copies and review them. But only about 44 million consumers per year, or about one in five, obtain copies of their files.
  • Most information contained in credit reports comes from a few large companies: Most information contained in credit files comes from a small number of large banks and other financial institutions. In fact, the top 10 data furnishers provide 57 percent of the trade lines coming into the credit reporting companies. The top 50 furnishers provide 72 percent. And the top 100 furnishers provide 76 percent.
  • Most complaints are forwarded to the furnishers that provided the original information: The credit reporting companies resolve an average of 15 percent of consumer disputed items internally, without getting the data furnishers involved. The remaining 85 percent are passed on to the furnishers. Today’s report, however, found that the documentation consumers mail in to support their cases may not be getting passed on to the data furnishers for them to properly investigate and report back to the credit reporting company.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Don’t be left in the dark when it comes to your credit.  Head to Quizzle to check your credit report and score now.

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Krystal lives, works, and plays in the Detroit area and loves covering a variety of personal finance topics for the Quizzle Wire.