The information in consumer credit reports has become increasingly important as the gateway to getting a mortgage, credit cards, insurance and even a job offer. Financial education programs stress the importance of credit reports, and especially credit scores, as a barometer of a person’s creditworthiness. But, for most of the past two decades, consumer groups and the press have repeatedly challenged the accuracy of credit report content. We know errors in credit reports do occur. Each month the three major national credit reporting agencies (Trans Union, Equifax and Experian) merge over 2 billion pieces of new and updated credit information from data furnishers into individual credit reports. The public policy question is how accurately this information gets assembled to provide creditors with a fair and reliable picture of a person’s credit and payment history.
Beginning this fall, the Take Charge America Institute is collaborating with the Center for Business and Industrial Studies at the University of Missouri-St. Louis and Fair Isaac Corporation to conduct a $1.13 million study on credit report accuracy for the U.S. Federal Trade Commission (FTC). The project will engage a nationally representative sample of over 1,000 consumers in a detailed review of their credit reports and credit scores. The researchers will assess the accuracy of credit report content, the impact of alleged errors on individual’s credit scores and the workings of the formal processes available to all consumers (under the federal Fair Credit Reporting Act) for resolving alleged errors. The study will inform the FTC as it develops recommendations for Congress for regulatory policies and industry practices regarding credit reporting. The detailed information on credit usage and payment behavior of individuals will also allow the research team to consider how best to educate consumers on the sensible use of credit and thus help protect them against fraud and abusive lending practices.
Collaborating in the design and execution of the research are Professors Michael Staten and Cathleen Johnson at the University of Arizona’s Take Charge America Institute; Professors L. Douglas Smith and Thomas Eyssell at the University of Missouri-St. Louis; Dr. Jeffrey Feinstein at Fair Isaac Corporation; and Dr. Peter Vander Nat and Dr. Paul Rothstein at the FTC. They are supported by a strong team of research assistants and specialists in information technology. Fieldwork will take place on the study over the next 12 months, with a final report expected by late fall 2011.