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If it ain’t broke…

Posted in 'Credit Reports' by Barry Stamp

06 August 2019

The United States has one of the best credit reporting systems in the World. It seems hard for some Americans to believe that, given that the Federal Trade Commission has issued a congressionally mandated study on credit report accuracy that found that one in five consumers found an error on at least one of their three credit reports.

Four in five of those errors were corrected or modified once reported to the credit reference agencies. The errors do not appear to be material as the FTC reports that nine in ten of those modifications and corrections resulted in no change to their credit scores.

This has led to some astonishing claims that the US credit reporting system in the US and/or the credit scoring systems used in the US are in major need of repair. The fact is that credit scorecards have been developed to such a level that a single error is unlikely to catastrophically impact a person’s credit score. Credit scores can also be derived from application form data, as was the case historically before credit reports became so rich with data, or can even be calculated from things like social media data, thought the latter is vulnerable to fraudulent manipulation of course.

Credit reports and credit scoring have enabled many Americans to get the credit they deserve, and have helped US lenders to extend credit in a more socially responsible way. The FTC needs only to look at other countries in the World, most of which have very undeveloped systems and some still rely on subjective lending by people of varying assessment skills, but never at the same level of accuracy as a credit scorecard fed by a data rich credit report.

To their credit, the FTC has stressed the need for consumers to check their credit reports to ensure accuracy, which is a message that has been issued in the US for many years now.

Barry Stamp

Barry is a Chartered Banker and a Fellow of the Chartered Institute of Credit Management. He has a degree in Statistics and Business Economics from the Open University. Barry writes mostly on news from the worlds of banking and mortgages.


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