Monday, February 11, 2013

When You Play With Anacondas......

Dave Ramsey (heard 2-5 weekdays here on News-Talk 1490 WOSH) has a saying about dealing with credit card companies "If you play with snakes long enough, eventually you are going to get bit."  That refers to the practices of huge late payment fees, jacked up interest rates and collection practices that border on bullying.  But after watching the 60 Minutes report last night on the three credit reporting bureaus, the little "snakes" you deal with at CitiBank and Capital One are apparently nothing compared to the "anacondas" that are apparently running TransUnion, Equifax and Experian.

According to the report, 20% of all credit reports have major errors on them.  As Steve Kroft put it "a 20% error rate wouldn't be tolerated in many other businesses would it?"  And of those errors, half of them are preventing otherwise creditworthy people from getting loans.  To top it off, the bureaus--while they give you avenues to challenge errors--actually make NO EFFORT to remove incorrect information.  My favorite part of the report last night was Kroft sitting in a bar with the three "twenty-somethings" in Santiago, Chile who were the "executives" in charge of correcting information for Experian.  They admitted they weren't even allowed to call creditors to check on the information provided.  Their job was to merely read the complaints and put them into a numerical code that would be entered into a computer somewhere else.

As we watched the report, I told my wife "As soon as this is done, I'm getting all three of our credit reports".  But then, Kroft told us about a woman who was provided with "clean" reports, but was still being turned down for loans.  It turns out, the bureaus provide completely different reports to lenders than they do to consumers.  Furthermore, the lenders are not allowed to show the consumers those alternative reports (this woman snuck a peak when a banker left her alone in his office for a few minutes and found bad debts belonging to another woman had been put on her credit history).  So basically, the credit bureaus have circumvented the law requiring them to provide us with free reports every year--by creating these "alternative" reports that we are not allowed to see--but are the actual basis for our credit-worthiness in the eyes of lenders.

Now as someone who never plans to borrow money again, you would think that such a finding wouldn't get me that worked up.  But, there is an unfortunate trend in the business world that credit reports--and credit scores--are being used by insurers, employers and utilities to determine rates, hireability and service connection.  Why should the fact that I don't borrow money mean that I should pay more for car insurance?  Wouldn't an employer want a worker that isn't up to their eyeballs in debt to be in charge of handling money for them?  And wouldn't having a positive net worth make me more likely to pay my cell phone bill every month than someone swimming in red ink?

And since the bureaus aren't providing us with the "real" credit reports every year anyway, how can we really be sure that someone hasn't hijacked our identities--or that bad debts in other people's names are being put on our record?  Unfortunately, the only way to find out is to try and go into debt and see if you get rejected.

Hopefully, those non-credit businesses I mentioned before will consider the facts presented in the 60 Minutes report and drop the practice of doing credit checks for non-debt related items.  And hopefully those choosing to play the "credit game" realize that they will have no teammates with them on the field.

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