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CFPB Shows Inner Working of Credit Bureaus

cfpbThe Consumer Financial Protection Bureau released a report on the consumer experience with the three largest nationwide credit reporting companies: Equifax Information Services, LLC; Experian Information Solutions Inc.; and TransUnion LLC. Among the key takeaways in the report, which is one of the most comprehensive studies of credit reporting to date, are that credit card history dominates the information in consumer reports and that debt collection items generate the highest rate of disputes.

The report is the result of the CFPB analyzing U.S. information from 2011, including information submitted by TransUnion, Equifax, and Experian.

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.

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.

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 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.

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. The 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.