Credit Bureaus Are Bullshit
There are certain unavoidable aspects of living in modern society. Death and taxes have been extolled for centuries. However, the last couple decades have added a new unavoidable feature of adult life: surveillance.
Everyone knows basically every step we take is tracked either through our smartphones, our purchases, or our internet usage. And while this sounds like an Orwellian hellscape, it’s really not that bad (if you can get past the amazing intrusion of privacy).
Humans can adjust to some pretty extraordinary circumstances. The government having full access to your browser history is pretty far down on the list of modern inconveniences. I’m much more concerned when the self checkout machine at the grocery doesn’t think I put the bananas in the bag (when I definitely DID) than I am with Google having a map of my path around the block while walking my stupid dogs.
Go ahead. Sell my metadata. Maybe I’ll get a useful coupon. Who cares.
But the truth is that this background collection of daily habits is nothing new. There are companies that have been putting together X-Files style dossiers on everybody for over a century. These files are then distributed between massively influential companies that can have a measurable impact on your quality of life.
They’re called credit bureaus. And they have created an arbitrary system that puts them in an undeserved position of power.
Their collective opinion can be the difference between you ever buying a house and living in fear of your landlord. Their rubric doesn’t make any sense, yet it’s treated like gospel by lenders and financial institutions throughout the world.
Now, I should mention for transparency’s sake that my credit kicks ass. I’m not bragging. I just want to illustrate that my viewpoint on this system isn’t because it’s screwing me over. This isn’t a grudge. It’s an honest opinion on an institution that I never really thought too much about. And I bet most people give their credit report an equal amount of thought.
Credit bureaus should be better understood. They have a massive influence on society, but they lurk in the background, collecting and disseminating your personal information without much oversight. There are three main companies — Experian, Equifax, and TransUnion — that can ruin your life if they feel like it.
How the hell did this happen?
The Birth of Credit Bureaus
The credit industry started because a bunch of babies in the late 1800’s started snitching on their neighbors. Lenders didn’t have any information on people asking for loans unless they knew them personally. And then when someone skipped town with the loan money they couldn’t do much more besides scream obscenities.
So they banded together. Merchants began keeping tabs on those who defaulted on loans. It wasn’t long before they started trading information.
Horses got lazy, cars were invented, and people started moving more freely throughout the country. Lenders were going to have to get more sophisticated to stay on top of these charlatans. The first credit bureaus opened up to service larger areas.
The collected information began to grow, so they needed to consolidate the information.
The Retail Credit Company started back around the end of the 19th century. By the 1920’s, they had offices all over the US. They’d continue to grow until they got so shitty that the government introduced regulations in 1970 — the Fair Credit Reporting Act (FCRA) — to reign them in.
The Fair Credit Reporting Act basically forced the Retail Credit Company to stop being such assholes. It dictated how information was collected, how long it was stored, and how it was shared. It stipulated that credit bureaus can collect information relating to bill payment history, existing debt, and other loans — how many dildos you own was no longer a matter of financial importance (this will make sense later).
They were so shitty that they ditched their old moniker and became Equifax to distance themselves from the bad press.
Their name might sound like something Tennessee would outlaw, but it actually refers to the fact that they didn’t originally have anything to do with credit, loans, or banking. In fact, they were a holding company for rail transportation equipment.
They eventually spread their wings and started buying up local credit bureaus until becoming a nation-wide sack of shit.
The babies of the group didn’t get into the game until the mid-1990’s after a series of incestual acquisitions that date back almost 200 years. However, their official formation in the post FCRA world didn’t keep them from dropping a few stinkers over the years, just like the others.
What’s So Bad About Credit Bureaus Anyway?
We’ve discussed the extent of influence these companies have over our lives. The natural question is why? How did it come to be this way?
Reason would dictate that these companies have been entrusted to pass judgement upon every single adult because they are the best at what they do. Capitalism at its best. Work hard and you, too, can be at the top of the world. Right?
Wrong. It seems they have this much power simply because they are the biggest. Which I guess is also capitalism, albeit the real-life iteration of the practice and not the idealistic version of it that most people cling to in order to slog through another day in our bullshit society.
These companies are not shining examples of exemplary practices despite their position of moral authority. In fact, as we hinted at earlier, they’re actually pretty shitty.
Why Is TransUnion Shitty?
TransUnion was sued just last year when they “mislabeled [the plaintiff] as a terrorist on his credit report based simply upon his having the same first name as two individuals on a terrorist watch list.”
That’s right, a guy went to apply for a mortgage and was denied because TransUnion said he was a terrorist (he is not a terrorist).
According to his lawyer, “”Despite TransUnion having Mr. Al-Shaikli’s full name, address, social security number, and date of birth, it appears that the company ignored most of that information, and instead associated him with the terrorist watch list because his first name was Ahmed.”
Not exactly the due diligence expected in a service that directly impacts your ability to find shelter.
Unfortunately, this isn’t the only example of this. They were also sued in 2007 when they labeled a grandmother in Colorado as a drug trafficker. They were also sued in 2011 when they labeled another man as a terrorist (he is not a terrorist).
Why is Experian Shitty?
Ever heard of freecreditreport.com? You’ve definitely seen their commercials. The idea was that you could sign up to receive a — you guessed it — free credit report. Can you guess what happened? People signed up and received a — you guessed it — bill for a credit monitoring service. They were sued.
They were sued again in 2015 when they “failed to detect for nearly 10 months that a customer of its data broker subsidiary was a scammer who ran a criminal service that resold consumer data to identity thieves.”
And then it was announced in 2015 that 15 million people had their information exposed in a data breach that went on for two years.
It seems to me that companies that deal solely in sensitive information should know how to protect it, but what do I know I’m just some jackass.
Why is Equifax Shitty?
Remember when I mentioned that Equifax changed their name from the Retail Credit Company in 1975 to distance themselves from some tomfoolery?
The New York Times claimed they kept files that “may include ‘facts, statistics, inaccuracies and rumors’ … about virtually every phase of a person’s life; his marital troubles, jobs, school history, childhood, sex life, and political activities.”
That’s right, the Retail Credit Company wanted to know if you sucked toes and how many dildos you had.
This type of information was interesting to lenders that would make their decisions based on moral judgements, with no regard to how likely you might be to make your payments.
Equifax continued to solidify themselves as a beacon of the industry until 2017, when they goofed up a little and exposed the sensitive information of hundreds of millions of consumers. But hey, hacks can happen to everybody, right? You can’t really fault them for that.
Okay, fine, but you can definitely fault the top executives for delaying the announcement of the data breach so they could sell their shares of company stock before it tanked.
You can also blame them for charging customers to freeze their credit — a recommended safety measure should your information be compromised. So not only did the company carelessly expose the sensitive information of millions of people, they profited from it.
Equifax’s carelessness and brazen disregard for the regulatory structures have led to them being sued hundreds of times by the Federal Trade Commission.
Come On, They Provide an Essential Service
For you? Or the financial institutions?
The Federal Reserve Board released a study that said black and hispanic Americans — on average — have lower credit scores that whites. This finding factors in location, income, and demographics. The discrepancy is due to institutional factors such as redlining and mass incarceration that create situations where the considerations of credit bureaus feed into a cycle of disenfranchisement.
The lender possesses the majority of the risk in a loan. Credit bureaus are in place to help financial institutions make wise decisions about who to trust with their money
These systems aren’t in place for you or me.
They’re in place to make sure rich people don’t lose any money when they trust you enough to let you put a down payment on a house or car.
Their rubric for creating your almighty credit score doesn’t make any sense. They’re supposed to assess your risk of defaulting on loans, then penalize when you successfully pay off a loan. They’re supposed to assess your ability to properly manage your money, then penalize you for not having enough debt.
Living within your means apparently makes you a liability.
The whole system needs to be dismantled. There’s too many predatory entities out there that can ruin a person’s credit and fuck them over for life.
Providing loans is a gamble. Sometimes you win, sometimes you don’t. Mostly, you win. And even if you don’t there are other means of penalizing the offenders. We need to stop coddling multi-million dollar corporations.
Credit bureaus have proven they don’t give a shit about us by failing to protect personal information that we never agreed to give to them. There aren’t any other companies that have your social security number that you didn’t provide. The grocery store doesn’t have my drivers license number. They don’t need it.
And neither does Experian.