For starters, let’s put aside the idea that the credit reporting agencies exist to ensure the safe keeping of your private financial data. The credit bureaus are not official government agencies and they do not create your credit reports for your benefit. They are not in the business of making sure your credit reports are accurate and they do not willingly provide you with a yearly copy of your credit reports.
What the credit bureaus are is something much different from what most people believe. Put simply, the credit bureaus are massive, for-profit corporations who make money by selling your information. They sell it to creditors, employers, insurance companies, marketers, and even back to you.
Who are the top 3 credit bureaus?
The big three credit bureaus, Equifax, Experian, and TransUnion, all trace their ancestry to small, local investigative companies. These early credit bureaus would collect every bit of seemingly relevant information they could about a person including employment history, marital status, age, race, religion, testimonials, and any other information they could get their hands on. They would then provide this information to creditors who used it to determine whether or not a person was worthy of a loan and how much interest they would be required to pay.
Over time, the credit bureaus grew and merged until the credit reporting system moved from one with many local credit bureaus to the current system of three major nationwide credit bureaus. As this happened, the large credit bureaus became so powerful that it became necessary for them to be regulated. This resulted in the Fair Credit Reporting Act (FCRA) being passed to protect you from the growing power of the credit bureaus.
Credit Bureaus Have Full Control Over Your Credit Scores
Credit scores had become increasingly important and it was the credit bureaus that had full control over the information used to create these scores. The problem was that the credit bureaus, as is the case today, are primarily motivated to collect your information and then sell it off. This meant that even though the credit bureaus were the definitive source for your credit information, they had no motivation to ensure its completeness or accuracy. They merely took the information they were provided, added it to your credit reports, and sold it off.
The FCRA Had to Force the Credit Bureaus to Be Held Accountable
The FCRA was passed to add accountability to the credit reporting process. The credit bureaus were no longer able to collect whatever they wanted and to not tell you what was on your credit reports. As a result of the FCRA, you have a right to a free yearly copy of your credit reports (see AnnualCreditReport.com) and you have the right to dispute the accuracy of the items in your credit reports. While this does not mean the credit bureaus now make sure your reports are accurate, it does give you recourse when the credit bureaus unfairly report your credit history.
Unfortunately, however, the FCRA did not eradicate all the problems of the credit reporting system. The credit bureaus are still enormous corporations with enormous power. They are also still primarily motivated by the money they make by selling your credit information. Providing you with credit reports and investigating credit disputes is something they are forced to do and not something they were willing to do on their own. As such, the credit bureaus do what they can to avoid these practices.
The Credit Bureaus Still Break the Law Sometimes
Specifically as it relates to credit repair, the credit bureaus have developed a full arsenal of tactics to keep from investigate disputes. These tactics range from general propaganda, to strong-arm tactics, to methods of questionable legality.
How many times have you heard that credit repair is impossible, the only way to improve your credit is to wait seven years, and any company who offers to repair you credit is a scam? It is surprising so many people believe some or all of these statements when not a single one of them is true. Misinformation is the best friend of the credit bureaus as it dissuades so many people from even attempting to dispute their credit. No wonder the credit bureaus are so quick to promote this flawed perception.
Know Your Rights
Knowing the history and the motivations behind the credit bureaus is your tool to understanding the nature of the credit reporting system. When you know the true persona of the credit bureaus, you can then see why you are granted access to your credit reports, why you have the right to repair your credit, and why it can be beneficial to have a credit repair expert working on your side.