Who are the credit bureaus? The bureaus (or the credit reporting agencies) are the mega, multi-billion dollar companies that will control and exert influence over you for your entire adult life. They will compile data and information regarding your spending habits, your track record of making loan payments in a timely fashion, how often you apply for credit, whether or not you borrow money and don't pay it back, etc. Then, with the help of FICO or VantageScore, your credit reports will be assigned a number. This little number, or credit score, will tell future lenders whether or not you are a good credit risk - whether or not you should receive a loan and under what terms if you do indeed qualify.
The credit bureaus hold power over you every time you try to purchase a home, a car, when you apply for a credit card, when you shop for car insurance, even when you apply for a job. Now comes the scary part. We've covered who the credit bureaus are and what they do (collect data). The ugly truth is that the credit bureaus really have no motivation to help you earn high credit scores.
You may ask why the credit bureaus might prefer for you to have a low to fair credit scores. The reason why is because the bureaus make MONEY, and a truckload of it, off people with low to fair credit scores. Don't believe me? Think this is just another wacky conspiracy theory? Check out the following list of some of the ways the bureaus make money off you and your information:
- Selling your credit report to lenders.
- Selling your credit report to you (the consumer).
- Selling credit report monitoring services to you (the consumer).
- Selling identity theft protection services to you (the consumer).
- Selling your information to companies for marketing purposes. (Think of all the credit card offers you receive in the mail.)
- Charging creditors and collection agencies when a consumer disputes inaccurate information on his/her credit report.
- Etc., etc., etc.......
As you can plainly see, the bureaus are in the business of selling information. Check out this example of how the credit bureaus make massive profits off individuals with low to fair credit ratings.
Joe Consumer goes to his local bank to apply for a car loan. The loan officer meets with Joe, takes his application, and pulls Joe's credit report. (The bank pays $$$ to access Joe's information.) Joe, who recently faced an illness and was out of work, has some negative items on his credit report. The loan officer turns Joe down, but tells Joe if he can boost his credit score just 45 points he can probably qualify. Joe goes online and pulls a copy of his credit report. (He pays the credit bureaus $$$ to access his own information.) Joe is upset when he discovers inaccurate information on his credit report and even some identity fraud! He joins a monthly monitoring program (for which he pays $$$) and signs up for identity theft protection (for which he pays $$$). Joe then hires a professional credit restoration service to dispute the inaccurate items on his credit report. (Each time an inaccurate account is disputed the creditor or collection agency has to pay the bureaus $$$ for researching the accuracy of the account.) Once Joe's credit has been restored he goes back to the bank to reapply for his car loan. (The bank pays $$$ again to access Joe's information.)
Now, look at what happens when Henry Highscore applies for his loan. Henry goes to his local bank to apply for a car loan. The loan officer meets with Henry, takes his application, and pulls Henry's credit report. (The bank pays $$$ to access Henry's information.) Henry has a great credit score and is approved on the spot.
Do you see the difference? Consumers with a low to fair credit score are cash cows for the credit bureaus. In fact, Joe Consumer is 24 times more profitable to the credit bureaus than Henry Highscore. Why in the world would the credit bureaus be motivated to help these consumers learn how to achieve and maintain high credit scores?
Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.