Digital Thoughts – Extra Credit
There exists one thing that follows us around wherever we go, impacts our adult life at all phases, yet we have little to no access to it, little idea how it gets measured, and little control over it. Three companies control it, one of whom just happens to own an affiliate network, an incentivized platform, along with two major lead generation companies. The company is Experian, and what it controls is your credit record and resulting credit score, a number that determines the interest rate of a credit card and a number that if below a certain threshold could mean you’ll pay hundreds of thousands of dollars more in interest over your lifetime. Like your T-cell count, chances are you won’t notice it if you have the right number – life will hum along like it should. But if you have the wrong number, you are often powerless to correct it, even, when as is the case with identity theft, someone else caused the problem. There’s a credit epidemic going on right now. It’s being used and abused – used in that people feel compelled to spread themselves too thin, and abused because others, i.e. those committing identity theft, are taking advantage of the frothy credit market, going surprisingly unnoticed on an almost unimaginable scale. The time is right then, for this, our own type of credit report.
Today marks the day for which all people, regardless of location, may request a truly free, not a “free*”, copy of their credit report. That however is not the motivation for this “credit report.” Of all places, the idea came about during a presentation I sat through this past weekend. In a dose of our world meeting the real world, I spent Saturday attending a new student orientation at the for-profit Art Institute. Thank me later as I indirectly helped someone out there have a slightly better conversion rate. For now what struck me was the image of a classroom full of prospective students, many of whom are attending college for the first time, and an obviously copied and pasted, all too official PowerPoint on the subject of financing, but more specifically credit as that determined current and future financing options. The slideshow highlighted important points; it informed the, by then somewhat disinterested, crowd that that they should borrow only what they need, that their credit stays with them for life, and that their credit will determine how they can borrow, not just now but, in the future. The presentation though didn’t do anything to explain how credit works or its origins, only that it was important. That lack of context, however, is no reflection on the presenter. It has everything to do with the rather mysterious way credit is scored, and the almost impenetrable manner with which the three credit reporting agencies refuse to provide transparency into both the report and the resulting numerical score.
I didn’t take credit seriously until I began a project on identity theft. Do any research on the subject, and two things stand out – the astounding impact it has on the people and economy, and the overall lack of objective resources for the public and victims. Besides the financial burden and feeling of being victimized, the other lasting impact of identity theft is the person’s credit. Thieves leverage the victims existing credit to open fraudulent accounts. The victims, unaware and unable to pay the massive debt, were they aware of the pending payments, then default lowering their credit, something they are stuck with despite not being at fault. Were the victims to have some transparency into who was accessing their credit they might have had some idea of the theft occurring. Legislation now says they can, albeit once per year, hardly a generous offering yet the reactions to it tell of the current mess which is the credit reporting system. Equifax’s CEO not only opposes the federal legislation enabling consumers to obtain a free copy of their credit report, he calls such legislation unconstitutional and un-American because it cuts into profits that Equifax and two rival credit reporting agencies — Experian and TransUnion — earn from selling credit reports and monitoring services.
Fiduciary responsibility comes secondary to consumer responsibility, something that the Equifax CEO will learn upon his exit, or worse upon his identity being stolen. And much like the competitive advantage Experian has in the lead generation, that credit agencies chose to close off credit to the individual’s it impacts, focusing instead on charging them for access to something that they maintain anyway and not as a favor, also seems unfair. Yet, here we are being graded without really knowing what the test is on and who can impact our grade. Credit is our life transcript without us truly feeling as though we are the ones writing it.
As a user, the process of checking one’s credit is a nerve-racking one. Using the test example from Part One of Digital Thoughts, with respect to one’s credit score, there are no midterms and no real guidance that provides a sense of what is going on. And, despite Equifax’s CEO statement that providing free access, even as little as once a year, is un-American, charging for routine access seems decidedly wrong. I went through the process of obtaining my free annual credit report from www.annualcreditreport.com. It allows you to view the report from each of the three reporting bureaus if desired. What it doesn’t do though, is provide you with your credit score. All of the three major credit reporting agencies try to charge an up-sell price for that, something frustrating and unexpected as a user. This is one reason why, in part of this week’s Digital Thoughts, we examine further what makes up the all important credit score along with the consequences of the current economic environment and legislation surrounding your credit. Join us.
