by Bill Hardekopf
A study released today by the Consumer Financial Protection Bureau shows that credit reports are dominated by a consumer's credit card history.
The report also showed that debt collection items generate the highest rate of disputes.
The CFPB analyzed 2011 information from the three biggest credit reporting agencies: Equifax, TransUnion and Experian. Each of these agencies has more than 200 million files on consumers.
"Today's study is another step toward bringing more clarity to the confusing world of credit
reports. It will help educate regulators and consumers about how this important industry works," said CFPB Director Richard Cordray. "If consumers know how these companies handle their credit histories, they can make better decisions on how to handle their financial lives."
The key findings of the report:
- Less than 20 percent of consumers obtain copies of their credit report each year. Consumers are entitled to receive a free copy of their credit report from each of these three major agencies, but only about 44 million consumers do so.
- Approximately 58 percent of the information on credit reports come from credit card companies: 40 percent from bank cards and 18 percent from retail credit cards. An additional 7 percent comes from mortgage lenders and 4 percent comes from auto lenders.
- Credit reporting companies resolve an average of just 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 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.
- Almost 40 percent of the disputes relate to debt in collections.
- A majority of the credit report information is provided by a small number of financial institutions and banks. The ten largest data furnishers provided 57 percent of the trade lines coming into the credit reporting agencies.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the
confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.