Credit Reporting
Insurance Credit Scoring is one of the most controversial new uses of credit reports. Insurance companies are using consumers credit information to decide whether they will offer consumers' coverage and at what price. The Consumers' Coalition has joined an effort to Stop Insurance Credit Scoring in Massachusetts. To learn more about this issue, visit our insurance credit scoring page.
Since the turn of the century, credit reporting agencies have been keeping track and selling credit and financial information about American consumers. The information in these files, which are compiled into credit reports, has long played a significant role in lenders' decisions to extend or deny credit to consumers. More and more these credit reports are being used for other purposes as well. Employers, insurance companies, landlords and other businesses all use credit reports to determine individuals' eligibility for a variety of financial and consumer services.

Studies have shown that credit reports are often riddled with errors. In 1998, a MASSPIRG survey found that 29% of credit reports contained errors that were serious enough to cause the denial of credit, insurance, employment or other benefits. A more recent 2002 examination of credit scores completed by the Consumer Federation of America found that 20% of consumers with credit histories would likely be misclassified as "high risk" due to inaccuracies in their credit files. Given these mistakes, it is no surprise that consumer complaints to the Federal Trade Commission about the three major credit bureaus increased by 75% last year, from 8,331 complaints in 2001 to 14,557 in 2002.

Fortunately, Massachusetts has a strong state Fair Credit Reporting law that helps protect against some of these problems. The law allows Massachusetts consumers free access to their credit reports once a year so that they can have a chance to check them for errors. It also requires companies that furnish the information to the credit bureaus to take certain steps to make sure that information is accurate. These provisions are much stronger than those in the Federal Fair Credit Reporting Act.

Generally, states have the right to pass stronger consumer protection laws as long as those state laws do not conflict with federal laws. That's why Massachusetts has a stronger credit reporting law than the national version. Other states also have passed stronger financial privacy laws to protect their citizens from credit reporting inaccuracies and theft of financial identity. Right now those laws are under attack.

The financial services industry is working to get Congress to change the federal Fair Credit Reporting Act so that it would permanently prohibit states from enacting these kinds of stronger consumer protection laws. They already have succeeded in getting the House Financial Services Committee to approve legislation (HR 2622) that would do just that. But, there is a growing effort by consumer groups and concerned individuals to get the Congress to strengthen the Fair Credit Reporting Act and to uphold state efforts to protect consumers' financial privacy. You can get involved by taking action and telling Congress to support federal legislation that protects consumers from credit reporting errors and identity theft without preventing states from passing even better financial privacy laws.

Resources:

To get a free copy of your credit report:

Equifax
P.O. Box 740241
Atlanta, GA 30374

(800) 685-1111
Experian
P.O. Box 2104
Allen, TX 75013-2104

(888) 397-3742
Trans Union
P.O. Box 1000
Chester, PA 19022

(800) 888-4213

Credit Reports and Credit Scores, U.S.PIRG
Financial Privacy Now, Consumers Union
Know the Score, Massachusetts Consumers' Coalition
The Fair Credit Reporting Act & the Privacy of Your Credit Report, EPIC