By Andrew Field – Follow on Twitter
What do you all understand by a credit bureau or indeed a credit rating bureau? The history of bureaux have been the establishment of databases which carried mostly negative information, such as civil defaults on loans or debt and perhaps even criminal records. These often operated on the old saying, ‘once a thief, always a thief’ and once you suffered a civil judgement against you then you could be blacklisted from obtaining credit, loans or other finance. That still happens today, but no credit rating bureau will admit it.
More recently, during the last couple of decades the credit bureaux have attempted to shrug off the blacklist image, and many of them talk of positive information going into their systems. Obviously the major credit retailers who use these bureaux feed information into the these bureaux, including good and bad credit redemption records. Through a process of algorithms both corporates and individuals are credit profiled (or scored) and by classification declared a good or bad risk.
I fail to see how these bureaux are covering all the points though. The banking sector is meant to have an ethos of holding its client information closely to its chest and indeed they have a fiduciary duty of confidentiality between themselves and their clients. Is it naive to trust that the banks are not providing your credit performance to any third party. Perhaps. One wonders if this client confidentiality extends to the large credit card companies too, since they have to be a major source of the information credit rating bureaux require. Perhaps your banking and credit card contracts allow for such disclosure. It is apparent the major credit card companies do ‘snitch’ your information to the rating companies. You should be told when they do.
If this secrecy about their clients is being honoured by both the banks and the credit card companies, then clearly our, now friendly, credit rating companies would not be seeing the entire picture. Even if they were, each bureau does not have the entire house of bankers, credit card companies and credit retailers’ information at their disposal, the entire picture. There is no global collation of the information either. Unless there is a mutual exchange of information between the very competitive, top three, credit rating companies, Experian, Equifax and TransUnion, then how can you be guaranteed you will get a fair hearing? I doubt you will.
It would seem clear then that, while the credit bureaux continue to accumulate negative data and blacklist, the quantum of positive information from its sources can only be a mere small sampling of the entire picture in each case. Yet the major credit rating companies, which basically use the FICO method of credit rating will claim that their systems are based on a statistical history of each individual’s or company’s credit handling. Are the bankers and credit card companies breaching their duty of confidentiality and disclosing your information to the rating companies, or are the credit rating companies simply pulling a fast one?
There also seems to be a lack of transparency here too. Any attempt by you to access your information more than say once a year is a difficult challenge and then you have to pay through the nose to get to the real information. The credit rating agencies should also be challenged about passing your information onto any third party in terms of national data protection and information acts. What is the real situation with credit rating? Clearly it has good purpose and gives some protection to the providers of credit, but it offers little protection to those who need or use credit.
Visit Andrew’s Simply Wild Photography photo blog… you will not regret doing so!
