Credit Bureaus: Friend Or Foe?

by Mike Bevel CollectionIndustry.com

Dr. Randy Padawer is a psychologist. A clinical psychologist. He’s also a self-styled researcher into consumer credit, and featured in Smart Money Magazine and the bestselling FICO 850 seminar for The Motley Fool.

Randy has decided to pathologize the three major credit bureaus, Equifax, Experian, and Transunion. "The three major credit bureaus truly want consumers to believe that they've each been blessed with an officially sanctioned franchise," Randy writes in a piece for Lexington Law, a firm he consults for and that helps consumers remove errors and negative information from their credit reports. "Actually, the only reason such corporations now dominate the landscape is because their progenitors simply managed to swallow up each other as they battled for preeminence through the decades. Greed, not official dictum, paved their way."

Randy then goes on to share four “myths” he feels consumers should know about the credit bureaus:

1. There are only three "official" consumer reporting agencies. (Not so, Randy says: “Many companies are in the business of collecting, compiling and processing credit information. Most Americans, however, are familiar only with the three companies that have positioned themselves at the top of the industry: Experian, Equifax and Trans Union.” However, his mythbusting doesn’t take into consideration that the Big 3 are the Big 3 for a reason.)

2. The three major credit bureaus are officially sanctioned by the federal government. (Not so, Randy rails again: “While most Americans perceive their credit reports to have at least the same legal standing as their driving records, the truth is that the government had no role in establishing the for-profit companies which produce them.")

3. The three major consumer reporting agencies all have the same information. (Randy’s right there with the “nope” again: “Consumer reporting agencies do not share information either, so if you find an error on your report from all three agencies, correcting it with just one of them does not mean the error will automatically come off the other two reports.”)

4. Consumer reporting agencies will act promptly to help me rectify an error or remove negative information from my credit report. (Nay, nay, says Randy: “The bureau may decide the disputed item remains on the report as is, revise but not delete the information, delete the information, or deem the complaint frivolous.”)

It’s not that Randy’s necessarily wrong throughout his screed. But when he suggests that “the average American knows little about consumer reporting agencies…And that's how the credit bureaus want it” – he might not be as on-point as he thinks he is. Consumers do need to be better educated about their credit reports – and how their financial activities affect their credit scores. But to suggest that the credit bureaus are actively participating in some Machiavellian scheme to willfully dupe consumers takes him from the land of rational thought and into a realm of Black Helicopters and endless governmental conspiracies.