New, Thicker Credit Report Worries Privacy Experts
By Marcia Frellick
December 14, 2011
As of this month, lenders have an even wider window into your successes and failures in managing your finances.
A company called CoreLogic has developed a new credit file that contains loads of data that some of the traditional credit bureaus don’t record on more than 100 million people in the U.S.
That information can include whether you pay your rent or child support on time, whether you’ve applied for a payday loan or been evicted or even whether you’re behind on your homeowners’ association fees. Now, if you owe more on your house than it’s worth, it could show up on your report.
The report captures information beyond the radar of traditional reports — such as details on homes paid for with cash, or homes gifted to someone or mortgages made by lenders who don’t report to the traditional credit bureaus. The company says it can also report data up to two months faster than those bureaus — usually within 23 days of filings.
“Until now, consumers who have used non-traditional credit or never purchased a home may have had a difficult time qualifying for loans and credit cards. The CoreScore credit report will allow these individuals to be recognized for how they have managed their finances,” Tim Grace, senior vice president of product management for CoreLogic said in a statement.
Clearer picture or invasion of privacy?
This extra information can work two ways. If you have a great track record in some areas that aren’t part of the credit data followed by the traditional big three bureaus, Experian, TransUnion and Equifax, this additional information may help your case. Say, for example, you’ve never missed a child support payment, but you didn’t pay your credit card bill for a few months. This added information may help you.
But others say it’s just one more erosion of consumer privacy. Alexis Moore, privacy expert and credit collections consultant in El Dorado Hills, Calif., says it could also lead to more identity theft.
“I am gravely concerned that this particular addition to the data furnishing industry is only going to make another obstacle for those seeking to safeguard their private information from predators and make it very difficult for those that are high-risk to protect their privacy,” she says.
“The data furnishing industry is not well-regulated and tends to do more harm to consumers than good. This particular data furnisher addition will only make it more difficult on consumers to protect their privacy information from predators and worse, it will create another database for identity thieves and online predators to hack to steal consumer private information and records.”
Businessman Jon Weisblatt says as someone who needs to make decisions about potential clients, he’s interested in what CoreLogic offers. Weisblatt is founder and CEO of an online business called UpgradeUSA, based in Austin, Texas, which leases laptops and tablet computers to consumers across the U.S. who may have trouble getting the equipment otherwise. Customers make monthly payments and the company helps them build a solid credit history.
While sometimes additional credit information serves to decline people, he says, his company uses it to see whom they can include in their services, he says. If a potential client is doing well in another area and the new information can prove it, the company might be more willing to take a risk, he says.
“Because we own the asset, there’s a risk associated with sending laptops and tablet computers all over the country. We have to make sure we’ve got really good decision tools to see if customers meet our minimum criteria.”
Information contained in the CoreScore credit report is designed to supplement the data included in traditional credit reports. It helps tell more of a person’s story than a Fair Isaac Corporation (FICO) score or report from a single credit bureau.
“(Traditional bureaus) don’t offer payday loan databases … or rent-to-own information. There are a lot of things missing from a credit bureau’s report,” Weisblatt says.
“People targeted here are definitely not the wealthy”
Andrew Schrage, editor of the personal finance blog Money Crashers, says he sees how the CoreScore could benefit the consumer in theory, but he’s skeptical it will work that way.
By looking at such things as whether people have applied for or made good on a payday loan, for instance, lenders are targeting low-income people or people who are already seeking last-resort money options. The people who will benefit are a very small subset — people, for instance, who have accessed resources such as payday loans for a very short time and have paid them back right away, he says.
“ I do feel the big picture is that this will hurt the consumer over the long term,” Schrage says. “The people targeted here are definitely not the wealthy. The top 1 percent won’t be affected at all by this. It’s the people who are already struggling, who are already in debt who are missing payments and it will ultimately affect the rates they will have to pay if you give lenders more ammunition.”
Schrage notes that even if lenders know more positive information about a consumer, there’s nothing forcing them to give a consumer a better deal because of it.
“They can do what they want with the information,” he says. “A lot of these credit reporting agencies and a lot of the lenders already have relationships with CoreLogic. They already have the system in place, they already have the trust in place so they just have to pay whatever fee CoreLogic charges them, which is probably going to be pretty small when compared to the ability to increase people’s rates 1, 2 or 3 percent a year.”
CoreLogic has teamed up with FICO to produce an actual score that will be available to lenders in March to use for mortgages and home equity lenders. The company plans to expand the report in the near future with data such as utility and telecommunications payments, spokeswoman Alyson Austin says.
That level of scrutiny worries Schrage.
“I already think with things like car payments, rent payments, child support payments that it’s beginning to cross over that fine line between me getting the necessary information as a lender and starting to invade privacy,” he says. “You get into utility bills and things that are part of your everyday life and it’s a little scary that they can get all this information. Hopefully there will be some legal roadblocks put into place that will prevent this from going too far.”
CoreLogic will now be covered by the Fair Credit Reporting Act, which governs consumer reporting agencies, so consumers can dispute any information they feel is inaccurate. But if the information is correct, there’s now more information that can stain your credit report for a long time—seven years or 10 years for bankruptcy.
Consumers can also write an explanation to be included in the report if there are good reasons payments have been skipped or are late — such as rent not paid because a landlord hasn’t fixed the plumbing.
The report is available now to all lenders and consumers can get one free report annually by calling 877-532-8778. That call initiates an online process at credco.com to get a report. Eventually it will be available through AnnualCreditReport.com, Austin says.