A consumer’s file also has information on whether the consumerrnhasrninitiated a security freeze, fraud alert,rnactive duty alert,rnor filed a consumer statementrnon his or herrnfile.</p

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Thisrninformation is used to generate credit reports to lenders and other users.  The Fair Credit Reporting Act (FCRA) limitsrnhow long a credit bureau can communicate certain adverse information; typicallyrnseven years for late payments or collections and no more than ten years forrnbankruptcies.  </p

Users vary in howrnthey evaluate creditrnreporting information. rnThe NCRAs provide a modified credit report for employment purposes that removesrnsome sensitive information and credit data. rnFinancial services users rely on credit reports as well as proprietary or third-party “scoring” models to interpret therninformation inrna creditrnreport. </p

Along with credit reports credit bureau will usually also deliverrna credit score.  The score is calculated from the information inrna credit report along withrnvariables derived from the credit reportrn(often called attributes.)  Lenders use credit scoring systems tornassess the relative risk ofrnconsumers not repaying a loan.  Consumers with very high scores are likelyrnto get more favorable interestrnrates andrnloanrnterms. </p

Creditors use credit scores to enhance the efficiency and consistency ofrndecisioning.  Credit scores may alsornreduce subjective decision making byrnlenders basedrnon impermissible factors like marital status, age or national origin. </p

NCRAs can deliver reports and scores tornusers almost instantlyrnmaking it possible for lenders to grant instantrncredit where it is integral to a purchase decision.rnIncorporating the use ofrncredit scores in mortgage underwriting has enabled Fannie Mae and Freddie Mac, to introducernautomated underwriting systems to streamline the mortgage underwritingrnprocess and provide rapid mortgage approvals.</p

Inaccuracies inrncredit report information canrnaffect consumers’ credit scores and some matter more thanrnothers.  An identificationrnerror (wrong address, misspelled name) won’t typically impact a creditrnscore or perceivedrncredit worthinessrnbut a public record or trade line incorrectly reporting a tax lien or a severe delinquencyrncould cause a lender to deny creditrnor significantly raise its cost.  </p

The NCRAs also providernlenders with analytical models using creditrnreportrndatarnwhich may predict thernlikelihood of accepting arncredit offer, of futurernaccount utilization,rnof consumers leaving an existing account, or ofrncollectability onrnan outstanding debt.</p

Not all creditors reportrninformation aboutrntheirrnborrowers. Some creditors report informationrnaboutrnfrom some of their credit products, butrnnot others. rnReporting is voluntary but furnishers have multiple incentives to participate.  They recognizernthe necessity of widespread participation to availability of information.  Reportingrnalso provides an incentive to borrowers to make timely payments.  Consumers recognize both the risk of having delinquentrnaccounts reported as well as the benefit of on-time performance. </p

There are also disincentives.  For example, thernnames of individuals withrnhigh credit scores may be sold by the bureau to lenders competitors.  There may also be costs for specializedrnequipment and the obligation to correct errors in a timely manner.</p

ThernNCRAs have extensive data quality processes in place that start with their screening of new furnishers. Thisrngenerally includes gathering information on physical headquarters,rnlicense, and company records and some NCRAs may hire third-party investigation services tornscreen forrnillegal or unethical business history.  Sole proprietorships and new businesses may receive more specializedrnscreening. Risk events may trigger reinspectionsrnand bureaus continue to monitor for data quality and fraud once a furnisherrnstarts contributingrnlive trade line data. </p

Furnishers generally providernmonthly trade line updates throughrndata file transfers that contain trade line updates on all of thernfurnishers’ active accounts.  Data generally goes through a multi-stage process to identify data irregularitiesrnsuch as blank fields or logicalrninconsistencies. rnIndividual consumerrnbase records and tradeline updates are similarly screened forrnformatting errors, logicalrnerrors, internal inconsistencies, andrnanomalies. The NCRAs dornnot conduct independent checks or audits suchrnasrncontacting a consumer tornverify information.  ThernNCRAs rely on furnishers to report information on consumers that is complete andrnaccurate.</p

In 2009rna number of federal regulatory agencies issued the “Furnisher Rule” which hasrnnow been restated by CFPB.  Under thernRule furnishers have arernobligated to supplyrnaccurate data and requiredrnto “establish andrnimplement reasonable writtenrnpolicies and procedures concerning thernaccuracy and integrity of therninformation it furnishes to consumerrnreportingrnagencies.”</p

Once the NCRAs have receivedrntrade line information fromrna furnisherrnthey must assignrnit to a specificrnconsumer’s identity. rnEach NCRA has about 200 million individual files and the average one contains 13 pastrnand current creditrnobligations, including nine bank andrnretail cards andrnfour installmentrnloans.rn </p

To locate and identify a consumer, NCRAs will use various combinations ofrnpersonal informationrnsuch as name, address, or date of birth. A trade line may not contain all ofrnthis identifying information and many consumers have the same orrnsimilar personal identifier.  This presents challenges whenrna NCRA tries to match anrnincoming trade linernwith the correct consumer’s file. Adding to the complexity, millions ofrnindividuals change how they identify themselves overrntime or betweenrnfurnishers, changing their name or using namesrninconsistently (i.e. an Elizabeth or may also be Betty, Beth, or Liz.  Also creditors themselves vary as to whatrninformation they require on credit applications. </p

Inaccuraciesrnin credit files occur when information is attached to the wrong consumer,rnomitted, or where there are factual errors in the trade line or otherrninformation.  Some errors come fromrnmatching challenges and others from data and data entry errors on either thernbureau or furnisher level, processing errors, or from identify fraud or timernlags in reporting payments or corrections of other errors.  Some supposed errors are actually borrowerrnmisperceptions – thinking a bill has been paid when it has not or assuming thatrnpaying an account in collection removes the delinquency notation.</p

Eachrntype ofrncredit report errors may affectrnhowrna creditor or a credit score assesses the creditrnworthiness of a consumer. Trade line errors can bothrnhurtrnor help a consumer’s credit score.  Anrnomitted current trade line, for example, may lowerrna credit score; arndelinquent trade line inadvertently assigned tornanother consumer or incorrectly markedrnasrncurrent, could raise it. </p

The FCRA gives consumers the right to dispute information</bthey deem inaccurate with anrnNCRA or arnfurnisher (where coveredrnby the Furnisher Rule), or bothrnand requires the NCRAs andrnfurnishers torn"reinvestigate" information containedrnin a consumer's credit file whenrndisputed.    Consumers are given thernseveral ways to obtain their file information including a free credit reportrnfrom each NCRA each year.   </p