In part 1 of our “Credit Repair Conspiracy” series, we talked about how the banks make money, and how they can make MORE money from consumers with BAD CREDIT.
In order to find the most profitable consumers to make offers to, the banks need to have a pool of data that includes the types of consumers they are looking for (i.e. consumers with “sub-prime” credit.)
And that is where the credit bureaus come in.
The Data Business
Credit bureaus are in the data business. They collect and sell data.
BANKS are the credit bureaus’ main customers. The banks go to the credit bureaus to get the data they need for marketing to consumers.
As we discussed in Credit Repair Conspiracy Part 1, the most profitable consumer for the banks is one with bad enough credit to justify a higher rate, but still fairly good chances of keeping good on their promise to pay the loan. In other words, the ideal is to find people with “bad credit”, not “horrible credit”.
So “bad credit” data is in high demand.
And this is where the issue comes in.
As a business, the credit bureaus naturally want to sell their customers the kind of data they want. And since bad credit data is in high demand, the more bad credit data they have, the better off they are.
The banks are happy. The bureaus are happy. (And the consumer pays double and sometimes triple for products and services.)
This is where the “credit repair conspiracy” really comes into play.
In very subtle but calculated ways, the credit bureaus do things that shape their data on a large scale to give their customers (the banks) what they want.
Anyone who has ever had a legitimate error on their credit report can tell you that it can be a REAL
PAIN to get things corrected.
You would THINK just writing the bureau would be enough. But it isn’t.
Letters get ignored, incorrect items get “verified”, and consumers get the shaft.
It’s not by accident either. The whole system is DESIGNED that way.
THE CREDIT SYSTEM IS DESIGNED TO HOLD YOU DOWN.
It’s a “kick you while you’re down and keep you there” sort of system. Once you’ve been buried, it can be quite difficult to get things fixed.
An article on SmartMoney.com(1) in 2009 described just how difficult it can be:
“And even a successful lawsuit won’t necessarily fix a mistake. Just ask Chino, Calif., marriage counselor Jeff Christensen. In 2003 the cable company Charter apologized to him for reporting a collections account in error and directed the credit bureaus to delete the information. Experian refused, so Christensen took the bureau to court. In 2005 a judge ruled that Experian was violating the law and fined the company $2,500. Experian paid the fine, but it didn’t correct the error until December 2008—when SmartMoney called—saying it never got the right paperwork. Turns out, the courts can issue fines, but they can’t demand corrections. ‘You have no right to an accurate credit report,’ says Lyngklip, the attorney. Consumer advocates estimate that bureaus pay just $25 million a year in court fines—a minor expense for the $7 billion industry.”
Why would a credit bureau CARE so much about keeping negative information in a file, so as to “REFUSE” to delete information that the creditor reported in error?
The answer is simple: negative information is just too profitable.
Race And Religion
Throughout history, people have been discriminated against time and again because of things like race and religion.
Just because someone was a member of particular race or religious group, they were either “safe” or “in trouble”. Do not think that your race or religious heritage will save you in the credit system. It won’t.
There are very rich, very powerful people who profit HUGELY from the MASSIVE amounts of people with bad credit and errors on their credit reports.
Your race or religion doesn’t matter to them. The only thing that matters is that you stay profitable. They want to lock you in to bad credit.
The Credit Repair Conspiracy
The credit repair conspiracy is about the banks and the credit bureaus working together to create a system in which consumers are categorized and herded like virtual cattle into the most profitable segment they can be shoved into.
Periods of “lenient lending” are followed by periods of “credit fallout”, where consumers who received loans can’t pay them.
And guess what those periods of lenient lending create? More people with bad credit.
And once you’re in that pool, the credit bureaus want to keep you there. Why would they care?
Because BANKS are the credit bureaus’ main customers. And banks want desperate buyers; consumers with bad credit and not a lot of choices. They want people who have no choice but to pay high interest rates on loans. And the credit bureaus do their best to give their customers what they want by designing the whole system (from the reporting format to the dispute process) to HOLD YOU DOWN.
From the credit bureaus resistance to deletion (both directly with consumers, and in instructions they give to lenders(2) for using their systems), to the banks’ tricks and tactics for keeping customers profitable (such as the much publicized Capital One practice of withholding credit limits(3) to make consumers look “less attractive” to other lenders), the credit system is designed to hold you down and make you as profitable as possible for the banks and credit bureaus.
And that’s what the credit repair conspiracy is all about.
(1) Source: http://www.smartmoney.com/spend/family-money/Why-The-Credit-Bureaus-Cannot-Get-it-Right/
(2) The CDIA Credit Reporting Resources Guide (Metro 2 file format documentation) repeatedly instructs creditors to NOT DELETE disputed information unless it is (undoubtedly) “inaccurate”. It’s a “guilty until proven innocent” approach. I.E. NEVER DELETE, unless you’re “absolutely sure” that the item is not right. (Deletion is a NO-NO when you need that “bad credit” data!)
(3) Written Testimony Before The HOUSE COMMITTEE ON FINANCIAL SERVICES Regarding “Fair Credit Reporting Act: How it Functions for Consumers and the Economy” June 19, 2007 Submitted by: Leonard A. Bennett