In the last few years the amount of advertising on television and other media platforms by credit bureaus (Experian, Equifax, Transunion) and credit monitoring companies offering services to consumers regarding their credit has skyrocketed.
The reason for this is simple. Consumers have seen their credit scores rapidly decline due to tough economic times and are searching for ways to quickly and easily monitor their score. The credit bureaus and the companies they own are happy to oblige while making billions of dollars along the way.
What Consumers Need to Know About The Three Credit Bureaus
Consumers need to be aware of some facts regarding the credit bureaus and understand that they are billion dollar profit centers. Because we call them ‘bureaus’ many believe them to be government agencies created to help consumers. That couldn’t be further from the truth.
Experian, Equifax and Transunion each generate over $1 Billion a year in revenue. Here’s how they do it:
- Credit Services- They sell consumer information to prospective creditors. Lenders of money to consumers pay the credit bureaus to get a copy of a consumer credit report to make a decision of whether that person is credit worthy.
- Consumer Decision Analytics- Creditors want to know the propensity a consumer has to respond to an offer of credit allowing them to better target their marketing efforts.
- Marketing Services- Creditors also want to know what consumers meet their approval criteria so they can market pre-approved credit offers. Consumer information is also sold for non-credit related marketing efforts.
- Consumer Services- This is the newest and fastest growing revenue stream for credit bureaus. Credit bureaus make money by selling services directly to consumers. Credit monitoring services, fraud protection, and identity theft solutions as some of the services they provide.
Beware of The Credit Bureau’s Consumer Services
Beware of the consumer services being offered by the credit bureaus. And, understand that the bureaus own some of the companies offering consumer protection and credit monitoring services on television. For instance, Experian owns FreeCreditReport.com.
Experian is also marketing a credit monitoring services called ProtectMyID. When hackers stole personal information from 70 million to 110 million people who shopped at Target during the 2013 holiday shopping season, Target rolled out what’s become a common response for corporate hacking victims: an offer of free credit monitoring for a year, courtesy of Experian which may seem like the right thing to do and bring back favor to Target.
However, ProtectMyID tracks only what’s known as “new account fraud,” which occurs when someone uses stolen information to try to get a new line of credit, such as with a credit card, car loan or mortgage.
The far more likely type of fraud, though, is “existing account fraud” – when someone uses the credit information they’ve stolen to buy luxury items like Rolex watches and Gucci bags, which they then sell on the street for cash. The Experian service will not detect this type of fraud.
And, it only tracks the credit inquiries that are sent to Experian, ignoring those made to the nation’s two other major credit bureaus, TransUnion and Equifax.
Credit Bureaus Do Not Fix Consumer Credit
Another point to be made about the credit bureaus is that they do not make money fixing consumer credit. Consumers can dispute items on their credit report that are erroneous or obsolete but this can be a frustrating process gaining little or no results.
In February, 2013 the Federal Trade Commission (FTC) reported that one in five consumers had an error on at least one of their three credit reports. The credit bureaus pay large fines for failing to update and correct consumer credit reports. It is widely held that the credit bureaus would rather pay these fines than correct the process they use to maintain accurate consumer credit information.