Jeff Gelles: Credit-reporting companies know more than they tell you

Quick quiz. Name a business you have to deal with whether you want to or not, isn't a public utility, and isn't the outfit that services your mortgage loan.

Stumped? Two more clues: At least three nationwide companies fill the bill. And they may not classify you as a customer at all - but they're eager to sell you stuff you can likely do without.

The answer is any of the nation's three main credit-reporting agencies: Experian, Equifax, and TransUnion. You can barely function in today's world without them - not if you want a home loan, credit card, job, or apartment. But to them, you're primarily a product - the name atop a valuable credit file - rather than a customer.

How detailed do their data get? Equifax was the subject of a widely circulated NBC News report last week on that very question. Bob Sullivan, writing for the network's "Red Tape Chronicles" blog, said an Equifax subsidiary, the Work Number, collects and sells employment and salary data on about a third of U.S. adults.

"It's the biggest privacy breach in our time, and it's legal and no one knows it's going on," one critic, who runs an employment-background firm, told Sullivan. "It's like a secret CIA."

As a frequent critic of the credit-reporting system, I'm heartened when others are shocked at disclosures about the industry's practices. But here's the truly scary thing: If you ask some of the lawyers and privacy advocates who pay even closer attention, the Equifax disclosures don't seem so shocking.

"If people are outraged by this, they should be outraged by the whole idea of credit reporting and background checks," says Chi Chi Wu, a lawyer at Boston's National Consumer Law Center. "It's the same thing - very sensitive personal information that's perfectly legal to gather and give out."

Wu, I should note, isn't opposed to the idea of credit reporting, a system that evolved to meet the needs of an increasingly complex consumer economy.

A few decades ago, getting credit meant dealing with a familiar retailer or banker, perhaps documenting your income and explaining how you planned to repay. Today, key decisions are made in the checkout lines of places like Home Depot, or in the distant back shops of credit-card issuers. Your credit reports - and especially the three-digit summations called credit scores - are what make the system work.

It may not always seem fair, but a bigger problem is that it isn't always perfect - sometimes, it seems, by design. For instance, consumers who dutifully check their free reports from the major bureaus (, 1-877-322-8228) see only data closely matched to their names, Social Security numbers, and other identifiers. But to guard against overlooking important data because of typos, lenders often obtain looser matches - a process that can lead to so-called mixed-file errors. It sounds innocuous until you discover a deadbeat lurking in your file.

And when something goes wrong, consumers must deal with companies that have had to be pushed repeatedly by Congress and regulators to take problems seriously.

Thankfully, the new Consumer Financial Protection Bureau is stepping up efforts at oversight. But it's a slow process. In December, Wu told a Senate committee about persistent problems, including a colleague who tried repeatedly to dispute a $70 debt she was confident she never owed. Over five days of trying, she was never able to access the dispute section of TransUnion's website - it always said there were too many users.

Wu says the surprised reaction to the Work Number's trading in salary data reflects misunderstanding of the system. The Fair Credit Reporting Act doesn't say what information can be included in credit reports. It just excludes certain information, such as older delinquencies, and defines who has a permitted use to buy the data - a category that includes debt collectors.

"They could include shoe-size information, or astrological signs, and use that to evaluate credit," she says. "The FCRA doesn't require predictiveness, it doesn't require relevance. All it requires is that credit-reporting agencies have reasonable procedures for ensuring accuracy."

And that's a persistent rub. If a consumer lawyer can't navigate that process, it's unclear what hope the rest of us have.

What is clear is this: As participants in a captive market, we deserve better protection.

As Wu puts it, "It's not like AT&T, T-Mobile, or Sprint. You don't get to choose."


Contact Jeff Gelles at 215-854-2776 or