I was recently asked by a Loan Officer, “Why do some credit reports contain information from accounts that belong to a completely different individual? And why is that information different than what the client sees when they order their own credit report?”
For some of you, this might be common knowledge, however, there seems to be some confusion out there on how credit reports are compiled.
First, it’s important to understand that there is a distinct difference in the way the information is compiled for a credit report ordered by a consumer versus the credit report a Loan Officer orders.
When a consumer orders their own report, the Bureaus make every effort to ensure that the person ordering the report is who they say they are (must have provide a lot of detailed information about themselves) — and that the report only contains information that directly applies to that person.
Could you imagine if you could find detailed account information for other people by simply ordering your own credit report? Or if you, as a consumer, could order someone else’s report with a partial SS# and or address?
Talk about an Identity Theft goldmine!
So, when a consumer orders a credit report, the name, SS#, address, and other identifying information must match exactly with any account info listed on that report.
When a Loan Officer orders a credit report, they or their company has signed an agreement with their provider to only use Credit Reports for permissible purposes, to abide by other restrictions, and to comply with the FCRA. Simply put, they are trusted by the Bureaus with this sensitive information and are given some flexibility in terms of the availability of that information.
They are also ordering the report to evaluate whether or not they would like to lend an individual money or extend a line of credit. The Bureaus, as a result, want to provide as much relevant information as possible to the potential lender to ensure nothing is left out of the decision process.
They certainly do not want to be held liable for excluding an important piece of information that may have changed a lender’s decision (e.g. late payment on an account that was entered with a misspelling of the individual’s name).
In an effort to provide as much information as possible, the Bureaus allow for partial matching of information. In many cases, if the SS# matches exactly, they will ignore all other information such as name, address, etc. If all but 2 of the SS#’s match, the name almost matches, and there is a regional commonality, the information will also be included.
What winds up happening is you have people with similar SS#’s and names living in the same part of the country that begin to share information on their credit reports.
Victoria Smith’s info winds up on Vickie Smith’s report…
This can have a devastating impact on one’s credit score and ability to obtain financing in the short-term (until the inaccurate information can be corrected – which isn’t always an easy task!).
Chris, thanks for the info. it is not common knowledge for alot of LOs, you are doing a great service trying to help new LOs understand how credit works and why the credit is scored the way that it is. I can tell you for me it is crazy how they actaully score, I understand to a degree but some times it just does not make since.
Thanks Ken.
Half the time some of it doesn’t make sense to me!
If there are ever any topics/questions you’d like me to touch on, let me know!
I once worked for TRW (now Experian) as a systems consultant. After two years there, I pulled my own credit report–low and behold, they had me working for an employer I hadn’t been with for 4 years (among other errors).
As a loan officer, I saw many many people derailed by shoddy credit reporting — mostly parents and their kids (one more reason NEVER to name your child “junior”) where one had great credit and the other was a dirtbag, and the dirtbag credit contaminated the good guy’s report. I can’t believe that no one has passed a law making a trade line reportable ONLY if it is a complete match on the social security number. No more guilt without proof. Oh, yeah, that might be a reform that actually has some merit, can’t do that….grrrr.
Chris,
Great post. This needs to be required reading for ALL loan originators!
Scott