When TRW, known for its credit reporting bureau, first offered consumers the chance "to take control of your own credit," it sounded good to many of them. Actually in the business of compiling consumer credit histories for lenders and merchants, TRW was now making it possible for consumers to "review" their reports and "strengthen (their) credit image."
Seems like a good idea: "Most of us don't even know what information is in our own credit report," says TRW's brochure, "much less what to do about it!"
Indeed, the clear implication of TRW's "Credentials" service is that what is supposedly the mere record of one's financial activity can be out of one's control, that it may contain unfamiliar and possibly harmful information. "There's always a nagging fear when it's called up," said Mel Wellerstein, vice president and general manager of TRW's Direct Consumer Information Services. "With Credentials service, you're in control, confident."
Finance Charges Baffling
The nation's credit reporting system may be as poorly understood as the credit system itself, with its bewildering methods of applying interest rates and finance charges. In theory, credit reporting bureaus such as TRW are just databases that store information on consumer accounts, taking it in from various creditors and selling it to others--either regular "subscribers" or one-time users.
The information usually includes the credit limit or loan balance on each debt, notations of missed payments (kept on record for seven years) and any publicly recorded liens, court judgments or bankruptcies, plus a list of everyone who ordered a copy of the report in the past year. The information is, as credit bureaus say, neutral and objective, but not necessarily true. Information is only collected and disgorged, not tested for accuracy.
Consumers, who provide fodder for the system, are oddly ignorant and fearful. Of the many people who complain to the Federal Trade Commission every year about credit reports, most are simply wrong: They believe, for example, that when debts are paid off or bankruptcies discharged, the record of them disappears. Similarly, people pay $100 million a year to credit "clinics" or fixers who claim they can "clean up" or erase a bad credit record.
Even relatively sophisticated people have a certain paranoia about their credit records. TRW's 160,000 subscribers in California have an average age of 41, income between $20,000 and $65,000, and typically, solid credit histories, college educations, savings, even stocks. They also recognize what Wellerstein calls "the fallibility of large organizations reporting to other large organizations."
'Could Lose the House'
And they know that a mistake in their credit report "can really screw up their lives," as a Los Angeles man says. "If they're buying a house and are disapproved because of a credit report, it can take months to resolve and they could lose the house."
There could be a late payment recorded when they never received a bill. There could be erroneous notation of an unpaid court judgment--the small claims judgment, for instance, that Redwood City financial adviser Robert Ortalda Jr. found on his record when he applied for a mortgage. "It had been paid," he says, "but people rarely bother to clear a claim. I just gave the lender a copy of the canceled check, but if I'd known ahead, I could have gotten the court to clear the record."
Under the nation's Fair Credit Reporting Act, anyone turned down for credit because of something on his credit report has the right to a free copy of the report, an investigation and either a correction or the right to insert a statement of disagreement. One can also buy a copy at any time (TRW charges $8), and many people advise doing so periodically, "like checking your Social Security file," says Ortalda. Certainly, says Walter R. Kurth, president of Associated Credit Bureaus, a trade association in Houston, "a consumer planning to make a major purchase like a home might want to do it in advance."
That prophylactic glimpse of one's own report is the biggest draw of the TRW service, which for $35 a year offers--among other things--unlimited copies on request, plus notification any time someone else orders a copy; "In the event that something goes awry, they'll know," Wellerstein said. For example, "if you hear there was a credit report pulled on you by an unknown merchant in Maine, it's an indication you should get involved." And "the credit report," he adds, "becomes better because the consumer has audited it."
But there's some question whether one needs to know that often, "unless you're doing a heck of a lot of credit activity," Ortalda said, or anticipate some problem, perhaps because of a move or a name change. Similarly, most people only need notification of inquiries if they expect problems--people worried about a former or estranged spouse's activity, for example.