I can hear the naysayers now, “Not only do we not need more credit bureaus, but we need fewer credit bureaus.” No, no, no. Let’s think about this for a moment. Right now there are three nationally recognized credit bureaus: Experian, TransUnion, and Equifax. And there are many smaller credit bureaus that service local geographies, have less-than-full/complete national coverage, or act as “affiliates” of one of the national credit bureaus; CSC and CBCInnovis are examples of these. And then you have “sales agents”, companies that sell to and service customers who buy credit data from one of the big three: Noesis Data and ChoiceData are examples of Equifax sales agents. You also have a small army of companies who “broker” credit data, meaning they buy and sell it to others; Credco and Kroll are examples. And finally, you have companies that are defined by federal law as being a consumer reporting agencies, but they are not CREDIT reporting agencies; ChoicePoint, Intelius, and LexisNexis (which now owns ChoicePoint) are examples.
This might sound like a crowded marketplace to some, but I’m of the opinion that we don’t need fewer credit bureaus or even the same number of credit bureaus. I believe we need more credit bureaus – at least three more, in fact. This would serve to make credit more affordable as the cost of credit reports sold to lenders, which we end up paying for somehow, would be less expensive. And, more importantly, it would force the “old guard” credit bureaus to do a better job with our credit file data. And, most importantly, it would likely force the old guard to seriously consider trashing their current “once-a-month” credit file updating practices to a more real-time system where your credit data would be updated dynamically. Imagine that every charge you make, every online payment… updated in seconds rather than in weeks. That would also mean credit scores that represent our actual current credit experience… not our credit experience from 30 days ago.
More, newer, credit bureaus would also mean more competition for the consumer’s dollar. Right now, if you compared the consumer offerings of the big three credit bureaus, you’d see that they are pretty much the same; credit reports, credit scores, and credit monitoring. Sure, there are some unique offerings, but by and large it’s all the same stuff. I always use the beverage industry as a great comparison. You have two dominant players (Coke and Pepsi), several secondary players (Dr. Pepper, Seven UP, and RC Cola), and a slew of newer players who are pushing “the big boys” to evolve and do better.
Where would these newer bureaus come from? I’ll save that one for myself. I need something to work on when I retire.
John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.