CREDIT SCORES AND CONSUMER REPORTING AGENCIES

SURVEILLANCE AND THE VICIOUS CYCLE OF DEBT

Imagine being tracked 24/7 by an invisible network, then classified and ranked according to a secret formula. Imagine your "file" was full of inaccurate and discrediting information, yet it was being sold to critical decision-makers and used to compute a numerical ranking which determined your ability to access the basic necessities of life — a roof over your head, basic utilities, even a job. Imagine this (low-ball) number turned out to be a self-fulfilling prophecy, sealing your fate in a financial caste system.

These are the basic dynamics of the system of surveillance and control known as "consumer reporting." Over 90% of the adult population is somehow entangled in the "dragnet," yet few know precisely how — it's hard to keep track. Consumer reporting agencies (CRAs, or simply "bureaus") gather, organize, and standardize consumer data — how we pay bills, how much money we owe, where we work and live, whether we've been sued, arrested, or filed for bankruptcy — then sell the information to creditors, as well as employers, insurers, and increasingly to consumers themselves. The "Big Three" — Equifax, TransUnion, and Experian — have long dominated the consumer reporting industry. Often labeled the "national credit bureaus," they are actually global corporate conglomerates, which source labor and operate in markets around the world. (Experian isn't even based in the United States, but in Ireland.)

CRAs play a crucial role in our ability to access even the basic requirements of life in our society. A survey by the Society for Human Resource Management found that almost 60% of its member employers used credit reports to screen applicants for at least some of their positions. Credit scores also frequently factor into insurance rates — approximately 92% of auto and home insurers rely on them, according to a survey in 2001. Alarmingly, hospitals have begun using credit scores to determine access to health care and to set costs. This chapter guides you through the consumer-reporting matrix, but also questions many of its basic assumptions and standard operating procedures. Decades of industry surveillance and control — often with government assistance or approval — have steadily transformed our culture, altering our values and behavior and generally instilling financial obedience.

Today, credit scores are treated as a measure not just of our crediUvorthiness but of our all-around personal integrity. Low scores virtually guarantee punishing credit terms and ruinous cycles of debt. And because someone won't have a credit score unless they use credit, it penalizes people who do not use credit products. Hence, it gives a boon to the widespread use of credit and propagates debt relations. People no longer have a choice of whether to use credit or not. But even "good" behavior cannot guarantee high scores in our systematically flawed consumer reporting system. Financial surveillance is a corrupt and impersonal machine, not a system that genuinely determines people's trustworthiness. Can't make a credit card payment because of health costs this month? It's recorded. Got laid off and couldn't pay tuition? It's recorded. Tried to pay a mortgage fee with an already-low checking account? It's recorded.

The fact that the credit reporting and scoring system is set up to maximize profits for the corporations involved instead of helping consumers is leading more and more people to consider alternatives. Thus, in addition to suggestions for individual "self- defense" and collective "harm reduction" in the context of the current credit regime, the chapter also offers ideas for moving outside or beyond it.

THE CRAINDUSTRY

Operating much like a typical oligopoly, credit reporting in the United States has long been dominated by the Big Three of Equifax, TransUnion, and Experian — with combined revenue of more than $6.7 billion in 2009. More recently, two different firms — Innovis and CoreLogic — have been given the distinction of the "fourth" CRA. Collecting "supplementary credit information," they represent the biggest "specialty" CRAs, companies which compile reports about much more than credit history, for example, medical history, employment history, rental history, checking account history, auto and property insurance claims, and utility bill accounts. These other non-credit reports are proving to be just as influential as credit reports; yet, even less is known about specialty CRAs than about the notoriously obscure Big Three, not to mention the shadowy connections between them.

CRAs started in the 1950s as regionally based companies that would track the publicly available details of your life — when you got married, if you got a speeding ticket, or if you committed a crime. CRAs have persistently drawn criticism for mishandling data and violating privacy; protest grew more intense and organized over the course of the 1960s. There was mounting evidence that credit — files were riddled with errors and that they were being sold indiscriminately, to practically anyone who requested them. Columbia University professor Alan Westin became a vocal critic of industry practices after reviewing a sample of files from Equifax, which at the time went by the name Retail Credit Company. According to an article he wrote in 1970, Westin discovered "'facts, statistics, inaccuracies and rumors' ... about virtually every phase of a person's life; his [sic] marital troubles, jobs, school history, childhood, sex life, and political activities." The looming computerization of credit files, which were increasingly concentrated in the databases of a few newly "national" CRAs (or NCRAs), led to the 1970 passage of the Fair Credit Reporting Act (FCRA). Setting regulations on the collection, dissemination, and use of consumer data, the FCRA was the first federal law to implement privacy protections in the private sector in the United States.

The expansion of retail credit and major innovations in informational technology led to a consolidation of the industry in the early 1970s, which meant data became shared across industries. (Up to that point, companies could only compile information about a particular type of credit, like your regional banking history or your mortgage.) CRAs saw rapid growth in the 1970s and 1980s with the...