Credit reports and scores have a direct and growing impact on Americans’ economic security and opportunity. Having poor credit can mean a consumer will end up paying a higher interest rate for a loan or a higher premium for car or homeowner’s insurance; have their application for a loan or insurance denied; be turned down for a job, or even be terminated from their current one. Credit history can affect the way Americans are treated by landlords, utility companies, and hospitals. This report reveals the extent of credit information “mission creep,” examines troubling shortcomings in the for-profit credit reporting industry, and recommends common sense steps to reform the credit reporting system.

TOP FACTS       

  • The credit reporting system falls short on basic goals of fairness and accuracy.
    • Reports and scores exclude relevant information, include inaccurate information, and contain data about medical debt collections that reveal more about an individual’s private health concerns than their overall credit worthiness.
    • Research suggests that more than 20 million Americans could have material errors on their credit reports.
    • Credit reports largely mirror racial and economic divides, with African Americans and Latinos dis- proportionately likely to have lower scores. In turn, these communities are more likely to be offered high-priced loan products, which may contribute to more defaults, maintaining and amplifying historical injustice.
    • Credit reports are composed exclusively of information about individual consumers, but consumers lack unrestricted access to relevant credit information and must often pay fees to obtain their own credit scores.
  • Credit reports and scores are experiencing “mission creep”—increasingly being used by insurance companies, employers, utilities and hospitals for a variety of economic decisions.
    • In 2010, 60 percent of employers use credit reports to evaluate job candidates, despite a lack of evidence showing that credit history correlates to job performance or likelihood to commit fraud.
    • Utility companies are using credit reports to make sales and pricing decisions about basic services like heat, water and electricity.
    • Home and car insurers charge more to those with low credit scores, claiming that people with poor credit are more likely to make an insurance claim. However, this propensity might reflect unfair factors such as race or income.
    • Hospitals are expanding their use of credit data, raising concerns that vulnerable patients will be pressured to charge their bills to high-interest credit cards before they have a chance to apply for charity care.