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Subject:  Re: Ever heard of the 30% rule? FICO Date:  8/26/2019  9:18 PM
Author:  joelcorley Number:  312617 of 312702


You wrote, True. It IS a useful tool. And society benefits from using it.

If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?

That's because of the Law of Unintended Consequences that most legislation falls prey to...

When the FCRA was first enacted in 1970, it was designed to create a level playing field for consumers while simultaneously promoting and indemnifying CRAs from the potential consequences of publishing inaccurate information about consumers. (Liable claims can be largely unbounded - especially if the injured party can show that the company should have reasonably have known it was in the wrong.) This law set up the dispute resolution process we know today. It also set up statutory damage amounts and permits you to litigate your claims in small claims court. In exchange, the CRAs essentially became immune to liable claims and their associated punitive damage awards.

This had unexpected consequences... CRAs asserted proprietary ownership over individual credit files and refused to provide a copy to the individual without payment unless forced to under the FCRA. As consumer credit evolved and became widely used, it became apparent that this left consumers with a frustrating dilemma: Either cough up lots of cash on a regular basis to monitor your credit report or risk it and wait until you've been denied credit.

Once credit scoring started becoming a thing, it became apparent that the hard inquiries required to get a free report were not themselves "free" - thus the unintended consequences. Being refused credit was itself damaging your credit report, at least according to FICO. Eventually this became a big deal. The lies the company was telling about you were considered proprietary and you couldn't even dispute them without paying some kind of price. This eventually rose to the level of political awareness and legislators eventually did something about it - they required free annual credit reports. And eventually they required the ability to freeze your credit too...

What I think some CRAs are even now still struggling to understand is that providing a more accurate view of consumer data increases the value of their product, so it's actually in their best interest to let consumers view the data whenever they like. But of course the CRAs counter that it costs them money to provide access and the more access required, the more money. Of course with the online age, that argument holds only a very tiny amount of water...

- Joel
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