WASHINGTON-At a personal finance conference hosted by the Consumer Federation of America, various interested parties from various points of view discussed the credit scoring system in both positive and negative lights. “The [Fair and Accurate Credit Transactions] Act represents a comprehensive overhaul of the FCRA with a number of consumer protections,” Joel Winston, Federal Trade Commission associate director of the division of financial practices in the Bureau of Consumer Protection, commented. He pointed to the recent start of making free credit reports available to consumers. “It seems to me there was recognition by Congress that these scores are easily being used by creditors, employers, insurance companies randomly, and others, to calculate not only whether to grant or deny consumer applications, but also the price them,” he said. He noted that last month the FTC issued an advance notice of proposed rulemaking on score fee setting. The agency will also perform a study by next year on whether scores correlate with experience. With its flaws, the United States still has the best credit system in the world, Consumer Data Industry Association president and CEO Stuart Pratt stated. He noted that China is struggling to have any sort of system and South Korea has a 25% loan failure rate. As far as consumers’ knowledge of their scores, it is getting better with about half of consumers having seen their credit score. “One of our challenges I think is to get consumers to care,” Pratt said. Another problem is that while some complain there is not enough information on credit scoring out there, he argued, there is too much. Pratt said Google gave him nearly nine million hits when he looked up credit scores. So really the issue is a “wheat and chaff” situation: what is good information and what is not. He emphasized that the bureaus are in favor of borrowers having a better understanding of their credit scores. Some major things that impact it, he explained, are payment history, overall debt, and the length of time a borrower has been in the credit marketplace. There are quirky things that consumers may not know about the credit scoring system, Privacy Times Editor Evan Hendricks said. “Did you know that paying off your credit card debt in full every month does not necessarily make your credit score go up?” he asked. Paying off old debts can make your score go down, he continued, and canceling credit cards may lower your score. He did admit that disclosure is improving but work still needs to be done. Hendricks also charged that the system is biased in favor of lowering your score because consumers with lower scores pay more. He also railed against the newer “universal default” policies where if a consumer is late paying one creditor, others may raise their rates. However, Pratt assured that the credit bureaus have no interest in driving scores up or down. [email protected]

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