Ever bought a car? Applied for a job? Checked your credit score? Then you’re probably in the system. The U.S. credit system.

Three of the biggest credit bureaus — TransUnion, Experian and Equifax — have data on millions of Americans. And some of that data, including addresses, Social Security numbers and driver’s license numbers, have now been compromised in a cyberattack on Equifax. An estimated 143 million people could be affected by the breach.

Why do three companies have control of so much private information? Who’s minding the credit bureaus? And is there anything consumers can do to protect personal data from future hacks?

Guests

  • Michelle Singletary Syndicated columnist of "The Color of Money" for The Washington Post
  • Nela Richardson Chief economist, Redfin
  • Tammy Baldwin U.S. senator, (D) Wisconsin
  • Joseph Rubin Senior vice president of Government Affairs and Public Relations, MWW

Interview Highlights

On What Companies Like Equifax Do

“We think of it in the sense of, because we have credit scores — but really the credit bureaus — we are not their customers. It’s really the businesses out there. They’re looking for people to lend money to. So, they are depositories for our consumer information. Mostly how we handle our loans.” Singletary said.

The three credit reporting agencies are Equifax, Experian and TransUnion. These agencies collect information on an individual’s spending habits and debt to determine whether someone is “a good credit risk” or “how credit worthy we are as consumers,” Singletary said.

“They match these customer accounts with our personal data, based on our social security numbers, our addresses, our names,” Richardson said. “It’s hugely complex. It’s really hard to do, and so it leads to error and breaches. The problem here is that…people rely on these data to provide their whole financial history. It is the financial identity by which you can make big purchases, like cars or homes…There’s no margin for error, if you’re going to make a home purchase, and yet we see 143 million errors just this last week.”

What Happened?

“According to Equifax, the credit file wasn’t breached,” Rubin said. “So, the credit file, the actual information wasn’t breached. The identifying information — driver’s license, social security number, that sort of thing — the actual information about your mortgage payments, your credit card payments, hasn’t been breached.”

Why Do We Have Credit?

1A listener Eric asked why we have credit — who controls and watches the credit industry and why it matters so much.

Credit makes lives better,” Rubin said.

It enables folks to afford products and services they couldn’t pay for today. It enables instant credit. It enables you to walk into a car dealer and drive off with a new $20,000 car without even writing a check or making any sort of down payment. Credit reports are accurate for more than 95% of all Americans … there are problems. It’s not a perfect system, but it is a good system … briefly on the 2008 downturn, one of the reasons it happened, one of the reasons the downturn was so significant is that there were a significant number of mortgage lenders who would make no doc or low doc loans and basically would provide a loan to a consumer that they in effect knew they couldn’t afford.

Rubin clarified that low and no document loans refers to lenders providing loans to borrowers who provided little to no documentary proof of their identity and never checked their credit report or source of income.

How Credit Ratings Affect Lives

“The FTC, in 2012, found that 1 in 5 Americans had an error on their credit report,” Richardson said.

Let’s just remind your audience that this isn’t just about buying a car or a house…employers use credit scores for job applicants. They’re used when you want to rent an apartment. Credit scores are becoming more and more pervasive in our financial transactions. The fact that you can’t even rent an apartment without having a solid credit history should make everyone concerned

We know that a reliance on credit scores historically, has affected people who are—have been discriminated against in lending institutions and are pushed into higher rate products. So, you credit score not only determines your access to credit, it determines what rate you pay for that credit. That can make it even more difficult to make timely payments. So, this is kind of a self fulfilling prophecy.

Is This Your Fault?

“90% of our data is not our fault…10% is probably when we’re giving up information when we don’t have to,” Singletary said. “For example, I went to a doctor’s office and they were like…’give me your social security number’. I was like, ‘I’m not giving you my social security number’…so you can object to it … you do need to be discerning.”

What Can You Do?

“Credit freezes are available in every state. Most consumers don’t use them,” Rubin said.

Singletary added:

“What a credit freeze does is it locks down your credit report, and you get a pin number, and when you are ready to get credit you can unfreeze your report…and given the breath of this breach, I think that’s really what many people need to do…if you have been a victim of identity theft you absolutely should put a credit freeze on your files. You can go to FTC.gov that’s probably the easiest way to help people figure out how to do it — what it costs. There is not a cost typically if you’ve been a victim of identity theft. Now, you’ve got to pay to put it on and pay to put it off — it’s so much less than what you have to pay to deal with identity theft.

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