House lawmakers held a hearing on the credit reporting system on Tuesday, where one expert pointed out ways that the industry has failed to put consumers first.
Syed Ejaz, a financial policy analyst for Consumer Reports, said during testimony before lawmakers on the U.S. House Committee on Financial Services that the current credit reporting system does not work for U.S. consumers and can limit their financial opportunities.
"Consumers need a credit reporting system that works for them - one where their reports are accessible and accurate and errors are easy to correct," Ejaz said.
Ejaz noted that complaints to the Consumer Financial Protection Bureau regarding credit reporting errors have doubled since 2019 and are among the most frequently cited concerns.
In a survey conducted by Consumer Reports earlier this year, 34% of 6,000 respondents said they found at least one error after checking their credit report.
"This is unacceptable. Credit reporting agencies hold information that can be used to make consequential lending, employment, and underwriting decisions about us," Ejaz said in prepared remarks. "Credit report errors that damage credit scores can keep people from affordable interest rates, as well as employment and in some states, affordable homeowners and auto insurance."
Consumers can also have difficulties getting reports corrected and some said they had trouble even accessing their own information.
Ejaz called on Congress to pass the Comprehensive CREDIT Act and the Protecting Your Credit Score Act, which are two pieces of legislation designed to ensure that consumer reporting agencies are reporting fair and accurate information.
The three largest credit reporting agencies in the U.S. are Equifax, TransUnion, and Experian. Many lenders review consumers’ credit reports in order to determine whether to extend – and under what terms – credit.
The average credit score in 2020 hit 711, up from 703 the year prior, according to Experian.