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A consumer’s credit score is perhaps the most important piece of financial information about them because it boils down almost their entire borrowing history to a single three-digit number, and now, a federal consumer watchdog is setting its sights on the reports on which those scores are based. (If you don’t understand how a credit score works, you’ll want to take the time to learn.)

The new federal Consumer Financial Protection Bureau recently announced that it would begin looking into the credit reporting industry and ways it can increase oversight for the companies that issue credit reports, according to a report from Sioux Falls, South Dakota television station KELO. Among the aspects of the credit reporting industry that the CFPB hopes to tackle is creating greater clarity for consumers in the scoring and reporting process, and helping to engender greater understanding of what these ratings mean. Further, the agency would also like to make the process of reporting and correcting mistakes on a credit report quicker and easier.

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“We are going to be supervising these institutions very closely to make sure they’re complying with the law,” CFPB director Richard Cordray, a former attorney general of Ohio, told the news station. “We are actually going to have firsthand knowledge of their operations because we have authority to go in and seek information about anything we want to know and they’re not at liberty to withhold it from us. That can be a really quick way to get a bird’s eye view of what’s going on.”

Currently, consumers who notice a mistaken or unfair entry on their credit report have to let the bureau that issued the document know about the situation, and usually provide proof that they are not responsible for the account listed on their file. And while this type of error can usually be resolved fairly quickly, recent studies have revealed that as many as 80 percent of all credit reports contain at least one such erroneous marking, necessitating that most consumers work with at least one credit bureau to clear up the issue.

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For this reason, experts recommend that consumers check their credit reports as regularly as possible. Americans are entitled to at least three free copies of their credit report per year—one from each of the credit bureaus through AnnualCreditReport.com—by federal law, but some states allow their residents more. (Consumers can also use Credit.com’s free Credit Report Card for an overview of their credit standing and an explanation of how it works.) Doing so will likely give borrowers insight into what work they may need to do to improve their standing.

Image: Scott Robinson, via Flickr

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  • http://credit.com Gayle Trask

    The present credit bureau situation is poorly done. You are constantly having to correct them and when you do, they still get it wrong, it takes months and even then, there is still something wrong. Also if they are going to have three then all information should be reported to all three.. You put in for credit and this is only report to this one and someone only reports to another and if you offer to get the other one, they cannot use it. Companies refuse to put it on your report but if you did not pay it, they would put it on. I don’t think that if a group does not report good payments, should be able to report bad like doctor’s offices or utility companies. This is not a fair situation. I am paying a bill I do not owe because the company sent it into collections and they are threatening to put it as a bad debt on my credit report. The collection agency does not think it is a bad debt but they do as the company who hired them says. This is gotten out of hand. I know they took away the locals because people would leave and leave behind debt but they still do that now. I got severely ill and had three car payments left. When I got my SSI, I arranged to pay them off at $25 a month, it took a long time but I paid it off. It was never reported and my credit report looks like they just charged it off as a loss. I offered to show my receipts and the cleared title and no one wants to see it because it shows as a bad debt on my credit report. I think the only fair thing is to have one agency, which is not allowed to sell you credit information or protection, or that all three agencies must have the information reported to them. Also why the misinformation on the reports. We all only have one social security number why do I have other people on my report? This situation needs attention.

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