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You probably know credit bureaus keep credit reports. But did you know that the information in those reports is provided by lenders and others, and the credit bureau doesn’t really have to check it? While everyone involved has a legal obligation to provide fair and accurate information, miscommunications and mistakes occur.
That’s where credit repair history comes in. Credit repair, consumer credit, and credit bureaus are all tied together. Learn more about the credit repair industry and the history of consumer credit reporting below.
In This Piece
- The History of Consumer Credit
- The History of the Credit Bureaus
- The History of the Credit Repair Industry
- The Credit Repair Industry Today
The History of Consumer Credit
Debt isn’t anything new, and the concept of credit reporting dates back centuries as well. While creditors weren’t looking up someone’s history of debt and payments via computers, many lenders did take risk-mitigation actions. For example, in early America, shopkeepers asked neighbors or others in the community to vouch for someone who wanted credit at their store.
It was a much more simplified version of the credit scoring and reporting system used today, but the goals were similar. Creditors want to know if a person is a good “bet.” In other words, they want to know if you’ll pay a loan back on time and if your history indicates you’ll be a risk.
Over time, as the credit bureaus formed and credit reporting became more organized, the system in place today evolved. These days, you can learn more about what is a good credit score and how to get there by paying attention to important credit scoring factors.
The History of the Credit Bureaus
As population and credit needs grew, the ability to check whether someone was a risk or not became complicated. In many cases, you couldn’t just ask neighbors for references. Companies began to create products and processes to solve this challenge. That process began the history of the credit bureaus. Here’s a quick timeline:
- 1950s: Local bureaus began to track credit-related behaviors of consumers in a single town or community. Typically, these organizations were cooperatives made up of area businesses. They simply reported on negative credit behaviors to warn each other. The agencies might also collect negative information from local newspapers.
- 1960s: Credit reporting bureaus “sponsored” by banks or other financial institutions didn’t share information outside of their networks. That limited the accuracy and completeness of any report. It also impacted some people’s ability to get credit with new lenders.
- 1970s: The Fair Credit Reporting Act was passed. The industry stopped reporting events such as arrests or marriages. Instead, it began concentrating on creating accurate reporting specifically for credit. Over this decade, several leaders emerged in the credit reporting space, including TransUnion and the bureau that would eventually become Experian. They would later be joined by Equifax.
- 1980s: Electronic storage supported increased accuracy and completeness of credit reports. Credit reporting agencies evolved from local or regional bureaus into national, integrated systems. It became possible for lenders to receive electronic information about a person’s credit quickly in the form of a fax.
- 1990s and beyond: The internet made credit reporting even faster and provided increased access to consumer credit reports and scores.
The History of the Credit Repair Industry
As soon as modern credit reporting was created, the pressure to have a good financial record and credit history increased. And that meant it was more important than ever for credit reports to be correct. But even today, with modern technology, credit reporting isn’t perfect. Credit repair history has its beginnings in this truth.
Some reasons the credit repair industry developed over the past several decades include:
- Accurate credit reports are so important. Credit reports and scores can open or close doors for financial opportunities. With many modern lenders making decisions based heavily or sometimes solely on this information, a mistake or error can have critical consequences for consumers. The credit repair industry creates ways for consumers to help alleviate those errors.
- Accurate credit is a legal right. The FCRA requires credit bureaus and others to report accurate information about consumer accounts. Credit repair provides a way for consumers to be proactive in asserting their rights under the FCRA.
- Mistakes do happen. Consumer Reports reported that a third of Americans have found at least one error on their credit reports. Inaccurate information can occur because of typos, miscommunications and other errors, so it’s important for individuals to be aware of what’s in their reports and how to repair their credit histories.
- Fraud is possible. Fraud such as identity theft is an increasing possibility in the complex, information-rich modern world. The credit repair industry evolved in part to provide consumers with options for recovering their credit reputation if they were a victim of identity theft.
- The complex credit system can be confusing for consumers. While consumers have rights under the FCRA and can conduct DIY credit repair, the system is somewhat complex and can be overwhelming for some. Many consumers also don’t have the time to manage and follow up on dispute letters, which is where the credit repair industry comes in.
The Credit Repair Industry Today
Today, the credit repair industry is alive—and thriving. It’s evolved over the last few decades, and many people misunderstand what these organizations really do. If your credit report has an error, a reputable credit repair agency can provide valuable tools and assistance to get the problem corrected.
It’s important to work with a reputable agency, though. Scammers have also evolved alongside the credit repair industry, preying on people who want help fixing their credit by promising the impossible and taking people’s money without providing any value.Not sure how to fix your credit? Let ExtraCredit help. Use Restore It—one of ExtraCredit’s features—to connect to some of the leading credit repair leaders around. They can take a look at your credit history and help you tackle any inaccurate or unfair negative items you may have on your credit report.
Article update. Originally published December 14th, 2020
The post The History of the Credit Repair Industry and Why It’s Still Important Today appeared first on Credit.com.
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