Consumer and Credit Reporting, Scoring, and Related Policy Issues

Consumer Credit Reporting, Credit Bureaus,
October October 15, 202012, 2023
Credit Scoring, and Related Policy Issues
Cheryl R. Cooper
The consumer data industry—generally referred to as credit reporting agencies or creditConsumer credit reporting agencies (also called credit bureaus or CRAs) collect and
Analyst in Financial Analyst in Financial
bureaus—collects and subsequently subsequently providesprovide information to firms about information to firms about the behavior of
Economics
consumers when they participate in various financial transactions. Firms use consumer

consumer credit and payment behavior, Economics called consumer reports or credit reports. Credit scores are (numeric) metrics used to predict a variety of financial behaviors, computed using the information obtained from one or more consumer reports. Firms use credit report and score information to screen information to screen for consumer risks. For example, lenders for consumer risks. For example, lenders may rely upon credit reports rely upon credit reports
Darryl E. Getter
and scores to determine the likelihood that and scores to determine the likelihood that a prospective prospective borrowersborrower will repay a loan (e.g., a mortgage or credit card). The consumer credit reporting system benefits the consumer lending industry by making credit underwriting cheaper and easier and by creating an additional incentive for consumers to pay back their loans on time. Equifax, Experian, and TransUnion are the three largest nationwide providers of credit reports, sometimes called nationwide consumer reporting agencies. These credit bureaus generally create consumer credit reports containing historical information about repayment on credit products such as mortgages, student loans, credit cards, and auto loans. Credit applications, bankruptcies, and debts in collection are also regularly included. Other CRAs provide a variety of specialized consumer reporting services, including employment screening, tenant screening, and check and bank screening. Firms that use consumer reports may also report information to CRAs, thus serving as furnishers. Furnishing information is voluntary, and furnishers are not required to submit their information to all CRAs. Consumer credit reports are more comprehensive and therefore more valuable as more companies choose to participate as furnishers. However, furnishers incur costs to report data—for example, by meeting regulatory requirements to ensure accuracy of consumer information. Reliance by firms on consumer data significantly affects will repay their loans.
Specialist in Financial
Insured depository institutions (i.e., banks and credit unions) rely on consumer data
Economics
service providers to determine whether to make available checking accounts or loans to

individuals. Some insurance companies use consumer data to determine what insurance
products to make available and to set policy premiums. Some payday lenders use data

regarding the management of checking accounts and payment of telecommunications and utility bills to determine
the likelihood of failure to repay small-dollar cash advances. Merchants rely on the consumer data industry to
determine whether to approve payment by check or electronic payment card. Employers may use consumer data
information to screen prospective employees to determine the likelihood of fraudulent behavior. In short,
numerous firms rely upon consumer data to identify and evaluate potential risks a consumer may pose before
entering into a financial relationship with that consumer.
Greater reliance by firms on consumer data significantly affects—and potentially limits—consumer access to consumer access to
financial products or opportunities. financial products or opportunities. Specifically, negative or derogatory information, such as late payments, loan
defaults, and multiple overdrafts, may stay on consumer reports for several years and lead firmsFor example, consumers with strong credit reports may have greater access to credit, but negative information, such as loan defaults, may cause a lender to deny a to deny a
consumer access to credit, a financial product, or a job opportunity. Having a nonexistent, insufficient, or stale
credit history may also prevent credit access.
Accordingly, various policy issues have been raised about the consumer data industry, including the following:
 How to address inaccurate or disputed consumer data provided in consumer data reports;
 How long negative or derogatory information should remain in consumer data reports;
 How to address differences in billing and collection practices that can adversely affect consumer
data reports, an issue of particular concern with medical billing practices;
 How to ensure that consumers are aware of their rights and how to exercise them in the event of a
consumer data dispute;
 Whether uses of consumer data reports outside of the financial services, such as for employment
decisions, adversely affect consumers and should be limited;
 Whether the use of alternative consumer data or newer versions of credit scores may increase
accuracy and credit access; and
 How to address data protection and security issues in consumer data reporting.
Congress has shown continuing interest in these and other policy questions surrounding the consumer data
industry. In the 116th Congress, the House passed H.R. 3621, the Comprehensive Credit Reporting Enhancement,
Disclosure, Innovation, and Transparency Act of 2020 (Comprehensive CREDIT Act). This bill includes
legislation from other bills marked up by the House Financial Services Committee: H.R. 3614, H.R. 3618, H.R.
3622, H.R. 3629, H.R. 3642. In the 116th Congress, the House Financial Services Committee marked up two other
bills: H.R. 5332 and H.R. 5330. On March 27, in response to the coronavirus (COVID-19) pandemic, the
President signed the CARES Act (P.L. 116-136). Section 4021 of the CARES Act addresses credit reporting
during the pandemic. The House also passed two versions of Heroes Act (H.R. 6800 and H.R. 925). Both bills
would create a moratorium on furnishing adverse information to credit bureaus during the COVID-19 pandemic
period, as well as for other future major natural disasters.
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link to page 4 link to page 6 link to page 6 link to page 9 link to page 10 link to page 12 link to page 12 link to page 14 link to page 16 link to page 17 link to page 18 link to page 19 link to page 21 link to page 23 link to page 23 link to page 25consumer access to credit. In recent years, average consumer credit scores have improved due to COVID-19-era forbearance and credit reporting protections, as well as improved financial situations for consumers. Consumers generally do not choose to participate in the credit reporting system. For this reason, consumer protection laws and regulations may be particularly consequential. The Fair Credit Reporting Act (FCRA; 15 U.S.C. §1681), implemented by Regulation V, is the main statute regulating the credit reporting industry. The FCRA establishes consumers’ rights in relation to their credit reports. It also imposes certain responsibilities on those who collect, furnish, and use the information contained in consumers’ credit reports. The Consumer Financial Protection Bureau (CFPB) has rulemaking and enforcement authorities over all CRAs for the FCRA and certain other consumer protection laws. It has supervisory authority, or the authority to conduct examinations, over the larger CRAs. The CFPB receives far more complains about credit reporting than any other industry it regulates. In 2022, more than three quarters of complaints that the agency received were from credit reporting, most frequently from the three nationwide CRAs. Congress has shown continuing interest in policy questions surrounding CRAs, credit reports, credit scores, and the consumer data industry. Policy issues include (1) how inaccurate or disputed consumer data provided in consumer reports should be addressed; (2) consumers’ rights in the credit reporting system; (3) whether and how medical debt should be included in credit reports; (4) whether uses of credit bureau data outside of the financial services, such as for employment or rental decisions, should be limited; (5) whether the use of alternative consumer data may increase accuracy and credit access; and (6) how to address data protection and security issues in consumer data reporting. Congressional Research Service link to page 4 link to page 5 link to page 5 link to page 7 link to page 9 link to page 11 link to page 12 link to page 13 link to page 14 link to page 15 link to page 17 link to page 18 link to page 21 link to page 22 link to page 22 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Contents
Introduction ..................................................................................................................................... 1
The Consumer Data Industry and Specialty Services ..................................................................... 32
Consumer Reporting Services ................................................................................................... 32
Credit Scoring Services ............................................................................................................. 6
Existing 4 Consumer Protections and Regulation of the Credit Reporting Agencies System ........................................ 7.. 6
Policy Issues .................................................................................................................................... 98
Inaccurate or Disputed Information .......................................................................................... 9
Length of Time to Retain Negative Information Consumer Disputes ...................................................................... 11
Inconsistent Billing and Reporting Practices: Medical Tradelines ......................................... 13
10 Consumer Rights in the Credit Reporting System ................................................................... 11 Medical Debt and Credit Reports ...................................................................... 14
Appropriate Purposes for Using Credit Bureau Data: Employment Decisions ...................... 15
Consumers with Limited Credit Histories and Use of Alternative Scoring Methods ............. 16
Data Protection and Security Issues12 Use of Credit Reports for Employment Decisions and Tenant Screening .............................. 14 Alternative Data in Credit Reports ........................................................................................ 18

Appendixes
Appendix. Natural Disasters, Government Shutdowns, and the COVID-19 (Coronavirus
Disease 19) Pandemic .. 15 Data Protection and Security Issues ......................................................................................... 18 Appendixes Appendix. Natural Disasters and the COVID-19 Pandemic ................................... 20...................... 19

Contacts
Author Information ........................................................................................................................ 2219

Congressional Research Service Congressional Research Service

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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Introduction
The consumer data industry collects and subsequently provides information to firms about
behavior when consumers conduct various financial transactions. Firms use this data to determine
whether consumers have engaged in behaviors that could be costly or beneficial to the firmsConsumer credit reporting agencies (also called credit bureaus or CRAs) collect and subsequently provide information to firms about consumer credit and payment behavior, called consumer reports or credit reports. Firms use credit report information to screen for consumer risks. For . For
example, lenders rely upon credit reports and scoring systems to determine the likelihood that example, lenders rely upon credit reports and scoring systems to determine the likelihood that
prospective borrowers will repay their loans.prospective borrowers will repay their loans. The data may also be used to predict The consumer credit reporting system provides benefits to the consumer lending industry by making credit underwriting cheaper and easier and by creating an additional incentive for consumers to pay back their loans on time. Since the 1970s, consumer loan underwriting has become more automated, first with the increasing use of credit scores and more recently with new data and technologies.1 Credit scores are a (numeric) metric calculated with information in consumer credit reports and prepared, for example, for lenders to determine the likelihood of loan default. Credit scores are generally calculated using algorithms, which are pre-coded sets of instructions and calculations that are executed automatically. Lenders may rely upon credit scores to help decide whether to offer consumers loans and at what terms consumer
behaviors that would financially benefit firms.
Although the general public is likely to be more familiar with the use of credit reporting and
scoring to qualify for mortgage and other consumer loans, the scope of consumer data use is
much broader. Insured depository institutions (i.e., banks and credit unions) rely on consumer
data service providers to determine whether to make checking accounts or loans available to
individuals. Insurance companies use consumer data to determine what insurance products to
make available and to set policy premiums.1 Some payday lenders use data regarding the
management of checking accounts and payment of telecommunications bills to determine the
likelihood that a consumer will fail to repay small-dollar cash advances. Merchants rely on the
consumer data industry to determine whether to approve payment by check or electronic payment
card. Employers may use consumer data information to screen prospective employees to
determine, for example, the likelihood of fraudulent behavior. In short, numerous firms rely upon
consumer data to identify and evaluate the risks associated with entering into financial
relationships or transactions with consumers. .
Reliance by firms on consumer data significantly affects consumer access to financial products or Reliance by firms on consumer data significantly affects consumer access to financial products or
opportunities. For example, negative or derogatory information, such as opportunities. For example, negative or derogatory information, such as multiple overdrafts,
involuntary account closures, loan defaults, and fraud incidentsloan delinquencies or defaults, may influence a lender to deny a , may influence a lender to deny a
consumer access to credit. consumer access to credit. Further, such information may stay on a consumer’s reports for several
years. The inclusion of negative information may be particularly limiting to consumers under The inclusion of negative information may be particularly limiting to consumers under
circumstances in which such information is inaccurate or needs to be updated to reflect more circumstances in which such information is inaccurate or needs to be updated to reflect more
current and possibly current and possibly more favorable improved financial situations. Furthermore, consumers may find the financial situations. Furthermore, consumers may find the
process of making corrections to consumer data reports to be time-consuming, complex, and process of making corrections to consumer data reports to be time-consuming, complex, and
perhaps ineffective. The exclusion of more favorable information, such as the timely repayment perhaps ineffective. The exclusion of more favorable information, such as the timely repayment
of noncredit obligations, from standard credit reporting or scoring models may also limit credit of noncredit obligations, from standard credit reporting or scoring models may also limit credit
access.
This report first provides background information on the consumer data industry and various
specialty areas. The report examines one prominent specialty area—consumer scoring—and
describes various factors used to calculate credit scores. Next, the report provides a general
description of the current regulatory framework of the consumer data industry. Finally, the report
discusses selected policy issues pertaining to consumer data reports. Specifically, the report
addresses policy issues concerning (1) inaccurate or disputed consumer data provided in
consumer data reports; (2) how long negative or derogatory information should remain in
consumer data reports; (3) differences in billing and collection practices that can adversely affect
consumer data reports, an issue of particular concern with medical billing practices; (4)
consumers’ rights; (5) whether uses of credit bureau data outside of the financial services, such as
for employment decisions, adversely affect consumers and should be limited; (6) whether the use
of alternative consumer data or newer versions of credit scores may increase accuracy and credit

1 See CRS Report RS21341, Credit Scores: Credit-Based Insurance Scores, by Baird Webel.
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link to page 23 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

access; and (7) how to address data protection and security issues in consumer data reporting. For
each policy issue, the report addresses corresponding legislative and regulatory developments.
In the 116th Congress, credit reporting and the consumer data industry is a topic of interest.2 On
January 29, 2020, the House passed the Comprehensive Credit Reporting Enhancement,
Disclosure, Innovation, and Transparency Act of 2020 (Comprehensive CREDIT Act; H.R. 3621).
Originally a narrower bill, H.R. 3621 was amended in committee to include other bills marked up
and ordered reported by the House Financial Services Committee: H.R. 3614 (The Restricting
Credit Checks for Employment Decisions Act, Title VI of bill); H.R. 3618 (The Free Credit
Scores for Consumers Act of 2019, Title II of bill); H.R. 3622 (Restoring Unfairly Impaired
Credit and Protection Consumers Act, Title IV of bill); H.R. 3629 (The Clarity in Credit Score
Formation Act of 2019, Title V of bill); and H.R. 3642 (The Improving Credit Reporting for All
Consumers Act, Title I and VII of the bill). In addition, in December 2019, the committee marked
up and ordered reported two bills, the Protecting Your Credit Score Act of 2019 (H.R. 5332) and
the Consumer Protection for Medical Debt Collections Act (H.R. 5330).3 Where relevant, this
report discusses the approach these bills would take to address the policy issues examined. When
H.R. 3621 is addressed, the references are to the bill as passed by the House. Where H.R. 5330
and H.R. 5332 are addressed, the references are to the bills after committee amendment.
COVID-19 Pandemic and Credit Reporting
On March 27, in response to the Coronavirus Disease 2019 (COVID-19) pandemic, the President signed the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136). Section 4021 of the CARES Act
addresses credit reporting during the pandemic. It requires furnishers during the COVID-19 pandemic covered
period to report to the credit bureaus that consumers are current on their credit obligations if they enter into an
agreement to defer, forbear, modify, make partial payments, or get any other assistance on their loan payments
from a financial institution and fulfil those requirements, provided they were current before this period.4
Although the CARES Act protects the credit histories of consumers with forbearance agreements, some
consumers may stil experience harm to their credit record because lenders can choose whether to enter into an
assistance agreement for many types of consumer loans. On May 15, 2020, the House passed the Heroes Act
(H.R. 6800), and on October 1, 2020, the House passed an updated version of the bil (H.R. 925). Division K, Title
IV, Section 110401 of H.R. 6800 and Division O, Title IV, Section 401of H.R. 925 would address this potential
harm by creating a moratorium on furnishing adverse information to credit bureaus during the COVID-19
pandemic and for 120 days afterward, as well as for other future major natural disasters. Although these
provisions would protect consumers from lower credit scores, the removal of information may also reduce credit
scores’ predictability in the future, which could harm some consumers in the long term. For more information on
credit reporting, the COVID-19 pandemic, and the CARES Act, see the Appendix.

2 On February 26, 2019, the House Financial Services Committee held a hearing on the consumer data industry; see
U.S. Congress, House Committee on Financial Services, “Who’s Keeping Score? Holding Credit Bureaus Accountable
and Repairing a Broken System,” 116th Cong., February 26, 2019. The Senate has also expressed interest in credit
reporting and the consumer data industry; see U.S. Congress, Senate Committee on Banking, Housing, and Urban
Affairs, “Crapo Outlines Banking Committee Agenda for 116th Congress,” prepared by Chairman Mike Crapo, 116th
Cong., 1st sess., January 29, 2019, at https://www.banking.senate.gov/newsroom/majority/crapo-outlines-agenda-for-
116th-congress.
3 H.R. 5332 and H.R. 5330 were marked up and ordered to be reported on December 10, 2019; see
https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404859. H.Rept. 116-416 to accompany H.R.
5332 was filed on March 12, 2020.
4 If the consumer was delinquent before the covered period, then the furnisher should maintain the delinquent status
unless the consumer brings the account or obligation current. The covered period starts on January 31, 2020, and
extends to the later of 120 days after enactment or 120 days after the national emergency declared by the President on
March 13, 2020, terminates. For more information, see CFPB, Statement on Supervisory and Enforcement Practices
Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act, April 1, 2020, at
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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

The Consumer Data Industry and Specialty Services
This section provides background information on the consumer data industry, which generally
includes credit reporting agencies (CRAs), also referred to as credit bureaus (both terms are used
interchangeably in this report). This section also provides background on credit scoring, a
specialty service the industry provides, including a summary of the access. Although the general public is likely to be more familiar with the use of credit reporting and scoring to qualify for mortgage and other consumer loans, the scope of credit report use is broader. For example, employers may use credit reports to screen prospective employees to determine the likelihood of fraudulent behavior. Landlords may use consumer data to determine whether to lease an apartment to a prospective tenant. In short, numerous firms rely upon consumer data to identify and evaluate the risks associated with entering into financial relationships or transactions with consumers.2 This report first provides background information on the consumer data industry and various specialty areas. An overview of a prominent specialty area, consumer scoring, is discussed and along with various factors used to calculate credit scores. Next, the report provides a general description of the current regulatory framework of the consumer data industry. Finally, the report discusses selected policy issues pertaining to consumer data reports. Specifically, the report addresses policy issues concerning (1) inaccurate or disputed consumer data provided in consumer data reports; (2) consumers’ rights in the credit reporting system; (3) whether and how medical debt should be included in credit reports; (4) whether uses of credit bureau data outside 1 Faster computing power, internet-based products, and cheaper data storage at scale have increased automation in consumer lending. New technological innovations have been used to update automated processes, in some cases beyond traditional numeric credit scores. For example, for some lenders, the internet has been incorporated to accept applications, and new data sources are used to conduct consumer loan underwriting. For more information, see CRS In Focus IF12399, Automation, Artificial Intelligence, and Machine Learning in Consumer Lending, by Cheryl R. Cooper. 2 For a list of consumer reporting agencies, see Consumer Financial Protection Bureau (CFPB), “List of Consumer Reporting Agencies,” https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/consumer-reporting-companies/companies-list/. Congressional Research Service 1 link to page 22 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues of the financial services, such as for employment or rental decisions, should be limited; (5) whether the use of alternative consumer data may increase accuracy and credit access; and (6) how to address data protection and security issues in consumer data reporting. For more information on credit reporting relating to natural disasters, government shutdowns, and the COVID-19 pandemic, see the Appendix. The Consumer Data Industry and Specialty Services3 This section provides background information on the consumer data industry, particularly the CRAs. It also provides background on credit scoring along with a summary of key factors known to affect key factors known to affect
credit scores. credit scores.
Consumer Reporting Services
According to the Fair Credit Reporting Act (FCRA), which generally regulates the business of
credit reporting, CRAs are firms that prepare consumer reports based upon CRAs are firms that prepare consumer reports based upon historical data of individuals’ financial transactions. Equifax, Experian, and TransUnion are the three largest nationwide providers of credit reports, sometimes referred to as nationwide consumer reporting agencies. These credit bureaus generally create consumer credit reports containing historical information about repayment on credit products such as mortgages, student loans, credit cards, and auto loans. Credit applications, bankruptcies, and debts in collection are also regularly included. Other CRAs provide a variety of specialized consumer reporting services, including employment screening, tenant screening, and check and bank screening.4 These credit reports may include historical information about credit repayment; utility, telecom, and rent payment; employment; insurance claims; arrests; bankruptcies; and check writing and account management. Consumer files, however, generally do not contain information on consumer income or assets or personal information such as race or ethnicity, religious or political preference, or medical history.5 Firms that use consumer reports may also report information to CRAs, thus serving as furnishers.6 Furnishing is voluntary, and furnishers have discretion over the types of obligations they wish to report to each CRA.7 Therefore, there is significant variance in what information is 3 This section of the report was originally authored by Darryl Getter. 4 Some specialty CRAs are subsidiaries of larger CRAs. Examples include the National Consumer Telecom and Utilities Exchange (http://www.nctue.com/), which is managed by Equifax, and RentBureau (https://www.experian.com/rental-property-solutions/rental-history), which is owned by Experian. 5 See Federal Reserveindividuals’ financial
transactions history data.5 Such data may include historical information about credit repayment,
tenant payment, employment, insurance claims, arrests, bankruptcies, and check writing and
account management. Consumer files, however, do not contain information on consumer income
or assets.6 Consumer reports generally may not include information on items such as race or
ethnicity, religious or political preference, or medical history.7
Equifax, Experian, and TransUnion are the three largest nationwide providers of credit reports.8
Other CRAs provide a variety of specialized consumer reporting services.9 Some specialty CRAs
collect data regarding payment for phone, utilities (e.g., electric, gas, water), and
telecommunication (e.g., cable) services.10 Utility and telecommunication service providers use
the reports to verify the identity of customers and determine downpayment requirements for new
customers. Property management companies and rent payment services may report to CRAs that
specialize in collecting rent payment data for tenant and employment screening.11 Some CRAs
specialize in consumer reporting for the underbanked, near prime, and subprime consumer

https://files.consumerfinance.gov/f/documents/cfpb_credit-reporting-policy-statement_cares-act_2020-04.pdf.
5 P.L. 91-508. Title VI, §601, 84 Stat. 1128 (1970), codified as amended at 15 U.S.C. §§1681-1681x. For the legal
definition, see 12 C.F.R. §1090.104, “Consumer Reporting Market,” at http://www.ecfr.gov/cgi-bin/text-idx?SID=
c13cb74ad55c0e8d6abf8d2d1b26a2bc&mc=true&node=se12.9.1090_1104&rgn=div8. The Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, and the Equal Credit Opportunity Act are all consumer credit protection
amendments included in the Consumer Credit Protection Act (P.L. 90-321).
6 See Bureau of Consumer Financial Protection (CFPB), Key Dimensions and Processes in the U.S. Credit Reporting
System, December 2012, at http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf.
7 See Federal Reserve Board (FRB), “Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity , “Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity
(Regulation B),” (Regulation B),” Consumer Compliance Handbook, , at http://www.federalreserve.gov/boarddocs/supmanual/cch/http://www.federalreserve.gov/boarddocs/supmanual/cch/
fair_lend_reg_b.pdf; and Experian, “Basic Questions About Credit Reports and Credit Reporting,”fair_lend_reg_b.pdf; and Experian, “Basic Questions About Credit Reports and Credit Reporting,” Reports on Credit
issue 1, at https://www.experian.com/assets/consumer-education-content/brochures/Reports_Issue_1.pdf. https://www.experian.com/assets/consumer-education-content/brochures/Reports_Issue_1.pdf.
8 For a list of consumer reporting agencies, see “List of Consumer Reporting Agencies,” issued by CFPB, at
https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-companies-list.pdf.
9 Some specialty CRAs are subsidiaries of larger CRAs. Examples include the National Consumer Telecom & Utilities
Exchange, at http://www.nctue.com/, which is owned by Equifax; and RentBureau, at http://www.experian.com/
rentbureau/renter-credit.html, which is owned by Experian.
10 For example, see National Consumer Telecom & Utilities Exchange, at http://www.nctue.com/.
11 For example, see Experian RentBureau, at http://www.experian.com/rentbureau/renter-credit.html.
Congressional Research Service
36 A tradeline is a record of the transaction (payment) activity associated with a consumer account that is reported by a furnisher to a CRA. See Experian, “Glossary of Credit Terms,” https://www.experian.com/blogs/ask-experian/credit-education/faqs/glossary/. 7 A community bank, for example, may choose to report delinquencies on consumer loans rather than on commercial loans given that it may have greater information regarding the cash flow circumstances of its larger commercial borrowers. See Federal Trade Commission (FTC) and Federal Reserve, Report to Congress on the Fair Credit Reporting Act Dispute Process, August 2006, https://www.federalreserve.gov/boarddocs/rptcongress/fcradispute/fcradispute200608.htm. Congressional Research Service 2 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues reported to different CRAs. For example, some furnishers may choose not to fully report information for a variety of different reasons.8 Consumer credit reports are more comprehensive and therefore more valuable as more companies choose to participate as furnishers. However, furnishers incur costs to report data—for example, by meeting security requirements when transferring data and procedures to ensure accuracy of consumer information. To become furnishers, firms must be approved and comply with the policies of a CRA, such as fee registration requirements.9 The transfer of consumer data involves security risks, and many CRAs have adopted standardized reporting formats and requirements approved by the Consumer Data Industry Association for transferring data.10 Furnishers must be able to comply with industry data transfer requirements or some CRAs are unlikely to accept their data.11 Compliance costs may be more burdensome for smaller firms, causing some to choose not to be furnishers. In addition, entities that elect to become furnishers face legal obligations, which may also influence a firm’s decision to become a furnisher.12 Generally, CRAs earn revenues by selling credit reports to firms, as well as other related services, such as credit scoring analysis (discussed in more detail in the next section).13 Business models and policies of CRAs are different. Some CRAs may regularly maintain information on consumers, others may offer investigative services to gather information about consumers, and some may do a combination of these activities. Moreover, different CRAs may adopt different conventions for storing consumer information. Consequently, consumer reports obtained from different CRAs on the same consumer are likely to differ. 8 For example, some large credit card companies may be choosing not to report payment amounts to the nationwide consumer credit reporting agencies, possibly for competitive reasons. Logan Herman, Jonah Kaplan, and Austin Mueller, Payment Amount Furnishing and Consumer Reporting, CFPB, November 2020, https://files.consumerfinance.gov/f/documents/cfpb_quarterly-consumer-credit-trends_report_2020-11.pdf; and John McNamara, “Why the Largest Credit Card Companies Are Suppressing Actual Payment Data on Your Credit Report,” CFPB, https://www.consumerfinance.gov/about-us/blog/why-the-largest-credit-card-companies-are-suppressing-actual-payment-data-on-your-credit-report/. 9 For examples of some furnisher requirements, see Experian, “Reporting to Credit Agencies,” http://www.experian.com/consumer-information/reporting-to-credit-agencies.html. 10 For more information on credit reporting furnishing requirements, see Consumer Data Industry Association, “Metro 2 Format for Credit Reporting,” https://www.cdiaonline.org/resources/furnishers-of-data-overview/metro2-information/. 11 Compliance may require investing in technology compatible with the computer systems of a CRA. 12 Furnishers are obligated to report accurate and complete information as well as to investigate consumer disputes. See FTC, “Consumer Reports: What Information Furnishers Need to Know,” https://www.ftc.gov/tips-advice/business-center/guidance/consumer-reports-what-information-furnishers-need-know. 13 Jonathan Burns, “Credit Bureaus and Rating Agencies in the US,” IBISWorld, January 2023, p. 15. Congressional Research Service 3 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues Credit Repair and Credit Counseling Services Some consumers turn to credit repair and credit counseling services when they want help identifying and disputing inaccurate information in their credit reports, access to financial education14 and debt management plans,15 and support to improve their credit report and financial situations.16 Generally, credit repair companies operate for profit, while credit counseling services are provided by nonprofits, although services that these types of organizations offer to consumers may be similar.17 Credit repair company revenue declined during the COVID-19 pandemic due to stronger household finances,18 and more consumers are using internet resources to dispute information themselves.19 In contrast, consumer demand for credit counseling services has increased.20 Going forward, increasing interest rates may make it harder for consumers to pay off debt, increasing demand for credit repair and credit counseling services.21 Credit Scoring Services A consumer score is a (numeric) metric that can be used to predict the likelihood of a variety of financial behaviors.22 Consumer credit scores are prepared for lenders to determine, for example, the likelihood of loan default for a particular type of credit (e.g., a mortgage or credit card). Other consumer scores can be prepared to predict the likelihood of filing an insurance claim, overdrawing a bank account, failing to pay a utility bill, committing fraud, or a host of other adverse financial behaviors. Consumer scores are typically computed using the information obtained from one or more consumer reports. Some firms, including CRAs, create consumer reports and scores, while others are primarily engaged in only the production of consumer scores.23 Hence, consumer scoring can be considered a specialty service in the consumer data industry. For example, if a user of a consumer report subsequently wants a consumer score, it may be charged an additional fee. Given the variety of different financial behaviors firms may want to predict, there are many consumer scores that are calculated. Consumer scores for the same individual and behavior calculated by different scoring firms are also likely to differ. Consumer scoring firms may have purchased consumer information from different CRAs, which have their own policies for storing and reporting information. Each scoring firm has its own proprietary statistical model(s), meaning 14 For more information on financial literacy and education, see CRS Report R46941, Financial Literacy and Financial Education Policy Issues, by Cheryl R. Cooper. 15 For information on debt management plans, see Christa Gibbs et al., Recent Trends in Debt Settlement and Credit Counseling, CFPB, July 2020, https://files.consumerfinance.gov/f/documents/cfpb_quarterly-consumer-credit-trends_debt-settlement-credit-counseling_2020-07.pdf. 16 See CFPB, “What Is Credit Counseling?,” February 2, 2018, https://www.consumerfinance.gov/ask-cfpb/what-is-credit-counseling-en-1451/; and CFPB, “What’s the Difference Between a Credit Counselor and a Debt Settlement or Debt Relief Company?,” August 24, 2022, https://www.consumerfinance.gov/ask-cfpb/whats-the-difference-between-a-credit-counselor-and-a-debt-settlement-or-debt-relief-company-en-1449/. 17 Campbell Lang, “Credit Repair Services in the US,” IBISWorld, June 2022, p. 4. 18 For more information on household debt during the COVID-19 pandemic, see CRS Report R46578, COVID-19: Household Debt During the Pandemic, coordinated by Cheryl R. Cooper. 19 Campbell Lang, “Credit Repair Services in the US,” IBISWorld, July 2023, pp. 8-16. 20 Brendan McErlaine, “Credit Counselors, Surveyors, and Appraisers in the US,” IBISWorld, October 2022, pp. 10-15. 21 Brendan McErlaine, “Credit Repair Services in the US,” IBISWorld, July 2023, pp. 8-16. 22 The predictability power of consumer scores, assuming no significant changes in consumer repayment patterns, may last for approximately one to two years. For examples of various types of scores and corresponding estimated months of predictive power, see TransUnion, “Scores Overview,” http://www.transunion.com/docs/financialServices/FS_ScoresOverview.pdf. 23 FICO (see http://www.fico.com/en/) and VantageScore (see http://www.vantagescore.com/) are examples of firms that specialize in the production of credit scores. Congressional Research Service 4 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues that each

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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

segments, including consumers with minimal recorded data.12 Some CRAs specialize in debt
collection (recovering past due funds) and fraud verification data.13
Examples of Specialty CRA Services: Checking Accounts and Check Verification
When an individual applies for a checking account, a depository institution typically pays a fee to purchase a credit
report from a specialty CRA. This is a component of the initial fixed costs the depository institution incurs to
begin a financial relationship with a new customer. The institution can use the information about a prospective
customer to determine whether to offer the consumer a checking account and, if so, what range of product
features (e.g., check-writing privileges, overdraft protection) to offer the consumer.
Specifically, depository institutions use credit reports to screen for certain types of borrower risks.14 Banks must
verify the identities of their customers as required by the Bank Secrecy Act.15 In addition, depository institutions
look for any incidents of fraudulent activity associated with a prospective customer.16 Depository institutions
typically reject consumers when they discover problems verifying identity or incidents of fraud. Next, depository
institutions look for information about past banking relationships, particularly to see if any financial institutions
closed checking or other accounts due to their inability to col ect overdraft or insufficient funds fees.17 Although
some institutions may choose to reject applicants if they discover adverse information in their credit reports,
many institutions may offer these applicants specialized checking accounts with less overdraft coverage and fewer
check-writing privileges. Institutions may also offer these applicants prepaid cards as a substitute for a checking
account. The information the institutions obtain from CRAs may also allow them to infer the probability of cross-
selling (or arguably preapproving access to) other financial products (e.g., mortgages, credit cards, savings
accounts) to new customers.
Some specialty CRAs help facilitate consumer payments by check. For example, if a customer wants to use a check
to pay for purchases, a merchant can electronically and quickly request check authorization from a specialty CRA
that provides information at the point of sale (at the cash register).18 The specialty CRA col ects payment history
and check-writing patterns, and the merchant pays a check authorization fee to obtain an instant recommendation
of accept or decline.19

12 For example, see Clarity Services, Inc., at https://www.clarityservices.com/about/, which focuses on higher-risk
borrowers and collects data from financial service providers, such as auto financers, check cashers, prepaid card
issuers, peer-to-peer micro lenders, and small dollar credit lenders.
13 See Consumer Data Industry Association (CDIA), “About CDIA,” at https://www.cdiaonline.org/about/index.cfm?
unItemNumber=515.
14 See ChexSystems, “ChexSystems—Credit System for Checking Accounts,” Crediful, at https://www.crediful.com/
chexsystems/.
15 P.L. 91-508.
16 Fraud may include, but is not limited to, identity theft and check kiting. Real Time Identity Check is a specialty CRA
used for this purpose; see Access Payment Systems, “Real Time Check Verification,” at
http://www.accesspaymentsystems.com/real-time-check-verification/. Another specialty CRA used for this purpose is
Early Warning, which offers a product known as Deposit Chek, at https://www.earlywarning.com/solutions/payment/
deposit-chek.html#real-time-deposit-chek-service. In the payment system, fraud occurs when an unauthorized person
accesses the value associated with a payment vehicle. See Mark Furletti and Stephen Smith, The Laws, Regulations,
and Industry Practices That Protect Consumers Who Use Electronic Payment Systems: ACH E-Checks & Prepaid
Cards, Federal Reserve Bank of Philadelphia, Payment Cards Center Discussion Paper, DP05-04, March 2005, at
http://www.philadelphiafed.org/consumer-credit-and-payments/payment-cards-center/publications/discussion-papers/
2005/ConsumerProtection.pdf.
17 For ChexSystems, which is owned by parent company Fidelity National Information Services (FNIS), this product is
known as QualiFile. See Rebecca Lake, “What Is a Good ChexSystems (Qualifile) Score?” My BankTracker, July 20,
2018, at https://www.mybanktracker.com/checking/faq/good-chexsystems-qualifile-score-276348. For Early Warning,
this product is known as Deposit Chek at https://www.earlywarning.com/solutions/payment/deposit-chek.html#real-
time-deposit-chek-service.
18 Certegy, which is owned by parent company FIS (see http://www.fisglobal.com/products-retailpayments), and
Telecheck (see http://www.firstdata.com/telecheck/) are specialty CRAs often used to obtain check authorization at the
point of sale (i.e., the moment customers pay for their purchases).
19 The fee paid by the merchant is analogous to the merchant discount fee that merchants pay when accepting credit or
debit card payments. See CRS Report R41913, Regulation of Debit Interchange Fees, by Darryl E. Getter.
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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Firms that use consumer reports may also report information to CRAs, thus serving as furnishers.
A tradeline is an account attached to a particular consumer that is reported to a CRA by a
furnisher.20 A tradeline serves as a record of the transaction (payment) activity associated with the
account. Furnishing tradelines is voluntary, and furnishers are not required to submit tradelines to
all CRAs. Furnishers also have different business models and policies, resulting in different
reporting practices. Some furnishers may report all unpaid customer obligations that were deemed
uncollectible and written off their balance sheets; some report when money balances owed
surpass minimum threshold levels; some report only the principal balances owed minus the
penalties and fees; and others may report all monies owed. Furnishers also have discretion over
the types of obligations they wish to report.21
Benefits to users of consumer data increase as more individual companies choose to participate as
furnishers, but furnishers do incur costs to report data. To become furnishers, firms must be
approved and comply with the policies of a CRA, such as fee registration requirements.22 The
transfer of consumer data involves security risks, and many CRAs have adopted standardized
reporting formats and requirements approved by the Consumer Data Industry Association (CDIA)
for transferring data.23 Furnishers must be able to comply with industry data transfer requirements
or some CRAs are unlikely to accept their data. Compliance may require investing in technology
compatible with the computer systems of a CRA. Compliance costs may be more burdensome for
smaller firms, causing some to choose not to be furnishers. In addition, entities that elect to
become furnishers face legal obligations under the FCRA.24 The FCRA requires furnishers to
report accurate and complete information as well as to investigate consumer disputes. Hence,
reporting obligations could possibly, under some circumstances, result in legal costs, which may
also influence a firm’s decision to become a furnisher.
Business models and policies of CRAs are also different. Different CRAs may collect the same
information on the same individuals but adopt different conventions for storing the information.
One CRA may report a delinquent debt obligation separately from the penalties and fees whereas
another CRA may choose to combine both items into one entry. Consequently, consumer reports
obtained from different CRAs on the same consumer are likely to differ due to different policies
adopted by furnishers, CRAs, or both.

20 See Experian, “Glossary of Credit Terms,” at https://www.experian.com/blogs/ask-experian/credit-education/faqs/
glossary/.
21 A community bank, for example, may choose to report delinquencies on consumer loans rather than on commercial
loans given that it may have greater information regarding the cash flow circumstances of its larger commercial
borrowers. See Federal Trade Commission (FTC) and FRB, Report to Congress on the Fair Credit Reporting Act
Dispute Process, August 2006, at http://www.federalreserve.gov/boarddocs/rptcongress/fcradispute/
fcradispute200608.htm#toc4.
22 For examples of some furnisher requirements, see Experian, “Reporting to Credit Agencies,” at
http://www.experian.com/consumer-information/reporting-to-credit-agencies.html.
23 The approved formats add security (privacy) protections to the data transfer process. See CDIA, “Metro 2 Format for
Credit Reporting,” at https://www.cdiaonline.org/resources/furnishers-of-data-overview/metro2-information/.
24 See FTC, “Consumer Reports: What Information Furnishers Need to Know,” at https://www.ftc.gov/tips-advice/
business-center/guidance/consumer-reports-what-information-furnishers-need-know.
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Credit Scoring Services
A consumer score is a (numeric) metric that can be used to predict a variety of financial
behaviors.25 Consumer credit scores are prepared for lenders to determine, for example, the
likelihood of loan default. Other consumer scores can be prepared to predict the likelihood of
filing an insurance claim, overdrawing a bank account, failing to pay a utility bill, committing
fraud, or a host of other adverse financial behaviors. Consumer scores are typically computed
using the information obtained from one or more consumer reports. Rather than maintaining a
repository of credit records, some firms are primarily engaged in the production of consumer
scores.26 Hence, consumer scoring can be considered a specialty service in the consumer data
industry. For example, if a user of a consumer report subsequently wants a consumer score, it
may be charged an additional fee.
Given the variety of different financial behaviors to predict, there are many consumer scores that
can be calculated. Consumer scores for the same individual and behavior calculated by different
scoring firms are also likely to differ. Consumer scoring firms may have purchased consumer
information from different CRAs, which have their own policies for storing and reporting
information. Each scoring firm has its own proprietary statistical model(s), meaning that each
firm decides what consumer information should be included and excluded from calculations. firm decides what consumer information should be included and excluded from calculations.
Each firm can choose its own weighting algorithms. For example, included information can be Each firm can choose its own weighting algorithms. For example, included information can be
equally weighted, or heavier weights can be placed on more recent information or on information equally weighted, or heavier weights can be placed on more recent information or on information
otherwise deemed more pertinent. Sometimes the consumer scoring firm selects the appropriate otherwise deemed more pertinent. Sometimes the consumer scoring firm selects the appropriate
weighting scheme, and sometimes the requestor of a consumer score may provide instructions to weighting scheme, and sometimes the requestor of a consumer score may provide instructions to
the preparer. Hence, consumers may not see the actual scores used until after the decisionmaking
firms release them, particularly in cases when customized scores were requested and used in the
decisionmaking process.

25 The predictability power of consumer scores, assuming no significant changes in consumer repayment patterns, may
last for approximately one year to two years. For examples of various types of scores and corresponding estimated
months of predictive power, see TransUnion, “Scores Overview,” TransUnion Scores, at http://www.transunion.com/
docs/financialServices/FS_ScoresOverview.pdf.
26 FICO (see http://www.fico.com/en/) and VantageScore (see http://www.vantagescore.com/) are examples of firms
that specialize in the production of credit scores; their primary business is not to compile consumer reports.
Congressional Research Service
6the preparer. In recent years, average consumer credit scores have improved due to COVID-19-era forbearance and credit reporting protections,24 as well as improved financial situations for consumers.25 24 For background on consumer loan forbearance and other relief options during the COVID-19 pandemic, see CRS Report R46356, COVID-19: Consumer Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper. 25 Alyssa Brown and Siobhán McAlister, “Credit Score Transitions during the COVID-19 Pandemic,” CFPB, January 25, 2023, https://www.consumerfinance.gov/about-us/blog/office-of-research-blog-credit-score-transitions-during-the-covid-19-pandemic/; and Scott Fulford, Marie Rush, and Eric Wilson, Changes in Consumer Financial Status During the Early Months of the Pandemic: Evidence from the Second Wave of the Making Ends Meet, CFPB, April 2021, https://files.consumerfinance.gov/f/documents/cfpb_making-ends-meet-wave-2_report_2021-04.pdf. Congressional Research Service 5

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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Some Factors Frequently Used to Calculate Credit Scores27
Lenders, whether for mortgages or other forms of consumer loans (e.g., credit card loans, installment loans, and
automobile loans), rely upon credit scores, which are calculated to represent the risk of delinquency or default of
consumers seeking credit. Scores26 To calculate a credit score, credit scoring models generally obtain the fol owing factors To calculate a credit score, credit scoring models generally obtain the fol owing factors
from a credit reportfrom a credit report.
: •
Payment history.. A lender is concerned about the borrower paying past credit accounts on time. A lender is concerned about the borrower paying past credit accounts on time. The
payment Payment history includes information related to late or missed payments, how late, amount owed, history includes information related to late or missed payments, how late, amount owed,
bankruptcies, foreclosures, lawsuits, and wage garnishments. Negative information on a credit report bankruptcies, foreclosures, lawsuits, and wage garnishments. Negative information on a credit report
negatively affects a credit score. negatively affects a credit score.
•
Credit utilization.. This factor measures the amount of outstanding debt a consumer has accumulated This factor measures the amount of outstanding debt a consumer has accumulated
relative to his or her credit limit. An individual with $3,000 in charges on a credit card with a $5,000 limit relative to his or her credit limit. An individual with $3,000 in charges on a credit card with a $5,000 limit
would have a credit utilization rate of 60%. A high credit utilization rate negatively affects a credit score. would have a credit utilization rate of 60%. A high credit utilization rate negatively affects a credit score.
•
Length of credit history.. The more experience an individual has using credit, the easier it is for a lender to The more experience an individual has using credit, the easier it is for a lender to
determine how well or poorly additional credit wil be managed. Calculating credit scores may be impossible determine how well or poorly additional credit wil be managed. Calculating credit scores may be impossible
for “invisible” consumers (i.e., consumers with either no credit history or an insufficient credit history). for “invisible” consumers (i.e., consumers with either no credit history or an insufficient credit history).
•
New credit accounts or requests.. There are two types of inquiries There are two types of inquiries.: A A soft inquiry occurs when inquiry occurs when
consumers request to check their credit reports, typically for accuracies or to dispute information, but there consumers request to check their credit reports, typically for accuracies or to dispute information, but there
is no corresponding request for credit. Users of credit reports do not receive information regarding soft is no corresponding request for credit. Users of credit reports do not receive information regarding soft
inquiries. A inquiries. A hard inquiry occurs when consumers apply for credit, and action is required by users of credit inquiry occurs when consumers apply for credit, and action is required by users of credit
reports, typically to make approval or rejection decisions. Hence, making numerous different credit requests, reports, typically to make approval or rejection decisions. Hence, making numerous different credit requests,
particularly over a short period of time, generally can negatively affect a score. If a consumer shops for credit, particularly over a short period of time, generally can negatively affect a score. If a consumer shops for credit,
which would be indicated by applying for the same type of credit within a short period of time (e.g., two to which would be indicated by applying for the same type of credit within a short period of time (e.g., two to
six weeks), then that activity would count six weeks), then that activity would count only as as only one hard inquiry in most credit scores.one hard inquiry in most credit scores.2827 Prescreening, Prescreening,
which is used frequently in credit card solicitations, does not count as a “firm offer of credit or insurance” which is used frequently in credit card solicitations, does not count as a “firm offer of credit or insurance”
and, therefore, does not affect consumer credit scores.and, therefore, does not affect consumer credit scores.29
28 •
Credit mix. Demonstrating the ability to manage multiple types of credit obligations (i.e., revolving, Demonstrating the ability to manage multiple types of credit obligations (i.e., revolving,
installment, mortgage credit, and finance company credit) influences a credit score. For example, the ability to installment, mortgage credit, and finance company credit) influences a credit score. For example, the ability to
maintain a stable debt-to-income ratio, preferably below 28%, despite having a mix of credit typesmaintain a stable debt-to-income ratio, preferably below 28%, despite having a mix of credit types, indicates indicates
the ability to manage credit. Having most of one’s credit consist of credit from the ability to manage credit. Having most of one’s credit consist of credit from indirect lenders,, such as such as
department stores and rent-to-own stores, may not be viewed as favorably in some credit scoring models as department stores and rent-to-own stores, may not be viewed as favorably in some credit scoring models as
credit from credit from direct lenders, such as banks and credit unions. , such as banks and credit unions.
Firms that prepare or users that purchase credit scores can decide how much weight to apply to each factor, and Firms that prepare or users that purchase credit scores can decide how much weight to apply to each factor, and
they may include additional predictive factors (e.g., information found on the credit application such as income and they may include additional predictive factors (e.g., information found on the credit application such as income and
employment history) in the calculations. The Equal Credit Opportunity Act, however, prohibits characteristics employment history) in the calculations. The Equal Credit Opportunity Act, however, prohibits characteristics
such as race, sex, marital status, national origin, and religion from being used in credit scoring models.such as race, sex, marital status, national origin, and religion from being used in credit scoring models.3029
Information for consumers on how to improve and maintain a good credit score is available from the Consumer Information for consumers on how to improve and maintain a good credit score is available from the Consumer
Financial Protection Bureau (Financial Protection Bureau (CFPB; see https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/). see https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/).
Existing Consumer Protections and Regulation
of of the Credit Reporting AgenciesSystem
This section provides a brief overview of existing consumer protections and This section provides a brief overview of existing consumer protections and regulationregulations related to related to
credit reporting.credit reporting.
As noted, the Fair Credit Reporting Act (FCRA), enacted in 1970, is the main statute regulating
Consumers generally do not choose to participate in the credit reporting the credit reporting industry. The FCRA requires “that consumer reporting agencies adopt

27system. 26 See Fair Isaac, “What’s See Fair Isaac, “What’s Inin My FICO Scores: How My FICO Scores Are Calculated,” My FICO Scores: How My FICO Scores Are Calculated,” at http://www.myfico.com/ http://www.myfico.com/
crediteducation/whatsinyourscore.aspx; and crediteducation/whatsinyourscore.aspx; and FRBFederal Reserve, “Credit Reports and Credit Score,”, “Credit Reports and Credit Score,” at
https://www.federalreserveconsumerhelp.gov/https://www.federalreserveconsumerhelp.gov/en/learnmore/credit-reports-and-scoreslearnmore/credit-reports-and-scores?sc_lang=en.
28. 27 CFPB, CFPB, What effect will shopping for an auto loan have on my credit? Ask CFPB, June 6, 2016, at
“What Effect Will Shopping for an Auto Loan Have on My Credit?,” June 6, 2016, https://www.consumerfinance.gov/ask-cfpb/what-effect-will-shopping-for-an-auto-loan-have-on-my-credit-en-763/https://www.consumerfinance.gov/ask-cfpb/what-effect-will-shopping-for-an-auto-loan-have-on-my-credit-en-763/. 28 See Federal Reserve, “Permissible Purposes of Consumer Reports (FRCA, Section 604) and Investigative Consumer Reports (FRCA, Section 606),” http://www.federalreserve.gov/boarddocs/supmanual/cch/200611/fcra.pdf; CFPB, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012, p. 9, http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf; and BankersOnline, “New Rules for Prescreening,” March 1, 1997, https://www.bankersonline.com/articles/103643. 29 P.L. 93-495, Title 5, 88 Stat. 1520; 15 U.S.C. §1691 et seq. Congressional Research Service 6.
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For this reason, consumer protection laws and regulations may be particularly consequential. The Fair Credit Reporting Act (FCRA; 15 U.S.C. §1681), enacted in 1970 and implemented by Regulation V, is the main statute regulating the credit reporting industry. The FCRA requires “that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, reasonable procedures for meeting the needs of commerce for consumer credit, personnel,
insurance, and other information in a manner which is fair and equitable to the consumer, with insurance, and other information in a manner which is fair and equitable to the consumer, with
regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.”regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.”31
30 The FCRA establishes consumers’ rights in relation to their credit reports, as well as permissible The FCRA establishes consumers’ rights in relation to their credit reports, as well as permissible
uses of credit reports. It also imposes certain responsibilities on those who collect, furnish, and uses of credit reports. It also imposes certain responsibilities on those who collect, furnish, and
use the information contained in consumers’ credit reports.use the information contained in consumers’ credit reports.32
The FCRA includes consumer protection provisions. Under the FCRA, The FCRA includes consumer protection provisions. Under the FCRA, consumersa consumer must be told must be told
when when theirhis or her information from a CRA has been used after an adverse action (generally a denial of information from a CRA has been used after an adverse action (generally a denial of
credit) has occurred, and disclosure of that information must be made free of charge.credit) has occurred, and disclosure of that information must be made free of charge.33 Consumers
have31 A consumer has a right to one free credit report every year (from each of the three largest nationwide credit a right to one free credit report every year (from each of the three largest nationwide credit
reporting providers) even in the absence of an adverse action (e.g., credit denial).reporting providers) even in the absence of an adverse action (e.g., credit denial).32 Consumers also Consumers also
have the right to dispute inaccurate or incomplete information in their have the right to dispute inaccurate or incomplete information in their reportreports. After a consumer . After a consumer
alerts a CRA of such a discrepancy, the CRA must investigate and correct errors, usually within alerts a CRA of such a discrepancy, the CRA must investigate and correct errors, usually within
30 days. The FCRA also limits the length of time negative information may remain on reports. 30 days. The FCRA also limits the length of time negative information may remain on reports.
Negative collection tradelinesDebts in collections typically stay on credit reports for typically stay on credit reports for 7 seven years, even if the consumer years, even if the consumer
pays in full the item in collectionpays in full the item in collection; a tradeline associated with a personal bankruptcy stays on a
credit report for 10 years.34
The . Personal bankruptcies stay on credit reports for 10 years.33 The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-FrankDodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203))35 established established
the Bureau of Consumer Financial Protection (CFPB)the CFPB, consolidating many federal consumer , consolidating many federal consumer
financial protection powers from other federal agencies. The CFPB has rulemaking and financial protection powers from other federal agencies. The CFPB has rulemaking and
enforcement authorities over all CRAs for certain consumer protection lawsenforcement authorities over all CRAs for certain consumer protection laws; it. It has supervisory has supervisory
authority, or the authority to conduct examinations, over the larger CRAs. In July 2012, the CFPB authority, or the authority to conduct examinations, over the larger CRAs. In July 2012, the CFPB
announced that it would supervise CRAs with $7 million or more in annual receipts, which announced that it would supervise CRAs with $7 million or more in annual receipts, which
at that time included 30 firms representing approximately 94% of the market.included 30 firms representing approximately 94% of the market.3634
The CFPB conducts examinations of the CRAs, reviewing procedures and operating systems The CFPB conducts examinations of the CRAs, reviewing procedures and operating systems
regarding the management of consumer data and enforcing applicable laws. In 2017, the CFPB regarding the management of consumer data and enforcing applicable laws. In 2017, the CFPB
released a report of its supervisory work in the credit reporting system.released a report of its supervisory work in the credit reporting system.3735 The report discusses the The report discusses the
CFPB’s efforts to work with credit bureaus and financial firms to improve credit reporting in CFPB’s efforts to work with credit bureaus and financial firms to improve credit reporting in
three specific areas: data accuracy, dispute handling and resolution, and furnisher reporting. As three specific areas: data accuracy, dispute handling and resolution, and furnisher reporting. As
the report describes, credit bureaus and financial firms have developed data governance and the report describes, credit bureaus and financial firms have developed data governance and

29 See FRB, “Permissible Purposes of Consumer Reports (FRCA, Section 604) and Investigative Consumer Reports
(FRCA, Section 606),” Fair Credit Reporting, at http://www.federalreserve.gov/boarddocs/supmanual/cch/200611/
fcra.pdf; CFPB, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012, p. 9, at
http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf; and “New Rules for Prescreening,”
at https://www.bankersonline.com/articles/103643.
30 P.L. 93-495, Title 5, 88 Stat. 1520; 15 U.S.C. §1691 et seq.
31 15 U.S.C. §1681.
32 CRS Insight IN10792, The Equifax Data Breach: An Overview and Issues for Congress, by N. Eric Weiss.
33 See FTC, A Summary of your Rights Under the Fair Credit Reporting Act, at https://www.consumer.ftc.gov/articles/
pdf-0096-fair-credit-reporting-act.pdf.
34 CFPB, How long does negative information remain on my credit report? Ask CFPB, August 4, 2016, at
quality control programs to monitor data accuracy through working with the CFPB. In addition, 30 15 U.S.C. §1681. 31 See CFPB, A Summary of Your Rights Under the Fair Credit Reporting Act, https://files.consumerfinance.gov/f/documents/bcfp_consumer-rights-summary_2018-09.pdf. 32 As of August 2023, Equifax, Experian, and TransUnion are offering free weekly online credit reports. See https://www.annualcreditreport.com/index.action. 33 CFPB, “How Long Does Negative Information Remain on My Credit Report?,” September 1, 2020, https://www.consumerfinance.gov/ask-cfpb/how-long-does-negative-information-remain-on-my-credit-report-en-323/. https://www.consumerfinance.gov/ask-cfpb/how-long-does-negative-information-remain-on-my-credit-report-en-323/.
35 P.L. 111-203, §1011.
3634 CFPB, “CFPB to Supervise Credit Reporting,” July 16, 2012, CFPB, “CFPB to Supervise Credit Reporting,” July 16, 2012, at httphttps://www.consumerfinance.gov/://www.consumerfinance.gov/about-us/newsroom/newsroom/
consumer-financial-protection-bureau-to-superivse-credit-reporting/.consumer-financial-protection-bureau-to-superivse-credit-reporting/.
37 35 CFPB, CFPB, Supervisory Highlights Consumer Reporting Special Edition, , Issue 14, 2017, at
2017, https://files.consumerfinance.gov/f/documents/201703_cfpb_Supervisory-Highlights-Consumer-Reporting-Special-https://files.consumerfinance.gov/f/documents/201703_cfpb_Supervisory-Highlights-Consumer-Reporting-Special-
Edition.pdf. Edition.pdf.
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quality control programs to monitor data accuracy through working with the CFPB. In addition,
the CFPB has encouraged credit bureaus to improve their dispute and resolution processes, the CFPB has encouraged credit bureaus to improve their dispute and resolution processes,
including making it easier and more informative for consumers.including making it easier and more informative for consumers.38
Recently, 36 Congress has also been interested in improving consumer protections in the credit Congress has also been interested in improving consumer protections in the credit
reporting system, particularly in response to the 2017 Equifax data breach, which exposed reporting system, particularly in response to the 2017 Equifax data breach, which exposed
personal information of millions of consumers.personal information of millions of consumers.3937 The 2018 Economic Growth, Regulatory Relief, The 2018 Economic Growth, Regulatory Relief,
and Consumer Protection Act (P.L. 115-174) established new consumer protections and Consumer Protection Act (P.L. 115-174) established new consumer protections relatingrelated to to
credit reporting, including the right to a free credit freeze. Credit freezes allow consumers to credit reporting, including the right to a free credit freeze. Credit freezes allow consumers to stop
new credit from being opened in their name, to protect themselves from fraud and identity theft.
Policy Issues
This section examines selected policy issues pertaining to the use of credit reports and scores in
consumer lending decisions. For each policy issue, the report highlights recent legislative and
regulatory developments and discusses selected legislative proposals from the 116th Congress that
would address the issue.
Inaccurate or Disputed Information
The accuracy of consumer information in consumer data reports has been an ongoing policy
concern. Inaccurate information in a credit report may limit a consumer’s access to credit in some
cases or increase the costs to the consumer of obtaining credit in others. In 2012, the Federal
Trade Commission (FTC) reported that 26% of participants in a survey of credit report accuracy
were able to identify at least one potentially material error on at least one of approximately three
different credit reports prepared using their consumer information.40 After the reports were
corrected, 13% of participants in the FTC study saw one or more of their credit scores increase.
For those who saw an increase, over 40% of their scores rose by more than 20 points, which
could increase the likelihood that the consumer would be offered less expensive credit terms.
Credit reporting inaccuracies may occur for various reasons. Consumers may inadvertently
provide inaccurate data when applying for financial services. Furnishers may inadvertently input
inaccurate information into their databases. Matching information to the proper individual poses
challenges, such as in cases when multiple individuals have similar names and spellings. In some
cases, the information may be properly matched, but the individual could be a victim of fraud or
identity theft.
The predictive power of consumer data, or the ability to accurately predict a consumer’s
likelihood to default on a loan, would be enhanced to the extent that consumer tradelines are

38 The credit bureaus’ efforts to make disputes easier and more informative for consumers include (1) online portals to
submit disputes and upload attachments of supporting documentation; (2) improvements to their call center scripts and
training regarding solicitation of relevant information from consumers with disputes; (3) no longer requiring that
consumers obtain or purchase a recent consumer report before investigations; and (4) notice to consumer of dispute
results, including investigation results. CFPB, Supervisory Highlights Consumer Reporting Special Edition, Issue 14,
2017, pp.9-11, at https://files.consumerfinance.gov/f/documents/201703_cfpb_Supervisory-Highlights-Consumer-
Reporting-Special-Edition.pdf.
39 Equifax, “Equifax Announces Cybersecurity Incident Involving Consumer Information,” press release, September 7,
2017, at https://investor.equifax.com/news-and-events/news/2017/09-07-2017-213000628.
40 See FTC, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003,
December 2012, at https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-
transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf.
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regularly updated with correct and current information. As mentioned in the previous section, the
CFPB has recently encouraged credit bureaus and financial firms to improve data accuracy in
credit reporting. For example, since 2014, the CFPB has required the largest consumer reporting
firms to provide standardized accuracy reports on a regular basis.41 The accuracy reports must
specify the frequency that consumers dispute information, list furnishers and industries with the
most disputes, and provide dispute resolution information. According to the CFPB, the top 100
furnishers provide 76% of tradeline information to the largest nationwide CRAs, and the
furnishers regularly update the account status of reported tradelines.42 In addition, the larger
CRAs have also made improvements to the communication tool they use to facilitate the dispute
resolution process between consumers and furnishers.43 Further, effective July 1, 2017, the CRAs
enhanced public record data standards for the collection and timely updating of civil judgements
and tax liens.44 Public record data must contain minimum identifying information (i.e., name,
address, and Social Security number or date of birth) and must be updated at least every 90 days;
otherwise, the tax lien and civil judgment information will no longer be reported. According to
the CFPB, this led to the removal of most civil judgements and half of all tax liens in credit
reports for the nationwide CRAs.45 The accuracy of credit reports, nonetheless, ultimately
depends upon consumers to monitor and dispute any discrepancies.
H.R. 3621 and H.R. 5332 would address some concerns relating to inaccurate or disputed data by
establishing new consumer rights around the dispute process. Both bills would guarantee
consumers more information about dispute investigations and would grant consumers the right to
appeal disputes to credit bureaus, thus formalizing the process.46 It also would explicitly establish
consumers’ right to seek injunctive relief, a legal remedy where a court requires future behavior
change (e.g., removing adverse information from a credit record).47 Moreover, it would provide
credit restoration to consumers who are the victims of some predatory activities, such as
deceptive lender acts or fraud.48 H.R. 5332 would require social security number matches before
information could be included in a consumer’s credit report.49 It would also create a CFPB credit
reporting ombudsperson to help resolve persistent errors.50

41 See CFPB, “Prepared Remarks of CFPB Director Richard Cordray at the Medical Debt Collection Hearing,”
December 11, 2014, at http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-
cordray-at-the-medical-debt-collection-hearing/. A sample accuracy report may be found at
http://files.consumerfinance.gov/f/201412_cfpb_sample-accuracy-report.pdf.
42 See CFPB, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012, p. 14, at
http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf.
43 The CRAs use a web-based tool, the Online Solution for Complete and Accurate Reporting (e-OSCAR), to
investigate credit reporting disputes. e-OSCAR is owned and operated by four companies: Equifax, Experian, Innovis,
and TransUnion. See http://www.e-oscar.org/.
44 See Consumer Data Industry Association, “New Public Record Credit Reporting Standards to Begin July 1, 2017;
Civil Judgments and some Tax Liens to be removed from many credit reports,” press release, June 28, 2017, at
http://s3.amazonaws.com/rdcms-cdia/files/production/public/PDFs/CDIA.NCAP.July1Changes.6.28.pdf.
45 Claire Brennecke, Jasper Clarkberg, and Michelle Kambara, Public Records, Credit Scores, and Credit Performance,
CFPB, Quarterly Consumer Credit Trends, December 2019, p. 2, at protect themselves from fraud and identity theft by stopping new credit from being opened in their names. Policy Issues Policymakers continue to debate the legal and regulatory framework around the credit reporting system, including whether the scope of the FCRA should be expanded.38 For example, the CFPB recently announced that it is considering whether to amend Regulation V to update credit reporting regulations.39 These new regulations may clarify whether new types of data brokers are subject to the FCRA as CRAs and what kinds of information constitute a credit report.40 The CFPB is also considering whether to clarify how medical debts should be included in credit reports, which is discussed in more detail later in this report.41 In addition, a recent Government Accountability Office (GAO) report highlights the use of consumer scores outside of FCRA purposes and suggests that Congress consider whether the FCRA or other consumer protection laws should be expanded.42 36 The credit bureaus’ efforts to make disputes easier and more informative for consumers include (1) online portals to submit disputes and upload attachments of supporting documentation; (2) improvements to their call center scripts and training regarding solicitation of relevant information from consumers with disputes; (3) no longer requiring that consumers obtain or purchase recent consumer reports before investigations; and (4) notice to consumers of dispute results, including investigation results. See CFPB, Supervisory Highlights Consumer Reporting Special Edition, pp. 9-11. 37 Equifax, “Equifax Announces Cybersecurity Incident Involving Consumer Information,” press release, September 7, 2017, https://www.equifaxsecurity2017.com/updates//-/announcements/a-progress-update-for-consumers. 38 In addition, FCRA compliance issues continue to occur. For example, a more recent 2019 CFPB supervisory report on consumer reporting discussed new violations and compliance management system weaknesses related to FCRA compliance. See CFPB, Supervisory Highlights Consumer Reporting Special Edition, Issue 20, December 2019, https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-20_122019.pdf. 39 CFPB, Fair Credit Reporting Act Rulemaking, Pre-Rule Activity, Fall 2022, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202210&RIN=3170-AA54. Pre-rule activity may include the following CFPB request for information: CFPB, “Request for Information Regarding Data Brokers and Other Business Practices Involving the Collection and Sale of Consumer Information,” 88 Federal Register 16951-16954, March 21, 2023; and CFPB, Small Business Review Panel for Consumer Reporting Rulemaking, https://www.consumerfinance.gov/rules-policy/small-business-review-panels/small-business-review-panel-for-consumer-reporting-rulemaking/. 40 CFPB, “Remarks of CFPB Director Rohit Chopra at White House Roundtable on Protecting Americans from Harmful Data Broker Practices,” August 15, 2023, https://www.consumerfinance.gov/about-us/newsroom/remarks-of-cfpb-director-rohit-chopra-at-white-house-roundtable-on-protecting-americans-from-harmful-data-broker-practices/; and CFPB, Small Business Advisory Review Panel for Consumer Reporting Rulemaking: Outline of Proposals and Alternatives Under Consideration, September 15, 2023, pp. 7-14, https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf. 41 CFPB, “CFPB Kicks Off Rulemaking to Remove Medical Bills from Credit Reports,” press release, September 21, 2023, https://www.consumerfinance.gov/about-us/newsroom/cfpb-kicks-off-rulemaking-to-remove-medical-bills-from-credit-reports/. 42 GAO, Consumer Protection: Congress Should Consider Enhancing Protections Around Scores Used to Rank Consumers, GAO-22-104527, May 2022, https://www.gao.gov/assets/gao-22-104527.pdf. Congressional Research Service 8 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues This section examines selected policy issues pertaining to the use of credit reports and scores in consumer lending and other decisions. Specifically, the report addresses policy issues concerning (1) inaccurate or disputed consumer information in consumer data reports; (2) consumers’ rights in the credit reporting system; (3) whether and how medical debt should be included in credit reports; (4) whether uses of credit bureau data outside of the financial services, such as for employment or rental decisions, should be limited; (5) whether the use of alternative consumer data may increase accuracy and credit access; and (6) how to address data protection and security issues in consumer data reporting. Inaccurate or Disputed Information Inaccurate information in a credit report may limit a consumer’s access to credit or increase the costs to the consumer of obtaining credit. Credit reporting inaccuracies may occur for various reasons. Furnishers may inadvertently input inaccurate information into their databases. Matching information to the proper individual poses challenges, such as in cases when multiple individuals have similar names and spellings or if individuals change their names. In some cases, the information may be properly matched, but the individual could be a victim of fraud or identity theft. The predictive power of consumer data, or the ability to accurately predict a consumer’s likelihood to default on a loan, would be enhanced to the extent that consumer information is regularly updated. The accuracy of consumer information in consumer data reports has been an ongoing policy concern. In 2012, the Federal Trade Commission (FTC) reported that 26% of participants in a survey of credit report accuracy were able to identify at least one potentially material error on at least one of approximately three different credit reports prepared using their consumer information.43 After the reports were corrected, 13% of participants in the FTC study saw one or more of their credit scores increase. For those who saw an increase, over 40% of their scores rose by more than 20 points, which could increase the likelihood that the consumer would be offered less expensive credit terms. More recent studies have found similar results.44 In recent years, legal and regulatory developments have encouraged the CRAs to make changes to improve accuracy in credit reports. As mentioned in the previous section, the CFPB has reported its actions to encourage credit bureaus and financial firms to improve data accuracy in credit reporting. In addition, in response to a 2015 settlement between the nationwide CRAs and over 30 state attorneys general, the National Consumer Assistance Plan was launched to increase accuracy in consumer credit reports.45 According to the CFPB, this led to the removal of most civil judgments and half of all tax liens in credit reports for the nationwide CRAs.46 Some research suggests that while the removal of this information may have benefited the consumers whose information was removed, the removal of these large categories of information may also have had distributional impacts on the allocation of credit for consumers. For example, one study found that when non-bankruptcy public records were removed from credit reports, consumers 43 See FTC, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, December 2012, https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf. 44 Syed Ejaz, “A Broken System: How the Credit Reporting System Fails Consumers and What to Do About It,” Consumer Reports, June 10, 2021, p. 4, https://advocacy.consumerreports.org/wp-content/uploads/2021/06/A-Broken-System-How-the-Credit-Reporting-System-Fails-Consumers-and-What-to-Do-About-It.pdf. 45 Claire Brennecke, Jasper Clarkberg, and Michelle Kambara, Public Records, Credit Scores, and Credit Performance, CFPB, December 2019, p. 2, https://files.consumerfinance.gov/f/documents/https://files.consumerfinance.gov/f/documents/
cfpb_quarterly-consumer-credit-trends_public-records-credit-scores-performance_2019-12.pdf. cfpb_quarterly-consumer-credit-trends_public-records-credit-scores-performance_2019-12.pdf.
46 46 Title I of H.R. 3621; H.R. 5332, §4.
47 H.R. 3621, §110.
48 Title IV of H.R. 3621.
49 H.R. 5332, §3.
50 H.R. 5332, §4Brennecke, Clarkberg, and Kambara, Public Records, Credit Scores, and Credit Performance, p. 2. .
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Length of Time to Retain Negative Information
Policymakers have also considered the appropriate length of time negative information should be
allowed to remain on a credit report. Negative information generally refers to delinquencies or
defaults, which typically remain on credit reports for seven years. Negative information in a
credit report often results in a consumer appearing to pose a greater risk of default or other
negative behavior. This may lead a consumer to either pay more for financial services or, in some
cases, be denied access to credit entirely. Limiting a consumer’s access to certain financial
services, such as depository checking accounts or lower cost loans, may disproportionately affect
the consumer’s cost of engaging in financial transactions. Similarly, the use of consumer data
reports by potential employers, discussed below, may limit job opportunities that could arguably
help applicants overcome financial challenges and thereby improve their credit histories.51
Retaining negative information on credit reports for an extended period of time may pose benefits
and detriments. On the one hand, under circumstances in which the underlying information in a
consumer data report is inaccurate or out of date, consumers may improperly be considered to
pose a greater risk to a firm. In that case, the consumer may be offered costlier credit options (or
even face denials of credit) that do not accurately reflect the consumer’s actual risk of default. In
other cases, consumers also may unfairly be considered to pose a greater risk now due to
circumstances in the past that they have since overcome. On the other hand, the longer
information remains on the credit report arguably allows lenders to see long-term trends that may
be helpful for distinguishing between a rare occurrence and a consistent pattern in a consumer’s
behavior. Shorter or insufficient periods of time in which negative tradelines appear on consumer
reports may also compromise the ability to compute reliable scores. If lenders view credit reports
and scores as unreliable due to premature removal of negative information, they could increase
downpayment requirements across the board for all credit applicants or reduce loan amounts. In
short, lenders who are uncertain about data reliability might adopt stricter underwriting and
lending policies. In addition to restricting credit access generally, this could reduce competition
by allowing lenders with an established relationship and more information on a consumer to
provide more favorable terms to that consumer than other companies. In addition, the Association
of Certified Fraud Examiners (ACFE) found that poor credit can signal criminal activity, and
earlier removal of negative information may make it more difficult for an organization to detect
fraud, which may be particularly costly for small businesses and nonprofit organizations.52
Many preparers and users of credit scores have adopted weighting schemes that place less weight
on older information in a consumer data report. Maintaining longer (rather than shorter) durations
of negative tradelines on reports allows preparers to make greater use of variable-weighted
algorithms to calculate scores, which may be useful when the importance of a weight needs to be
modified over time. In addressing this policy issue, H.R. 3621 would shorten the time period that

51 See Dana Dratch, “States Weigh Limits on Credit Checks for Employment,” CreditCards.com, at
http://www.creditcards.com/credit-card-news/states-weigh-limits-credit-checks-for-employment-1282.php.
52 See Michelle Long, “Internal Controls for Small Businesses to Reduce the Risk of Fraud,” Intuit, at
http://longforsuccess.com/wp-content/uploads/2010/09/Good-Internal-Controls.pdf; and Association of Certified Fraud
Examiners (ACFE), Report to the Nations on Occupational Fraud and Abuse: 2012 Global Fraud Study, Fraud Q&A
with James Ratley, President and CEO of the ACFE, at https://www.acfe.com/uploadedFiles/ACFE_Website/Content/
rttn/2012-report-to-nations.pdf. Approximately 36% of fraudsters live beyond their means and 27% undergo personal
financial difficulties. See Preventing and Detecting Fraud in Not-For-Profit Organizations, at
https://www.kellerowens.com/wp-content/uploads/2012/07/Fraud-Booklet-2012-Revised-Version.pdf.
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adverse information could remain on a person’s credit report by three years (such that it remains
on the report for a total of four years), among other things.53
Rehabilitation of Education Loans
Borrowers who default on some federal student loan programs (defined as not having made a payment in more
than 270 days) have a one-time loan rehabilitation option.54 A loan rehabilitation (as opposed to a loan
consolidation) requires a defaulted borrower to make nine on-time monthly payments during a period of 10
consecutive months.55 The loan is considered rehabilitated if the borrower satisfies the requirements, and then
the loan may be reinstated. In addition, the borrower’s credit report is generally updated to show that the loan is
no longer in default (or the default record would be eliminated); however, the information pertaining to the late
payments that led up to the rehabilitation would stil remain for seven years.56
By contrast, students who default on private loans are less likely to receive a rehabilitation option.57 P.L. 115-174,
Section 602, allows a borrower a one-time opportunity to remove a reported default on a qualified (private)
student loan from a credit report if the borrower satisfies the requirements of loan rehabilitation programs that
private lenders may be wil ing to offer (with the approval of prudential regulators), which is analogous to the
procedures fol owed when federal student loans are in default.58 However, depositories (i.e., banks and credit
unions), which are regulated for safety and soundness, treat their student loans like all other private consumer
loans. Private student loans must stil satisfy underwriting requirements, typically requiring co-signers who become
responsible for the loans if the students are unable to repay. After 120 days past due (closed-end), consumer loans
held by depositories are treated as uncol ectible.59 The Office of the Comptrol er of the Currency also points out:
“Banks have some latitude to offer similar federal workout programs to private student loans. Banks, however,
should do so while adhering to safety and soundness requirements and fol owing existing banking guidance and
GAAP.”60 Apart from safety and soundness requirements, the information pertaining to the late payments that led
up to the rehabilitation would likely remain on the students’ credit reports for seven years even if the default
records were removed. Hence, this information would stil be likely to be incorporated in students’ credit scores.
H.R. 3621 would require credit bureaus to remove adverse information for private student loan borrowers who
have demonstrated a history of repayment, similarly to federal student loans.61 Private lenders currently have
discretion in offering rehabilitation; under H.R. 3621, however, all private student loan borrowers would have the
right to obtain loan rehabilitation. This provision would increase the ability of private student loan borrowers to
receive rehabilitation. Because this practice would likely increase costs on financial institutions, as discussed above,
this provision might reduce the wil ingness of lenders to originate private student loans.62

53 H.R. 3621, §401.
54 See CFPB, “What Does It Mean to ‘Default’ on My Federal Student Loans?” press release, August 4, 2016, at
https://www.consumerfinance.gov/ask-cfpb/what-does-it-mean-to-default-on-my-federal-student-loans-en-649/.
55 See CRS Report R40122, Federal Student Loans Made Under the Federal Family Education Loan Program and the
William D. Ford Federal Direct Loan Program: Terms and Conditions for Borrowers, by David P. Smole.
56 See Experian, “What Is Student Loan Rehabilitation?” February 3, 2020, at https://www.experian.com/blogs/ask-
experian/what-is-student-loan-rehabilitation/.
57 CFPB, Private Student Loans, Report to the Senate Committee on Banking, Housing, and Urban Affairs, the Senate
Committee on Health, Education, Labor, and Pensions, the House of Representatives Committee on Financial Services,
and the House of Representatives Committee on Education and the Workforce, August 29, 2012, at
http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf.
58 P.L. 115-174, §601 prohibits a private student loan lender from accelerating a debt or declaring a default against a
student loan borrower upon the bankruptcy or death of a co-signer. Section 601 also releases a co-signer from the debt
obligation upon the death of the student.
59 After 120-180 days, a depository firm may hire a debt collector, who receives a percentage of the collected amount,
or sell the defaulted loan outright to a collection agency. The debt collection process is guided by the Fair Debt
Collection Practices Act (P.L. 90-321).
60 See Office of the Comptroller of the Currency, Comptroller’s Handbook, Version 1.0, May 2016, p. 34, at
https://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/student-lending/pub-ch-student-
lending.pdf.
61 Title III of H.R. 3621.
62 For more information, see CRS Report R45339, Banking: Current Expected Credit Loss (CECL), by Raj Gnanarajah.
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12who previously had this information on their credit reports may look like they have similar credit records as other consumers, although on average, they were more likely to default in the future.47 Therefore, lenders reduced credit to these groups, and consumers who previously did not have non-bankruptcy public records on their credit reports may have experienced a decrease in their access to credit. Therefore, there may be trade-offs between ensuring accuracy, encouraging information furnishing, and the allocation of access of credit for consumers. Consumer Disputes The accuracy of credit reports depends in part on consumers to monitor and dispute any discrepancies. While consumers have the right in the FCRA to dispute inaccurate or incomplete information in their reports, issues with the dispute process may exist. In addition, in 2022, the CFPB found some CRAs failing to conduct reasonable dispute investigations, deleting information rather than investigating for accuracy, and not following up appropriately with consumers.48 In addition, CFPB research found that disputes are generally more common on credit reports for consumers who live in majority Black and Hispanic neighborhoods, younger consumers, and consumers with lower credit scores.49 The CFPB receives more complaints about credit reporting than for any other industry it regulates. In 2022, for example, more than three quarters of complaints that the agency received were about credit reporting, most frequently about the three nationwide CRAs.50 In 2020 and 2021, consumer complaints submitted to the CFPB about Experian, Transunion, and Equifax increased dramatically.51 The CFPB attributes some of these complaints to an automated system causing information disputes not to be addressed quickly and consumers spending lots of time fixing errors.52 The CFPB found that in 2020, the nationwide CRAs changed how they responded to consumer complaints, which included not responding when they suspected that a third party such as a credit repair company had submitted a complaint on behalf of the consumer.53 The nationwide CRAs have identified credit repair companies as a challenge to their dispute processes, claiming that they submit a large volume of illegitimate disputes, harming the quality of their information about consumers.54 Some argue that credit repair companies may be disputing correct yet negative information, claiming it is fraudulent or incorrectly reported, in order to increase consumers’ credit scores.55 In 2022, while the number of CFPB complaints from consumers remained elevated, the CFPB reported that complaint responses from the nationwide 47 Scott L. Fulford and Éva Nagypál, “The Equilibrium Effect of Information in Consumer Credit Markets: Public Records and Credit,” CFPB, Office of Research, Working Paper No. 23-03, April 2023, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4419376. 48 CFPB, Supervisory Highlights, May 2022, pp. 6-11, https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-26_2022-04.pdf. 49 Ryan Sandler, Disputes on Consumer Credit, CFPB, October 2021, https://files.consumerfinance.gov/f/documents/cfpb_disputes-on-consumer-credit-reports_report_2021-11.pdf. 50 CFPB, Consumer Response Annual Report: January 1-December 31, 2022, March 2023, p. 3, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_2022-consumer-response-annual-report_2023-03.pdf. 51 CFPB, Annual Report of Credit and Consumer Reporting Complaints: An Analysis of Complaint Responses by Equifax, Experian, and TransUnion, January 2022, p. 23, https://files.consumerfinance.gov/f/documents/cfpb_fcra-611-e_report_2022-01.pdf. 52 CFPB, Annual Report of Credit and Consumer Reporting Complaints, pp. 3-4. 53 CFPB, Annual Report of Credit and Consumer Reporting Complaints, p. 4. 54 CFPB, Annual Report of Credit and Consumer Reporting Complaints, p. 19. 55 AnnaMaria Andriotis, “Deluge of Fraud Claims Adds to Concerns About Credit Scores,” Wall Street Journal, December 1, 2022, https://www.wsj.com/articles/credit-score-washing-identity-theft-11669848797. Congressional Research Service 10 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues CRAs were more substantive and tailored and more likely to contain consumer relief, fixing some of these past issues.56 A 2019 GAO report argues that the CFPB should better define its expectations around accuracy and reasonable investigations.57 In particular, it describes consumer report accuracy issues primarily caused by consumer matching challenges due to inaccurate personally identifiable information and errors in furnished information. For consumer dispute investigations, GAO recommends that the CFPB provide more clarity on investigation obligations for CRAs. Since the GAO report was released, the CFPB published guidance about the inadequacy of name-only matching procedures58 and inconsistent information in credit reports,59 as well as dispute investigation requirements, such as providing the furnisher all of the information in a consumer’s dispute and not limiting how a consumer can request an investigation with the CRAs.60 The agency also issued guidance on consumer privacy and permissible purposes for accessing a credit report.61 The CFPB is considering proposals to clarify dispute processes in its current credit reporting rulemaking.62 Consumer Rights in the Credit Reporting System Consumers sometimes find it difficult to advocate for themselves when credit reporting issues arise because they are not aware of their rights and how to exercise them. According to a CFPB report, some consumers are confused about what credit reports and scores are, find it challenging to obtain credit reports and scores, and struggle to understand the contents of their credit reports.63 Currently, the CFPB provides financial education resources on its website to help educate consumers about their rights regarding consumer reporting.64 The credit bureaus’ websites also provide information about how to dispute inaccurate information and how consumers can contact them by phone or mail. Special populations have unique needs in the credit reporting system. For example, active-duty military may move more frequently than civilians do and spend time in war zones, making them more vulnerable to identity theft.65 Thus, policymakers have considered whether servicemembers 56 CFPB, Annual Report of Credit and Consumer Reporting Complaints: An Analysis of Complaint Responses by Equifax, Experian, and TransUnion, January 2023, https://files.consumerfinance.gov/f/documents/cfpb_fcra-611-e_report_2023-01.pdf. 57 GAO, Consumer Reporting Agencies: CFPB Should Define Its Supervisory Expectations, GAO-19-459, July 2019, https://www.gao.gov/assets/gao-19-459.pdf. 58 CFPB, “Fair Credit Reporting; Name-Only Matching Procedures,” 86 Federal Register 62468-62472, November 10, 2021. 59 CFPB, “Fair Credit Reporting; Facially False Data,” 87 Federal Register 64689-64693, October 26, 2022. 60 CFPB, “Consumer Financial Protection Circular 2022-07: Reasonable Investigation of Consumer Reporting Disputes,” https://www.consumerfinance.gov/compliance/circulars/consumer-financial-protection-circular-2022-07-reasonable-investigation-of-consumer-reporting-disputes/. 61 CFPB, “Fair Credit Reporting; Permissible Purposes for Furnishing, Using, and Obtaining Consumer Reports,” 87 Federal Register 41243-41246, July 12, 2022. 62 CFPB, Small Business Advisory Review Panel for Consumer Reporting Rulemaking: Outline of Proposals and Alternatives Under Consideration, September 15, 2023, pp. 15-17, https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf. 63 CFPB, Consumer Voices on Credit Reports and Scores, February 2015, https://files.consumerfinance.gov/f/201502_cfpb_report_consumer-voices-on-credit-reports-and-scores.pdf. 64 For example, see CFPB, “Credit Reports and Scores,” https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/. 65 CFPB, “Credit Reporting Companies Should Do More to Ensure That Servicemembers Receive the Free Credit (continued...) Congressional Research Service 11 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues should have rights to additional credit reporting protections. For example, active-duty military consumers are entitled to place active-duty alerts in their credit reports to notify creditors and other credit report users.66 In addition, victims of human trafficking may have credit reports that include adverse information resulting from their being trafficked. Responding to this concern, in December 2021, Congress passed new language prohibiting credit reporting companies from including negative information that resulted from human trafficking to be included in consumers’ credit reports, providing new credit reporting protections for these victims.67 Medical Debt and Credit Reports68 When a consumer defaults on a debt, a third-party debt collector—rather than the lender (or medical provider) to whom the debt is originally owed—often collects the debt obligation.69 Debts in collection, including medical debts in collection, can be reported to credit bureaus and appear on consumers’ credit reports. Medical debts are the most commonly reported type of debt collection on credit reports. According to the CFPB, in 2021, medical debts constituted 58% of debts reported in collection.70 Medical debts reported to the credit bureaus tend to be for relatively small amounts and may be more likely to be reported than are other types of debts. According to the CFPB, most medical debts reported are under $500.71 Inconsistencies associated with medical billing can lead to inconsistencies in credit reporting. Medical debts are often transferred to debt collectors after different periods of time, depending on the medical provider. Health insurance disputes can cause the consumer to be unaware of a medical debt in collection.72 Some medical providers may offer financial assistance programs, complicating the medical billing process for consumers.73 In addition, debt collectors can decide whether or when to report debts to CRAs. Therefore, medical debts can appear on people’s credit reports inconsistently. Perhaps for these reasons, CFPB research has found that medical debts may be a less reliable predictor of future credit performance than other debts are.74 While some Monitoring Services They Are Legally Entitled To,” April 27, 2023, https://www.consumerfinance.gov/about-us/blog/credit-reporting-companies-servicemembers-receive-free-credit-monitoring-legally-entitled-to/. 66 15 U.S.C. §1681c-1. 67 P.L. 117-81, §6102. This provision is implemented by CFPB, “Prohibition on Inclusion of Adverse Information in Consumer Reporting in Cases of Human Trafficking (Regulation V),” 87 Federal Register 37700, July 25, 2022. 68 For more information on medical debt, see, CRS In Focus IF12169, An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues, by Cheryl R. Cooper. 69 For more information on debt collection, see CRS Report R46477, The Debt Collection Market and Selected Policy Issues, by Cheryl R. Cooper. 70 CFPB, Medical Debt Burden in the United States, February 2022, https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf. 71 CFPB, Medical Debt Burden in the United States. 72 Consumers also complain to the CFPB about disputed, inaccurate, or not-owed medical debts on credit reports. For more information on medical debt complaints to the CFPB, see CFPB, Complaint Bulletin: Medical Billing and Collection Issues Described in Consumer Complaints, April 2022, https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf. 73 For more background on financial assistance for medical care and medical debt reported to the CRAs, see Susan Singer, Eric Wilson, and Tavi Carare, Understanding Required Financial Assistance in Medical Care, CFPB, July 28, 2022, https://www.consumerfinance.gov/data-research/research-reports/understanding-required-financial-assistance-in-medical-care/; and Octavian Carare, Susan Singer, and Eric Wilson, Exploring the Connection Between Financial Assistance for Medical Care and Medical Collections, CFPB, August 24, 2022, https://www.consumerfinance.gov/about-us/blog/exploring-connection-between-financial-assistance-for-medical-care-and-medical-collections/. 74 See Kenneth P. Brevoort and Michelle Kambara, Data Point: Medical Debt and Credit Scores, CFPB, May 2014, http://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf. Congressional Research Service 12 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues newer credit scoring models take this into account, older or in-house models are still used by the financial industry and could impact consumers with medical debt.75 In 2022, there were significant policy and market developments related to medical debt. In March 2022, the three nationwide credit bureaus—Experian, Equifax, and TransUnion—jointly made the following announcements: • Paid medical debts will no longer be included on credit reports for consumers; • Medical debts that are less than a year old will no longer be included on credit reports for consumers in order to give consumers time to work with insurance companies and medical providers to settle the debt; and • Beginning in the first half of 2023, medical debts under $500 will no longer be included on credit reports for consumers.76 The credit bureaus believe that these actions will remove almost 70% of medical debts from consumer credit reports.77 CFPB research estimates that about half of consumers with medical debt on their credit reports prior to the announced changes will no longer have any medical debts included in their credit reports and that consumers will experience additional access to credit now that this change is going into effect.78 In December 2020, Congress passed the No Surprises Act, part of the Consolidated Appropriations Act, 2021 (P.L. 116-260, Division BB, Title I), to address surprise medical bills—for example, out-of-network emergency bills. After this law went into effect, the CFPB released a bulletin stating that if debt collectors report debts barred by the No Surprises Act, they may violate the FCRA.79 In April 2022, the Biden Administration announced that (1) the Department of Health and Human Services would do a study of more than 2,000 health care providers to evaluate how billing practices impact the affordability of care and accumulation of medical debt; (2) the Administration would direct all federal agencies not to consider medical debt in underwriting their credit programs, such as for mortgages and small business loans; (3) the Department of Veterans Affairs would make their medical debt forgiveness process easier and stop reporting medical debt to credit bureaus; and (4) the CFPB would increase its education materials around medical debt.80 75 CFPB, Medical Debt Burden in the United States. 76 TransUnion, “Equifax, Experian, and TransUnion Support U.S. Consumers with Changes to Medical Collection Debt Reporting,” press release, March 18, 2022, https://newsroom.transunion.com/equifax-experian-and-transunion-support-us-consumers-with-changes-to-medical-collection-debt-reporting/. 77 TransUnion, “Equifax, Experian, and TransUnion.” 78 Alyssa Brown and Eric Wilson, Data Point: Consumer Credit and the Removal of Medical Collections from Credit Reports, CFPB, April 2023, https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf; and Lucas Nathe and Ryan Sandler, Paid and Low-Balance Medical Collections on Consumer Credit Reports, CFPB, July 27, 2022, https://www.consumerfinance.gov/data-research/research-reports/paid-and-low-balance-medical-collections-on-consumer-credit-reports/. 79 CFPB, “Bulletin 2022-01: Medical Debt Collection and Consumer Reporting Requirements in Connection with the No Surprises Act,” 87 Federal Register 3025-3026, January 20, 2022. 80 The White House, “Fact Sheet: The Biden Administration Announces New Actions to Lessen the Burden of Medical Debt and Increase Consumer Protection,” press release, April 11, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/11/fact-sheet-the-biden-administration-announces-new-actions-to-lessen-the-burden-of-medical-debt-and-increase-consumer-protection/. Congressional Research Service 13 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues In September 2023, the CFPB announced that it is considering proposals in its rulemaking to limit the reporting of medical debts on credit reports.81 For example, the CFPB is considering prohibiting medical debts “on consumer reports furnished to creditors for purposes of making credit eligibility determinations.” Alternatively, the CFPB is also considering proposals to allow medical debts on credit reports but mandating a delay in furnishing medical debts or not allowing medical debts below a particular dollar amount to be furnished. Some believe it is unfair for any medical debts to appear on credit reports, because these debts are often incurred for medically necessary reasons and are less likely to indicate whether someone is financially responsible. Moreover, health insurance disputes can take time to resolve. For these reasons, some argue that the credit bureaus should be prohibited from including debts related to medically necessary procedures in credit reports and from including medical debts that are less than a year old or paid. While the three nationwide credit bureaus may limit medical debt reporting voluntarily, some argue that these changes should be required by law and should apply to all credit bureaus. Others argue that medical debts may demonstrate consumers’ credit risk and should therefore be included in credit reports. Use of Credit Reports for Employment Decisions and Tenant Screening According to the FCRA, consumer credit reports can be used in specific permissible ways beyond lenders using them to evaluate loan applications.82 For example, some employers use credit reports or background screening companies to evaluate job applicants for job openings.83 Many landlords may use credit and other information to help decide whether to rent to an individual or household, including what is sometimes called a tenant screening report. These reports may have information from the nationwide CRAs, as well as possibly other information, such as past rental history or criminal records.84 To comply with the FCRA, employers and landlords must inform an applicant that his or her credit report is a part of the decision

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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

Inconsistent Billing and Reporting Practices: Medical Tradelines
Another policy issue that often arises in connection with credit reporting is that different holders
of consumer debt bill differently and report to the CRAs differently. Inconsistent reporting
practices result in variation of the timing with which unpaid debts appear on consumer reports.
For example, medical providers may assign unpaid bills to debt collectors or sell outstanding
debts to debt buyers. Some medical providers may assign or sell the debt after 60 days, but some
may do so after 30 days (by comparison, most bank credit card delinquencies are assigned or sold
after 180 days). Some firms may turn obligations over to collections as a tool to encourage
consumers to settle unpaid balances, blurring the distinction between billing and collecting
policies.63 Debt collectors or buyers subsequently furnish negative information to CRAs, causing
tradeline accounts to sometimes appear on consumer reports.
The CFPB used a random sample of approximately 5 million consumers as of December 2012 to
determine what types of tradeline accounts were reported most frequently and the amounts.64 The
CFPB found that approximately 33% of credit reports surveyed had collection tradelines, and
approximately 52% of those collection tradelines were related to medical collections. After
medical obligations, the CFPB found that the remaining collection tradelines of significant
relevance were associated with unclassified debts (17.3%), cable or cellular bills (8.2%), utilities
(7.3%), and retail stores (7.2%). All other categories of collectible tradelines were approximately
2% or less of the survey. For 85% of the respondents, the amounts owed for medical debt were
for less than $1,000. In short, more than half of collection tradelines were associated with medical
debt, and they were for relatively small amounts. Specifically, the median amount owed for the
medical collection tradelines was $207, and 75% of all medical collection tradelines were under
$490.
One form of consumer debt—medical debt—is most often disputed by consumers and raises
specific policy issues related to inconsistent billing and reporting practices. According to the
CFPB study, consumers are unlikely to know when and how much various medical services cost
in advance, particularly those associated with accidents and emergencies. People often have
difficulty understanding co-pays and health insurance deductibles.65 Consequently, consumers
may delay paying medical obligations as they either assume their insurance companies will pay or
attempt to figure out why they have been billed, which often results in medical debt appearing
unpaid on credit reports.
Regulators and industry have taken actions that may reduce medical tradelines and their
associated negative effects on consumer credit data. On December 31, 2014, the Internal Revenue
Service (IRS) announced a final rule requiring the separation of billing and collection policies of
nonprofit hospitals.66 Under the rule, hospitals that have or are pursuing tax-exempt status are

63 See CFPB, Consumer Credit Reports: A Study of Medical and Non-Medical Collections, December 2014, p. 36, at
http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.
Other firms may not immediately employ a collections strategy to encourage repayment of obligations for fears of
reputational risk.
64 See CFPB, Consumer Credit Reports: A Study of Medical and Non-Medical Collections, December 2014, at
http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.
65 Confusion about costs and co-pays may increase when medical care is administered outside of a consumer’s state of
residence, given that health insurers and providers determine costs that vary and are influenced by state regulations. See
CRS In Focus IF10043, Introduction to Financial Services: Insurance, by Baird Webel.
66 See Department of the Treasury, Internal Revenue Service, New Requirements for 501(c)(3) Hospitals Under the
Affordable Care Act, at https://www.irs.gov/charities-non-profits/charitable-organizations/requirements-for-501c3-
hospitals-under-the-affordable-care-act-section-501r.
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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

required to make reasonable efforts to determine whether their patients are eligible for financial
assistance before engaging in “extraordinary collection actions,” which may include turning a
debt over to a collection agency (thus creating a medical tradeline) or garnishing wages. In short,
tax-exempt hospitals must allow patients 120 days from the date of the first billing statement to
pay the obligation before initiating collection procedures.67 The IRS rule only impacts nonprofit
hospitals, but, on September 15, 2017, the three major credit reporting agencies—Experian,
Equifax, and TransUnion—established a 180-day (6 month) waiting period before posting a
medical collection of any type on a consumer credit report.68 In addition, P.L. 115-174, Section
302, amended the FCRA to provide credit reporting protections for veterans as follows:
 CRAs must exclude certain medical debt incurred by a veteran from his or her
credit report if the hospital care or medical services relating to the debt predates
the credit report by less than one year.
 CRAs must remove from the credit report a veteran’s fully paid or settled
medical debt previously characterized as delinquent, charged off, or in collection.
 CRAs must establish a dispute process and verification procedures for veterans’
medical debt.
 Active duty military personnel receive free credit monitoring.
H.R. 3621 and H.R. 5330 would impose restrictions on the appearance of medical collections on
consumer credit reports, extending the CRA’s 2017 rule to 365 days and excluding all debts
related to medically necessary care.69 H.R. 3621 would also require expedited removal of all fully
repaid or settled medical debts.70
Consumer Rights in the Credit Reporting System
Consumers sometimes find it difficult to advocate for themselves when credit reporting issues
arise because they are not aware of their rights and how to exercise them. According to a CFPB
report, some consumers are confused about what credit reports and scores are, find it challenging
to obtain credit reports and scores, and struggle to understand the contents of their credit reports.71
The CFPB receives more credit reporting complaints than complaints in any other industry it
regulates.72 Currently, the CFPB provides financial education resources on its website to help
educate consumers about their rights regarding consumer reporting. The credit bureaus’ websites
also provide information about how to dispute inaccurate information, and consumers can contact
them by phone or mail.

67 See Department of the Treasury, Internal Revenue Service, “Additional Requirements for Charitable Hospitals;
Community Health Needs Assessments for Charitable Hospitals; Requirements of a Section 4959 Excise Tax Return
and Time for Filing the Return,” 79 Federal Register 78954-79016, December 31, 2014.
68 See Experian, “Medical Debt and Your Credit Score: Here’s What You Need to Know,” press release, August 8,
2017, at https://www.experian.com/blogs/ask-experian/medical-debt-and-your-credit-score/.
69 H.R. 3621, §403; H.R. 5330, §§2-3.
70 H.R. 3621, §403.
71 CFPB, Consumer Voices on Credit Reports and Scores, February 2015, https://files.consumerfinance.gov/f/
201502_cfpb_report_consumer-voices-on-credit-reports-and-scores.pdf.
72 CFPB, Complaint Snapshot: Mortgage, January 2019, pp. 3-6, at https://files.consumerfinance.gov/f/documents/
cfpb_complaint-snapshot-mortage_2019-01_liwsYNV.pdf.
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Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues

H.R. 3621 and H.R. 5332 would require that CRAs provide free credit scores in their annual free
credit report.73 H.R. 3621 would allow consumers to be entitled to free credit reports at other
times, for example, whenever they apply for a new mortgage, auto loan, or student loan, or if a
consumer’s identity is stolen. The report and score used to make underwriting decisions in
connection with these events would be provided to the consumer. H.R. 3621 would also direct the
credit bureaus to give consumers more information on dispute rights, and it would require hard
inquiries to be limited for a longer 120-day shopping window for certain consumer credit
products74 (as described in the box “Some Factors Frequently Used to Calculate Credit Scores”
above). H.R. 5332 would require an online consumer portal landing page for consumers to access
their credit report and initiate disputes and credit freezes.75 It also would allow consumers to opt
out of having their credit report sold to third parties.76
Appropriate Purposes for Using Credit Bureau Data:
Employment Decisions
Policy questions exist regarding the appropriate uses of credit bureau data, particularly for uses
outside of extending credit to consumers.77 For example, credit information can be used for
employment decisions. According to the Society for Human Resource Management (a human
resources professional society), in 2012, almost half of surveyed organizations in their
membership used credit background checks on some of their job applications.78 Employers report
that they use this information to reduce the likelihood of employee theft or embezzlement and to
reduce legal liability for negligent hiring.79 To comply with the FCRA, employers must inform an
applicant that his or her credit report is a part of a hiring decision, and acquire the applicant’s and acquire the applicant’s
written permission to obtain the report. If an applicant is denied a jobwritten permission to obtain the report. If an applicant is denied a job, or if the employer takes
another adverse action or apartment due to information on a credit report, then the applicant must be given a due to information on a credit report, then the applicant must be given a
copy of the report and a summary of their FCRA rights.80
Whether the use of credit information in employment decisions unnecessarily harms prospective
job applicants is debatable. For some occupations, past financial difficulties may increase the
likelihood, for example, that the employee could be bribed or compromised in some way;
however, this information may not be essential for success in all occupations. Currently, many
states limit employers’ use of credit information for employment decisions.81 H.R. 3621 would

73 Title II of H.R. 3621; H.R. 5332, §2.
74 H.R. 3621, §102 and §705.
75 H.R. 5332, §2.
76 H.R. 5332, §2.
77 Whether credit information should be used in insurance decisions is also a topic of congressional interest, see H.R.
1756.
78 Society for Human Resource Management (SHRM), copy of the report and a summary of his or her FCRA rights. Some states limit or place additional regulations around the use of credit information for these types of decisions.85 81 CFPB, Small Business Advisory Review Panel for Consumer Reporting Rulemaking: Outline of Proposals and Alternatives Under Consideration, September 15, 2023, pp. 17-19, https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf. 82 15 U.S.C. §1681b. 83 According to the Society for Human Resource Management, in 2012, almost half of surveyed organizations in its membership used credit background checks on some of their job applications. Employers report that they use this information to reduce the likelihood of employee theft or embezzlement and to reduce legal liability for negligent hiring. See Society for Human Resource Management, “Background Checking—The Use of Credit Background Checks
in Hiring Decisions, SHRM Blog,,” August 27, 2012, August 27, 2012, at https://blog.shrm.org/trends/background-checkingthe-use-of-https://blog.shrm.org/trends/background-checkingthe-use-of-
credit-background-checks-in-hiring-decisions. credit-background-checks-in-hiring-decisions.
79 SHRM, Background Checking—The Use of Credit Background Checks in Hiring Decisions.
80 FTC, Using Credit Reports: What Employers Need to Know, October 2016, at https://www.ftc.gov/tips-advice/
business-center/guidance/using-consumer-reports-what-employers-need-know.
8184 CFPB, “Errors in Your Tenant Screening Report Shouldn’t Keep You from Finding a Place to Call Home,” July 1, 2021, https://www.consumerfinance.gov/about-us/blog/errors-in-your-tenant-screening-report-shouldnt-keep-you-from-finding-a-place-to-call-home/. 85 For example, see Rosemarie Lally, Rosemarie Lally, “Using Workers’ Credit Information Increasingly Prohibited,,” Society for Human Resource Society for Human Resource
Management, July 28, 2015, Management, July 28, 2015, at https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/
pages/states-credit-history.aspx. pages/states-credit-history.aspx.
Congressional Research Service Congressional Research Service
1514 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues The CFPB has highlighted many issues in the tenant screening market.86 Incorrect or outdated information in tenant screening reports are a significant issue that may make it difficult for some consumers to find housing.87 Some of the data that tenant screening reports regularly use, such as eviction records, may have data quality issues.88 While the National Consumer Assistance Plan (discussed earlier in this report) led to the removal of most court records in nationwide CRAs’ credit reports due to accuracy concerns, this did not apply to many tenant screening companies. Even if a consumer is able to fix errors in a tenant screening report, the apartment may get rented to somebody else before the errors are fixed, especially in a competitive rental market. Moreover, CFPB research highlights how consumers may know less about the tenant screening industry and have less awareness about how to get issues with their information addressed compared to the nationwide CRAs.89 For these reasons, the CFPB has recently issued guidance related to tenant screening report accuracy90 and issued a request for information along with the FTC.91 Policy questions are related to whether and under what conditions it is appropriate to use consumer reports or credit bureau data outside of extending credit to consumers, including in employment or rental decisions. While this information may better inform employers or landlords before making employment or rental decisions, it could also disadvantage some consumers. Because many employment and tenant screening companies exist, a consumer may not be aware of an error in his or her consumer report until after a denial of employment or an apartment. Therefore, it may be more difficult for consumers to assert their FCRA rights, and incorrect information issues may be more likely to reoccur, harming some consumers. For these reasons, some argue that the CFPB should prioritize supervising for accuracy in these markets or that consumer report information should not be allowed to be used for these purposes. Alternative Data in Credit Reports92 The CFPB estimates that credit scores cannot be generated for approximately 20% of the U.S. population due to their limited credit histories.93 The CFPB distinguishes between different types 86 CFPB, “CFPB Reports Highlight Problems with Tenant Background Checks,” November 15, 2022, https://www.consumerfinance.gov/about-us/newsroom/cfpb-reports-highlight-problems-with-tenant-background-checks/. 87 CFPB, Consumer Snapshot: Tenant Background Checks, November 2022, https://files.consumerfinance.gov/f/documents/cfpb_consumer-snapshot-tenant-background-check_2022-11.pdf. 88 CFPB, Tenant Background Checks Market, November 2022, pp. 26-32, https://files.consumerfinance.gov/f/documents/cfpb_tenant-background-checks-market_report_2022-11.pdf. 89 CFPB, Consumer Snapshot: Tenant Background Checks, p. 21. 90 CFPB, “CFPB Takes Action to Stop False Identification by Background Screeners,” press release, November 4, 2021, https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-to-stop-false-identification-by-background-screeners/; and CFPB, “As Federal Eviction Protections Come to an End, CFPB Warns Landlords and Consumer Reporting Agencies to Report Rental Information Accurately,” press release, July 1, 2021, https://www.consumerfinance.gov/about-us/newsroom/as-federal-eviction-protections-come-to-an-end-cfpb-warns-landlords-and-consumer-reporting-agencies-to-report-rental-information-accurately/. 91 FTC, “FTC and CFPB Seek Public Comment on How Background Screening May Shut Renters out of Housing,” press release, February 28, 2023, https://www.ftc.gov/news-events/news/press-releases/2023/02/ftc-cfpb-seek-public-comment-how-background-screening-may-shut-renters-out-housing; and White House, “Fact Sheet: Biden-⁠Harris Administration Announces New Actions to Protect Renters and Promote Rental Affordability,” January 25, 2023, https://www.whitehouse.gov/briefing-room/statements-releases/2023/01/25/fact-sheet-biden-harris-administration-announces-new-actions-to-protect-renters-and-promote-rental-affordability/. 92 For more information on alternative data in financial services, see CRS In Focus IF11630, Alternative Data in Financial Services, by Cheryl R. Cooper. 93 For more information on credit access policy issues, see CRS Report R45979, Financial Inclusion and Credit Access Policy Issues, by Cheryl R. Cooper. Congressional Research Service 15 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues of consumers with limited credit histories.94 One category of consumers, referred to as credit invisibles, have no credit record at the three largest credit bureaus and, thus, do not exist for the purposes of credit reporting. This group represents 11.0% of the U.S. adult population, or 26 million consumers. Another category of consumers do have credit records, but they still cannot be scored and are considered nonscorable.95 According to the CFPB, nonscorable consumers represent about 8.3% of the U.S. adult population, or approximately 19 million consumers. Younger adults may be more likely to be a part of the credit invisible or nonscorable population because they lack sufficient credit histories.96 Alternative data generally refers to information used to determine a consumer’s creditworthiness that the nationwide CRAs do not regularly include in traditional credit files.97 New technology makes it possible for financial institutions to gather other information, including financial and nonfinancial data, from a variety of sources. In 2017, the CFPB included examples of alternative data, such as payments on telecommunications, rent, or utilities; checking account transaction information; educational or occupational attainment; how consumers shop, browse, or use devices; and social media information.98 These data can be used either in credit reports or by lenders directly to underwrite loans. Alternative data could potentially be used to expand access to credit consumers, particularly consumers without extensive credit histories, such as young people and immigrants. Recent findings suggest that some types of alternative data—such as education, employment, and cash-flow information—might expand access to credit or make credit cheaper for some consumers.99 For example, analysis of a private credit model that uses alternative data to make credit and pricing decisions suggests that the model expands the number of consumers approved for credit; lowers the rate consumers pay for credit on average; and does not increase disparities based on race, ethnicity, gender, or age.100 Another recent study suggests that cash-flow data may more 94 See Kenneth P. Brevoort, Philipp Grimm, and Michelle Kambara, Data Point: Credit Invisibles, CFPB, May 2015, http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf. 95 Because credit scoring models vary by firms, consumers who cannot be scored by some models might still be scored by other models. Thus, being nonscorable may depend upon the credit reporting data records and scoring models used. 96 The CFPB estimated some additional information about these groups by age, income, and race. See Brevoort, Grimm, and Kambara, Data Point: Credit Invisibles. 97 Consumers could also potentially build credit histories by using credit building loans, such as secured credit cards, or through the reporting of new credit products, such as “Buy Now, Pay Later” finance products. For more information on the impact of credit builder loans, see CFPB, “Targeting Credit Builder Loans: Insights from a Credit Builder Loan Evaluation,” July 2020, https://www.consumerfinance.gov/data-research/research-reports/targeting-credit-builder-loans/. For more information on credit reporting “Buy Now, Pay Later” finance products, see Martin Kleinbard and Laura Udis, “Buy Now, Pay Later and Credit Reporting,” CFPB, June 15, 2022, https://www.consumerfinance.gov/about-us/blog/by-now-pay-later-and-credit-reporting/. 98 CFPB, “Request for Information Regarding Use of Alternative Data and Modeling Techniques in the Credit Process,” 82 Federal Register 11185, February 21, 2017. 99 See Julapa Jagtiani and Catharine Lemieux, “The Roles of Alternative Data and Machine Learning in Fintech Lending: Evidence from the LendingClub Consumer Platform,” Federal Reserve Bank of Philadelphia, https://www.philadelphiafed.org/consumer-finance/the-roles-of-alternative-data-and-machine-learning-in-fintech-lending; and Alexei Alexandrov, Alyssa Brown, and Samyak Jain, “Looking at Credit Scores Only Tells Part of the Story—Cashflow Data May Tell Another Part,” CFPB, July 26, 2023, https://www.consumerfinance.gov/about-us/blog/credit-scores-only-tells-part-of-the-story-cashflow-data/. 100 Patrice Ficklin and Paul Watkins, “An Update on Credit Access and the Bureau’s First No-Action Letter,” CFPB, August 6, 2019, https://www.consumerfinance.gov/about-us/blog/update-credit-access-and-no-action-letter/; and Marco Di Maggio, Dimuthu Ratnadiwakara, and Don Carmichael, “Invisible Primes: Fintech Lending with Alternative Data,” NBER Working Paper Series, March 2020. Congressional Research Service 16 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues accurately predict creditworthiness and that its use would expand credit access to more borrowers while meeting fair lending rules.101 The collection and use of alternative data, however, raises various policy concerns related to data security and consumer protection.102 In terms of using alternative data in consumer lending, questions exist about how to comply with fair lending laws.103 In addition, some prospective borrowers may be unaware that alternative data have been used in credit decisions, or such information may be incorrect, raising privacy and consumer protection concerns. In an effort to address such concerns, many consumer reporting agencies and firms currently use alternative data only when consumers choose to participate (i.e., opt in or consumer-permissioned data).104 The CFPB and federal banking regulators have been monitoring alternative data developments in recent years. In December 2019, they released a brief policy statement on the appropriate use of alternative data in the underwriting process, highlighting the potential benefits and risks.105 The release followed an October 2017 statement from the CFPB outlining nine principles for consumer-authorized financial data sharing and aggregation. These principles included, among other things, consumer access and usability, consumer control and informed consent, and data security and accuracy.106 101 FinRegLab, “The Use of Cash-Flow Data in Underwriting Credit: Empirical Research Findings,” July 2019, https://finreglab.org/wp-content/uploads/2019/07/FRL_Research-Report_Final.pdf. 102 For a longer discussion on the benefits and risks of alternative data to consumers, see CFPB, “Request for Information Regarding Use of Alternative Data and Modeling Techniques in the Credit Process,” 82 Federal Register 11185-11188, February 21, 2017, https://www.federalregister.gov/documents/2017/02/21/2017-03361/request-for-information-regarding-use-of-alternative-data-and-modeling-techniques-in-the-credit. 103 For example, the Equal Credit Opportunity Act (ECOA; 15 U.S.C. §§1691-1691f) generally prohibits discrimination in credit transactions based upon certain protected classes, including sex, race, color, national origin, religion, marital status, age, and “because all or part of the applicant’s income derives from any public assistance program.” ECOA has historically been interpreted to prohibit both intentional discrimination and disparate impact discrimination, in which a facially neutral business decision has a discriminatory effect on a protected class. Alternative data may pose fair lending risks if they are correlated with ECOA-protected characteristics, such as race or ethnicity. In these cases, lenders’ uses of alternative data to make credit decisions could result in disparate impacts. However, the Supreme Court’s reasoning in a June 2015 decision involving the Fair Housing Act, another federal antidiscrimination law, has sparked debate about whether disparate impact claims are covered under ECOA. For background on disparate impact claims, see CRS Report R44203, Disparate Impact Claims Under the Fair Housing Act, by David H. Carpenter. 104 For example, FICO introduced the UltraFICO Score, a voluntary opt-in product that relies on bank account transaction data. For more information, see FICO, “Introducing UltraFICO Score,” October 2, 2019, https://www.fico.com/ultrafico/. For the unscorable population, FICO also developed FICO Score XD for bankcard issuers by using landline phone, mobile phone, and cable payments history data. For more information, see FICO, “FICO Score XD,” October 2, 2019, https://www.fico.com/en/products/fico-score-xd. Experian launched Experian Boost, which allows consumers to include utility and telecom bill payments in their credit records. For more information, see Stefan Lembo Stolba, “What Is Experian Boost?,” Experian, September 19, 2022, https://www.experian.com/blogs/ask-experian/introducing-experian-boost/. 105 Federal Reserve, CFPB, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency, Interagency Statement on the Use of Alternative Data in Credit Underwriting, December 3, 2019, https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_alternative-data.pdf. 106 CFPB, Consumer Protection Principles: Consumer-Authorized Financial Data Sharing and Aggregation, October 18, 2017, pp. 3-5, https://files.consumerfinance.gov/f/documents/cfpb_consumer-protection-principles_data-aggregation.pdf. Congressional Research Service 17 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues Data Protection and Security Issues Congressional interest in data protection and security in the consumer data industry increased following the 2017 Equifax data breach.107 CRAs are subject to the data protection requirements of Section 501(b) of the Gramm-Leach-Bliley Act (GLBA; P.L. 106-102).108 Section 501(b) requires the federal financial institution regulators to “establish appropriate standards for the financial institutions subject to their jurisdiction relating to administrative, technical, and physical safeguards—(1) to insure the security and confidentiality of consumer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access or use of such records or information which could result in substantial harm or inconvenience to any customer.” The regulatory system established in GLBA splits responsibilities across multiple agencies.109 The FTC issues the implementing rules, referred to as the Safeguards and Privacy Rules, that financial institutions (including nonbank institutions like CRAs) are obligated to follow.110 However, for CRAs, there is no agency with the authority to supervise for compliance with these rules. Further, if a violation is discovered, then enforcement is also possible at many agencies. In March 2019, GAO released a report that recommended actions for the FTC, the CFPB, and Congress to strengthen oversight of credit bureaus’ data security.111 The Dodd-Frank Act granted the CFPB broad authorities to regulate and enforce for unfair, deceptive, and abusive acts in consumer financial products or services.112 Recently, the CFPB published guidance asserting that insufficient data protection or information security of sensitive consumer data could be considered an unfair act or practice under the Consumer Financial Protection Act.113 Consumers maintain consumer protection rights related to data protection and security of their credit report data. Section 301 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) requires credit bureaus to provide fraud alerts for consumer files for at least one year under certain circumstances. In addition, it established the right to a free credit freeze, which allows consumers to stop new credit from being opened in their name, to protect themselves from fraud and identity theft. Currently, an identity theft victim may receive credit monitoring from the company that housed data that was exposed as part of a breach. Credit 107 For more information, see CRS Testimony TE10021, Consumer Data Security and the Credit Bureaus, by Chris Jaikaran. 108 See CRS Insight IN11199, Big Data in Financial Services: Privacy and Security Regulation, by Andrew P. Scott; and CRS Report R44429, Financial Services and Cybersecurity: The Federal Role, by M. Maureen Murphy and Andrew P. Scott. 109 GLBA delegated the authority for federal consumer privacy provisions to the federal banking regulators for federally insured depository institutions; the Securities and Exchange Commission for brokers, dealers, investment companies, and investment advisors; state insurance regulators for insurance companies; and the FTC for all other financial institutions. See CRS Report R44429, Financial Services and Cybersecurity: The Federal Role, by M. Maureen Murphy and Andrew P. Scott. 110 FTC, “Privacy of Consumer Financial Information,” 65 Federal Register 33646-33689, May 24, 2000. 111 GAO, Consumer Data Protection: Actions to Strengthen Oversight of Consumer Reporting Agencies, GAO-19-196, February 2019, https://www.gao.gov/products/GAO-19-196. 112 12 U.S.C. §5531(a). 113 CFPB, “Consumer Financial Protection Circular 2022-04: Insufficient Data Protection or Security for Sensitive Consumer Information,” August 11, 2022, https://www.consumerfinance.gov/compliance/circulars/circular-2022-04-insufficient-data-protection-or-security-for-sensitive-consumer-information/. Congressional Research Service 18 Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues bureaus charge fees for these services, paid for by the private company after a data breach incident or by consumers if they choose to subscribe to that service. Appendix. Natural Disasters and the COVID-19 Pandemic If consumers experience disruptions in their income following unexpected events, such as natural disasters or a pandemic, they are more likely to be delinquent or default on loans and other regularly scheduled payments. Lenders have various options to mitigate the impact on consumers’ credit scores and future credit access following disasters or catastrophic events. For example, furnishers may use special codes to report delinquencies due to special circumstances.114 In addition, lenders may offer forbearance plans, which are agreements that allow extended time for consumers to become current on their payments.115 If lenders and consumers enter into loan forbearance agreements, then furnishers have the option to report to the credit bureaus that these consumers are current on their credit obligations. Congress has also responded to mitigate the financial consequences of adverse events on consumers. For example, Section 4021 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) required furnishers during the COVID-19-pandemic-covered period to report to the credit bureaus that consumers are current on their credit obligations if they enter into agreements to defer, forbear, modify, make partial payments on, or get any other assistance on their loan payments from financial institutions and fulfil those requirements, provided they were current before this period.116 In other words, prior to the act, lenders could choose whether to report loans in forbearance as paid on time. Under the act, lenders were required to report such obligations as paid on time during the COVID-19 pandemic period. Although the act protected the credit histories of consumers with forbearance agreements, some consumers may still have experienced harm to their credit records, because lenders could choose whether to enter into assistance agreements for many types of consumer loans.117 Author Information Cheryl R. Cooper Analyst in Financial Economics Acknowledgments This report was originally written by Darryl Getter, and the current author recognizes his significant contributions to this report. 114 During natural disasters, lenders can flag affected borrowers by using special comment codes when reporting to credit bureaus. See CFPB, Natural Disasters and Credit Reporting, November 2018, https://files.consumerfinance.gov/f/documents/bcfp_quarterly-consumer-credit-trends_report_2018-11_natural-disaster-reporting.pdf. 115 Loan forbearance may be more difficult for some institutions if they require changes in credit contracts. 116 See CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116-136), coordinated by Andrew P. Scott. 117 For more information on consumer loan forbearance and debt relief during the COVID-19 pandemic, see CRS Insight IN11550, COVID-19: Consumer Debt Relief During the Pandemic, by Cheryl R. Cooper. Congressional Research Service 19

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ban the use of credit information for employment decisions, unless required by law or for a
national security investigation.82
Consumers with Limited Credit Histories and Use of Alternative
Scoring Methods
The CFPB estimates that credit scores cannot be generated for approximately 20% of the U.S.
population due to their limited credit histories.83 The CFPB distinguishes between different types
of consumers with limited credit histories.84 One category of consumers, referred to as credit
invisibles, have no credit record at the three largest credit bureaus and, thus, do not exist for the
purposes of credit reporting. According to the CFPB, this group represents 11.0% of the U.S.
adult population, or 26 million consumers. Another category of consumers do exist (have a credit
record), but they still cannot be scored or are considered nonscorable. Nonscorable consumers
either have insufficient (short) histories or outdated (stale) histories. The insufficient and stale
unscored groups, each containing more than 9 million individuals, collectively represent 8.3% of
the U.S. adult population, or approximately 19 million consumers according to the CFPB.
Younger adults may be part of the credit invisible or nonscorable population because they lack a
sufficient credit history. As consumers get older, however, the problem of being credit invisible or
belonging to the insufficient part of the nonscorable group typically declines, but may begin to
reoccur after the age of 60. Older adults, who may have considerably reduced their credit usage,
perhaps as they prepare to enter retirement years, may encounter the problem of having stale
credit records.85 Because credit scoring models vary by firms, consumers that cannot be scored by
some models might still have the ability to be scored by other models; thus, the state of being
nonscorable may depend upon the credit reporting data records and scoring models used.
Borrowers with missing or impaired credit histories may be able to improve their ability to get
reliable credit scores by using credit building loans, such as secured credit cards that require
either security deposits as collateral for the amount of the line of credit or links to checking or
savings accounts, thereby allowing lenders to recover funds if payments are missed.86 The
security deposit is refunded if borrowers do not miss payments. Secured credit card lending can
help borrowers build or repair their credit histories, assuming that the more favorable customer
payment activity is reported to credit bureaus. In addition, the use of alternative credit scores may
also help the credit invisibles because other types of consumer payment activity (discussed
below) may be predictive in regard to how borrowers would manage credit. In short, options that
increase the ability to calculate scores for the invisible or currently nonscoreable consumer
groups could allow lenders to better determine the quantity and scope of financial relationships
they can establish with such groups.

82 Title VI of H.R. 3621.
83 For more information on credit access policy issues, see CRS Report R45979, Financial Inclusion and Credit Access
Policy Issues, by Cheryl R. Cooper.
84 See Kenneth P. Brevoort, Philipp Grimm, and Michelle Kambara, Data Point: Credit Invisibles, CFPB, May 2015, at
http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf.
85 The CFPB estimated some additional information about these groups by age, income, and race. See Kenneth P.
Brevoort, Philipp Grimm, and Michelle Kambara, Data Point: Credit Invisibles, CFPB, May 2015, at
http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf.
86 For more information on the impact of credit builder loans, see CFPB, Targeting Credit Builder Loans: Insights from
a Credit Builder Loan Evaluation, July 2020, at https://www.consumerfinance.gov/data-research/research-reports/
targeting-credit-builder-loans/.
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Alternative credit scoring models could potentially increase accuracy by including additional
information beyond that which is traditionally included in a credit report. For example, some
credit score models do not distinguish between unpaid and paid (resolved) tradelines.87 Most
credit scores are calculated without utility and rent payments information. Arguably, including
this information would benefit the credit scores for some individuals with limited or no credit
histories, potentially increasing their access to—and lowering their costs of—credit.88 Conversely,
information about medical debts has often been included in credit scores, but the unevenness in
medical reporting, as previously discussed, and possibly the consumers’ lack of choice in
incurring medical debt raises questions about whether medical debt tradelines should be
considered reliable predictors of creditworthiness or credit performance.89 For this reason, some
newer versions of credit scoring apply less weight to medical debt.90 In short, developing credit
scores with new information might allow lenders to find new creditworthy consumers.
Regulators and Congress have considered the potential for alternative credit scoring. In 2014, the
Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac—the
government-sponsored enterprises (GSEs) that purchase mortgages in the secondary market—to
consider using more updated credit scoring models in their mortgage underwriting.91 Under P.L.
115-174, FHFA is required to define, through rulemaking, the standards and criteria the GSEs will
use for validating credit score models used when evaluating whether to purchase a residential
mortgage.92 If enacted, H.R. 3621 would direct the CFPB to report to Congress on the impact of
using nontraditional data on credit scoring.93
Full implementation of newer versions of credit scoring models, however, may not occur
quickly.94 In the mortgage market, upgrading automated underwriting systems is costly for the
GSEs, FHA, and loan originators. Not all originators will choose to update their automated
underwriting systems.95 Even if alternative credit scoring models were widely adopted, the credit
score is not the only variable considered during the underwriting process. Just as several factors
are included in the development of a credit score, a credit score is only one of several factors

87 The treatment of paid and unpaid collection tradelines varies among different credit scoring models. See “New FICO
Score Model Could Boost Credit for Millions—Medical Bills in Focus,” NerdWallet, August 8, 2014, at
http://www.nerdwallet.com/blog/health/2014/08/08/new-fico-score-boost-credit-medical-bills-focus/.
88 Experian, New Study Shows How Alternative Payment Data Helps U.S. Consumers’ Credit Profiles, February 25,
2015, at https://www.experianplc.com/media/news/2015/alternative-data-to-credit-reports-utilities-and-rent-2015/.
89 See Kenneth P. Brevoort and Michelle Kambara, Data Point: Medical Debt and Credit Scores, CFPB, May 2014, at
http://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf.
90 See Bev O'SheaMay, “FICO Score 9: What You Need to Know,” NerdWallet, May 5, 2020, at
https://www.nerdwallet.com/article/finance/fico-score-9.
91 See Kevin Wack, “Fannie, Freddie to Evaluate Alternative Scoring Models,” American Banker, September 22, 2014,
at http://www.americanbanker.com/issues/179_183/fannie-freddie-to-evaluate-alternative-credit-scoring-models-
1070140-1.html.
92 Specifically, the law allows Fannie Mae and Freddie Mac to employ alternative credit scoring models when
purchasing mortgages rather than rely exclusively on the FICO scoring model. See Federal Housing Finance Agency,
FHFA Announces Decision to Stop Credit Score Initiative: No Decision in 2018; Focus Shifts to Implementing New
Law, News Release, July 23, 2018, at https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Decision-to-
Stop-Credit-Score-Initiative.aspx.
93 H.R. 3621, §501.
94 See Mary Ellen Podmolik, “Rollout is Slow for FICO’s New Credit Scoring Model,” Chicago Tribune, October 14,
2014, at http://www.chicagotribune.com/classified/realestate/ct-mre-1019-podmolik-homefront-20141014-
column.html.
95 See Adrian Nazari, “How FICO’s New Credit Score Will Impact Consumers,” Huffington Post, September 19, 2014,
at http://www.huffingtonpost.com/adrian-nazari/how-ficos-new-credit-score-will-impact-consumers_b_5844530.html.
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included in an automated underwriting model (also referred to as an underwriting scorecard).96
The debt-to-income ratio, for example, may still be an important variable for mortgage
underwriting. Higher levels of medical and student loan debts may still affect mortgage
underwriting decisions.97 Hence, the use of alternative credit scores may help some borrowers
close to a threshold or borderline, yet still not translate into significant changes in credit access
across the board.
Data Protection and Security Issues
Congressional interest in data protection and security in the consumer data industry has increased
following the announcement, on September 7, 2017, of the Equifax cybersecurity breach that
potentially revealed sensitive consumer data information for 143 million U.S. consumers.98 CRAs
are subject to the data protection requirements of Section 501(b) of the Gramm-Leach-Bliley Act
(GLBA).99 Section 501(b) requires the federal financial institution regulators to “establish
appropriate standards for the financial institutions subject to their jurisdiction relating to
administrative, technical, and physical safeguard—(1) to insure the security and confidentiality of
consumer records and information; (2) to protect against any anticipated threats or hazards to the
security or integrity of such records; and (3) to protect against unauthorized access or use of such
records or information which could result in substantial harm or inconvenience to any
customer.”100
The CFPB does not have the authority to prescribe regulations with regard to safeguarding the
security and confidentiality of customer records.101 Instead, the FTC has the authority to enforce
Section 501(b) as the federal functional regulator of nonbank financial institutions, including

96 An underwriting scorecard may include information such as income, assets, and employment history obtained from
the borrower’s application not taken into account while preparing the credit score. See Federal Deposit Insurance
Corporation, Credit Card Activities Manual, Chapter VIII.-Scoring and Modeling, March 2007, at
https://www.fdic.gov/regulations/examinations/credit_card/pdf_version/ch8.pdf; and Cary Collins, Keith D. Harvey,
and Peter Nigro, “The Influence of Bureau Scores, Customized Scores, and Judgmental Review on the Bank
Underwriting Decision-Making Process,” Journal of Real Estate Research, vol. 24, no. 2 (2002), pp. 129-152.
97 Carrying higher levels of debt may become an equally or, under some circumstances, a more important factor in
mortgage approval decisions relative to other factors in light of recently adopted mortgage underwriting requirements.
See “How the New FICO Score Model Will Affect Banks,” American Banker, August 13, 2014, at
http://www.americanbanker.com/issues/179_156/how-the-new-fico-score-model-will-affect-banks-1069413-1.html.
98 See Equifax, “Equifax Announces Cybersecurity Incident Involving Consumer Information,” press release,
September 7, 2017, at https://www.equifaxsecurity2017.com/2017/09/07/equifax-announces-cybersecurity-incident-
involving-consumer-information/.
On October 2, 2017, Equifax announced that an additional 2.5 million consumers may have been affected, for a total of
145.5 million. See, “Equifax Announces Cybersecurity Firm has Concluded Forensic Investigation of Cybersecurity
Incident,” press release, October 2, 2017, at https://investor.equifax.com/news-and-events/news/2017/10-02-2017-
213238821.
99 See CRS Insight IN11199, Big Data in Financial Services: Privacy and Security Regulation, by Andrew P. Scott;
and CRS Report R44429, Financial Services and Cybersecurity: The Federal Role, by N. Eric Weiss and M. Maureen
Murphy.
100 See 15 U.S.C. §6801 and CRS Insight IN10792, The Equifax Data Breach: An Overview and Issues for Congress,
by N. Eric Weiss.
101 See CRS Testimony TE10021, Consumer Data Security and the Credit Bureaus, by Chris Jaikaran.
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CRAs.102 The FTC has promulgated rules implementing the GLBA requirement.103 Because the
FTC has little upfront supervisory or enforcement authority, the agency typically must rely upon
its enforcement authority after an incident has occurred. In addition, in March 2019, the
Government Accountability Office released a report that recommended actions for the FTC, the
CFPB, and Congress to strengthen oversight of credit bureaus’ data security.104 If enacted, H.R.
3621 would allow the CFPB to supervise and enforce cybersecurity standards for credit reporting
agencies.105 If enacted, H.R. 5332 would allow the CFPB to write rules for credit reporting
agencies under the safeguards rule.106
Meanwhile, P.L. 115-174, Section 301, requires credit bureaus to provide fraud alerts for
consumer files for at least a year under certain circumstances. In addition, credit bureaus must
provide consumers with one free freeze alert and one free unfreeze alert per year. The law also
established further requirements to protect minors. Currently, many credit bureaus provide
consumers services such as credit monitoring for identity theft victims. In general, credit bureaus
charge fees for these services, paid for by either a consumer or private company after a data
breach incident. H.R. 3621 would expand protections for identity theft victims, including the right
to free credit monitoring and identity theft services.107 It would require the CFPB to create new
regulations to define the parameters for these new consumer benefits, including how long they
should be provided and what services should be included.108

102 GLBA delegated the authority for federal consumer privacy provisions to the federal banking regulators for
federally insured depository institutions; the Securities and Exchange Commission for brokers, dealers, investment
companies, and investment advisors; state insurance regulators for insurance companies; and the FTC for all other
financial institutions. See CRS Report R44429, Financial Services and Cybersecurity: The Federal Role, by N. Eric
Weiss and M. Maureen Murphy.
103 FTC, “Privacy of Consumer Financial Information,” 65 Federal Register 33646-33689, May 24, 2000.
104 U.S. Government Accountability Office, Consumer Data Protection: Actions to Strengthen Oversight of Consumer
Reporting Agencies, GAO-19-196, February 2019, at https://www.gao.gov/products/GAO-19-196.
105 H.R. 3621, §910.
106 H.R. 5332, §9.
107 Title VIII of H.R. 3621.
108 H.R. 3621, §808.
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Appendix. Natural Disasters, Government
Shutdowns, and the COVID-19 (Coronavirus
Disease 19) Pandemic
Many consumers may experience disruptions in their income following unexpected events, such
as natural disasters, government shutdowns, or a pandemic and, therefore, are likely to be
delinquent or default on loans and other regularly scheduled payments. For example, from
December 22, 2018, to January 25, 2019, the federal government shut down for five weeks,
raising concerns that federal employees may experience difficulties meeting their scheduled
payment obligations that might subsequently affect their credit records and future credit scores.
Likewise, a growing number of cases of Coronavirus Disease 2019 (COVID-19) were identified
in the United States during the early spring of 2020, significantly impacting many
communities.109 As this situation rapidly evolves, the economic impact is likely to be large due to
illnesses, quarantines, and other business disruptions.110 Consequently, many Americans may lose
income and face financial hardship.111
Lenders have various options to mitigate the impact on consumers’ credit scores and future credit
access following disasters or catastrophic events. For example, furnishers may use special codes
to report delinquencies due to special circumstances.112 Financial institutions also may agree to
limit late or other fees. Lenders offer forbearance plans, which are agreements that allow
extended time for consumers to become current on their payments. However, some of these
efforts may be more difficult for some institutions if they require changes in credit contracts. If
lenders and consumers enter into loan forbearance agreements, then furnishers have the option to
report to the credit bureaus that these consumers are current on their credit obligations.
Congress has also responded to mitigate the financial consequences of an adverse event on
consumers. For example, various bills were introduced during the federal shutdown to allow
credit restoration for some affected consumers.113 In addition, on March 27, 2020, in response to
the COVID-19 pandemic, the President signed the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act; P.L. 116-136).114 Section 4021 of this bill requires furnishers during
the COVID-19 pandemic covered period to report to the credit bureaus that consumers are current
on their credit obligations if they enter into an agreement to defer, forbear, modify, make partial
payments, or get any other assistance on their loan payments from a financial institution and fulfil

109 For background on COVID-19 (Coronavirus Disease 2019), see CRS In Focus IF11421, COVID-19: Global
Implications and Responses, by Sara M. Tharakan et al.
110 For more information on the effects of COVID-19 on the U.S. economy, see CRS Insight IN11235, COVID-19:
Potential Economic Effects, by Marc Labonte.
111 For more information on financial industry policy issues during the COVID-19 outbreak for consumers having
trouble paying their bills, see CRS Insight IN11244, COVID-19: The Financial Industry and Consumers Struggling to
Pay Bills, by Cheryl R. Cooper.
112 During natural disasters, lenders have the ability to flag affected borrowers by using special comment codes when
reporting to credit bureaus. See CFPB, Natural Disasters and Credit Reporting: Quarterly Consumer Credit Trends,
November 2018, https://files.consumerfinance.gov/f/documents/bcfp_quarterly-consumer-credit-trends_report_2018-
11_natural-disaster-reporting.pdf.
113 For example, H.R. 935, H.R. 799, H.R. 1286, and S. 535. House Financial Services Committee Chairwoman
Maxine Waters also released a related draft bill, “Protecting Innocent Consumers Affected by a Shutdown Act.”
114 CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116-136), coordinated by Andrew P. Scott.
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those requirements, provided they were current before this period.115 The covered period starts on
January 31, 2020, and extends to the later of 120 days after enactment or 120 days after the
national emergency declared by the President on March 13, 2020, terminates. In other words,
prior to the CARES Act lenders could choose whether to report loans in forbearance as paid on
time. Under the CARES Act, lenders must report such obligations as paid on time. However,
some affected consumers may still experience harm to their credit record because lenders
generally can still choose whether to enter into an assistance agreement with an individual
consumer.
The CARES Act grants all consumers a right to request forbearance for many types of
mortgages116 and for federal student loans.117 In addition, financial regulators have encouraged
lenders to work with consumers affected by the outbreak,118 and many financial institutions have
announced efforts to provide assistance to affected consumers.119 However, for many types of
consumer loans, such as auto loans and credit cards, different financial institutions may be subject
to different laws and incentives to handle consumer relief requests.120 Therefore, a consumer’s
ability to access loan forbearance may vary, and some consumers may still experience harm to
their credit records.
CARES Act protections related to the credit reporting system may impact consumers’ ability to
access credit in the future, possibly in positive and negative ways. Although these CARES Act
protections allow consumers with loan forbearance agreements to protect their on-time credit
histories, these provisions may also lead to some unintended consequences.121 Financial

115 If the consumer was delinquent before the covered period, then the furnisher should maintain the delinquent status
unless the consumer brings the account or obligation current. For more information, see CFPB, Statement on
Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the
CARES Act, April 1, 2020, at https://files.consumerfinance.gov/f/documents/cfpb_credit-reporting-policy-
statement_cares-act_2020-04.pdf.
116 §4022 gives consumers the right to request a forbearance and provides a moratorium on foreclosures on loans that
are either (1) insured or guaranteed under provisions of the National Housing Act (12 U.S.C. §1707 et seq., 12. U.S.C.
§1715z-20); (2) guaranteed under §184 or §184A of the Housing and Community Development Act (12 U.S.C.
§1715z-13a, §1715z-13b); (3) guaranteed or insured by the Department of Veterans Affairs or (including those made
by) Department of Agriculture; or (4) purchased or securitized by Freddie Mac or Fannie Mae.
117 §3513 suspends all payments due for loans made under part D and part B (that are held by the Department of
Education) of title IV of the Higher Education Act of 1965 ( 20 U.S.C. §1087a et seq.; §1071 et seq.) through
September 30, 2020. Any payment that has been suspended will be treated as if it were a regularly scheduled payment
made by a borrower for the purpose of reporting information about the loan to a consumer reporting agency.
118 On Monday, March 9, federal and state financial regulators coordinated a statement to the financial industry,
encouraging it to help meet the needs of consumers impacted by the coronavirus outbreak. They stated that “financial
institutions should work constructively with borrowers and other consumers in affected communities,” as long as they
take “prudent efforts that are consistent with safe and sound lending practices.” See Federal Reserve Board et al.,
Agencies Encourage Financial Institutions to Meet Financial Needs of Customers and Members Affected by
Coronavirus, March 9, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200309a.htm.
119 Jessica Menton, “Contact Your Mortgage Lender: Payments May Be Deferred as Coronavirus Pandemic Causes
Worker Hardships,” USA Today, March 22, 2020, at https://www.usatoday.com/story/money/2020/03/20/coronavirus-
mortgage-payments-may-deferred-amid-pandemic/5073179002/.
120 For more information on consumer loan forbearance during the COVID-19 pandemic, including the impact of the
CARES Act and other federal regulatory efforts, see CRS Report R46356, COVID 19: Consumer Loan Forbearance
and Other Relief Options, coordinated by Cheryl R. Cooper.
121 While Section 4021 of the CARES Act requires loan forbearances to be reported to the credit bureaus in the same
way, “it does not address how model developers or individual lenders treat any particular variables or information on
the back end.” See FinRegLab, Covid-19 Credit Reporting & Scoring Update, Research Brief, July 2020,
https://finreglab.org/wp-content/uploads/2020/07/FinRegLab-Research-Brief-Covid-19-Credit-Reporting-Scoring-
Update.pdf (hereinafter FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020).
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institutions may find credit scores less predictive of whether a consumer is currently creditworthy,
in part due to deferrals being treated the same as on-time payments.122 This situation could make
it more difficult for consumers to access new credit, particularly those currently meeting their
loan obligations.123
On May 15, 2020, the House passed the Heroes Act (H.R. 6800), and on October 1, 2020, the
House passed an updated version of the bill (H.R. 925). H.R. 6800, Division K, Title IV, Section
110401 and H.R. 925, Division O, Title IV, Section 401 would create a moratorium on furnishing
adverse information to credit bureaus during the COVID-19 pandemic and for 120 days
afterward, as well as for other future major natural disasters.124 Consumers could request to
remove adverse information during the covered period and for 270 days afterward if experiencing
economic hardship. Medical debt related to treatments arising from COVID-19 or another major
disaster would not be furnished or included in the credit report. New credit scoring models could
not be implemented during a major natural disaster period if they would identify a significant
percentage of consumers as being less creditworthy than the previous model. Although these
provisions would protect consumers from lower credit scores during the COVID-19 pandemic,
the removal of information may also reduce credit scores’ predictability in the future, which
could harm some consumers in the long term.125





Author Information

Cheryl R. Cooper
Darryl E. Getter
Analyst in Financial Economics
Specialist in Financial Economics




122 Current macroeconomic uncertainties may also make credit scores less predictive of future consumer defaults. See
AnnaMaria Andriotis, “‘Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t Tell Who’s
Creditworthy,” Wall Street Journal, June 29, 2020.
123 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7.
124 For more information on HEROES Act consumer loan provisions, see CRS Insight IN11405, Heroes Act (H.R.
6800/H.R. 925): Selected Consumer Loan Provisions, by Cheryl R. Cooper.
125 For more information about the policy options and consequences of different credit reporting approaches during the
COVID-19 pandemic, see FinRegLab, Disaster-Related Credit Reporting Options, May 2020, https://finreglab.org/wp-
content/uploads/2020/05/FinRegLab-Disaster-Related-Credit-Reporting.pdf.
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Disclaimer
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Congressional Research Service Congressional Research Service
R44125 R44125 · VERSION 1719 · UPDATED
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