Experian Fined by CFPB Months After TransUnion

Experian Fined by CFPB Months After TransUnion

Experian Fined by CFPB Months After TransUnion and False advertising is defined as misleading consumers or potential consumers with incorrect or unproven information. You might say that Experian, one of the major credit scoring agencies, was found guilty of this recently. Specifically, Experian was fined $3 million by the Consumer Financial Protection Bureau (CFPB) for incorrectly telling consumers that the credit scores it offered were used by lenders to make decisions.

In addition to the fine, the CFPB informed Experian that it must be honest and accurate when relaying messages about the credit scores it offers moving forward.

Experian Isn’t the First

In a not-so-surprising reaction, Experian released a statement that respectfully disagreed with the CFPB’s ruling (though it should be noted that it complied with it). Regardless of Experian’s thoughts on the matter, the argument can be made that the credit scoring giant should have known better. After all, it’s not the first time that the CFPB has punished an entity this year.

Yes, back in January Equifax and TransUnion were dinged for similar acts of deceit. Specifically, this punishment came in the form of a combined $5.5 million fine and $17.6 payout in restitution.

So What Credit Scores Do Lenders Use?

With this news coming about Experian – not to mention similar penalties levied against TransUnion and Equifax just months ago – you might be wondering just what credit scores lenders do use when weighing whether a consumer’s financial behavior is worthy of approval. If it’s not a score from one of the major bureaus, then where does the score come from?

In a nutshell, there’s no real good universal answer to this question. For starters, every lender is different. Mortgage lenders may look at one score or series of scores, where an auto loan lender may look at a different one. You’ve likely heard of the FICO score as one of the most important scores that lenders use. It’s true that the FICO score is still king, but what many consumers may not realize about it is that there are many different types of FICO scores that use different formulas to provide lenders with that valuable three-digit number that’s so crucial to the approval decision-making process.

Experian Fined by CFPB Months After TransUnion That’s why Experian – as well as Equifax and TransUnion – were punished by the CFPB, because while it’s entirely possible that lenders do use their respective scores to weigh their decisions, it’s also entirely possible that they do not. It’s also not to say that there’s no value in checking your credit score or purchasing it from one of the major bureaus – just be sure that you think of it as a general estimate and not something that’s set in stone.

Tax Liens, Judgments Could Be Omitted from Credit Reports in Near Future

For tax liens The Consumer Financial Protection Bureau (CFPB) has been winning a lot of battles for the people lately. Aside from socking Equifax and TransUnion with fines for deceiving consumers back in January. More recently, it hit Experian with a $3 million fine for the same thing in March. Now, it’s recently championed an effort to change the way tax liens and judgments are reported on your credit record. It’s a major shakeup when it comes to credit reporting.

Specifically, per a report in the Wall Street Journal, Experian, Equifax and TransUnion – the three major credit reporting agencies – will soon be readjusting their respective credit reporting models to omit tax liens and judgments. It’s a move that could help out millions of Americans when it comes taking control of their finances in the future.

What This Means

This move looks to help out millions of consumers and could very well raise the overall average credit score nationwide. This news is especially significant when you consider how crippling tax liens and judgments currently are to most consumers. Presently, tax liens and judgments, even if they’ve been resolved, can stay on a credit report for up to 10 years. That’s right, even if they’ve been paid off, a consumer’s best bet is to get it released and then petition the credit agencies to remove it from their record to avoid extensive credit repair.

Unresolved liens and judgments stay on a credit report for 15 years.

To be fair, there’s still some things that we don’t yet know when it comes to this news. For instance, will consumers have to petition the agencies to have liens and judgments removed? Or will the agencies perform this automatically? That’s an unknown. What’s not an unknown, however, is how positive a move like this can be for consumers.

Not Everyone’s Happy About It

While consumers should be welcoming this news, not everyone is happy about it. For instance, this report is putting lenders a little bit on edge. Why? Simple – it provides less data for them to assess consumer risk. When lenders make the decision on whether or not to approve a loan, it becomes a question largely of how reliable of a consumer they’re working with. A tax lien or judgment on one’s credit report would certainly factor into their decision, and being that it can take up to 15 years for such to be removed from an individual’s credit report, it provides lenders with more of a comprehensive history of consumer behavior. This news, obviously, alters that, giving lenders one less thing to ultimately analyze. In a worst-case-scenario situation, it could wind up burning a lender in the long run.