There are over 200 million consumer credit files stored by the three major credit bureaus, Equifax, Experian and TransUnion according to the Consumer Financial Protection Bureau (CFPB). Those 200 million plus files represent about 63% of the U.S. population.
The credit bureaus major source of revenue is to sell information from those files to just about anyone that wants to buy it including to other companies, including lenders, employers, insurers and debt collectors, as well as to consumers. The CFPB says the bureaus had U.S. revenue of about $4 billion in 2011. That’s a butt load of data and information being sold.
Now, it might be easier to imagine how all those unsolicited offers for credit end up in your mailbox. Credit card issuers pay credit bureaus for the contact information of individuals who meet specific criteria, like a certain minimum credit score, zip code and other criteria. Lenders do the same thing to make refinancing offers after obtaining your credit scores and mortgage balance.
Sounds similar to a having a unsolicited taxi drive up to your house for pickup before you even considered going out…
Lenders also buy updates on existing customers from the bureaus. Some credit card issuers will pull data including credit scores to determine if their cardholders have become riskier. They can use a lower credit score as a basis for cutting a customer’s credit line or increasing their interest rate on new purchases. From a bank’s perspective every transaction on a credit card represents a new loan, so lenders check to make sure their customers are still eligible for revolving credit and likely to repay the loan.
While the Fair Credit Reporting Act states that credit bureaus can provide consumers’ information to companies that plan to make a firm offer of credit, consumers may benefit from this practice because they stand to receive credit offers that may be less expensive than what they currently pay. Individuals who’d like to avoid solicitations can remove their name from the lists that credit bureaus sell by visiting my Protect My Personal Privacy and follow the suggestions.