|Received:||3/12/2005 8:56:30 PM|
|Agency:||Federal Trade Commission|
|Rule:||Notice of Proposed Study on the Effects of Credit Scores and Credit-based Insurance Scores on the Availability and Affordability of Financial Products|
Comments:While I understand the necessity of a score-based system in order to try and ensure fairness in credit transactions, the problem with the current system is that they do not, in fact, ensure fairness and, in many cases, hurt the consumers more than help. There are many credit reports that contain errors, duplicate trade lines, etc, that non-savvy consumers are unsure how to correct. Moreover, this is a problem that consumers should not have to correct, as the current system should be set up to prevent these errors in the first place. Additionally, the scoring system does not have enough safeguards in place to assist consumers who have attempted to make amends to companies listing derogatory information on their credit report. There are not many people who practice the same habits from one year to another, much less seven years. One of the most notable groups I speak of is college students. Credit card companies set up multiple stands on campuses in order to draw students into the game of "buy now, pay later" knowing that many students will take advantage because they do not have much in the way of disposable income. When students make late payments or fall behind, they will be haunted with that mistake for seven years. Seven years after graduation, most college graduates either have, or are seeking to begin, families and home ownership. Yet, these derogatory marks from years before will inhibit their ability to go on with life and live out the "American Dream" they have been socialized to believe in. If these same people do have the ability to get financed for a home, it will often be for percentage points higher than other people, thereby inhibiting their ability to actually purchase (as the PITI expenses would be cost-prohibitive). There is also the issue of the use of credit scoring to affect people's automobile insurance rates. This is the epitome of the fleecing of American consumers. I fail to see the correlation between credit scores and driving habits. What's more, if people with lower credit scores are consistently forced to pay higher rates for every aspect of living in American society (credit card rates, mortgages, auto loans, etc), this simply increases the prospect of these consumers filing for bankruptcy. In light of the not only devastating effects of bankruptcy on consumers' credit scores, but the effects on other consumers (in the form of higher interest rates to compensate companies), this seems to be a counter-productive measure. There is a lot of confusion about what credit scoring model is the most accurate. Although FICO is the generally used score, there are other scores used, such as auto enhanced. There needs to be a streamlining in the formula used to report scores. Additionally, there should be a uniformity in reporting derogatory information to prevent certain credit reporting agencies from being lax in their reporting measures and destroying comsumers' credit.