Collections, Public Records & Inquiries

“Data on collection agency accounts, public records, and creditor inquiries are a source of inconsistency, redundancy, and missing information in credit records”.

Federal Reserve Bulletin, Summer 2004

A FRB study titled Credit Report Accuracy and Access to Credit examined a data set of credit records for 301,000 individuals from June 30, 2003.  Below are some of the findings:

Collection Agency Accounts:
Collection agencies are inconsistent (surprise!) in their handling of claims.  The report highlights that: “Those whose collection items happen to be reported to the credit-reporting agency will have lower credit history scores than will those whose collection items go unreported”.

Public Records:
A duplication problem exists with public records, wherein “a single episode can result in one or more public record items depending on how it is recorded”.  For example, “amendments to a public record filing, such as a bankruptcy or a foreclosure, can be treated as updates, which result in no change in the number or items, or as a new filing”.

Inquiries:
Inquiries were not coded properly 99% of the time.  Improper coding of inquires as to purpose (i.e. mortgage, auto loan, etc.) precludes FICO from lumping all similar inquires together with 100% accuracy.  The study concludes: “Consequently, credit evaluators must use less reliable rules, potentially harming consumers who are simply shopping for a single loan by failing to distinguish them sufficiently from consumers who are seeking an excessive amount of credit”.