232 Part Two Information Technology Infrastructure
INTERACTIVE SESSION: ORGANIZATIONS
CREDIT BUREAU ERRORS—BIG PEOPLE PROBLEMS
You've found the car of your dreams. You have a
good job and enough money for a down payment.
All you need is an auto loan for $14,000. You have
a few credit card bills, which you diligently pay off
each month. But when you apply for the loan
you're turned down. When you ask why, you're
told you have an overdue loan from a bank you've
never heard of. You've just become one of the
millions of people who have been victimized by
inaccurate or outdated data in credit bureaus'
information systems.
Most data on U.S. consumers' credit histories are
collected and maintained by three national credit
reporting agencies: Experian, Equifax, and
TransUnion. These organizations collect data from
various sources to create a detailed dossier of an
individual's borrowing and bill paying habits. This
information helps lenders assess a person's credit
worthiness, the ability to pay back a loan, and can
affect the interest rate and other terms of a loan,
including whether a loan will be granted in the
first place. It can even affect the chances of finding
or keeping a job: At least one-third of employers
check credit reports when making hiring, firing, or
promotion decisions.
U.S. credit bureaus collect personal information
and financial data from a variety of sources,
including creditors, lenders, utilities, debt
collection agencies, and the courts. These data are
aggregated and stored in massive databases
maintained by the credit bureaus. The credit
bureaus then sell this information to other
companies to use for credit assessment.
The credit bureaus claim they know which
credit cards are in each consumer's wallet, how
much is due on the mortgage, and whether the
electric bill is paid on time. But if the wrong
information gets into their systems, whether
The sheer volume of information being
transmitted from creditors to credit bureaus
increases the likelihood of mistakes. Experian, for
example, updates 30 million credit reports each
day and roughly 2 billion credit reports each
month. It matches the identifying personal
information in a credit application or credit
account with the identifying personal information
in a consumer credit file. Identifying personal
information includes items such as name (first
name, last name and middle initial), full current
address and ZIP code, full previous address and
ZIP code, and social security number. The new
credit information goes into the consumer credit
file that it best matches.
The credit bureaus rarely receive information
that matches in all the fields in credit files, so they
have to determine how much variation to allow
and still call it a match. Imperfect data lead to
imperfect matches. A consumer might provide
incomplete or inaccurate information on a credit
application. A creditor might submit incomplete or
inaccurate information to the credit bureaus. If the
wrong person matches better than anyone else, the
data could unfortunately go into the wrong
account.
Perhaps the consumer didn't write clearly on
the account application. Name variations on
different credit accounts can also result in less-
than-perfect matches. Take the name Edward
Jeffrey Johnson. One account may say Edward
Johnson. Another may say Ed Johnson. Another
might say Edward J. Johnson. Suppose the last two
digits of Edward's social security number get
transposed-more chance for mismatches.
If the name or social security number on
another person's account partially matches the
data in your file, the computer might attach that
person's data to your record. Your record might
likewise be corrupted if workers in companies
supplying tax and bankruptcy data from court and
government records accidentally transpose a digit
or misread a document.
The credit bureaus claim it is impossible for
them to monitor the accuracy of the 3.5 billion
pieces of credit account information they receive
each month. They must continually contend with
bogus claims from consumers who falsify lender
through identity theft or errors transmitted by
creditors, watch out! Untangling the mess can be
almost impossible.
The bureaus understand the importance of
providing accurate information to both lenders and
consumers. But they also recognize that their own
systems are responsible for many credit-report
errors. Some mistakes occur because of the
procedures for matching loans to individual credit
reports.
Chapter 6 Foundations of Business Intelligence: Databases and Information Management 233
information or use shady credit-repair companies
that challenge all the negative information on a
credit report regardless of its validity. To separate
the good from the bad, the credit bureaus use an
automated e-OSCAR (Electronic Online Solution for
Complete and Accurate Reporting) system to
forward consumer disputes to lenders for
verification.
If your credit report showed an error, the
bureaus usually do not contact the lender directly
to correct the information. To save money, the
bureaus send consumer protests and evidence to a
data processing center run by a third-party contrac-
tor. These contractors rapidly summarize every
complaint with a short comment and 2-digit code
from a menu of 26 options. For example, the code
A3 designates "belongs to another individual with a
similar name.” These summaries are often too brief
to include the background banks need to under-
stand a complaint.
Although this system fixes large numbers of
errors (data are updated or corrected for 72 percent
of disputes), consumers have few options if the
system fails. Consumers who file a second dispute
without providing new information might have their
dispute dismissed as "frivolous.” If the consumer
tries to contact the lender that made the error on
their own, banks have no obligation to investigate
the dispute-unless it's sent by a credit bureau.
Sources: Dennis McCafferty, “Bad Credit Could Cost You a Job,"
Baseline, June 7, 2010; Kristen McNamara, "Bad Credit Derails Job
Seekers," The Wall Street Journal, March 16, 2010; Anne Kadet, Lucy
Lazarony, "Your Name Can Mess Up Your Credit Report,
Bankrate.com, accessed July 1, 2009; "Credit Report Fix a
Headache," Atlanta Journal-Constitution, June 14, 2009; and "Why
Credit Bureaus Can't Get It Right," Smart Money, March 2009
CASE STUDY QUESTIONS
MIS IN ACTION
1. Assess the business impact of credit bureaus' data
quality problems for the credit bureaus, for lenders,
for individuals.
2. Are any ethical issues raised by credit bureaus'
data quality problems? Explain your answer.
Go to the Experian Web site (www.experian.com)
and explore the site, with special attention to its
services for businesses and small businesses.
Then answer the following questions:
1. List and describe five services for businesses and
explain how each uses consumer data. Describe
the kinds of businesses that would use these
services.
2. Explain how each of these services is affected by
inaccurate consumer data.
3. Analyze the management, organization, and tech-
nology factors responsible for credit bureaus' data
quality problems.
4. What can be done to solve these problems?
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