Credit Cards Have Biggest Impact on Credit Reports

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The handful of credit cards in a typical American’s wallet bears a disproportionate impact on a credit report compared to other consumer accounts, according to a new CFPB report. In a white paper published this month, officials at the Consumer Financial Protection Bureau used existing research to call out the need for stronger financial literacy among consumers and broader protection from lender errors.

Based on publicly available information from industry, government, and academic sources, the study’s authors found that 58 percent of reported trade lines originated with personal credit cards. By comparison, only 7% of trade lines represented mortgages, while just 4% of trade lines originated as auto loans. According to Federal Reserve statistics, Americans actually carry an almost inverse ratio of revolving to non-revolving debt.

The study’s authors estimated that credit bureaus pass as much as 85 percent of their complaint case load to data furnishers, such as credit card issuers and collections agencies. Although the agencies assert their neutrality over the information that appears on consumer credit reports, CFPB officials have stated that credit bureaus’ automated complaint systems may not pass along enough data for banks to thoroughly resolve legitimate mistakes.

Debt buyers and third-party collection agencies generated nearly five times as many complaints as other types of data furnishers, according to the study’s authors. Although more than a third of reported complaints involve collections agencies, fewer than one in five Americans took the time to review their free annual credit report last year. CFPB officials speculated consumers often wait to review their credit until they start shopping for mortgages, auto loans, or balance transfer offers.

credit cards' impact on credit report

In a statement to reporters, CFPB Director Richard Cordray said that the study would “help educate regulators and consumers” about how the credit reporting industry works. Last July, Cordray’s bureau became the first government agency to directly supervise activities at the country’s largest consumer credit reporting agencies. Consumers can now file official complaints about credit reports on the bureau’s website, at CFPB.gov.

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