The Credit Repair Industry

I pay off my credit cards (and other bills) every month by automatic deduction so it’s impossible for me to accidentally miss paying a bill. I don’t pay attention to my credit score because I never borrow money – I use the credit cards for convenience.

Consumer credit is an important part of the Macro economy. The Federal Reserve keeps track of many kinds of consumer credit.

Poor credit is so costly to people that an industry of “credit repair” has arisen.

The High Cost of Bad Credit

Desperate to improve their ratings, Americans now spend billions on “credit repair” — but the industry often can’t deliver on its promises.
By Mya Frazier, The New York Times, June 7, 2023

Last year, according to one recent market estimate, the credit repair industry had revenues of $4.4 billion, up from $3 billion in 2019. Despite this remarkable scale, many Americans are unaware of the industry’s existence, because the burdens associated with credit break down starkly along racial and class lines. In low-income communities, payment delinquencies on credit cards, mortgages and auto loans — all of which invariably lower credit scores — are twice as high. A report last year from the Federal Reserve indicates that only 11 percent of applicants whose incomes exceed $100,000 said they were turned down (or approved for less than they applied for) on credit applications during a 12-month-period; among those with incomes below $50,000, 43 percent of white applicants and 60 percent of Black applicants were denied credit. (Across all income levels, Black consumers are denied credit more often than their white counterparts.).

The volume of denials, along with the sheer complexity of a credit-reporting system that all but forces people to seek help from others, has spurred the industry’s rise. An estimated 60,000 credit-repair businesses operate independently in the United States, often remotely. …

In many ways, credit scores have become the arbiter of who gets to live the good life in America. A score above 700 opens a world of low-interest car loans, favorable offers to refinance mortgages, a smoother hiring process with employers, the ease of never having to explain away a rough period to secure an apartment. A score below 659 can mean costly consequences. Landlords, and employers in some states, can legally reject applicants because of poor credit; some auto insurers charge as much as 156 percent more in yearly premiums; auto lenders might impose double-digit interest rates…

The unresolved balance between the “right” of individuals to identify errors and the credit bureaus’ obligation to ensure accuracy helped create space for the credit-repair industry to thrive. … [end quote]

This is a long article that describes the credit repair business, including honest agents and scammers. Even though the scale of the industry is small compared with the Macro economy, the amount of misery caused by bad credit is huge, especially to lower income people.

To avoid the problems caused by errors on credit reports, every person is allowed one free credit report from each of the credit reporting agencies (Experian, Equifax and TransUnion) annually. It’s advisable to do this.


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