In order to evaluate how credit scores affect consumers it is necessary to understand how the underlying data is compiled, how scores are created, and how they are used by lenders. This section provides background information on credit reporting and credit scoring.

Subsequent sections describe the market for scores sold to lenders and how lenders use scores, and the market for scores
sold to consumers.

A. Consumer reporting agencies and credit reports Consumer reporting agencies are companies that gather, organize, standardize, and disseminate consumer information, especially credit-related information. In mandating this study, the DoddFrank Act refers specifically to scores provided by “consumer reporting agencies that compile and maintain files on consumers on a nationwide basis,”1 also called “nationwide CRAs.” The three
nationwide CRAs are TransUnion, Equifax, and Experian.2 For the purposes of this study, these three firms are referred to as “the CRAs.” Most consumers with a history of using credit products will have a file at each of the three CRAs.

The CRAs collect, among other information, credit account information including the amount of a loan, the credit limit on a credit card, the balance on a credit card or other loan, and the payment  status of the account; items sent for collection; and public records, such as judgments and bankruptcies.3 The CRAs compile the information into files about individual consumers. The CRAs also track requests, or “inquiries,” for a consumer’s credit data, and records of those requests are maintained in the consumer’s file.4 Consumer files are used to produce reports that the CRAs provide to creditors, insurance companies, potential employers, and other users.


These reports are formally called “consumer reports” but are often referred to as “credit reports,” which is how they will be referred to throughout this report.5 The activities of CRAs, creditors, and others that provide


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