CFPB hopes to bring clarity to credit scores

As many as 80 percent of all consumer credit reports contain at least one error, Business Insider reports. The resulting process that comes with having to contact at least one of the "Big Three" credit bureaus - Equifax, Experian and TransUnion - can be time consuming and frustrating. The newly formed Consumer Financial Protection Bureau was enacted to protect against this. KELO-TV notes that the bureau had previously chastised the bureaus' scoring system, as many times they'd provide one score to lenders and another completely different one to consumers. This could have far-reaching effects on major decisions in a person's life. For instance, potential employers check credit scores during the job application process and could deny a candidate based on a low score, assuming they're irresponsible with their money. Boiling down one's entire borrowing history into a three-digit number may seem like an effective way of consolidating all credit action into a neat, gift-wrapped package. However, the news source found that at least 35 percent of scoring factors have nothing to do with one's payment history - what's more, a large number of inquiries about a credit score can actually lower it. Business Insider notes that the CFPB will begin investigating the credit reporting industry to increase oversight and lower the number of complaints received about questionable scores or reporting errors. "We are going to be supervising these institutions very closely to make sure they're complying with the law," said CFBP director Richard Cordray, as quoted by  KELO. "We are actually going to have firsthand knowledge of their operations because we have authority to go in and seek information about anything we want to know and they're not at liberty to withhold it from us. That can be a really quick way to get a bird's eye view of what's going on." The CFPB hopes to provide greater clarity about the credit scoring process, and create a better understanding of what the ratings mean, explains Business Insider. It also plans to make the process of reporting and correcting a credit report error quicker and easier. BankCreditNews reports that the CFPB recently hired Stuart J. Ishimaru to be its new diversity officer. He will be responsible for establishing the agency's hiring standards and building a more diverse workplace environment.