Credit reporting shakeup could take place after FTC testimony

In the wake of a study conducted last year that noted 26 percent of all consumer credit reports contain an error, the Federal Trade Commission (FTC) is taking steps to streamline the industry. According to insideARM, the FTC recently discussed the state of credit reporting in America at a testimony before the U.S. Senate's Commerce subcommittee.

The focus of the meeting was to outline the agency's findings in the report, but to also explain the efforts it is undertaking to improve scoring accuracy. Increased enforcement and education are the primary tools with which the FTC aims to reform credit scoring practices, the source noted.

The Fair Credit Reporting Act (FCRA) is the main source of regulation for credit scoring enterprises. At the Senate hearing, FTC officials said a top priority for the agency is more dedicated enforcement of FCRA standards.

Poor credit scoring methods can have a detrimental effect on the economy, as mistakes on credit reports can adversely affect consumers' ability to take out new loans or lines of credit. In its 2012 report, the FTC noted that 5.2 percent of citizens that had errors on their reports corrected were able to increase their credit scores so much that it made it more likely for them to be offered a lower interest rate on auto loans.