The Credit Bureau Monopoly

Since I work for a financial services insitution and have, in various capacities for several years now, I have spent a lot of time thinking about credit reports. I know the ins and outs of the Fair Credit Reporting Act and the problems that can happen with an individual's credit report.

And, like it or not, we are all defined by our credit reports. This single document can make the difference between owning a house and not, between getting a job or not, between being able to send your kids to college, or not. Credit bureau apologists will tell you that the document is reflective of whether the person has been responsible with their finances over time or not, and if someone has a bad credit report, that is because they were irresponsible. And, often, that really is true. Except.

Except when someone has a singular, long-standing dispute with a company over a bill, and on principal, that person refuses to pay the bill. Except when someone's ex-spouse runs up the credit card bills in that person's name without telling them, declares bankruptcy themselves, and then leaves that person stuck with overdue bills and significant "late payment history" on their credit report. Except when someone is a vicitim of identity theft.

It used to be that credit reporting was fractured and inconsistent, so, financial service institutions had to take into account a number of other factors to show the customer's likelihood for financial responsibility. And, yes, those factors included personal interaction with the customer themselves and personal references from the customer's employers, friends, business associates, etc. But, with the improvements of technology over the years, personal factors do not matter at all compared to the line items on your standardized credit report. So, any of the personal trauma leading to the exceptions listed above do not matter -- typically.

I applaud financial services institutions finding alternative ways of granting credit to folks that do not include the almighty credit report. There are a lot of underserved populations who either have no credit, little credit or abysmal credit out there -- and most members of that population are legitimate U.S. citizens or have every legal right to be in this country. Some of those folks really are irresponsible with credit and should be viewed as very high risk. But, if the financial institution can figure out a way to separate those out, without the benefit of the credit report, why shouldn't they use that methodology?

Innovation like this in financial services is unusual and should be encouraged. Sure, maybe there are some issues with the initial implementation of the methodology, but, the idea itself is solid and important and good.

That's my soapbox speech for today.

My first post!

Happy Valentine's Day and welcome to my brand new blog!

There are about a million things that I want to talk about in this blog, and we will see how that goes. Please take a look at the "About Me" for more, but, in the meantime, I am just going to jump right into it!

Okay -- so, the New York Times had an article today talking about Intrade.com:

http://www.nytimes.com/2007/02/14/business/14leonhardt.html?ex=1329195600&en=5af2f211e2418739&ei=5124&partner=permalink&exprod=permalink

Intrade.com, if you don't know, is a type of stock market concept where you pay to wager on the outcome of, well, basically anything. For example, you can put money on the prediction that Barack Obama will win the Democratic presidential nomination or that Helen Mirren will win the Oscar for The Queen. It's a cool concept and according the Times article, was actually more effective in predicting the final outcome of the last elections than the pundits.

In any case, the point that I found most intriguing is that certain corporations have set up a similar type of system for their employees, at all levels of the organization, to wager on issues affecting the company. Everything from what vendor will ultimately succeed on a bid, to whether a new product should have this feature over that feature.

What a neat idea and what a great way to engage everyone in the corporation on issues big and small. I am not suggesting this is the way to make major decisions in the company -- I just think that it might provide an interesting and sometimes useful perspective. I love technology and the innovative ways it can be used to get new types of information, so, this has really captured my imagination for the time being.

And, that leads me back to this new blog. I know that I am way behind in blogging and that is unusual for me -- I am usually all over new technologies. But, between working and having babies, I just have not been ready to start a proper blog. My excuse now is that because of my new job -- where I provide advice on e-commerce issues -- I really need to understand the blogging community from within its midst.

As I said, we'll see how this goes!