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89 Fed. Res. Bull. 47 (2003)
An Overview of Consumer Data and Credit Reporting

handle is hein.journals/fedred89 and id is 127 raw text is: An Overview of Consumer Data and Credit Reporting Robert B. Avery, Paul S. Calem, and Glenn B. Can- ner of the Board's Division of Research and Statis- tics, and Raphael W. Bostic, of the University of Southern California, prepared this article. For some time, the Board of Governors of the Federal Reserve System has sought to obtain more detailed and timely information on the debt status, loan payment behavior, and overall credit quality of U.S. consumers. Such information could facilitate the Board's analysis of macroeconomic conditions, improve its understanding of the way credit is pro- vided to consumers, and enhance the System's super- vision of banking activities. For decades, information of this type has been gathered by credit reporting companies, primarily to assist creditors in evaluating the credit quality of current and prospective custom- ers. The information gathered by credit reporting companies is vast and seeks to cover virtually all U.S. consumer borrowing.' To the extent that this informa- tion is complete, comprehensive, and accurate, it represents a potential new source of statistical data for the Federal Reserve on consumer credit markets and behavior. To evaluate the potential usefulness of these data, the Federal Reserve Board engaged one of the three national credit reporting companies to supply the records of a nationally representative sample of individuals.2 The data provide a unique opportunity 1. The Fair Credit Reporting Act generally refers to a company that regularly assembles or evaluates consumer credit information for the purpose of furnishing consumer reports as a consumer reporting agency. Such companies are also called credit bureaus or, as in this article, credit reporting companies, Three national credit report- ing companies-Equifax, Experian, and Trans Union Corporation- jointly have a dominant presence in the market for credit-related information on consumers. Each national credit reportng company seeks to maintain records for each individual, although, for a variety of reasons, all companies may not have the same information for a given individual. For more information on industry structure, see Robert M. Hunt, What's in the File? The Economics and Law of Consumer Credit Bureaus, Business Review. Federal Reserve Bank of Philadelphia (second quarter, 2002), pp. 17-24. 2. Identifying information, such as name, address, and social secu- rity number, was omitted fiom the data obtained by the Federal Reserve. The identities of the creditors, collection agencies, and other to profile the nature and content of information con- tained in credit reporting company records. Assessing the usefulness of these data as a poten- tial source of information for the Board involves several tasks. This article is an initial step in the process; it examines the scope and content of the data, using a framework based on key aspects of credit evaluation. This approach is a natural way to begin the assessment process because the credit reporting companies' primary purpose for collecting these data is to facilitate credit evaluation. Future steps will focus on other aspects of this evaluation, including comparing measures of aggregate borrow- ing activity and credit quality derived from the credit reporting data with measures from other sources. The article begins with a brief description of the way the credit reporting companies compile and report their data and gives background on the regula- tory structure governing these activities. This descrip- tion is followed by a detailed look at the information collected in credit reports. The discussion of these data is divided along the lines of the major com- ponents of consumer credit report data-credit accounts; public records relating to the person's debt or payment obligations (bankruptcy filings, liens, judgments in civil actions, and so on); collection agency accounts; and inquiries regarding credit sta- tus. The distribution patterns of items such as account balances, credit utilization, and measures of payment performance by type of account and creditor are broadly described. Key aspects of the data that may be incomplete, duplicative, or ambiguous as they apply to credit evaluation are highlighted in the analysis. The article concludes with a discussion of steps that might be taken to address some of the issues identified. entities that reported information to the credit reporting company were also omitted. An index variable, unique to this dataset, allowed record of the same individual to be linked. A similar index variable allowed records of the same creditor (or other reporter) to be linked. Neither of these variables could be used to link to any publicly available information.

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