The existing credit system has been in place for years, with many not really questioning the methods used to assess a credit risk. That’s why Congress and the U.S. Federal Trade Commission (FTC) recently commissioned a study to examine just how accurate credit reports really are.
Inside Tucson Business reports that the University of Arizona will undertake a $1.13 million study that will take a look at the credit formulas used by the major credit bureaus, TransUnion, Equifax and Experian and see if they paint an accurate picture of credit risk. The findings will be reported to the FTC, which is compiling a larger set of data in order to better advise Congress on regulatory practices for the industry.
The study will also look at cases of errors on credit reports, which can drastically lower a consumer’s score if they go unnoticed and unchallenged.
The data will also be used by the Take Charge America Instituted, a financial education program based at the school. The group hopes to use the data to issue better recommendations for consumers when giving mortgage and auto loan advice and strategies for raising bad credit scores.