Credit Bureaus Now Estimating Income


You know that the three credit bureaus, Equifax, TransUnion, and Experian collect information about your credit history, be it good or bad.  Well, now they will also be estimating your income based on that credit history, which they will be providing to the credit card companies.

The CARD Act, which goes into effect late next month includes a provision that makes credit card companies consider your income before granting you credit. Smart, right? I mean, they’re supposed to be granting you credit only if you have the ability to pay.  However, verifying income can take some time and that would mean no more “instant” credit approvals for credit card companies or the large retailers who offer in-house credit cards.

In order to allow the credit card companies to issue quick decisions, the Fed has allowed for “a reasonable estimate” of income to be used if done with a “statistically sound model.”  The credit bureaus were quick to jump in, rolling out what they call their “ability to pay” products that use information from your credit report, such as payment history, credit limits, and the age and amount of your mortgage to estimate your income.

The credit bureaus admit their estimates aren’t accurate and their contracts with the lenders prohibit them from denying someone outright using just this data, however, this begs the question: if it isn’t accurate, why use it at all?

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