Credit Information Reporting and the Practical Implications of Inaccurate or Missing Information in Underwriting Decisions

Robert Avery, Paul Calem, Glenn Canner

BABC 04-11: Concerns about the accuracy, timeliness, and completeness of information gathered by credit reporting agencies have grown as credit evaluation and decisions on access to other services have become ever more reliant on credit history scores and other automated systems for decision-making. Previous research indicates that key aspects of credit record data may be incomplete, duplicative, or ambiguous. This study assesses the degree to which such data limitations may potentially benefit or harm “at risk” consumers (those at the margin of creditworthiness). The analysis suggests that many data quality issues have already been recognized and accounted for by credit score card developers and, thus “corrections” of these data items have little impact on the credit scores of “at risk” individuals. We show, though, that other data quality issues are likely to have a more significant impact on credit availability either because they potentially affect a larger portion of the “at risk” population or because of the magnitude of their effects on the credit scores of the individuals impacted…