Why The Credit Bureaus LOVE Bad Credit

Your credit profile is made up of data collected by creditors, then reported to the credit bureaus.  The bureaus then make a profit by selling this data in reports, leads, and other methods to creditors for the purpose of issuing new credit or soliciting you for credit.

For example, when a creditor, such as CHASE, wants to offer you new credit, they purchase a data list from the credit bureaus.  This list might be of consumers with credit scores from 550-620, for example.

The bureaus then profit my selling that list to CHASE and CHASE will then use that list to send mailers to you soliciting you to apply for their credit card.

In the data selling world, credit challenged consumers with sub-prime credit are always more valuable.  This means a creditor will pay more for a list of consumers who are 30 days late on their mortgage than a consumer with a perfect pay history.

This is simply due to supply and demand.  Very few companies want the perfect pay history consumers, so this data has a low value.  But there are a significant amount of sub-prime companies who will pay top dollar for this data.

Sub-prime credit card companies, auto and home loan, credit repair, loan modification, short sale companies, and even debt consolidation are just a few company types who pay big money for these types of leads.

Companies also pay more for “triggers” or “selects” for consumer leads.  This means they pay more for bankruptcy leads, high credit card balances, late payments on credit cards, COLLECTIONS, 30-90 day late payments, foreclosures, and even late payments on mortgages.

CHASE won’t pay much for a list of good credit customers.  In comparison, a bankruptcy company will pay a lot more for a list of consumers who filed bankruptcy within the last 30 days.  That list is much more specific, and would cost about TWICE as much from the bureaus.

So the credit bureaus actually make MORE money the worse your credit is.  This is NOT an opinion, but a clear FACT.  It is NOT in the credit bureaus’ best interest to help ensure your credit report is accurate.  Actually, they make more money if your credit is bad.

The only reason they allow you to dispute accounts on your report is that they are obligated by law to do so.  And these laws were created due to the rampant credit bureau abuse and mishandling of consumer data.

The credit bureaus are not your friends and they do not benefit by you having a positive credit profile.  So don’t expect them to be looking out for the accuracy of your credit profile.

About The Author

Brian Diez

Brian Diez is a nationally recognized credit expert. He has been quoted in the Wall Street Journal, Yahoo Finance, Dow Jones' Market Watch and Credit.com.