A number of years ago, a report carried in a major US daily newspapers described how a would-be patient was refused admission after hospital staff pulled a copy of his personal credit report. The would-be patient did not have any missed repayments but was instead ‘maxed out’ on his credit cards. Without personal health insurance and armed with a copy of the credit report, hospital staff advised he check in to another hospital a few miles away.
Personal credit reports are no longer just a record banks refer to when evaluating loan applications. Increasingly, personal credit files are being used by employers as part of the hiring process and even by landlords when vetting prospective tenants. In a recent report carried in New York Times, a shoe salesman was refused employment because he had a poor credit history.
In Ireland, certain positions within financial services are already off-limits for those with a tarnished credit history.
Across the EU, the matter of banking, risk…and credit reporting is likely to take on greater focus by authorities. The days of national credit reports will likely draw to a close as banking becomes more and more pan-EU in nature. Assessing risk is likely to be taken on by large multinational firms that are well established. Access to such data is likely to be standardised. Forward projecting credit risk models will form the basis of credit departments…and even HR departments depending on needs.
But back to individual consumers. For them, understanding how credit reports work and in particular, credit scoring will become increasingly important if they are to avoid being trapped by circumstance…and errors within credit reporting system.
It is a topic worthy of inclusion in the current school curriculum as preparation for the world that we live in.