You apply for a car loan or a mortgage and find out your credit score isn't what you'd expect. But the reasons behind your lower score are vague and perhaps non-existent.
The newly formed Consumer Financial Protection Bureau criticized the scoring system over bureaus providing one score to lenders and different ones to consumers.
Whether you're applying for a mortgage or a job, your credit score determines how easy it will be for you to get it. But how your score is determined is a mystery. 35 percent of the scoring factors have nothing to do with your payment history. Even the number of inquiries into your credit report can hurt your score.
Angela Kennecke: Your FICO-nothing could be more mysterious than that-how they come up with it? Is your organization going to tackle that issue?
Consumer Financial Protection Bureau Director Richard Cordray: We are going to be tackling the issue of credit reporting agencies. We have two studies Congress has required us to do that demystifies the issue of your credit score; why it can be different when you ask for your credit score as opposed to when a bank asks for it.
Today your credit score is even more of a factor in your life than it was a decade ago.
"It is a tremendously influential thing for consumers. When you go to borrow money for a car to get a mortgage, your credit card, depending on what's on your credit card, you will be charged a higher rate of interest if you're viewed as bad credit. A lot of people don't know that," Cordray said.
You could even be turned down for a job if your credit score isn't high because you may look irresponsible to a prospective employer. The CFPB says it will be muddling through the mess that makes up your credit score and come up with new ways to make it easier for consumers to track and understand.
"We are going to be supervising these institutions very closely to make sure they're complying with the law. We are actually going to have first hand knowledge of their operations because we have authority to go in and seek information about anything we want to know and they're not at liberty to withhold it from us. That can be a really quick way to get a bird's eye view of what's going on," Cordray said.
Cordray also wants to come up with a faster, easier process to get mistakes on your credit report corrected.
You should be checking your credit report regularly. You have a right to get free access to your credit report from each reporting agency once a year, which means you can check it several times throughout the year.
Friday night, we'll show you the new interactive tool from the Consumer Financial Protection Bureau to answer your questions and what to do if you have a concern or complain.