Biden to Replace Credit Bureaus with Public Credit Reporting Agency

Following a proposal from Demos, a “think-and-do” tank searching for solutions to economic inequality, the Biden administration has been planning on shutting down the three major credit bureaus. In their place, a public Credit Reporting Agency (CRA) would be in charge of credit reporting and scoring.

The biggest reason for this move is that the US credit reporting system is controlled by three for-profit companies: Equifax, Experian, and TransUnion. The three bureaus have been calculating credit scores using different methods, without a transparent process or consumer consent, with varying results and frequent errors.

American economic security has been deeply affected by credit reports: Low scores can often result in unfair treatment by lenders, landlords, employers, and even hospitals. There are ways to improve a thin credit file, but credit history is often misused, and poor scores can lead to higher interest rates and insurance costs, or even job or loan application rejection.

What’s more, if a consumer wants to access their score, only one report per year is free. Beyond that, Americans have to pay anytime they want to know their score or purchase credit monitoring software to record their transactions.

According to Forbes, credit scoring systems are rife with racial biases, and the BIPOC community is disproportionately represented in the credit-invisible and poor-credit categories. Instead of rectifying this, the Trump administration attempted to introduce credit scoring as an additional requirement on immigrant permanent residency applications.

Thankfully, Biden's proposal seems to be on the right track for leveling the economic playing field and standardizing credit score calculations.