Terrific Article on the Great Recession’s Impact on Consumer Credit

The fine folks at the National Consumer Law Center recently posted a great article concerning the impact of the mortgage crises of 08 and beyond on consumer credit reports. It’s well worth the read. I’ve included some excepts below that really leaped out at me:

Credit reporting has become the determining factor for many essentials in a consumer’s financial life – not only credit (mortgages, auto loans, credit cards) but insurance, employment and rental housing. It is no exaggeration to say that a credit history can make or break a family’s finances. The Big Three credit bureaus (Equifax, Experian, and TransUnion) stand as gatekeepers – and solely profit-motivated ones at that – to many economic essentials in the lives of Americans.

More disturbingly, credit reports are used for other purposes, such as employment, rental housing, and insurance. Thus, the damage from a foreclosure or other adverse mortgage-related event could cause a consumer to be denied a job, lose out on a rental apartment after losing his or her home, and pay hundreds of dollars more in auto insurance premiums. The cumulative impact of these financial calamities could strand a consumer economically for years after the foreclosure itself. It could create a self-fulfilling downward spiral in a consumer’s economic life.

One of the most pernicious aspects of the use of credit reporting is its use as a proxy for “character.” There is a popular conception, not just in the credit industry, but also among employers and the average layperson, that a poor credit score means that the consumer is irresponsible, a deadbeat, lazy, dishonest, or just plain sloppy. However, this stereotype is far from the truth. A bad credit record is often the result of circumstances beyond a consumer’s control, such as a job loss, illness, divorce, or death of a spouse, or a local or nationwide economic collapse.