Not only are the Big Three credit reporting agencies making a killing selling personal information, what most don’t realize is that they’ve also got an actual financial stake in gathering as many poor credit scores as possible.
Some data is more valuable than other data, which allows the credit bureaus to charge more for it. As sick as it sounds, there is more money to be made in people with problem credit, because they can be taken greater advantage of.
Consider a credit card company that charges outrageous fees, and inflated interest rates to high-risk consumers. They want to market to people with less-than-average credit. The methodology is that these consumers will be willing to pay more to have a credit card because their credit is poor.
People with harmed, bruised, or sub-prime credit are the people who make the banks the most amount of money in fees and interest. Banks don’t get rich on consumers who get approved for 0% interest credit cards. Instead their biggest profits come from their customers who are getting charged interest rates of 25% and higher.
The only trick is that the lender doesn’t want too many borrowers defaulting.
Now consider the sales department at one of the Big Three credit bureaus. Their sole job is maximizing the income they can generate off their data. When it comes to making the most money off a credit report, subprime customer data is worth more than good credit consumers. So the bureaus can easily sell this data and make a lot more money.
The problem with this is that predatory lenders are the best customers that the credit reporting agencies could ask for. This is because they’re willing to pay top dollar prices in order to get access to the bottom-of-the-barrel FICO scores.
All of this means one important thing; damaged credit consumers are more valuable to the credit reporting agencies than those with good credit. This actually gives the bureaus an incentive to try and NOT fix damaged credit – since the better the credit, the less money they can make on the data.
