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Big Business

According to the Federal Reserve Bulletin of February 2003, the credit reporting system of the three main credit agencies has information on 1.5 billion accounts held by about 190 million people. This information is analyzed by businesses using credit-scoring formulas to decide whether to do business with you and under what terms. And this is a good thing. As Fed Chairman Alan Greenspan said in testimony to the House Financial Services Committee in April 2003, “…there is just no question that unless we have some major sophisticated system of credit evaluation continuously updated, we will have very great difficulty in maintaining the level of consumer credit currently available because clearly, without the information that comes from various credit bureaus and other sources, lenders would have to impose an additional risk premium because of the uncertainty before they make such loans or may, indeed, choose not to make those loans at all. So it is clearly in the interest of consumers to have information continuously flowing into these markets.

It keeps credit available to everybody, including the most marginal buyers. It keeps interest rates lower than they would otherwise be because the uncertainties which would be required otherwise will not be there.” And when Alan Greenspan speaks, everyone listens.


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