Why Advisors Should Discuss Credit Report Data Privacy With Clients

Apr 19, 2022 Share This 

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When consulting with clients, it’s easy for advisors to get caught up in conversations about portfolios, emerging financial trends and news about inflation or market volatility. What might not enter the conversation is a discussion surrounding a client’s credit rating or credit report.

Do your clients understand the role their credit ratings play in their financial outlooks and that lower credit scores generally mean it will be more costly to borrow? Are they aware of their current credit score? Do they realize who can and cannot view their credit report?

The next time you connect with clients, consider including the following information as part of your discussion.

Who Can View Credit Reports?

Many consumers may not be fully aware of all the personal identifying information that is associated with their credit reports. They contain home addresses, whether an individual has been sued or filed for bankruptcy, loan paying history, how someone pays their bills and much more.1

Your clients may also be surprised to learn just how accessible their credit report is to some organizations or individuals they do business with, such as insurance companies, landlords and lenders. Credit reporting agencies may sell your information to these entities if they have a valid need for access. A valid need might be something as simple as evaluating an application for a car lease or purchasing a new phone on a payment plan through a carrier. By applying for these services, you’re essentially giving them permission to access your credit report.2 

There is one type of application that requires a person’s consent when requesting a credit report. If someone applies for a job, consumer reporting agencies cannot give out their information to a potential employer or current employer without written consent. An exception is the trucking industry.2

The Dark Side of “You’re Pre-Qualified!”

There is somewhat of a back door to the “valid need” requirement that grants certain companies access to people’s credit reports. Insurance companies and credit card companies that want to offer consumers new cards can inspect credit reports based solely on their own determination of various qualifications.3 

Once a credit card company identifies its ideal potential customers based on certain criteria like credit scores or borrowing histories, it can purchase lists from the credit bureau agencies that meet those criteria. The credit card company might also have lists of potential customers that it will send to various credit bureaus to confirm whether they meet their requirements.3 

In other words, these companies can gain access to credit reports based on the prospect of doing business with someone rather than actually doing business with them, whether an individual agrees to it or not. The good news is that these types of inquiries and “prescreened” offers won’t hurt an individual’s credit score.3

Opting Out of Prescreened Offers

If your clients are concerned about limiting who has access to their credit reports (and their personal information), they can limit unsolicited prescreened offers. In general, any unsolicited offer is required to include a toll-free phone number that individuals can call to remove their names from the list. That’s a start. They can go a step further and opt out with the nationwide credit bureaus by calling them toll free at 888-5-OPTOUT (888-567-8688) or visiting optoutprescreen.com.3

Checking Credit Reports for Identity Theft

Advisors may want to encourage clients to get a copy of their credit reports to see who has accessed their information and to ensure that the information is accurate and up-to-date. Checking credit reports can also help to identify whether there are signs of identity theft. Multiple mistakes on a credit report may be an indicator.4

Identity theft is a major concern and can have devastating consequences on a person’s financial wellness. Identity thieves can purchase items in a victim’s name, open accounts, steal tax refunds, drain bank accounts and even get medical care under the victim’s health insurance carrier.4

Traditionally, consumers can request a free credit report every 12 months. However, there are some provisions that allow for more frequent requests, such as evidence of identity theft, unemployment or denied benefits.4

Keep the following information on hand in the event you need to help a client check their credit reports:

Three Ways to Order a Free Credit Report

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-52814

How to Correct Mistakes on a Credit Report

  • Individuals need to contact all three credit reporting bureaus, Equifax, Experian and Transunion
  • Visit the the Federal Trade Commission Website for detailed instructions4

How to Report Identity Theft

Educating clients on the importance of protecting their personal financial data and ensuring accurate information is just one way to maximize client relationships. View additional content and videos by leveraging our Acceleration® resources — six modules that spotlight topics and trends that can help improve your business results. Simply click below.

Acceleration Resources

SOURCES:
1 Federal Trade Commission, Credit and Your Consumer Rights, June 2017
2Federal Trade Commission, A Summary of Your Rights Under the Fair Credit Reporting Act, no date
3Federal Trade Commission, Prescreened Credit and Insurance Offers, May 2021
4Federal Trade Commission, Free Credit Reports, May 2021 

CMGA-4274971.1-0222-0324


Topics: Risk Control