Americans Required to Give Up Even More Privacyby Tim Manni
Think your paycheck is for your eyes only? Think again. Americans are surrendering over more and more of their personal information with each passing day — and your paycheck is the latest bit of personal data that’s now out in the open.
The final rules issued by the Federal Reserve under the CARD Act will now require credit-card companies to examine your income when you apply for credit as a means of determining your ability to make payments. The examination of your income, among other factors, can be used to determine whether or not your application is approved, the size of your credit limit, and/or whether you may be pre-approved for certain offers:
To provide flexibility, however, the Fed said that issuers can use “a reasonable estimate” of income or assets based on “statistically sound models.”
Red flag number one. Does the term “estimate” scare anyone else? How about the phrase “statistically sound models”? The credit bureaus themselves admit that their ability to judge an applicant’s income is merely a ballpark estimate:
Experian estimates income to the nearest thousand, while TransUnion offers a range. But both acknowledge the estimates are just that. Experian says that more than 85% of the incomes it estimates at about $35,000 will indeed be below $50,000—but that’s hardly precise. Chet Wiermanski, global chief scientist at TransUnion, said it isn’t uncommon for estimates to be off by $15,000 or $20,000.
According to the Wall Street Journal, contracts prohibit lenders from turning down applicants based on their income data alone. However, that stipulation opens the door to even more of your personal information — such as pay stubs and tax returns — being brought out into the open.
Karen Blumenthal of the Journal writes that, because the state of your personal info means so much these days, “…it’s more important than ever to make sure the debt data in your report are accurate. Check your three reports at least once a year, or check one bureau’s report every four months.”
Paying your bills on time — even the seeming “less-important” ones like your utilities and cable — is extremely important for your credit score. It’s not just the “big three” credit bureaus who are collecting information on you.
And this is a little heads up to those out there — perhaps many of our younger readers — who have little to no credit established yet, paying bills, like your cellphone, on time is your key to establishing a decent credit score.