Key priorities for 2025: 

• Reform credit reporting: Ensure transparency and accountability for fairer financial assessments.
• Ban credit checks for jobs: Protect workers from biased employment practices.
• Simplify disputes: Streamline the credit report error correction process for consumers.
• Embrace open banking: Use real-time data to improve credit access and accuracy.
• Empower consumer control: Allow individuals to manage their financial data effectively.
• Fix outdated systems: Revise the Metro 2 format, which is outdated and cumbersome, thus discouraging fintechs from reporting valuable data.

Following the 2024 election, voters of all ages are urging the incoming government in 2025 to create systems that actually work for them. One key area in need of reform is credit reporting, which has the power to open doors for Americans but often unfairly shuts many out.

The current system is outdated, penalizing responsible financial decisions and leaving consumers vulnerable to errors and biased lending practices. Americans need reforms that simplify the process and give them more control over their financial data, ensuring fairness for all.

The Problem: Lack of Transparency and Accountability

Credit reporting agencies act as both judge and jury over an individual’s financial worth, with minimal transparency or accountability. Consumers are left in the dark about how their credit scores are calculated, and this opacity benefits corporations, not consumers. A 2012 Federal Trade Commission nationally representative study found that 26 percent of consumers found at least one potentially material error in their reports. Out of those consumers, about five percent of consumers found errors that, if corrected, would have shifted their scores into a higher credit score tier, likely resulting in lower interest rates on an auto loan. This limits financial opportunities, and in some cases employment opportunities for many.

Updating Systems for Modern Data
The Metro 2 format used in credit reporting is outdated and complex, discouraging fintechs and short-term credit providers from sharing data. Modernizing this format would greatly benefit consumers, especially those with limited or nontraditional credit histories, like younger individuals or those with thin credit files. Simplifying reporting fields and enabling fintechs to report on-time payments and completed loans would create a powerful credit-building tool. This update would empower “credit invisible” consumers to establish creditworthiness, fostering fairer, more inclusive assessments and creating a clearer path to mainstream financial opportunities that reflect their true repayment behavior.

Proposed Reforms for Fairness

To fix this broken system, several key reforms are necessary:

1. Ban Credit Checks for Employment: According to a 2024 report from the Urban Institute, credit checks for employment disproportionately harm low-income workers, women, and people of color. Job eligibility should be based on qualifications and experience, not credit scores.
2. Simplify the Dispute Process: Fixing credit report errors should be as easy as updating personal information online. Research from the Federal Trade Commission (FTC) shows that the current dispute process is cumbersome, often taking months to resolve if at all. 
3. Embrace Open Banking: Enhancing traditional credit scoring with cash flow underwriting can provide a more accurate financial profile, using real-time data rather than solely relying on outdated metrics. A study from the U.S. Department of Treasury advocates for broader use of alternative data, like banking transactions, to improve credit access and accuracy.
4. Simplify the Metro 2 format: The Metro 2 format, used for credit reporting, is complex and outdated, especially for fintech small-term loans. Fields like the payment history profile and the last date of delinquency are cumbersome, as they require detailed tracking that may not suit the flexible repayment structures of fintech loans. Simplifying these fields could improve clarity and efficiency, making the format more adaptable to the dynamic fintech landscape, thereby encouraging more fintechs to supply data which will paint a more accurate picture of consumer creditworthiness. 

Consumers Deserve More Control

Open banking empowers individuals to control who can access their data and how it’s used. The CFPB has highlighted how greater consumer control over personal data leads to better financial outcomes for all. It’s time to overhaul the credit reporting system, focusing on transparency, fairness, and consumer empowerment to ensure it works for everyone. By implementing these reforms, we can create a system that accurately reflects financial behavior and ensures every consumer is treated fairly.

Too Much is at Stake
If policymakers and regulators fail to act, millions of Americans will continue to face biased credit decisions, limited job opportunities, and an inability to correct errors on their credit reports. Outdated systems will persist, deepening financial inequality, denying consumers control over their personal data, and preventing the use of real-time information to improve credit access, fairness, and transparency for all.