[tedunangst]

Of course the credit-reporting bureaus profit tremendously by upholding the current system as it is.

This doesn't seem to follow. The credit bureau has incorrectly identified a responsible person and denied them a loan. No loan = no interest payments. How do they or the bank profit? People who deal solely in cash are the worst kind of (non) customer for the financial industry. Wouldn't the banks prefer (and pay for) accurate ratings over inaccurate ratings?

[unclebucknasty]

If that denied person then goes off to build a credit profile by engaging in a series of other credit transactions, then the value of that customer grows tremendously for the credit bureau. Each debt becomes a part of his/her profile that can then be sold and re-sold. And each transaction generates revenue for the bureau as prospective new creditors pull the customer's credit. It's a self-serving system that benefits both the creditors and the bureaus. From the bureau's perspective, this is far more profitable than taking into consideration other factors to get just one loan decision "right".

And, this is the how we've been trained to "build credit", as evidenced by the grandparent's standard advice to improve credit by financing cars and paying them off over the months vs. paying in cash. This is how things work currently, and most people understand and follow that program, which suits the bureaus quite well.

>Wouldn't the banks prefer (and pay for) accurate ratings over inaccurate ratings?

This is not to say that the current approach is wholly inaccurate. It certainly can be one way to measure worthiness. I'm just saying that there are other approaches that are overlooked and, as it happens, the credit bureaus don't have much incentive to pursue those other approaches.