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Credit and Mortgage Triggers

Until JD linked [3] to my story about how credit cards get you in, keep you in and keep you spending [4], I had never heard of “credit triggers,” which is the highly profitable side business all three major credit bureaus (TransUnion, Experian, Equifax) are deep into. This article on the Daily Kos about credit and mortgage triggers [5] gives a great recap but basically the bureaus are paid by companies to let them know when you’ve starting doing trigger-type activity.

For example, if you start paying off some of your debt, collection agencies get a ping from the credit bureaus. When this happens, they know that they should start coming after you because you’re back on your feet. While this particular aspect of the service doesn’t trouble me as you should be paying your debts, the fact that your information is actively up for sale does. Others ways this manifests itself is in the idea of universal default, where failure to pay or late payment of one debt results in an increase in rate for another, which is one of the more insidious ideas of the credit card companies; but unless the companies are actively notified, which they are in the case of credit triggers, they would never know.

This also happens with mortgage companies, which explains why I received a deluge of mortgage refinancing offers for about two months after I bought my house. I received approximately two or three refinancing offers a day! I just bought the freaking thing, why would I want to refinance!? The same exact thing happened whenever I paid off the second mortgage… two or three offers each and every single day (while I am a fan of hyperbole, that was no exaggeration and anyone who has every bought a house can attest to the tenacity of those companies).

Of course, the credit bureaus spin both of those triggers as things that help the consumer – “you can get offers more aligned with your rating, so that they will be better when your score improves!” or so “you can shop around!” Ultimately, they’re taking the cash, selling your information, and there’s not much you can do about it. The difficult part in all this is that they do the work of collecting it but the onus of keeping it accurate is up to you, this is definitely one industry I wouldn’t mind seeing nationalized and more tightly regulated (fat chance, if anyone has any political-swing money, this industry does).