Survey: Consumers See Credit Scoring As Fair Practice

Today's Credit Reporting System Makes Obtaining Needed Credit Easier

Atlanta, December 3, 1996 -- A new nationwide survey, released today by Equifax, shows a substantial majority of Americans believe the growing use of credit scoring formulas by credit granters is a fair practice to help manage the risk of offering credit. In addition, the vast majority of Americans believe the current system of reporting consumer credit history makes obtaining needed credit much easier.

Results of the 1996 Equifax-Harris Consumer Privacy Survey show approval of the use of credit scoring formulas with 79 percent of respondents saying the practice is fair. Credit scores are designed to help quickly identify the relative credit risk of a particular consumer based on specific financial characteristics and reported as a single number. In use for a number of years by credit grantors, credit scores have recently become an area of increased public focus as their use and acceptance grows in the mortgage lending industry because of encouragement from Freddie Mac and Fannie Mae.

On a related issue, the vast majority of Americans believe that in the absence of today's credit reporting system, the cost of credit would be greater and it would be harder to obtain the credit needed to make necessary purchases and improve their quality of life.

Specifically, 91 percent say the cost of credit would go up to cover increases in bad debt if not for the current credit reporting system. Eighty-eight percent say many businesses would cut back and extend credit to only their best customers. Eighty-six percent say businesses would ask for loans to be secured. Seventy-six percent say it would take weeks rather than days to get loan approvals. And perhaps most important, 70 percent say people with good credit records would not get the lower rates that their records deserve.

"These results show Americans appreciate the ability to obtain needed credit quickly. They understand that businesses take risks in extending credit and appreciate the need for credit reporting systems and other risk management strategies used by businesses to make the process easier and more equitable," said John Rougeou, President of Equifax"s North American Credit Services.

"Sometimes we focus only on the negative anecdotes or complaints about our credit system, but the truth is America has the best credit system on Earth. Americans by and large recognize this fact, value the benefits it provides and appreciate its positive impact on their quality of life, when given an opportunity to think about our credit system," Rougeou added.

Equifax is the world's leader in the consumer credit reporting industry and also provides a number of credit scoring products. It most recently announced a novel, new bankruptcy management solution based on innovative scoring techniques to help businesses predict bankruptcy rates among consumers in high-, medium- and low-risk categories. The Bankruptcy Navigator system responds to a growing concern among credit grantors for better ways to manage bankruptcy risk during a period of increased bankruptcy filings that do not follow traditional warning signs.

The 1996 Equifax-Harris Consumer Privacy Survey was conducted by Louis Harris & Associates in collaboration with Dr. Alan Westin of Columbia University. It is the seventh in a series of detailed surveys of consumer attitudes on privacy, financial, insurance and healthcare industry trends. The survey results are based on 1,005 telephone interviews conducted July 20-29, 1996. The sample is designed to be representative of telephone household in the 48 contiguous United States and is weighted to age, education, race and sex to bring them in line with figures for the adult population. The sampling error is ±3 percent.

Equifax Inc. (NYSE: EFX), committed to Global Information Leadership for the Information Age, is the leading provider of information services that help businesses grant credit, authorize and process credit card and check transactions, and insure lives and property. Established in 1899 in Atlanta, Equifax today employs 14,000 people throughout North and South America, the United Kingdom and continental Europe. Revenues for the 12-month period ended Sept. 30, 1996, exceeded $1.7 billion.