Credit Monitoring: Industry Overview
The credit monitoring industry has grown significantly in the last ten years. In 2009 credit monitoring was a $650 million industry in the United States, while, in 2020, it is expected to reach $12.7 billion.
Historical Background Of The U.S. Credit Monitoring Industry
- Credit reports and credit scores are the most well-known credit monitoring services. In 1956, Bill Fair worked with Earl Isaac to create Fair, Isaac and Company. Their goal was to create a standardized credit scoring system. The name given to the company was FICO and the FICO score system, which was launched in 1989.
- According to Credit Sesame, a FICO score above 700 is considered positive, while a score below 550 is perceived as negative. This information is available in consumers' credit reports.
- Until 2019, U.S. citizens could access a free copy of their credit report, once every year, according to the Fair Credit Reporting Act (FCRA). The report was provided by any of the credit reporting companies (Equifax, Experian, and TransUnion). From 2020, everyone in the U.S. can get up to six free credit reports per year by visiting the Equifax website.
- U.S. citizens have connected identity theft to credit cards, online shopping, and FICO scores. However, there are early forms of identity theft from the 1800s. The rise of technology has created a new era of identity fraud. According to the Identity Theft Resource Center, in 2017, the total number of exposed credit card numbers was 14.2 million, an increase of 88% since 2016, making identity theft one of the most common data breach issues.
Overview Of The U.S. Credit Monitoring Industry
- Credit reports are very important nowadays. While U.S. consumers recognize the importance of having a good credit score, nearly 20% of them stated that they check their credit score, according to a Mintel report.
- The market size of the Credit Bureaus & Rating Agencies industry is expected to reach $12.7 billion in 2020, a 2.3% increase from 2019. Credit bureaus benefit from an increase in applications regarding credit cards, home equities loans and mortgages.
- About 15 million U.S. consumers experienced identity theft in 2017. In addition, the Federal Trade Commission reported 400,000 cases of identity theft in 2016, with 29% of those cases related to the use of personal data to commit tax fraud. 32% of identity theft was related to credit card fraud
- A report published by the Department of Justice stated that 86% of the victims of identity theft in 2015 faced the fraudulent use of their credit card account information. In the same report, it is mentioned that the cost of identity theft for the US economy was $15.4 billion in 2015.
- According to information provided by IBISWorld, the market size of the credit repair services industry is expected to reach $2.8 billion in 2020. The market is expected to decline by 7% in 2020 due to a declining life cycle stage and a very high growth risk score.
Role Of The Credit Monitoring Aggregators
- Household debt in the U.S. was $14 trillion in 2019.
- The big data breach at Equifax in 2017 and the fines that both Equifax and TransUnion received from the Consumer Financial Protection Bureau for misrepresenting data provided to consumers had a positive impact on credit monitoring aggregators because it raised awareness among U.S. consumers.
- These platforms use advanced technologies to help their members increase their credit scores and better manage their debts.
- Credit Sesame uses machine learning and AI to help its clients improve and manage their credit. The company states that 61% of its members saw credit score improvements within the first six months of their subscription.
- Credit Karma provides free credit reports to its members that are updated weekly. The credit scores included in Credit Karma's reports are based on the VantageScore 3.0 model, which is a new scoring model created by the three credit reporting companies Equifax, Experian, and TransUnion. Credit Karma was one of the first to recognize the dormant consumer demand for credit reports. The company had reported over $1 billion in annual revenue in 2019 and was acquired by Intuit in February 2020.
- WalletHub provides a credit alert section in the user's dashboard that identifies all the factors that influence a consumer's credit score.
- Credit Sesame, one of the major credit monitoring aggregators recently announced that it will expand its business into digital banking. The vision of the company is to use information from banking customers’ finances to personalize its credit improvement solutions.