When acquired legally and ethically, credit reports (aka “consumer reports”) can be an outstanding investigative resource.
note: Neither the author nor the editors/publishers of Pursuit are offering legal advice.
The Fair Credit Reporting Act
When I started doing business research, I had a vague understanding of the Fair Credit Reporting Act (FCRA) and the very limited circumstances under which a reporting agency may furnish a credit report. [See 15 U.S. Code § 1681b. Permissible purposes of consumer reports]
The main point that lodged in my brain was that if I lied or used a pretext to obtain a consumer report, I could go to jail. [See 15 U.S. Code § 1681q. Obtaining information under false pretenses]
Even if I had permissible purpose for obtaining the report, the means mattered. Of course, in business due diligence, there’s rarely permissible purpose — which is why anytime I had a credit report in my hands, I always felt a little bit transgressive.
Even after years of doing this work, it still feels risky, high-stakes, and even mildly illicit. But I also know that when obtained properly, it can be an outstanding investigative resource.
Yes, I have a law degree, but this is not a law review article. I am not giving legal advice on the FCRA, nor am I giving any interpretations of the FCRA. (I am not even a practicing attorney, so I give no legal advice to anyone on anything.) This article will not cover when you can run a credit report or what you should do with the results of a credit report. You must decide that. But I would suggest that while lots of people attend to the former, many more should consider the latter.
Instead, I want to discuss how to use a credit report for background research. At the end of this article, I’ll offer examples of interesting findings that stemmed from good use of credit reports.
Some Ways to [Permissibly] Get Your Hands on One
After that introduction, I’m sure you’re wondering how I ever got my hands on a credit report in the first place. Whether I can decipher their strange code and syntax. How I know the magic they can cast.
Nearly all the credit reports I get come from these magic words in the FCRA: “In accordance with the written instructions of the consumer to whom it relates.” In other words, when a person signs a release, that authorizes you to obtain the report.
In investigative contexts this comes up in a few ways. In a standard due diligence check, where a credit report may not be otherwise permissible, a party can still ask for it, using the release for legal cover. There are also situations in which a person is cooperating with an investigation, perhaps to mitigate their actions. Signing a release for investigators to run a credit report can be one way for them to demonstrate cooperation.
Nearly all the credit reports I get come from these magic words in the FCRA: “In accordance with the written instructions of the consumer to whom it relates.”
Credit reports can sometimes be run in employment context, but this lawyer-not-lawyer is telling you to be wary: there are very specific provisions to follow when using a credit report for employment.
My message to you is that if you can get your hands on a credit report, you’ll find wonderful things therein. My message is also that you may be frustrated in the attempt, because the FCRA may prevent you from getting the credit report and finding these aforementioned wonderful things.
Wonderful Things You Can Find in a Report
Did I mention that you can find wonderful things in a credit report? Let me add here that there used to be so much more you could find. The biggest change is that tax liens and most judgments are no longer reported by the credit bureaus.
While these remain public records and can be found via other legitimate searches (i.e., fact searches conducted without FCRA permissible purpose), that credit report would sometimes ping a public record you didn’t know about — say, something filed in a jurisdiction you wouldn’t have checked.
Several other changes may affect what you can read from a credit report. In the old days, far fewer places accepted Visa/MasterCard, and the card issuers set much lower credit limits. This meant people carried more cards for specific purposes: a gas card for gassing, a department store for department storing, and so on. And because credit limits were tight, you’d also carry a card like American Express if you were gonna spend big.
Nowadays, a lot can be lumped into one big high-limit credit account, which makes it tougher to break down the details of how someone is spending.
Even in the old days, I tended to think there was more information out there than met the eye. I used to think, almost with complete sincerity, that the credit bureaus had stringers planted in every bankruptcy court across the country. As soon as the clerk stamped “filed” on a petition, the stringer would grab the sheets, scribble the name and social security number on a pad, and at some point later (probably at a payphone) transmit the information to the bureau.
There, someone would create a punch card and feed it into one of those ancient computers with big reels. Somehow, this new information got added to a credit record.
Silly me. I know now that there are no stringers, and there are definitely no pay phones. I’ve learned that the bureaus may not even learn about a bankruptcy, or anything specific. Instead, the information in a credit report nearly always comes from what creditors provide. In other words, anytime you open an account, from a new cell phone to a home loan, the organization on the other end may provide that information to the credit bureaus.
That information may include employer, email address, credit limit, etc. The credit bureaus use certain key identifiers to link new information to existing profiles. So a consumer credit report is essentially a snapshot of the information provided up until the date it is obtained, with the information going back seven years (for the most part).
The credit bureaus organize that information into five buckets:
- Identifying information, including current and former addresses, email addresses, etc.
- Public records, such as bankruptcies
- Credit accounts, including auto loans, mortgages and lines of credit secured on real estate, traditional credit cards (Visa, Amex, etc.), and store or proprietary credit cards — your Nordstrom card and the like
- Information on your credit accounts, which generally covers three things: the total amount of credit or size of the loan, the current balance on the account, and your payment history on the account
- Inquiries made of your credit report
There are all sorts of caveats, exceptions, limitations, exclusions, and general idiosyncrasies regarding what fills those buckets. Know that not all creditors report to all credit bureaus. Know also that not all loans and similar activities get reported. For instance, payday loans and other similar personal loans tend not to be reported. Rental payments are not reported in consumer credit reports, although there are companies that collect information on rental payments. I have never seen a casino marker show up on a consumer credit report.
A credit report is not all-encompassing.
Gleaning and Interpreting What’s There (and What Isn’t)
The primary use of a credit report is to decide whether to grant new credit. It’s one tool banks and others use when deciding when to make a loan or issue a credit card.
But investigators and other researchers are not passing out cash. They want to see what they can learn about you from the information in the credit report. Credit reports come in various degrees of code and arcana, and deciphering those numbers and letters is part of the learning. For the sake of now, let’s assume you can figure out how to read whatever credit report you have (legally) obtained. What have you got, and what’s it worth?
The worth for investigative researchers of credit reports is that they capture information that is otherwise difficult or impossible to obtain from public records.
Certain data points in a consumer credit report can be replicated with public record research (e.g. public real estate records, motor vehicle registrations, and court records). For example, a direct search of certain records may be more likely to identify bankruptcies and tax liens. And of course, you can gather this kind of information through surveillance and interviews … eventually.
But you can never get exactly what’s in the report, not for the low-low cost of said report. And there’s no better tool for assessing a person’s financial activities. But if you just look at the credit report like a banker, you’re missing its special value.
Don’t ignore the obvious, of course: If there are collections, write-offs, and such, report them. If the person has a million-dollar home loan, report that. But what does a million dollars really mean?
You need additional context: credit and debt vs. assets and income. What’s the expression? The most credit goes to those who need it the least. Those credit limits speak volumes. What speaks more: how large is the auto loan, or the mortgage, and where do they stand in relationship to all that credit? Do they pay their bills on time? Are they flush or just getting by, living beyond their means, propped up by debt?
The real picture, as painted in the consumer credit report, may be nothing like the subject’s public profile.
A credit report shines light where there was none. It can be a window into activity otherwise hidden. It is a sonogram of your lifestyle.
As for whether you can draw conclusions about a person’s reputation or character from said history, that’s up for debate. But the thrill of having a credit report comes less from the stated payments and the like and more from what else you can glean. That’s where you really earn your research chops.
The best thing about a credit report is that it shines light where there was none. It can be a window into activity otherwise hidden. It is a sonogram of your lifestyle. Those accounts, their activities, and even who makes inquiries paint a sharp picture of how you spend your money and how much money you have to spend.
In a sense, the credit report tells us who you are. Sure, it’s not a complete picture, but it’s still a very interesting one. As researchers, it’s our job to put it all in context.
If someone — say, a potential investor in a company — is supposedly brimming with liquid assets, does the credit report indicate that? Or does his debt ratio indicate that he lives beyond his means?
Sometimes, what’s not there (but should be) is just as interesting as what is.
Here are two cases where I found unexpected information on a credit report that led to more questions and a closer investigation:
In the first case, a company learned about an employee’s on-the-job hacking activities after police seized his computer. Needless to say, this made the company wonder what had gone wrong with his background check. A credit check had been run as part of the pre-employment procedures, but his credit was super clean — no negative hits.
We went back in for a closer look and noticed something odd: the report was four pages, about two pages longer than most credit reports. The excessive number of accounts, opened by a guy barely old enough to drink, raised a red flag and plenty more questions.
Since this person turned out to be a hacker, it’s conceivable that these extra credit accounts had something to do with his extracurricular activities online. Of course, it’s hard to say whether a more thorough screening might have identified him as a hacker, or otherwise kept him from being hired. But it did show that something was amiss — and demanded a little more digging.
In the second case, the subject’s basic header information provided an employer name that was not otherwise on this person’s resume or LinkedIn profile. This piqued our curiosity: Who was this bonus employer, and why did it show up only on the credit report?
A little search here and a little search there, and I found a federal lawsuit involving this company, a lawsuit over allegations of someone trying to usurp someone else’s business. The litigation records revealed that the person we were researching was a witness to these allegations — and possibly a participant in the scheme.
None of that was apparent in the credit report. What was apparent was a small discrepancy in the subject’s employment history. It was that minor anomaly in the credit report, the undisclosed employer, that led me to an even bigger finding.
There are many other good uses an investigator or researcher can get from a credit report. If there’s litigation or you have the appropriate releases, you can use a credit report as a map to find assets. Every account has an application, and every application is something you want to see if you’re searching for assets. And if there are collections, someone may be willing to share leads. Last, do not forget the inquiries — when they were made and who made them can tell you all sorts of stuff.
Whenever I do get my hands on a credit report, I feel like I’ve discovered buried treasure. They provide so much insight that’s hard to glean any other way. So my advice is this: Be 100 percent sure that you have permission to obtain a report, and that you’re doing so legally. And then, when you do get a report, make good use of it, knowing that the best secrets may hide between the lines, as my two examples show.
If you have stories of how you used credit reports to inform an investigation, please share them in the comments below or on Twitter! I’d love to hear from you.
About the author:
Robert Gardner likes to think he has been performing research so long, credit reports came on stone tablets. Over a long career, Robert has worked with private investigators, forensic accountants, fraud auditors, litigators and others who need vital information to make decisions and react to unforeseen problems. Robert works in all aspects of business research including due diligence, litigation support, fraud investigations, asset searching, and competitive intelligence. He has made inquiries in nearly every part of the world. Well versed in a variety of data collection methods, especially online and Internet searching, he has transformed public record findings into reports, charts, schedules, timelines, and databases to assist in many situations.