Democrats and Republicans in Congress have a message for American credit bureaus: The current system for determining credit scores isn't working. Credit scores are used for more than just basic loan, credit card and mortgage applications. Many landlords and apartment complexes rely heavily on them. Insurance products like renters insurance and auto policies may also require a credit check, depending on the provider. Even some employers may seek a credit report before hiring a candidate. "There are so many meaningful things that rely on a credit score as a basis for things like terms and even the decision someone is making about you," John Ulzheimer, an expert on credit scores and credit scoring, tells CNBC Make It. Though they're widely relied on, the credit reports of about 1 in 5 people have an error of some kind, according to a study by the Federal Trade Commission. And members of the House Financial Services Committee aren't having it anymore. Members from both political parties grilled the CEOs of the three major U.S. credit bureaus — Equifax, Experian and TransUnion — on Tuesday, calling for accountability and change. Chairwoman Maxine Waters, D-Calif., called the hearing to discuss the current state of the bureaus after the massive 2017 Equifax data breach and to discuss proposed bills that aim to reform the current credit reporting system.

'The credit reporting system is in major need of repair'

"The system is broken," ranking member Patrick McHenry, R-N.C., said Tuesday. "While the credit scoring system provides us with a foundation that allows millions of Americans to access credit quickly and efficiently, the credit reporting system is in need of major repair." Democrats, including Waters and committee member Alexandria Ocasio-Cortez, D-N.Y., noted that part of the problem is that, to credit reporting bureaus, consumers aren't customers — they are the goods. "This commodification of consumers and their personal data is the core reason why our nation's consumer credit reporting system is broken," Waters says. Waters and McHenry have both proposed bills in the past to improve the credit bureaus, but Waters said Tuesday that she would be " introducing legislation ... to see what we can do to protect our consumers more and strengthen the entire system." Representatives for the industry have concerns about the proposals. As Francis Creighton, president and CEO of the Consumer Data Industry Association told Politico, "In effect, consumers will be able to take things off their report that are negatively impacting them," he said. "And we think that's really problematic."

Equifax data breach highlighted problems

The 2017 Equifax data breach put some of the credit bureaus' shortcomings front and center. The company announced in early September 2017 that consumers' personal information, including Social Security numbers, passport information and partial driver's license data, had been exposed. Equifax actually discovered the hack at the end of July, though it didn't publicize the news until over a month afterward. A few days after its initial announcement, the credit bureau revealed that the hackers took advantage of a security gap that it had known about since that March but had failed to fix. All said, the data breach affected more than 145 million Americans. That's roughly 2 out of every 5 Americans who found that some of their most sensitive information had been put at risk. "The reality today is that, if you have a credit file, your information is probably on the dark web," McHenry said during Tuesday's hearing.

Complaints and lawsuits against the credit bureaus

An investigation published earlier this month by the Atlanta Journal-Constitution found consumers filed 175,000 complaints with the Consumer Financial Protection Bureau related to credit reports between 2015 and 2017. About 65 percent of the complaints filed in 2017 pertained to inaccurate information on credit reports across all three of the bureaus. The investigation revealed that more than 4,000 lawsuits have been filed in federal court against Equifax, Rep. Katie Porter, D-Calif., pointed out during Tuesday's hearing. She asked Equifax CEO Mark Begor if he would provide his Social Security number, his birthday and address out loud to the committee. "I would be a bit uncomfortable doing that," Begor told Porter, because of concerns about identity theft. "It's sensitive information that I like to protect and I think consumers should protect theirs." "If you agree that exposing this kind information — information like you have in your credit reports — creates harm and therefore you're unwilling to share it, why are your lawyers arguing in federal court that that there was no injury and no harm created by your data breach?" Porter asked.

The reality today is that if you have a credit file, your information is probably on the dark web. Patrick McHenry a North Carolina Republican

Porter argued that Equifax lawyers, in defending the company in a number of lawsuits filed by affected consumers, claimed those consumers had not suffered any harm as of yet. When Begor said he wasn't a lawyer and could not speak to the company's legal defense strategies, Porter dismissed his answer, "You do employ those lawyers and they do operate at your direction, at your counsel, and they're making these arguments in court, on the record." Equifax says it has taken steps to address cybersecurity as well as consumer complaints. It appointed four new members to its board of directors and added to its senior leadership within its security, data governance, IT and risk management teams, according to Begor's testimony Tuesday. Additionally, Equifax hired 1,000 full-time IT and security employees and plans to spend $1 billion on technology and security through 2020 to improve its systems.

Changes to credit reports are coming

In addition to any bills that Waters or McHenry are planning to put forward, there are already changes to consumer credit reporting on the way. Experian and FICO are both working on products that will roll out this year and will incorporate additional information in your credit report, such as your phone and utility payment history. The programs, called Experian Boost and UltraFICO, allow consumers to opt in to share their payment history, as well as the overall health of their bank accounts and if their spending and income ratios are positive. "The consumer is in control," Nick Thomas, co-founder and president of Finicity, one of the companies powering the data collection behind these new products. Early indicators show that, with Experian Boost, consumers saw their credit score increase, Thomas says. In one case, a pilot participant boosted their score by 74 points. Raising your credit score can have a real impact. For example, research shows boosting you score by roughly 100 points, from good to excellent, can save you over $10,000 in interest on a mortgage.

This commodification of consumers and their personal data is the core reason why our nation's consumer credit reporting system is broken. Maxine Waters Democrat of California