Many consumers go beyond getting their free annual credit report from the nationwide credit reporting agencies, Equifax, Experian and TransUnion. These consumers pay for monthly subscriptions to a credit monitoring service with the goal of knowing their credit score at any point in time and receiving alerts when someone uses their personal information or accesses their credit history. It takes many people by surprise when they purchase credit scores just before applying for credit only to find the lender’s credit score disclosure does not match. Why is that the case, and what can you do?
What Credit Scores Tell Consumers and Lenders
Credit monitoring services and nationwide credit reporting agencies make money by selling credit scores to consumers, lenders and other businesses that use credit scores for decision-making. You, as a buyer, borrower or consumer, can buy educational credit scores from a credit monitoring service. Educational credit scores help you prepare to apply for loans, manage your debts and eliminate fraud or identity theft. Mortgage lenders, auto loan companies, credit card providers, insurance companies, landlords and employers buy credit scores from credit reporting agencies. Credit scores help them determine if you will pay your bill on time, in full, every month; predict if and when you might fall delinquent on your accounts; or evaluate if and when you are likely to default on your credit obligations. Whatever they’re being used for, credit scores should be based on the same information for both lender and customer, so why are scores from different sources so different? Two reasons credit scores differ are discrepancies in reporting methods and different scoring models.
Issues with Reporting Methods
Common discrepancies in reporting methods include:
- Consistency – not all data furnishers give information to all credit reporting agencies.
- Timing – data furnishers may provide the same information to all agencies but at different time schedules.
- Accuracy – changing personal information, i.e. names or addresses, has to be matched to the correct credit file.
- Privacy – Credit reporting agencies do not cross-share details on inquiries and information with each other.
Lenders and other creditors can choose what information to report, when to report it and which agencies to report to. Some lenders report monthly to all three agencies. Other creditors, like collection agencies, may report quarterly or only when there is activity on your account. Some agencies only report to a single credit reporting agency. A one-week difference in reporting information to the agencies could make a difference in your score from each one. Since reporting agencies do not cross share information with each other, the report and score you buy may not contain the same information that the lender report and score contains.
Each credit reporting or monitoring agency uses a different method to calculate your score. They base these calculations on complex mathematics, statistical or algorithmic models. Scoring models are proprietary systems and are protected by trademarks, patents and copyrights.
There are three types of credit scores that credit providers purchase:
- Generic scores – predict general payment performance
- Industry scores – predict performance on specific type of credit
- Custom scores – predict performance by company’s customer base
Generic credit scores are used by credit monitoring services to educate you, the consumer. You can use a credit monitoring service to learn how to get your score from what it is today to where you need it to be in the future. You can also use this service find out how late payments, opening new accounts or paying off debts may change your scores over time. Again, these are educational items and there is no guarantee you will achieve a certain score at any time.
Industry credit scores tell, for example, car lenders how you have paid your car loan, but that score may be different from a mortgage or credit card score. If you have had an automobile repossession, your auto industry score may be low in comparison to your mortgage industry score if you have never had mortgage delinquencies. Lenders may have their own in-house system to calculate a custom score based on their specific credit products and customer base. These scores often rank you in comparison to other customers and may work more like a grading curve than a general purpose credit score.
Take an Active Role in Providing Your Own Credit Information
You cannot control what credit scores you or a lender will get at any time, but you can know what information is in your credit file and keep it up to date. Make sure your name, address, birth date, Social Security number and employment information are current and correct. If you have a common name make sure other people’s information is not in your credit report. If you have received collection agency notices, check for reporting with the original creditor. Duplicate items can affect your credit score. When you correct or dispute an item, make sure you do it with all three bureaus, Equifax, Experian and TransUnion.
The Bottom Line
Finally, educate yourself about the different types of credit scores, credit reporting agencies and credit monitoring services in the market. Visit their websites to learn about their scores and services. Here is a list of providers most often used by consumers and industry.
|CreditXpert Score||Affinion||www.privacyguard.com www.identitysecure.com|
|Experian PLUS Score||Experian||www.experian.com www.freecreditscore.com www.freecreditreport.com www.familysecure.com|
|Equifax Credit Score||Equifax||www.equifax.com|
|FICO Score||EquifaxFICO||www.equifax.com www.myfico.com|
|VantageScore||TransUnionVertrue||www.transunion.com www.truecredit.com www.privacymatters.com
Read more @:sfgatedotcom
Denied credit? Maybe you’re dead
Lots of people ‘die’ every year, at least on paper, and untangling the mistake can be a big headache. Here’s what to do if you learn you’ve ‘died.’
Rejected for a loan because your credit history was shut down? It might be because the credit bureaus think you’re dead.
About 1,000 people per month get mistakenly declared dead by the Social Security Administration, according to government estimates. Many more get falsely reported as deceased by their bank or credit card issuer, or by one of the big three credit bureaus — Experian, Equifax and TransUnion.
Often, when victims find out that they have been mistakenly declared dead, they assume that proving they’re alive and well will be easy. Instead, they find they will have to wait a month or more before lenders will acknowledge their living, breathing, bill-paying status.
Or, in more extreme cases, they’re told that they must be mistaken. They can’t possibly be alive right now because investigators have looked into their case — and records show they’ve passed away.
“There’s a sense of powerlessness, a sense that you are disenfranchised,” says James Willis, a California journalist and professor who was mistakenly declared dead by Capital One two years ago. Willis had started a new job and was getting ready to buy a house when he learned that, according to credit-reporting agency Experian, he had recently died.
“The news of my demise came in the form of a credit alert from Experian,” Willis recalls. “It said a potentially negative item had just been posted to my credit report.”Are debt protection policies worth it? FEATURED
When Willis followed up, he learned that one of his lenders, Capital One, had written off his charges as uncollectible because they believed that he was dead. Experian then froze his report, shutting out the mortgage company that Willis had enlisted to help him buy his house.
“When a credit card company declares you dead, then they send that notice on to the credit-reporting agencies, and then your credit history gets locked down,” explains Willis. “You cannot access it. Nobody can access it, because of the fact they assume you’re dead.”
At that point, being mistakenly declared dead shifts from minor annoyance to potential big, costly problem, says Jim Francis, a consumer lawyer in Philadelphia who has represented clients who have been declared dead on paper.
“The real problem with being marked as deceased on a credit account is you can’t get a credit score,” says Francis. “It’s impossible to get credit to the extent that most banks, mortgages (and) car dealerships require a credit score to assess risk. They have no possibility of getting that, and so there’s no way of getting credit.
“That’s the real problem and the real harm,” he adds.
Getting resurrected takes time
The amount of time it takes for “dead” consumers to be brought back to life can also hurt, say consumer advocates. Credit bureaus have 30 days under the Fair Credit Reporting Act to investigate a credit dispute and check on whether the information they have on file is correct.
However, that’s a long time to wait if a consumer is in the midst of applying for a time-sensitive loan, such as a mortgage, or is applying for a job and needs an immediate credit check, says Todd Mark, vice president for education at the Consumer Credit Counseling Service of Greater Dallas. “Those are situations where you don’t want to have to wait 30 days or longer for a dispute to be initiated,” says Mark.
In the meantime, customer-service representatives are rarely able to help speed up the process, which can be frustrating for a consumer who’s on a tight deadline, says Willis, the customer mistakenly declared dead by Capital One.
Short on time and anxious to erase Capital One’s mistake, Willis says he spent several hours on the phone, trying to get someone to help him in time to close on his home loan.
However, the workers at Capital One told him there was nothing they could do. Instead, Willis had to wait for the bank’s computers to process an investigation into the mistake and report back to the credit bureaus, he says.
“I don’t think you’re dead,” Willis says one customer-service representative told him over the phone. “I know you’re alive, but our computer is in control and our computer has 30 days to rectify the situation.”
“That’s when it took kind of a leap into the twilight zone for me,” says Willis. “Even though the individuals at Capital One believed I was alive, no one seemed to be able to do anything about the computer.”
Eventually, Capital One figured out that it had mixed up Willis with his deceased father, James Willis Sr., and restored his account. However, by that time, Willis had already spent countless hours trying to resurrect his credit.
“That’s what started weighing on me,” says Willis of the time spent trying to get the mistake corrected. “I was starting a new job at the time, and it was just a lot of time devoted to it — a lot of distraction that was caused by this.
“One of the frustrating things is to try to get them to understand that your time is valuable,” he adds.
It may take months — or years — to resolve
Willis was lucky. He was able to get his dispute resolved in less than a month and closed on his house just in time. However, other consumers have had to wait much longer to get their financial lives back on track.
Francis, the consumer lawyer in Philadelphia, says that many of his clients came to him in desperation after submitting their disputes through the credit-reporting agencies’ automated dispute process and getting nowhere.
“They tried sending detailed disputes, documentation (saying), ‘Here I am. This is my Social Security number. This is obviously not me.’ And surprisingly, in a bizarre fashion, the credit-reporting agency verified them as being deceased,” he says.
That’s when their lives turned upside down. Not only could they not get credit, but they had no idea how long it would take the credit bureaus to figure out the mistake.
If you, too, find that you are having trouble proving to lenders that you’re alive, don’t panic.
Prepare a detailed, notarized dispute for the credit-reporting agencies that includes documentation proving you’re alive, and send it by certified mail, say experts.
Also send a notarized copy of your dispute and copies of supporting evidence to any furnisher or creditor that you believe may be responsible for the mistake. If you believe the Social Security Administration is responsible for the mistake, contact your local Social Security office.
In addition, write down the name and number of every person you talk to over the phone, including what the person promised he would do for you, says Mark. “Create your own paper trail at home, and don’t be afraid to step up who you talk to,” he says.
If nothing works and your credit information is still shut down, seek legal help. Under the Fair Credit Reporting Act, you are entitled to seek legal action when legitimate errors — such as being mistakenly declared dead — aren’t corrected in a reasonable period of time.
Finally, remain calm, says Willis. If you believe you’ve located the source of the error, try calling repeatedly until you get a sympathetic voice on the line, he says. “I found one of those individuals with Capital One, and I found one with Equifax,” says Willis.
Explain your situation and understand that the person is at the low end of the totem pole and may not be able to do much to help you, he adds. “The natural tendency is just to boil up, but it doesn’t help anyone to do that. You just have to try to reason with them. Try to remain calm and reasoned, and try not to appear like a nut.”
Credit-reporting agencies are required by the Fair Credit Reporting Act to thoroughly investigate any item on a credit report that a consumer says is wrong. However, in many cases, Francis says, the original furnisher of the information got the record wrong, not the credit bureau, and the credit-reporting agencies don’t follow up.
“The credit-reporting agencies don’t conduct any type of independent investigation,” says Francis. Instead, they send a consumer’s dispute to the organization that supplied the information and rely on it to look into whether a consumer is really dead. “That’s how things are getting verified,” he says.
If a creditor looks at its records and sees that the consumer is listed in its files as deceased, it might not dig further, says Francis. “They’re not really that interested in conducting investigations,” he says. “It’s not really a profit center for them, so they are doing the bare minimum.” As a result, the creditor sometimes ends up repeating the same inaccurate information to the credit bureaus.
At that point, consumers have few options but to wait and try again.
Banks and other creditors are required by law to thoroughly investigate whether the information they have on file is correct, says Francis. “They have the same duty that the credit-reporting agency has,” he says. “Both the credit-reporting agency and the furnisher must conduct a reasonable investigation.” So consumers have the legal ammunition to fight back against credit-reporting agencies’ and furnishers’ claims that they are dead.
However, they have little power to speed up the process and get their credit reports unlocked when they need them.
“It takes a really persistent effort” to get a dispute resolved, says Nina Heck, the director of the Consumer Credit Counseling Service of Maryland and Delaware. “Sometimes (a dispute) has to be resubmitted and resubmitted.”
Heck has worked with multiple clients who have been mistakenly declared dead, and she says it often occurs because a client’s name was mixed up with someone else’s.
When that happens, proving you are who you say you are can be a challenge, she says. “First, you have to prove that you are you, and then you have to be able to validate that this (other) person is deceased,” says Heck.
Beware of the Death Master File
Consumers who have been accidentally declared dead by the Social Security Administration, rather than a creditor, have it even worse. The Social Security Administration keeps a master list called the Death Master File that lists everyone in the United States who has died. Sometimes, a person will get mixed up with someone else, or a typographical error will cause that person to be listed as deceased.
Once a consumer is listed as dead in the Death Master File, numerous stakeholders are notified, including the credit bureaus and other government agencies. Soon after, that individual’s credit reports are shut down, his or her benefits are cut off, and the person can’t get a new job (that requires a valid Social Security number for a living person).
Getting taken off the Death Master File, meanwhile, can sometimes take years, financially devastating those involved.
“As many news reports have accounted, incorrect death reports have created severe personal and financial hardship for those who are erroneously listed as deceased,” said U.S. Rep. Sam Johnson of Texas in February, announcing a congressional hearing on the Death Master File’s accuracy. “Those affected have experienced termination of benefits, rejected credit, declined mortgages and other devastating consequences, while their personal and private information is publicly exposed.”
By Kelly Dilworth for CreditCards.com
Found at money.msn.com/credit-rating/denied-credit-maybe-youre-dead
Are Serious Errors Lurking in Your Credit Report?
How accurate is the all-important data in your credit report? It depends on whom you ask.
Previous estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. But according to a recent study paid for by the Consumer Data Industry Association, the trade group for the credit bureaus that assemble and sell credit reports, that rate is much lower. Consumer advocates, meanwhile, were skeptical of those results.
The study, conducted by the Policy and Economic Research Council, found potential errors in 19.2 percent of credit reports examined. But once consumers disputed potentially problematic errors and got the bureaus to fix them, less than 1 percent of these corrected reports led to meaningful increases in credit scores.
And what is meaningful in the credit score context? Well, very few of the corrections led to a big enough credit score gain to push those consumers into a better “credit risk tier,” where they would have access to cheaper loans and such.
But that’s a pretty narrow way to view the results. Consumers typically want to hang on to every last point they can — especially at a time when lenders are reluctant to extend credit.
Score wise, the report found that less than 1 percent of all credit reports examined, or 0.93 percent, prompted a dispute that resulted in a correction that boosted scores by 25 points or more. About 1.2 percent of reports resulted in a score increase of 20 points or more; nearly 1.8 percent of reports saw scores climb 10 points or more; and slightly more than 3 percent had an increase of 1 point or more.
Keep in mind we are not speaking in FICO terms, or the popularly known credit score scale that most lenders use. Instead, the study measured scores using the bureaus’ VantageScore credit score, whose scale ranges from 501 to 990. The higher the score, the better the credit rating.
Consumer advocates pointed out that even seemingly low error rates can affect millions of consumers because each of the big three credit bureaus — Equifax, Experian and TransUnion — have at least 200 million credit files. So a 1 percent error rate would translates into two million consumers per bureau, noted Chi Chi Wu, a staff attorney at the National Consumer Law Center. For those consumers, “the credit bureaus should conduct real and meaningful investigations of disputes, which they do not,” she said.
Here’s how the researchers arrived at their numbers: Over all, the study, which included 2,338 consumers, found that 19.2 percent of credit reports had one or more pieces of information that a consumer believed could be inaccurate and disputed. Of those reports, 63 percent, or 12.1 percent of all reports examined, were found to contain errors that could potentially have “material impacts” that could lead to “possible adverse consequences.” Ultimately, 7 percent of reports in the study were disputed.
Consumers received their credit reports from one or all of the three bureaus, along with a credit score. They were instructed to identify any errors and then to file disputes with the relevant bureau, which then calculated scores based on the corrected report too. The study found that most changes were consistent with the consumers’ requests and that 95 percent of participants who lodged disputes were satisfied with the outcomes.
But satisfaction is almost certainly easier to achieve when you have a dedicated phone line for the participants making disputes — and one of the big bureaus did. Michael Turner, president and chief executive of PERC, said there wasn’t a meaningful difference in the results from the bureau that had the special phone number versus those that did not.
Experts also questioned the way the study participants were found. Instead of being randomly selected from the population at large, they were recruited through the Synovate Global Opinion Panels, where one million consumer members are compensated to complete an average of 12 to 14 surveys annually. But Mr. Turner said that the study’s sample “looks very much like an adult population on every sociodemographic metric.”
“We are transparent and are making available to academics and regulators the underlying data and the results from our independent peer review,” he added.
Still, it wasn’t enough to completely quiet the study’s critics. “To claim less than 1 percent have meaningful errors is kind of like trying to change an “F” to an “A” on you report card,” said John Ulzheimer, president of consumer education at SmartCredit.com, who also pointed out that the study thanks the three credit bureaus for providing “numerous insights, guidance, and invaluable assistance with the implementation of the research.”
The Federal Trade Commission is conducting a nationwide study of its own that also examines the accuracy of credit reports. It’s expected to deliver its results next year, and, it may include recommendations for legislative action. Perhaps that study will provide more clarity.
Have you discovered any serious errors in your credit report? What did you do to fix them? And what do you think of the study?
By TARA SIEGEL BERNARD
Now is the time of year for Promotions and Graduations and preparing for the future.
Do you know someone that needs to prepare for their financial future?
A recent graduate?
A newly engaged couple?
A prospective Home Buyer?
Here are 3 simple ways to improve your credit sores:
1) Review a copy of your credit reports and scores
There are many reasons you may have no credit history (A thin file). Maybe you’re just starting out, maybe you pay cash for everything and have never needed a loan. In any case, if you have no credit history, your FICO score is likely to be low. Get a copy of your report to view the facts about your personal history.
If you need help in understanding your credit, adding positive credit or on any related topic, just ask!
2) Maintain a GOOD credit history
Good job – you have paid your bills on time, and do not have high credit card debt. Here’s some ideas to keep your FICO score as high as possible.
Keep your old accounts OPEN. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score, as well as close the age of your active accounts.
Something to think about. The day of the month you pay off your credit card may have a lot to do with your FICO score. Try changing the payment dates you pay it if your reports show that you are carrying over a balance each month. …just be sure NEVER to pay late.
3) Fix negative information on your reports
Start with making on time payments. The next largest portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down your credit cards. Next, challenge any and all erroneous, disputable and obsolete credit information with the 3 major credit bureaus.
Elite Financial, LLC is a credit services organization that offers the
* Credit Repair
* Restoration & Rebuilding credit for clients affected by divorce,
bankruptcy or foreclosures
* Credit Education
* Our niche is fixing credit for loan approval
A good FICO score is a huge part of your financial life and future. Keep it healthy. Use it wisely.
Get help when needed.
Use these tips and watch your score climb.
Based on a recent study just completed by the FTC…
Is your credit report accurate?
1 in 5 credit reports has an error
Online credit bureau websites designed to sell premium products
Reports for consumers are different from lenders
Dispute process fails to comply with the Fair credit Reporting Act
40 Million Mistakes from 60 minutes
Credit Life…After Death
By CHM for Elite Financial, LLC- California Credit Repair
The death of a loved one seems to linger on in more ways than one. As the passing of my father in October, we were filled with grief while rejoicing his life. In a continued effort of polishing his legacy, I have recently protected his credit identity by placing a security freeze or “Deceased Flag” on his credit profiles with the 3 major credit bureaus, Experian, Trans Union and Equifax.
Sorting through financial matters after the death of a spouse or loved one can be a challenging experience. When the heart is heavy with grief, the last thing you want to think about is protecting your loved one’s identity and forging a new credit life of your own. But, alas, this too shall pass…
By placing a freeze, I have secured his credit so as to prevent any would be thieves from stealing his identity and using it to create a new profile. Obituaries are the starting point for many identity thieves. You may have seen something like this being offered as a form of Credit Repair.
This is absolutely illegal and should never be done. In advertisements, you will see this marketed as “creating a new credit file overnight” and many times will include obtaining a new EIN # or CPN #. It is also offered as a shelf corporation or seasoned tradelines. Don’t fall for it. If it sounds too good to be true, it usually is.
Here is what I did to place the security freeze on his profile:
1) Type a letter containing all identifying information of the decease person. This includes
- Date of Birth
- Include your name and relationship
2) Attach copy of death certificate to the letter
3) Mail to 3 Major Credit Reporting Agencies
PO Box 9701 Allen, TX 75013
- Trans Union
PO Box 2000 Chester, PA 19022
PO Box 740256 Atlanta, GA 30374
4) Wait for response in mail (Should be within 45 days)
Now, getting into Joint Accounts, Authorized User accounts and handling other credit matters directly with banks can get a bit more extensive. I will write another article about this at a later date. If dealing with areas such as Probate, Estates, Trusts or Wills, I would suggest speaking with an attorney who specializes in this area. In addition to all this, community property states (such as California) can add a whole new layer of difficulty when sorting through this area and will require a whole new set of ideas that I will write about in the future.
If you think this article was helpful, sign up for our newsletter. It’s free and contains reliable content twice a month. Until next time, be smart with your credit and your loved ones.
The truth behind the numbers that help determine your financial fate.
1. “You may never know your real score.”
Roughly 200 million consumers have a FICO score, which ranges from 300 to 850 and is used by most lenders to determine whether to approve them for financing and at what terms. This score is based solely on the information in consumers’ credit reports. While consumers can check their generic FICO score, which weighs how well they have been managing their credit, it’s unlikely they’ll ever know the exact score a lender sees when they apply for credit.
More than 45 FICO scores are available to lenders, says John Ulzheimer, president of consumer education at SmartCredit.com, a credit monitoring site, and a former manager at FICO. There are FICO scores that assign more weight to certain characteristics, such as borrowers’ credit card activity, or history with car loans, mortgages or installment loans (that include furniture and jewelry payment plans). Car loan lenders, for instance, often pull a FICO auto score which weighs more heavily a borrower’s past car loan activity. Even if they have a stellar generic score, their auto score can be lower if they missed a car loan payment or never had a car loan, which could leave them with a higher interest rate than expected, says Barry Paperno, a credit expert at Credit.com, which tracks consumer credit issues, and a former manager at FICO.
For its part, FICO says its generic score is the most prevalent, and that all its scores use that model as their foundation. The company created the industry scores at the request of the lenders, says Anthony Sprauve, a spokesman for myFICO.com, the consumer division of FICO.
Consumers, for their part, are often left in the dark as to what score lenders have used to come to their decision — unless they’re rejected for a loan or given a rate that’s higher than what the lender advertises. One year ago, a rule that stems from the Dodd-Frank financial overhaul kicked in requiring lenders to automatically present the score they pulled on these borrowers.
2. “Lenders aren’t placing full faith in us.”
Large lenders are increasingly going beyond FICO scores to determine a potential borrower’s creditworthiness. Indeed, credit bureau Experian (which has created scores that compete with FICO) reports that roughly 80% of large banks and lenders use their own custom scores; they incorporate applicants’ credit reports from the three major bureaus — Equifax, Experian and TransUnion (just like the FICO score). But they also take into account other factors, such as applicants’ income, assets, chances of filing for bankruptcy, and the likelihood they’ll generate loan revenue for the bank, says Ulzheimer.
While large lenders have used this strategy for years, experts say the practice is becoming more widespread. The concern is that by itself FICO cannot display the full potential risk of a borrower, says Frank Donnelly, president of the Mortgage Bankers Association of Washington, D.C. But by confirming that borrowers’ have enough cash reserves or assets to weather a sudden job loss, for example, lenders lower the chances that they won’t repay their debts. “They’re saying let’s not put full trust in this — let’s back it up with other evidence,” says Martha Doran, professor emeritus of accounting at San Diego State University, who studies credit scores.
FICO says it agrees with lenders’ strategy. “Any lender naturally would want other information to address ability to pay and other factors in making their lending decision,” says Sprauve.
Consumers could feel the impact. A high FICO score might not guarantee that they get approved for the loan, or get it at the terms they prefer, if the lender discovers an otherwise unfavorable trait that’s not listed on a traditional credit report. On the flip side, consumers with mediocre FICO scores could end up in better terms with a lender than they expected if positive information is discovered through the lender’s independent credit research.
3. “We’re multiplying.”
Consumers can now order their credit scores from more than 20 web sites, up from around five just a few years ago, at a cost of $7 to $20. But while consumers tend to think of one, uniform credit score, there are several types of scores, each of which relies on its own mix of payment history, credit applications, debt and other factors. Beyond FICO, there’s the VantageScore, which was created by the three largest credit bureaus — Equifax, Experian and TransUnion; each of those has at least one score of its own as well. But while lenders have access to different scores, FICO remains the industry standard. It’s used in 90% of lending decisions, according to CEB TowerGroup, a financial services research firm.
For consumers, the sale of other scores can lead to confusion. While many of the scores currently for sale rely on similar sets of data, there can be significant differences. VantageScore ranges from 501 to 990, while FICO scores range from 300 to 850. Others add extra information. For example, in 2010, Experian started factoring in data about on-time rental payments in some renters’ credit reports, data that would impact a VantageScore from that bureau, although a VantageScore from another bureau would not take that into account. Jeff Richardson, a spokesman for VantageScore, says that more competition has led to “more accurate scoring methodologies and more attention to consumer education.”
The credit bureaus say that most lenders don’t rely on just one credit score. “It’s a competitive marketplace and different lenders choose which credit score they prefer to use for various reasons,” says Daryl Toor, a spokesman for Equifax. Separately, they say some of their scores can provide educational value to borrowers. Michael Troncale, a spokesman for Experian, says the bureau’s PLUS score, which ranges from 330 to 830, “helps consumers understand their credit worthiness.”
4. “Our power is greater than you may think.”
When Dan Belanger tried to lease a condominium in Grand Rapids, Mich., a year ago, he provided past tax returns and bank statements to prove he could afford the place. To his surprise, his realtor told him he was rejected — because of his poor credit score. Belanger, who owns an automated data collection firm, says he offered to pay 12 months of rent before moving in to no avail. “It didn’t matter–I was pegged a risk because of my credit history,” he says.
A poor credit score can threaten much more than a consumer’s shot at new credit. Low scores prevent consumers from getting a mortgage and from renting in many cases. Home and car insurers often consult “credit-based insurance scores,” which include the applicant or policyholder’s credit score as well as other factors like their past claims and location. These scores help determine whether to approve a client and what premiums to charge. J.B. Hancock, of Chicago, says her car insurer raised her premiums 33% after her credit score dropped roughly six points to 811, and that the company didn’t allow for any negotiation on the price hike.
Loretta Worters, a vice president with the Insurance Information Institute, says insurers rely on a variety of information to determine coverage and premiums. She says insurers consider only those items from credit reports that are relevant to insurance loss potential.
5. “We can wreck your career.”
Credit reports, which determine borrowers’ credit scores, are also the new resume, used by many employers to help determine whether to hire an applicant. Some 47% of employers report doing credit checks for some or all job candidates, according to the Society for Human Resource Management.
The assumption, experts say, is that a bad credit report might help flag poor work habits and decision-making, and even general untrustworthiness. Some research seems to back employers’ fears: Nearly one third of employees with self-reported credit problems engaged in “counterproductive work behavior,” such as theft or accepting bribes, compared to about 18% of employees without financial problems, according to a 2008 academic study.
Consumer advocates argue that the credit check serves as one more setback for the unemployed. To earn extra income while in retirement, Penny Fox, 68, applied for an insurance sales position at a large health insurer one month ago. Fox, who’s based in Phoenix, Ariz., has more than 30 years experience in the field, but was rejected for the position after the employer discovered her poor credit. Fox recently lost a home to foreclosure and fell behind on credit card payments. “It’s like a house of cards — I’m caught in it,” she says.
The tide could be shifting. At least seven states prohibit companies from doing credit checks on many applicants, and similar bills are pending in another 20 states and Washington D.C. Separately, the latest SHRM report released this month shows that fewer employers are conducting credit checks than two years ago and 80% of employers who did said they hired a job candidate with negative information on their credit report.
5 more items to cover from original article will be posted next…
By ANNAMARIA ANDRIOTIS
Imagine getting denied a credit card because someone else is on your credit report. I’m not talking about identity theft. I’m talking about a case of blended credit reports.
The Columbia Dispatch found that 1 in 17 consumer complaints (of 21,500) in 2009 to the Federal Trade Commission and 1 in 12 complaints (of 1,842) in 2009 and 2010 to state attorneys general involved the consumer’s credit report being mixed with another person’s.
The news report illustrated the mix-up by offering three tales of financial identity confusion.
One Ohio woman’s credit report contained the bad credit of a woman living in Utah. Another found her daughter’s poor credit history on her own report. And one lady named Brenda Campbell almost had her wages garnished because two other Brenda Campbells were on her credit report.
At this point, I’d normally say, pull your credit report and make sure everything on it is correct. (You’re entitled to a free credit report from each of the three credit reporting agencies every 12 months at AnnualCreditReport.com.)
The report you pull will be based off your name, date of birth, Social Security number and current address. However, lenders often use only one or two of those identifying features to pull a credit report.
That means if a creditor pulls your credit report using your name and date of birth, there’s a possibility someone else shares those features and their report will be combined with yours. In other cases, Social Security numbers or names just have to be similar for the mistake to occur.
This kind of botch typically happens to people who share the same or similar names and often are in the same family, says John Ulzheimer, president of consumer education at SmartCredit.com.
To help the credit bureaus keep records straight, make sure to fill in your credit application with complete information, he says. Don’t forget the Jr. or Sr. and/or an apartment number, for example.
If the blunder does happen, Ulzheimer recommends disputing the process manually. Talk to someone at each credit bureaus — TransUnion, Equifax and Experian — and have them contact the lender of the disputed item. (Each bureau has a dedicated department for mixed files, which is separate from departments that handle run-of-the-mill credit report errors.)
(Of course, this is easier said than done as the Columbia Dispatch article showed the difficulties the three ladies had correcting their reports. If you run into a brick wall, consider a consumer-law attorney.)
“The good news is once something is identified as not belonging to a consumer, there is a way to red flag it, so it won’t happen again,” Ulzheimer says. “It’s a permanent fix.”
What’s your worst/most unusual credit report problem? How did you resolve it?
By Janna Herron · Bankrate.com
|TWELVE STEPS TO FINANCIAL SUCCESS|
|A new year typically brings with it a renewed commitment to become more financially stable. Toward that end, the NFCC offers the following 12-step formula to financial success:
How Credit Inquiries Impact Your FICO Score
It’s no secret that FICO scores and other credit risk scores consider credit inquiries when calculating your credit scores. A credit inquiry, if you are not familiar with it, is a record of who pulled your credit report and on what date.
If you want to bone up on inquiries you can do so here. I wrote that article for Mint a couple of years ago and the content is still accurate today.
When it comes to credit applications, many consumers are worried that by applying for credit they might lower their scores. That is certainly a possibility. Credit inquiries can lower your FICO scores. Notice I used the word “can” and not the word “will.”
The True Impact of an Inquiry
Before you choose to not apply for whatever it is you’re applying for, consider the fact that inquiries have a marginal, at best, impact on your credit scores.
Further, just because an inquiry causes your score to go down it may not cause it to go down enough to change any lender’s mind. Going from FICO 790 to FICO 786 because of new inquiries is likely going to be an irrelevant change when it comes to your credit application.
You’ll also want to keep in mind that the majority of credit applications result in one new inquiry on one of your three credit reports.
Applying for a new credit card doesn’t mean all three of your credit reports are being accessed. Only one is going to be pulled so the new inquiry will only appear on that particular credit report. That means your FICO scores at the other two credit bureaus are not impacted at all.
The only exception to this rule is a mortgage application where the lender or broker will likely pull all three of your credit reports.
The Grand Scheme
Something else to keep in mind…credit inquiries really aren’t terribly important in the grand scheme of things. Inquiries account for up to 10% of the points in your FICO scores. When it comes to pieces of the FICO score pie, it’s the smallest piece. The age of your credit report is more important than your inquiries.
FICO just released some data quantifying the true impact of inquiries to their scores. 57% of consumers are getting the maximum number of points from the inquiry category, which means inquiries are not lowering their scores at all. Inquiries are one of the top four reasons your FICO scores aren’t higher only 11% of the time.
And finally, only 4% of consumers lose more than 20 points in their FICO score because of inquiries. According to Frederic Huynh, one of FICO’s credit score scientists, “The bottom line is that I would not characterize inquiries as being a very important score factor relative to other predictors.”
Bigger Fish to Fry
If you’re concerned about your FICO scores then there are certainly bigger fish to fry than inquires. Negative information and paying your bills on time makes up a 35% piece of the pie. The various debt related measurements account for 30%. How long you’ve had credit is worth 15%. And, the diversity of account types accounts for 10% of the score points.
Keep in mind that when you pull your own credit report through sites like www.annualcreditreport.com, the inquiry has no impact on your scores. And, if you subscribe to a credit monitoring service or choose to purchase your credit reports through any of the retail websites, those inquiries also do not impact your scores.
By John Ulzheimer for Mint.Com