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Inside Information on Credit Reports and Credit Scores

How The Financial World Judges You

Today, your credit report and credit score dictate how much you pay for credit, insurance and other services. It is the measurement others use to determine their risk in doing business with you. Having a professional review your credit report and credit score with you are critical to saving money, avoiding identity theft and having access to credit when you need it.

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Inside Information on Credit Reports and Credit Scores
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Less than 10% of the population looks at their credit report annually. If you are not reviewing your consolidated credit report at least once a year you are more likely to have errors and problems with your credit that can cost you money.

Your credit score is a numerical measurement of your perceived credit worthiness. Your score can be low simply due to errors or it can be lower than it should be due to mistakes you have made in organizing your credit. With professional help, these mistakes can be corrected. For example, recently I assisted someone who was able to raise their credit score 100 points in just one day by making one small adjustment with one of their accounts. This increased score allowed them to qualify for a mortgage at a lower rate saving them tens of thousands of dollars.

How much money are you wasting by not reviewing your credit report and score?

Inside Information on Credit Reports and Credit Scores

Inside Information on Credit Reports and Credit Scores

How Credit Reporting Errors Can Occur

Errors can appear in several ways:

Sometimes a credit bureau’s internal processes make mistakes when trying to create precision in an imprecise world.

Are John, Jack and Johnny, who live at the same address, the same person? Is the Mary Ellen Watson in San Diego in 2006 the same as the Mary Ellen Watson in Los Angeles in 2007? And is the Richard Martin on Willow Street the same as the Richard Martin on Willow Avenue?

Sometimes human error is at fault. A clerk, for example, might make a typographical error or misread a hand-written credit application. In both cases, an incorrect letter or number can become part of a credit file.

Sometimes a consumer introduces errors into a credit report by obtaining credit under different names (Robert and Bob, for example, Margaret and Peg, or J. Michael and James Michael); providing an inaccurate Social Security number when applying for credit; or omitting the “Senior” or “Junior” when father and son share the same name.

Sometimes a consumer’s payment history is reported to credit bureaus incorrectly. For example, an error in your credit report may occur when a payment is applied to the wrong account.

What You Can Do to Prevent Errors

To ensure you get the credit you deserve, here are a few simple steps you can follow when applying for new credit:

  • Always use the same name on all your credit cards, loans and lines of credit. For example, Jonathan Q. Consumer should not omit his middle initial in some accounts, use the name J. Quincy Consumer for other accounts or use his nickname, Jon, when applying for still other accounts. Doing so can introduce inconsistencies and incompleteness in his report. It also can lessen his chance of getting the credit he asks for.
  • If you’re a “Junior” or a “Senior,” ALWAYS include your generation code (sometimes called a “suffix”) after your name. Omitting it almost guarantees that credit grantors and credit bureaus will mix up your credit accounts. (Separating the accounts requires special intervention.)
  • Always provide your Social Security number when applying for credit. This helps prevent your credit information from being mixed up with other consumers in the United States with the same or similar name.
  • Always list your address and your previous addresses for the past five years on your credit applications. This will help credit bureaus link together pieces of your credit history, even if you move across the country.

Understanding What an Error Really Is

When you’re reviewing your credit report, it’s important to know what really is an error and what isn’t. Credit bureaus and credit grantors sometimes have unfamiliar definitions to certain common words. When you see those words used, you may think your credit report has an error when, in fact, it doesn’t.

Two examples:

  1. “Current”: If you see this term to describe one of your accounts, it means you’re making or you have made your payments on time. Even if your balance is $0 or even if the account is closed it still will appear on your credit report as “current.” Though you probably would define “current” to mean “up to date” or “at the present time,” the credit industry uses it to mean the opposite of “delinquent.”
  2. “Paid:” You probably think a “paid account” is one that’s paid off. Wrong. Credit bureaus and credit grantors consider a “paid account” to be one that is closed. So even if you’ve paid off a credit card account, for example, it won’t be listed as “paid” unless it also is closed to new charges.

Two other common situations may cause you to think there’s an error in your report when there really isn’t: late payments and joint accounts.

If you make a late payment, a record of that delinquency will remain on your credit report for seven years from the date the payment was due. This is true even if you later pay your bill in full. (Similarly, you may be surprised to find out that a bankruptcy will appear on your credit report shortly after you file papers with the bankruptcy court. It will remain even if you later change your mind or the judge does not grant you the bankruptcy. Most bankruptcies remain on your credit report for 7 years.)

If you get divorced, you still are responsible for paying the joint accounts you had with your ex-spouse. This is true even if your divorce judge orders your ex-spouse to assume responsibility for particular debts. Why? The fact that you no longer are married does not affect the legal contract you made with your credit grantors to pay back your debts.

The True Test of Credit Reporting Accuracy

Critics, journalists and the credit reporting industry can argue and have argued for years about accuracy. What matters most to you, though, is how accurate your own credit report is. Credit bureaus encourage consumers to review their credit reports on a regular basis at least every one to two years or before purchasing a major item such as a home or car.

If you find an error in your report, let the credit bureau know. They can ask the source of the information (a credit grantor, for example, or a government agency) to verify your dispute. Once it’s verified no more than 30 days later, but often much sooner they will remove the item from your report. This service is free of charge.

It’s important to remember that no one benefits from an inaccurate credit report. As a consumer, you expect to be rewarded for your responsible use of credit with new financial opportunities and a higher living standard. The retailers, credit card issuers, banks, finance companies and other businesses that purchase credit reports also demand accuracy. It gives them confidence that they’re making correct credit-granting decisions.

Inside Information on Credit Reports and Credit Scores
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Daniel

    Credit repair is not illegal.  The act of charging fees before the contracted service is fully rendered is illegal.  Most companies can’t offer a guarantee that an item will be removed.  Credit service organizations (credit repair companies) are not allowed to dispute information if it is, or should be, known to them as being accurate and/or timely.  The problem in the credit repair industry, from the prespective of the CSO, is that clients lie about what is and isn’t inaccurate, and then piss and moan when their “inaccurate” accurate information isn’t removed, or they get a threatening letter from the credit bureau.  The only thing that can fix your credit report is time, timely payments, paying down debt, removing actual inaccurate information.

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  • ComplianceSlave

    They’re a “Credit Repair” Law Group in Davie FL…. My experience is there is limited success in credit repair. Most fixes are temporary & most attempts are futile. Steve has excellent advice on fixing your own credit. I dont have the link… Look on the Home page.
    I believe that a law group will likely charge you up front with no guarantee. The FTC states that credit repair is illegal if fees are charged up front, however, lawyers are not typically included.
    You’ll be rolling the dice.

  • Steve Rhode

    For what?

  • FDEFIORE

    IS LEXINGTON LAW A GOOD COMPANY

  • FDEFIORE

    IS LEXINGTON LAW A GOOD COMPANY

    • http://GetOutOfDebt.org Steve Rhode

      For what?

      • http://www.ftc.gov ComplianceSlave

        They’re a “Credit Repair” Law Group in Davie FL…. My experience is there is limited success in credit repair. Most fixes are temporary & most attempts are futile. Steve has excellent advice on fixing your own credit. I dont have the link… Look on the Home page.
        I believe that a law group will likely charge you up front with no guarantee. The FTC states that credit repair is illegal if fees are charged up front, however, lawyers are not typically included.
        You’ll be rolling the dice.

      • Daniel

        Credit repair is not illegal.  The act of charging fees before the contracted service is fully rendered is illegal.  Most companies can’t offer a guarantee that an item will be removed.  Credit service organizations (credit repair companies) are not allowed to dispute information if it is, or should be, known to them as being accurate and/or timely.  The problem in the credit repair industry, from the prespective of the CSO, is that clients lie about what is and isn’t inaccurate, and then piss and moan when their “inaccurate” accurate information isn’t removed, or they get a threatening letter from the credit bureau.  The only thing that can fix your credit report is time, timely payments, paying down debt, removing actual inaccurate information. 

  • John

    I need a real expert on the fair isaac model and credit reporting so that I may speak to them All the information on the net is rehashed and does not address the nuts and bolts of the system. I am in mortgage finance and have raised many peoples scores. I just did a rapid rescore that was supposed tho raise my clients scores 11 points and I lost 1. If you can someones name that would be great.

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