Credit scores 102: A crisis, and some changes

Posted: Tuesday, March 18 at 05:00 am CT by Bob Sullivan

Having taken a look at what credit scores are -- and what they aren't – in Friday’s column, we’re ready to look at how they came to be used for purposes for which they were never intended and how they gave birth to a cottage industry aimed at manipulating them.

You might be surprised to learn that even the people who invented credit scores say their use has gotten out of hand. And if lenders learn a simple lesson – that they should rely a little less on a number and a little more on interpersonal skills when making loans -- the current credit crisis might have a silver lining.

"There became an over-reliance on credit scores," said Lisa Nelson, vice president of global scoring for Fair Issac, who is in the unusual position of telling banks they put too much stake in her product. "Lenders became came too overly focused on credit scores."

Express mortgage vetting that leaned too much on credit scores made a lot of companies a lot of money during the go-go days of the housing bubble. Bear Stearns was one. Now, many of those companies are in the cross-hairs.

Bear Stearns’ collapse was precipitated by the implosion of two hedge funds last year that invested chiefly in risky mortgages. That turned out to be a mortal blow to the company, and Bear Stearns’ collapse may yet do wider damage to the economy.

But can credit scores themselves be faulted?

‘Very smart but very limited’
You can blame credit scores for a lot of things -- unfair mortgage interest rates, sneaky auto insurance premium hikes, to mention a few. But you can't blame them for the housing meltdown, say supporters of the three-digit numbers that control so much of consumers' lives.

"Credit scores are very smart but very limited in what they do," said John Ulzheimer, who worked at Fair Isaac for nearly a decade and now runs consumer advice Web site Credit.com. He's also recently wrote a book called "You're Nothing But a Number."

Fair Isaac is on a crusade to correct overly ambitious descriptions of just what credit scores can do. They do not, strictly speaking, predict a borrower’s ability to repay a loan, says Fair Isaac spokesman Chris Groppa.

“The score actually quantifies the odds that borrowers will become seriously delinquent in repaying ANY creditor within the next two years -- card issuers, banks, retail stores, etc,” he wrote in an e-mail. “The score does not predict the risk for one specific loan or credit account unless, of course, the consumer only has one credit account on file at the credit bureau. This mischaracterization is a subtle but common misperception about FICO scores (the original credit score invented by Fair Isaac).”

The distinction apparently was lost on banks, which during the past 10 years came to rely more and more on credit scores. Some even bet their business on the numbers, and lost.

Credit score fixers
Meanwhile, the increased reliance on credit scores forced home buyers in competitive markets into a shadowy den of thieves -- credit score fixers. There are now hundreds of companies who say they know the secret sauce that goes into calculating a credit score and claim they can help you improve your number quickly -- for a fee.

The shroud of secrecy around credit scores encourages this behavior. There are, in fact, legitimate ways to improve your score quickly, through what the industry calls "rapid rescoring." But it's nearly impossible for consumers to tell the difference between legitimate rapid rescoring and the snake oil salesmen.

The latter may take hundreds of dollars from consumers and merely send in automated disputes of every item in a credit report in an effort to remove one or two black marks.

On the other hand, the rapid rescoring industry has the blessing of the credit bureaus. Generally, consumers only discover mistakes in their credit reports when they are applying for a loan, when time is of the essence. It normally takes 30 to 60 days to clean up mistakes on a credit report because creditors only send in items to the bureaus once each month, Ulzheimer said. Rapid rescoring firms can fix errors and update credit reports within a day or two -- for $50 per report, per item, Ulzheimer said.

"You could spend $1,000 or more just to update your own credit reports," he said. "That's a joke."

While the service can be a life saver for consumers struggling to get a decent rate on a loan, its mere existence points out problems in the system, he said. If someone can change their credit score from 620 to 670 overnight, which number is the accurate reflection of their risk to a lender?

Credit ‘scorecards’ are key
Consumers can easily be tempted to use illegitimate firms to improve their scores – in part because it seems some consumers really do win the credit score lottery. There are countless stories from consumers who say they've removed one black mark on their report and pumped up their credit score 30 to 40 points -- which as we've seen could means thousands of dollars in savings each year.

If any single credit item could have that much of an impact on a credit score, it would cast some doubt on the efficacy of the scoring system, which would seem fragile if it were subject to such wild swings.

Both Ulzheimer and Nelson say no one change could have such a dramatic impact on a score. In fact, they say, there is no way to assign a point value to individual items. Each time a lender gets a credit score, the scoring formula is re-run on an entire credit report, and a new score is generated from scratch. Because account balances are generally fluid, there is no way to assign exact values to any item.

There is an explanation, though, for large swings. Ulzheimer says that consumers fall into different buckets, or scorecards, within the Fair Isaac formula. One scorecard is for those with short credit histories, or "thin" credit files. Another is for those who have filed bankruptcies. Another is the "derog" scorecard, for those who have derogatory (unpaid) accounts in their files. Each scorecard uses a different formula. When a consumer shifts from one to the other -- something called "scorecard hopping" -- their score can shift dramatically up or down. So, a consumer who jumps from the "derog" scorecard to the "clean history" scorecard may indeed see a big credit score increase, for instance.

That means consumers with perfect credit can suffer much more from a single mistake, or a single dispute with a lender, than a consumer with bad credit.

Meanwhile, the Internet is awash with ways to improve your credit score by small increments. One that seems to work is to shift balances among your existing credit cards -- it's better to have several cards with modest balances than one card with a huge balance and several cards with a zero balance.

Changes coming
Many score-enhancing tricks will be "gamed" out of the system, however, by FICO 08, the new credit scoring system that Fair Isaac is expected to release later this year.

One trick that will lose its oomph is the practice of adding “authorized users” to an account. Consumers have been able to tack other users onto their credit cards and essentially "borrow" their good credit. A small cottage industry formed during the housing boom to match up willing credit "donors" with consumers who had poor credit scores.

Fair Issac says the new scoring formula in FICO 08 will eliminate that trick and do a better job of assessing risk for consumers with so-called “thin” credit files, meaning they have few credit accounts. Recent immigrants frequently fall into this category.

But still unaddressed is the problem of unfair scores that arise from inaccurate credit reports, and the difficulty consumers can have fixing them. Ulzheimer said that simplest thing the industry could to do to clean up its act would be to force the credit bureaus to quickly repair errors.

"The score is only as good as the report it's based on," he said.

But even that isn't enough to save lenders from themselves when they rely too much on credit scores and don't take into account other obvious factors like income and assets. In his recent book, “The Two Headed Quarter,” mathematician Joseph Ganem talks about the seductive power numbers have over people. Many can't resist the notion that numbers are objective and infallible, when in fact, they often require context to understand and can easily be manipulated. SAT scores, for example, once measured students’ verbal and math ability. Today, they largely measure students' ability to afford expensive preparation classes, he says.

"People are very adaptable and very responsive to how they are being rewarded," Ganem said. Hyper-focus on credit scores naturally encourages lenders and banks to simply focus on improving those scores, rather than focus on being responsible borrowers. And mortgages lenders – and the investors who buy up mortgage loans – use credit scores to rationalize risky investments. “People give great weight to numbers so there can be accountability,” Ganem said. “But in fact they have the reverse effect, because numbers can be manipulated.”

De-emphasizing the credit score would get under control some of the lunacy of credit repair, rapid rescoring charges and credit score mythology. It might also take the jingle out of those credit score television ads, something that would likely benefit all consumers.

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66 COMMENTS

credit scores are just another for big business the serew joe 6 pack...the rich dont have to worry about credit scores...there justed to screw the poor...the hole system sucks ..just a money maker for big business...every one should do bankrupt every 8 years to get even...hope the blood sucker JPMorganChase goes belly up soon.

Robert The Woodlands Tx (Sent Mar 18, 2008 8:03:51 AM)

I've got several cards with a 0 balance and one with a high balance. I transfered the other balances to it, because it has a 0% interest rate. This article says that is hurting my credit score. I am wondering if I should open one more 0% interest rate and split the balance from the card that is high. Would that help? This is a good and interesting article. Thank you.

(Sent Mar 18, 2008 8:09:54 AM)

I don't care what they do with their wonderful system as far as how a score is determined. But we need laws in this country that limit the use of said score to times when a person applies for credit of some kind. Using the scores to determine auto insurance rates, or decide on the employability of someone should be nothing less than criminal.

(Sent Mar 18, 2008 8:58:43 AM)

Sorry, Isaac, but I don't buy it. The credit score is SUPPOSED to be an independent gauge of the credit-worthiness of the consumer. That way a bank can fairly gauge the matters. In our over-litigous society where racism and sexism cries are rampant, a credit score IS valuable. The fact that the measurement is bad means that Fair Isaac needs to look at their formula again - not just that the banks were over-reliant

Mark, Dallas, TX (Sent Mar 18, 2008 9:16:13 AM)

IT IS MY PERSONAL OPINION THAT THE PEOPLE WHO OPERATE AND SUPERVISE THE CREDIT BUREAUS ARE IN BED WITH THE CREDIT CARD COMPANIES. THIS GIVES THE CREDIT CARD COMPANIES THE OPPORTUNITY TO RAISE RATES AND FEES TO THOSE CUSTOMERS WHO HAVE THEIR CREDIT SCORES LOWERED BY SOME MAGICIAL POWER FOR NO APPARENT REASON.

BILL SANTOS- FLORENCE, KENTUCKY (Sent Mar 18, 2008 9:23:46 AM)

I have a problem with my credit report from TransUnion. They won't even talk to me. They send my to a company called CCC which doesn't respond to my emails, letters or calls.
The report states TransUnion across the top, with no mention of CCC (which I understand is an affiliate). TransUnion takes no responsibility and their so called customer support hangs up on me when I point out TU has it's name on the report, not CCC.

I have found no option to get the report corrected, which the other two reporting agencies have done.

How can anyone get TransUnion off center? I've spoken with others who have the same complaint.

(Sent Mar 18, 2008 9:28:39 AM)

I read the araticle with interest. I have recently discovered that a medical laboratory has turned me over to a collection agency and it has posted on my credit report. The fact is I never received a bill from the lab as the doctor's office gave them the wrong address. I confirmed this with the company. I never received a bill and did not know of its existence since I never did business directly with them. How do you "fix" something like this?

(Sent Mar 18, 2008 9:30:01 AM)

If a third party puts out false info. about you that affects your life in a negative damageing way, why wouldnt that be a sue-able offence. Lawyers out there, lets do the worlds biggest class action against folks who sell false info, and companies who use it to descriminate. After all in the final analysis the money used by the mortgage companys initially is public money.

(Sent Mar 18, 2008 9:33:01 AM)

It's pathetic that every time an inquiry hits your credit score it takes it down. I lost over 20 points when shopping for a car, not realizing that each dealer was sending your credit report to multiple lenders. The same with car insurance companies - what does a credit score have to do with car insurance... if you don't pay it the insurance cancels! Once your score gets taken down, its hard to recover and get it back up again quickly... it's just another game that messes over middle class working people. I also have inaccurate info on my bureau and when I contacted the reporting bureau they said they could only add a comment about it, they could not immediately take it off!

bev, pgh, Pa (Sent Mar 18, 2008 9:50:55 AM)

I would like to know who I can trust to clean my credit I know there are many things on my report that should have been removed I just got married and I have in the pass made many masteaks I now make good money and with then a year would somuch like to apply for a loan for a house and I know with my credit pass I wouldnt get the a good loan I so much wont to clean up my credit but im afraid of the clean up groups out there can you help me

I love this report you wrote

lonnie beasley chicago Il (Sent Mar 18, 2008 9:58:13 AM)

Wait a minute - I'm confused - first they say all these bad loans were given to people with low credit scores who never should have gotten the loans in the first place. Now Fair Isaac is saying that putting too much weight on credit scores fooled lenders into giving people loans?

Mary (Sent Mar 18, 2008 10:04:10 AM)

What about older collections that happened almost 10 years ago and collection companies obtaining this information and still using it against you?

(Sent Mar 18, 2008 10:11:07 AM)

Credit scoring companies have absolutely too much control over our lives. You are correct, they are very quick to place derogatory statements in your file. However, it is virutally impossible to get them to correct them. Even when you prove the entry is not correct, they seldom remove the item. I have a very common name. It seems every one with this name's accounts are randomly placed on my file. When I bring this to the attention of the credit scoring company, they are loathe to do anything about it. Basically I have resigned myself to having to deal with the subprime market for the rest of my life. All because of my name and a very unfair and inept credit system!

Michael C. Smith, Mclean, VA/Winston-Salem, NC (Sent Mar 18, 2008 10:16:32 AM)

Here is a way for Credit Card companies to keep your Fico Score low. This revolves around your debt to credit ratio. Meaning the less money you have available to borrow from your total credit limit, the worse your Fico score will be.

Lets say you have 5 credit cards that each have a credit limit of $6,000. So you have a total credit limit of $30,000. You borrow a total of $28,000. Now even if you have never been late or missed a payment with any company or have any black marks on your credit report, your Fico score will be low (like low 600's) because you have borrowed almost all of your total credit available. I know because this has happened to me.

Here's where the Credit Card companies such as Chase, Providian, and Citi Bank MANIPULATE your credit score. When you start to pay down your debt, the Credit Card companies will lower your Credit Limit. That's right. You read that right. Thus keeping your debt to credit ratio high. This in turn keeps your Fico score low. The low Fico score also justifies the banks increase in the interest rate they charge you.

The government should do something about that.

Joe, FL (Sent Mar 18, 2008 10:17:09 AM)

I would like to respond to some people who questioned my comment in the previous Credit Score 101 article. I stated that I had a 900+ score with the credit bureaus, and at least 2 people called BS on my statement. One guy claimed that he had "15 years of experience in Finance and never seen over 860" and the other guy said the highest score you can get is 850. You are both incorrect. I get one of my credit reports every four months on a rotating basis from www.annualcreditreport.com. I pay the $5 or whatever it is so that I can see my score. The last one I received was Transunion in February. My score was 897. Their scoring goes up to 990 according to the little chart on the credit report. I got my equifax score in October with my report and it was just about the same (can't remember it exactly since its been a while). I have them both saved as PDFs on my computer. I'll be glad to take a screen shot of the score if you have any further doubts.

John Doe Durham, NC (Sent Mar 18, 2008 10:23:29 AM)

The main problem with the credit scores is you have to pay to see them, which is BS. If it is MY credit score then I should be able to see it without paying. The credit bureau's have no desire to fix the reports, which if corrected, would correct the scores. If this whole thing is corrected in my lifetime I would be suprised (40 now).

Skeptic, LA, CA (Sent Mar 18, 2008 10:23:47 AM)

Credit bureaus are pure evil. I have spent the last year trying to get them to remove illegal inquiries made by a rogue bank from my report. Even though I provided proof that the entries were illegal, I was forced to contact the "bank" andbeg them to remove the inquiries. Thes companies are in the palm of the creditors' hand. They work for the creditors and take them at their word. Many banks have automatic "verification" messages that verify the credit report entry as valid when you submit a dispute. And now, the worst of the bunch (Experian by far) will not re-investigate issues that are confirmed by the credit issuer. The credit bureaus should be shut down and the managers should be prosecuted under RICO.

Mike, Los Angeles, CA (Sent Mar 18, 2008 10:30:43 AM)

Consumer beware!!!! Credit is not fair in anyway, the three majors would have you believe that they are an object group providing a service to companies to judge credit. This is not true they charge companies to be members of this grouping and are reluctant to remove inaccurate items because of the way they verify, this usually being electronic. I would like to tell you of how it took me two years to get the credit companuies to remove an account that was not mine from there records. Its strange because I asked them to provide proof that I opened the account and they could not furnish, but yet these companies did not remove these trade lines. It was not until I treaten to sue them that they decided to remove these credit lines.

Millard (Sent Mar 18, 2008 10:32:48 AM)

Well written and very insight full. Going off to check my credit history right now.

Geoff Beane, Baltimore, MD (Sent Mar 18, 2008 10:49:28 AM)

I received my first credit card with a limit of $750. I received this while I was a new immigrant student. This helped me to build my credit over a period of time. Credit industries should still make credit card available to new immigrant with a small limit and give them a chance to show they are financially responsible rather than exclude them.

PJ, Athens, Ohio (Sent Mar 18, 2008 10:56:42 AM)

Well written and very insight full. Going off to check my credit history right now.

Geoff Beane, Baltimore, MD (Sent Mar 18, 2008 10:57:32 AM)

More needs to be done as far insurance,jobs and utilites go. Those types of companies should not be allowed in your business. It basically means they can do whatever they want and screw the little man already struggling with everything.

(Sent Mar 18, 2008 11:14:12 AM)

America needs to stop living on credit.

Pay off your credit card in full every month.

If you can't then you are living beyond your means.

Cut back or get a better job, or two.

The only credit you should have is house and car.

If you have mortgage problems it IS your fault.

My government or my bank should not bail you out.

You read it, you signed it, now live with it.

RH Oregon (Sent Mar 18, 2008 11:18:30 AM)

What happen to a 10 grace period? Now credit card companies can charge more than I do simply by adding a $35.00 late fee if you are a minute late getting payments in. Plus if that late fee puts you over the limit they can charge another $35.00 over limit fee, this is robbery and put a bad mark on credit reports.

(Sent Mar 18, 2008 11:23:43 AM)

I am constantly amazed at how our government does not require these credit score companies to improve their processes in error corrections and its practices. These scores affect the lives of all of us and yet, their practices are in some cases, just downright careless. I've read a report that stated over 40% of American's have an error in their credit report. Now that to me is unacceptable. I checked my credit report and I have aliases listed that I have never ever used, such as my first name and my wife's maiden last name. I'm sure this is implied, but to my knowledge, I have never changed my last name ever. This baffles me as to these credit score companies quality control issues.

John Doe, San Francisco (Sent Mar 18, 2008 11:30:17 AM)

this is interesting to me. also i wonder if anyone knows why an auto finance company would pull up one credit score (in this case a 605 from transuion) when I pull my own transunion credit score the same day and get a 643.

(Sent Mar 18, 2008 11:30:49 AM)

why do we have to "pay" to see our credit score?

Linda Bear Grass NC (Sent Mar 18, 2008 11:36:08 AM)

You know its bad when the people who came up with the scoring system says "stop focusing so much on the number, and pay more attention to the individual".

daniel harper (Sent Mar 18, 2008 12:06:04 PM)

Not really sure how my credit score can be useful to a mortgage investor. If, say, I get a mortgage on a credit score of 700, and two years later, my financial situation deteriorates and my score is now 550, I still have a mortgage interest rate based on a score of 700 - and the investor is now at a much higher risk. The converse isn't true - if I got a mortgage on the basis of a credit score of 550, and my score is now 700, I can re-finance out of the high rate. Basically, the way mortgages work is that, in the aggregate, people pay a interest rate based on their best credit score of all time. This does not reflect the risk to the mortgage investor at all. Essentially, a credit score is pretty much useless for any loan that lasts more than a few months. I get the feeling that Wall Street is now finding this out.

Byron Raum, Beverly Hills, CA (Sent Mar 18, 2008 1:19:57 PM)

As a 30-year banker, I can tell you that the three main credit bureaus, and especially Experian, are in the business of reporting bad information only (even if they know it is false.) This facilitates an industry that charges higher rates to many people, then shrugs, and says that Experian gave them a low score and there is nothing they can do. The lenders say it is an issue between you and the credit bureaus even if they know the information is incorrect or out of date.

Chris Carmichael, Atlanta, GA (Sent Mar 18, 2008 1:22:54 PM)

I really hate that I have to have credit cards to have a higher score! Why can't I have a great track record with my mortgage company and have a great score? Just because I choose to stay out of the rat race as much as I can, I am penalized.

TJ Bella Vista AR (Sent Mar 18, 2008 1:26:56 PM)

One thing you haven't mentioned, but a dirty little secret everyone knows - credit scores are age based. When I turned 60, with no changes whatsoever to my job or income or debt, my credit score dropped 50 points. Friends have noticed the exact same thing. I would assume that the idiots in Washington know this (and likely know about the massive age discrimination that goes into layoff and hiring poractices by hi tech and other companies, too), but they do nothing about it.

Mike Brooks, Eugene, Oregon (Sent Mar 18, 2008 1:32:07 PM)

Do a story on Assetcare/NCO.

(Sent Mar 18, 2008 1:37:32 PM)

"If any single credit item could have that much of an impact on a credit score, it would cast some doubt on the efficacy of the scoring system, which would seem fragile if it were subject to such wild swings."

I would agree with you except for situations where the wild swing was due to error correction. If it could be wildly swung--good or bad--by any other factor, then I'm in total agreement.

(Sent Mar 18, 2008 1:45:02 PM)

This one perplexes me and I've contacted the "fico folks" without assistance twice...my wife and I each had 790 FICO score 1 year ago. We both share a single credit card that gets paid off 100% monthly, and ALL bills are paid off 100% and early...k, now in this past year, we bought a used car jointly (12k loan), and I paid for some hardwood flooring in the house (8k on 12 month deferred payment so I can earn some high yield CD interest before having to pay it off). That had my name on it but not my wife's.

Oh, and I made 175k last year, and my wife stays home with the kids, so she made...nothing.

I checked our numbers this year...mine went from 790 down to 750 and hers went from 790 up to 810?!?!?!?

My debt to income ratio is next to nil (save the house obviously, but even that is minor - 220k mortgage, 5.25% 30yr int).

So explain to me how my numbers dropped 40 points in a year and hers went up 20 and the only difference is that I opted to keep a 8k 0% "loan" for 12mo so I could earn some extra $ on the cash reserve before sending it to them when it was obvious that I had MORE THAN ENOUGH to cover that in my account.

Basically I'm getting penalized for making a sound financial decision, and my wife, who has no income...gets bumped even higher for taking on more debt (car) and can get pretty much get pre-approved based on her FICO score for anything.

I'm not saying that 750 is bad...but I don't understand why I'm not up at 800+ as well...it makes NO SENSE!

Like I said, I've tried to contact them twice and at first, got a "what is you FICO score" pdf and the second time, I've received no response.

Any incite is appreciated.

shawn, orlando, florida (Sent Mar 18, 2008 1:51:06 PM)

I have deal with the credit bureaus for years and I think that should be done away with-they says they do not establish the credit ratings-that is not true-that have created the scoring system-trying to get my credit report cleaned up has been a big pain-they hit and miss the first time one sends in a report to be verified-the second time you still have to tell then that they did not check all they needed to be verified.

Mildred, Pensacola, FL (Sent Mar 18, 2008 1:54:16 PM)

I just got notified from my home owners insurance
company that they ran my credit report to get an
idea how often and what types of claims I might file.
Perhaps if they looked in there own recordes they couls have saved some money by noticing I haven't filed any claims with them for the 25 years I have been with them.

(Sent Mar 18, 2008 1:55:27 PM)

How come today more and more companies are able to look at your credit scores when you apply for jobs? If you are not working with money, why should this matter? Any reasons?

Sue, San Juan Capo, CA (Sent Mar 18, 2008 2:00:03 PM)

A good resource for those of you who are having trouble with credit bureaus and other companies might be your state attorney general's office. It's amazing how responsive some of these big companies become when the AG steps in!

nanoot, St. Cloud MN (Sent Mar 18, 2008 2:28:06 PM)

First of all, there is NOT only one score. There are hundreds. FICO just happens to be used most often. I have worked for creditors that didn't use FICO at all. Second, you all need to remember that you are not "entitled" to credit cards or mortgages or insurance. The company is making a bet that you will not create a loss for them. A credit score is a tool in making that bet. Become educated about your credit file, providers, etc. and make good on the commitments that you make and the system will reward you. I have been working with credit scoring for 18 years and the reliability of the scores is sound IF the business owner is using them correctly.

Lynn, Atlanta, GA (Sent Mar 18, 2008 2:28:42 PM)

Dispute! Dispute! Dispute! Every consumer has the right to dispute anything on thier credit report. Here's how it works, obtain a copy of your credit report from all 3 companies. Transunion, Experian, and Equifax. Go over each item on your report to see if it is valid, if not send a certified letter to each of the credit bureaus stating that you want to dispute it. When they receive your letter, they have 30 days to investigate the entry. If the despute has not been resolved after 30 days, they must remove it from your credit report. If you have an account that is more than 7 years old, tell each credit bureau to remove it. Remember though, if you have an old account that was paid in full, on time, don't remove it. That will show your length of credit history. Don't pay someone to do this for you, do it yourself for free.

Tony, St Louis, MO (Sent Mar 18, 2008 2:38:06 PM)

I'm one of those holding very little debt - mortgage only and one credit card with a small balance - and the advice I get is to use more of the credit cards I get all the time and never use? ...never close an inactive account? I cared very little about my credit score until I recently got my mortgage and then I learned how important it was in getting the best interest rate. So even those of us who have very little debt are dependent upon this shady practice. I think it justifies an investigation because it does have an impact on the consumer and is blatantly unfair.

GC Guffey, CO (Sent Mar 18, 2008 2:46:15 PM)

People who have stated that bills that are '1 minute' late are landing on credit reports have legal recourse. Bills must be 30 days late before a late payment record can appear on the report. Of course this has no bearing on the outrageous late fee applied. Typically, only installment loans have 10 day grace periods, and much of that is governed by state laws

(Sent Mar 18, 2008 3:00:34 PM)

regarding credit scores you get from annualcreditreport.com, those are personal credit scores and not the same formulas/modules are used for lending purposes. personal credit scores are always higher than lending scores.

(Sent Mar 18, 2008 3:01:35 PM)

To put credit scores into the line of fire of why the mortgage industry is imploding is creating a false identity. The mortgage industry is imploding because very few, if any, people showed any fidicuary responibility to either the lender or the consumer the past few years. Just like Enron, all anyone cared about was profit and the bottom line today - not the bottom line when all these variable interest rates would rise. To sell a consumer a variable rate loan and tell them they could refinance in a few years, in hopes that in a few years down the road the boom would be still active, was insane. Not even people who spent their lives forcasting the economy can say for certainity what the future will bring.

As for the credit score - explain to me how someone who is debt free - and I mean completely debt free including a mortgage - cannot get a loan but someone with thousands in credit cards and has a mortgage can get a loan. The former has no credit score and thus is unworthy? Our passed away fore fathers, who lived through the depression and learned to by only what they can afford, are spinning in their graves and shaking their heads in disbelief that we the current generation learned nothing from our past.

CHIgirl (Sent Mar 18, 2008 3:03:22 PM)

My husband's credit report has credit inquiries and addresses he never lived at due to his ex-wife using his Social Security number after their divorce to try and get credit and well as housing, since she had no credit history. His credit report now shows variations of his name and addresses in states he's never lived in. It is dipicable that these report are so highly regarded when they contain false items, which are nearly impossible to get cleared off once they are on your report.

Jane Doe, Sioux Falls, SD (Sent Mar 18, 2008 3:04:16 PM)

if we don't have a watch system like the credit bureau, any and every one would have credit cards and with no way to pay back the credit card company,yes i would like to know it bob got merchandise from Macy's and didnot pay.Then saks would not give bob credit so!! what every thing cost welcome back to earth this how would do here

(Sent Mar 18, 2008 3:18:19 PM)

They need to do away with the whole "credit score" system. It's obivious that it's flawed-so flawed that you can pay to change your score but don't have to pay back bad debt.

And, God forbid you have someone steal your identity. My husband is wrestling with those stupid people who work at all the credit scoring-companies because someone took out huge credit cards and mortgages (and defaulted on all of them) in his name when he was only a baby. It's obivious it wasn't him just because of the dates and his birth date all show he was between 2 and 5 years of age, but every one he talks to says they need a police report. Well, the police won't do anything about it because it happened so long ago and it's a waste of their time. So, it just sits on his credit reports (for some reason they won't take it off even though it's been nearly 15 years) and damages his scores even though he has nearly great credit in everything else (not perfect, but better than most).

Selena Meeka (Sent Mar 18, 2008 3:26:14 PM)

You speak as if the vermin credit reporting bureaus and the leeching credit industry built on them since they invaded everyone's personal lives in the 70's are somehow the innocent good guys in this, and the people who are tired of their lives being invaded and controlled by them, and who are kicking their asses at their own game, are somehow the bad guys.

I can only hope that the whole system gets so deeply laid open to the public that the shell game implodes, and that Experian, TransUnion et al go bankrupt and take their spawn with them in a spectacular public show of their corruption and despicable, self-serving, underhanded tactics and motivations.

John Smith, Freehold, NJ (Sent Mar 18, 2008 3:28:03 PM)

This message is to John Doe from Durham, NC. Not all credit scores are equal. This is directly copied from Credit Scores 101 from the Redtape Chronicles:

"Not all credit scores are the same. Consumers usually buy their credit scores from the credit bureaus, but when they do they are buying a product called a VantageScore, not the FICO score from Fair Isaac that most lenders use. And some lenders sometimes create their own variation on a FICO score, adding in their own criteria."

If you go to Myfico.com which is the website for Fair Isaac, you will see the "seal" that states "Officially Certified; 300 - 850; Fico Credit Score"

If you found a score of higher than 850 then you are "buying" one of the other scores - not the FICO score that lenders use.

(Sent Mar 18, 2008 3:29:02 PM)

Let's not forget that the founder and COO of Lifelock, Robert J. Maynard Jr., was one of these thieves that run credit repair companies. His was called National Credit Foundation, Inc. NCF was shutdown by the FTC and Maynard was BANNED FOR LIFE from ANY credit improvement business. Not only did Maynard and NCF deceive consumers through ads and false claims, he fraudulently drained money from people's accounts without their approval, once he got their checking account information.

Joey Donuts (Sent Mar 18, 2008 3:49:02 PM)

My scores are Experian 764, Transunion 748, Equifax 711. Equifax has only part of my files. EX & TU have a much thicker & complete file. Only degrog is 2001 BK. Everything else is never late, paid as agreed. My score tanked 30 pts when I maxed out a 0% for 12 months on purchases. 0% is a great deal and any payment goes to principal. I had the money to pay the card off anytime. (if they ever closed the account or greatly increase the interest). My score tanked 35 pts because my % utilization was over 95% part way through the 12 month cycle.

Frank Delaney, Irvine, California (Sent Mar 18, 2008 3:52:24 PM)

I am proud of myself that I don't have a credit score or credit. I'm proud because I will not surrender my free will and self-determination to a computer algorithm. I will never subvert my behavior to conform to a database. I also live well, not extravagantly, but well. I buy what I can afford, and if it means not getting it right away, fine. When I do buy something, I like knowing that it is "mine" and I don't owe anyone anything. The admonition that a good credit score is the lifeline to the American Dream is a crock of hooey.
Credit scoring was forced on people, many of whom are so scared of it that they play all kinds of sad games to please the watchers who keep an eye on their scores. But these people never really get ahead; all they really do is barely keep up with a system that guarantees they will lose for almost any kind of slip up, including staying out of debt. Again, as I said before, some things in life are a sham no matter how much someone tries to dress them up. Credit scoring is one such sham. It's bullshit in a 16-ounce tumbler.

Val, Brea, CA (Sent Mar 18, 2008 7:29:48 PM)

There was a person that was saying that her scores went up to 900 are called FACO scores! the only way to get real FICO score is to go to myfico and pay for the scores! Anyone that wants to learn about correcting their credit reports and how things work on your CR need to go to the fair issac forum www.myfico.com. Every thing must be done legally! BUT you can read the threads & ask questions. The people that will answer have usually already done what you are asking about.This is a free thread BUT you must give your SS#...they do not put up with credit repair BS this is a site that will help you understand and make corrections on credit reports the right way!

ted martin bethel ct (Sent Mar 18, 2008 7:42:59 PM)

I have read articles referencing to hearings by Congress about the abuse commited by the 3 major
credit repositories(Experian,TransUnion,& Equifax)against consumers and yet, nothing is being done
to correct them.

Jayson Perrini, Boston, MA. (Sent Mar 18, 2008 7:58:45 PM)

Jayson Perrini, Boston, MA. (Sent Mar 18, 2008 7:58:49 PM)

My sympathies to the person who had a score above a 900 and the person who was a customer of an insurance company for 25 years. It is ridiculous that our society is so dependent on this system of averages that the outstanding person who is financially solvent pays a premium price in aggravation and frustration. My father in law had an insurance company cancel his coverage after 20+ years because he had never filed a claim and they decided that the odds were overwhelmingly against him at that point. He was indignant to say the least, but in the end, it was the insurance company who lost an excellent and loyal customer, as well as all of HIS loyal customers who had purchased cars from him for the same number of years. This type of business practice is the result of increasing population and anonymity in our society coupled with the demand for instant gratification. It's definitely not a perfect system. But I have to admit that my lifestyle benefits from my ability to acquire credit.

Tina, Nashville, TN (Sent Mar 25, 2008 12:21:03 PM)

Just a point of clairification here for everyone bashing the credit card companies. I used to work for MasterCard as a consultant and I had the same misconceptions as most people posting here. But I learned thru programming of the various systems something that I think most consumers dont understand. Visa, MasterCard, and the other credit card companies do not set your interest rates, assess fees, set over limit charges or anything like that. The party responsible for all of the things you dislike about your cards is the issuing bank. If your card is a Chase Visa then you should direct your inqueries and angers to Chase, not Visa..

All that Visa and Mastercard do is process the transactions.. the banks set the rules, offers, credit limits, charges, fees, and everything else associated with the line of credit they choose to issue. Not the credit card company.

Rob, St. Louis MO (Sent Mar 29, 2008 1:30:18 PM)

Several years ago I was re-working my fathers insurance (house, car). I was able to get a better rate for the house but was told that the company could not insure the car, and thus was unable to provide a multi line discount. When I asked why the agent let me know that it was because my father was a credit risk. I started in on the agent but he cut me off with "I understand the problem but the companies all look at credit score for auto insurance". The reason that he didn't have a credit score was that he had been paying cash for many years, house, car, daily stuff all paid with cash or with a debit card. The agent knew us and realized that there was no problem but suggested that my father keep his car insurance with the old insurance company since no one would provide new insurance. Yes, the way the credit score is used sucks.

(Sent Apr 1, 2008 10:08:25 AM)

John Doe Durham

Afraid your FICO score is not 900. Go to the FICO website, check the education page. Scores range from 300-850. And having spent 6+ years working for Equifax, I can tell you 825+'s are hard to come by. Now each Credit Bureau might have there own score such as Equifax's Decision Power, but your FICO Score is NOT 900. Good Try

JRM, Atlanta GA (Sent Apr 1, 2008 1:39:59 PM)

The whole credit score process is a problem. for newer accounts I can see the potential uses, but I have had a 32 year credit histroy, and have never left anyone holdng the bag for even a nickel. My score is pushed down because I have a lot of debt (due to a divorce). However, I have a substantial income and a 32 year history of paying my bills on time. Thanks goodness my credit union looks at a bit more than just credit scores!!!!!

Michael, Camp HIll, PA (Sent Apr 1, 2008 2:57:07 PM)

I have 2 big issues with credit scores.

1) From one year to the next, information can appear that is old and a complete surprise. I found a collection for a medical provider from 2001 on my last report. I never receive a late notice from the original provider, nor did the collector contact me. It just showed up on my credit report, designed to inflict maximum damage over a $20 payment (which I paid immediately upon confirming it was correct, and would happily have paid in 2001 had I received a bill).

2) Paying your credit cards in full each month will drive a lower score than carrying a balance. On what planet does this make sense? I am a higher risk because I pay in full each month? Yeah, higher risk to not generate interest income. What a racket.

Cathy, WA (Sent Apr 4, 2008 6:22:30 PM)

What is wrong with you people that you allow yourselves to be held captive to credit scores? “Land of the free and home of the brave”? Yeah, you would like to think so until something makes you think your credit score is in jeopardy, and then you cower like children afraid of the boogeyman. Don’t think you are not held prisoner to those scores, either; from what I’ve read on these blogs, most of you would do almost anything short of eating your young to maintain a credit score. You remind me of the myth of King Sysyphus, who was forced throughout eternity to roll a boulder up a hill only to have it roll down again, then he would roll it back up, and so on. You do the same thing; you are sucked into some fool’s game where you subvert the way you would normally behave in favor of the way a computer algorithm tells you to behave. You work like dogs to build your score, then after you go bust because some misfortune occurs, and instead of learning that credit scoring is used against you, you try to rebuild your scores, and on and on it goes, rolling a boulder up a hill. You are never rewarded for your work because credit scoring is nothing but negative reinforcement and a way to do you out of something. One “oh shit” knocks out 10 “attaboys.” Where is the sense of proportion in that? How does that work for anyone? It doesn’t! I even read that some debt collectors try to collect debts that were discharged in bankruptcy and succeed because people are such whores to their scores that they are afraid of their already trashed credit. Where is the outrage? Hey people, why don’t you pull up your pants, tell the credit score mongers to go drown in crap, and take back your lives? What would really happen that could be so bad that it justifies your ongoing bondage to a computer model? Credit scoring only has power over you because you allow it to; it has no force of law, and you are under no obligation pay it any heed. This is one freedom you can take back. Be free.

Cat, Fullerton, CA (Sent Apr 6, 2008 5:50:11 PM)

OK - how many people here complaining have contacted your representatives? Seriously? If you don't talk to your representatives, don't fault the government. If your representatives don't represent you, vote them out.

Ed Snopse (Sent Apr 15, 2008 10:56:32 AM)

Keep an eye on your credit card interest rates in the next few months. I was just notified of a 9% hike in my rate starting June 1st. The card is a fixed-rate card that has been open for over a year and the original rate was not a teaser rate. There has been no derogatory info posted to my credit reports. The hike is because one credit bureau just switched to FICO 08 and the switch caused my credit score to drop 76 points in one month. I am in process of appealing the rate increase, but watch out folks in case you get caught by the same thing.

K Mitchell, MI (Sent Apr 17, 2008 2:57:39 PM)

Yes, yes OF COURSE the credit card companies are "in bed" with the credit bureaus--as are many other companies that we pay over time. "John Doe" of San Francisco puts forth an erroneous belief that is one of the (many) forces that keep this whole system going: that the credit bureaus are "careless." They are in no way careless. The processes are so sneaky and the participants so good at feigning ineptness and creating confusion, that any critic who describes these actions as they really are is called paranoid-- and looks paranoid until the relevant research is done. When the light bulb slowly begins to come on, the people who have been duped are in total shock. But "John," I too am astounded that they are allowed by the FTC to operate this way--the FCRA means nothing because the agency that is supposed to enforce it makes no actual attempt to do so. (The fines levied against the 3 bureaus in 2000 for refusing to even take consumers' calls were token amounts to them. Three years after the 3 shared payment of a $2.5 million "settlement" for violating the FCRA, Equifax was fined $250,000 more for essentially the same infractions--and then did not miss a beat continuing the practices to this day. Only a couple of writers here are onto the truths about this--yes, it sounds paranoid--conspiracy. Poor naive Tony from St. Louis explaining "Here's how it works:" and describing how a consumer can follow steps to get credit reports corrected! Tony, I used to be like you, but there is one fatal fallacy in this set of directions: THE CREDIT BUREAUS PAY NO ATTENTION TO THE FCRA!!!

And yes, Congress has hearings, and then they go away and the credit bureaus have only been mildly annoyed. And yes, Ed Snopse, I an countless others have gone to our senators and congressmen, state and federal. Barney Frank as chair of the House Financial Services Committee fooled around with some proposed legislation for a while in 2006; apparently it petered out in 2007. I hate to be so jaded and pessimistic, but we are not going to be able to change this--we consumers are too ignorant and the other guys too smart and powerful.

Judy, Cleveland Ohio (Sent Apr 17, 2008 8:46:50 PM)

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