Why Your Credit Score Is Probably Wrong And What To Do About It
Whether you like it or not, you have a credit score. And equally distasteful is the fact that you have very little say-so into what your credit score is. Actually, that is not true, despite the fact that most people would believe that. The biggest reason that most people believe that is because they see the big three credit bureaus (Experian, TransUnion, and Equifax) as big profit-motivated conglomerates whose job it is to make your life miserable when you are applying for credit or a loan.
To a certain degree, you could say that is true but there is more to the story than that. You see, these credit reporting agencies all have to follow rules that have been setup. The unfortunate part is that they can also play dumb, which they do frequently, with the attitude of “we do not MAKE the news, we only report it”. Where all of this is going is the fact that the credit report of the MAJORITY of consumers that these companies are reporting on contain ERRORS. Yes, this is a known fact, or at least it is a fact if you follow this industry and understand what they are doing and how easy it is for errors to creep into their systems. It is not necessarily a lack of quality control, it is simply a matter of the tremendous volume of data they deal with. Consider keeping records on about 300 million (or more) consumers and businesses, and if each one only has had 10 instances of credit or a loan in their lifetimes, that is still well over 3 BILLION records they need to keep straight.
So let’s say that Citibank transposed some digits on a social security number when they reported to the credit bureaus last month, and the transposed number turned out to be yours. Presto, now in the eyes of the credit bureau, you have a Citibank account, which might even be past due, which lowers your credit score. And the fact that some companies only report to one credit bureau, while others report to two of them or all three just compounds the problem further, since you undoubtedly have a DIFFERENT credit score at each credit bureau! Yes it really is as simple as that, and yes, you should be concerned.
You have rights and one of those rights is that the data that the credit bureaus keep on you is accurate and reflects the truth. And yes, the law even recognizes that there can sometimes be “extenuating circumstances”, and while most consumers do not realize it, you also have the right to have a 100 word statement included in any credit report that is requested. If you missed two months worth of payments because you fell ill to beri-beri or something and are now caught up, by all means add a statement about that to your credit report!
Upon reading your credit report, you may also find accounts listed that you know nothing about. You may have just discovered that you are a victim of identity theft, one of the fastest growing crimes of this century. To find out more about identity theft and how to protect yourself from it, you may want to visit Protect Yourself From Identity Theft for more information.
Take the time to get a copy of your credit report, a separate copy of it from each of the three credit bureaus, and then go through it with a microscope if you need to. Identify each and every item that is not right and then file a dispute with the credit bureau. They are obligated by law to either verify the information or to remove it from your credit report. But it does not happen automatically – YOU need to initiate the dispute, and if you don’t, the inaccurate data will remain on your credit report until the cows come home.
The more positive things and fewer negative things that are contained on your credit report, the higher your credit score will become. And yes, that part IS automatic.
Jon is a computer engineer who maintains web sites on a variety of topics based on his knowledge and experience. You can read more about how to boost your credit score at his web site at Four Ways To Boost Your Credit Score.
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In your financial life, few things figure as prominently as your credit report and credit score. Learning the basics of the credit report process, and keeping your credit report free of errors, is essential to good financial health. You should focus on improving your credit score as the highest credit scores receive the best interest rates and loan terms. On a mortgage, a difference of 100 points could be worth hundreds of dollars each month.
Since 2005, all Americans have the legal right to obtain a free annual copy of their credit report from TransUnion, Equifax and Experian credit reporting bureaus. This law is intended to help consumers reduce errors in their credit reports by minimizing the obstacles to viewing credit reports. To receive a free credit report visit the official site run by the bureaus: annualcreditreport.com
Your personal credit score is a number from 350-800 which stands for your credit risk. The higher numbers are considered less likely to default. Credit scores come from mathematical formulas that measure many variables in your credit report such as payment history, public records, and debt to income ratio.
The Fair and Accurate Credit Transaction Act (2003) amendment to the FCRA Fair Credit Reporting Act guaranteed all Americans the right to see their credit report once a year to check it for errors. To learn more about free credit, credit scores and financial terminology, visit our glossary page.
