Tag Archives: Credit score

Funishers must report that your credit account is disputed after notification.

Under the FCRA, a furnisher must include a notation that your account is disputed as part of its response to a credit reporting agency if you have previously disputed the accuracy of the account.  The furnisher must include this notation even if it believes that you are responsible for the debt associated with the account.  Furnishers that fail to include this notation as part of a response to a dispute reinvestigation may have violated the FCRA and caused significant damage to your credit score.

The reason that a furnisher must include the notation that a consumer disputed the credit reporting for the account is found in 15 U.S.C. 1681s-2b(b)(1)(C) of the Fair Credit Reporting Act.  This provision requires a furnisher to report the results of its dispute reinvestigation to the credit reporting agency. Because furnishers must report accurate information that is not misleading, a furnisher must indicate that the consumer previously disputed the credit account to provide a complete representation of the account status.  When a furnisher fails to note that the consumer disputed the credit reporting of the account, it provides misleading information that the account is simply a refusal to pay and not a genuine material dispute as to whether the consumer is liable for the debt reported on the credit report.

For identity theft victims, the failure to report a debt as disputed can undermine the victim’s ability to have inaccurate accounts removed from their credit report.  When debt collectors, furnishers, and credit reporting agencies see past due accounts that are not marked disputed, those entities may be inclined to believe that the consumer is not being truthful about the time period related to the identity theft or the scope of the identity theft.  Any doubt that the victim is not being truthful about the circumstances of the identity theft can undermine the ability of the identity theft victim to restore their good credit history.

Finally, a consumer wants the disputed accounts reported as disputed because the notation can alter how the account is scored in credit scoring models. Some credit score models do not include disputed accounts when determining the consumer’s credit score. Accordingly, if a derogatory account is not scored, you will have a higher credit score than if the derogatory account was included.  As with all items in a consumer credit file, you should review the file so that it includes information that accurately reflects how you manage your credit history.

How do I get a free copy of my credit report?

The FCRA requires certain credit reporting agencies to provide you with one free copy of your credit report per year. The important thing to remember is the correct website to visit in order to obtain your free credit report. The website is:

www.annualcreditreport.com

When you visit the website, you will need to know basic details about your financial life in order to answer security questions. Initially, you will enter obvious items like your name, address, and social security number.  As you enter a specific credit reporting agency website, you will answer more difficult questions about your financial history to verify your identity.  Examples include prior street address names and numbers, monthly payment amounts for certain debts, and maybe even the names of prior roommates.

You do not need to purchase anything to obtain a free copy of your credit report.  You may be solicited for optional items like credit scores and credit monitoring, but you need not purchase anything in order to see your free credit report.

Because their are three main credit reporting agencies, I like to review one free report every four months by staggering the individual reports that I obtain for free.  A good reference point is near your birthday with scheduled reminders to get another free report four months later.  By viewing credit reports in this fashion, you are getting periodic snapshots to make sure that no new inaccuracies are on any credit report.

I would print off and maintain in your records the copies of the reports that you obtain.  This creates a baseline snapshot of your credit file if you are ever the victim of identity theft, a mixed credit file, merged credit file, or multiple credit files.  Monitoring the contents of your credit file is important in protecting your future.  Do not delay, get a free copy of your credit report today.

 

How your credit score is calculated.

The best answer to the question of how your credit score is calculated is that no one knows exactly how the score is determined because credit score models and formulas are closely protected secrets of the companies that generate the credit score.  A consumer’s FICO score is the most commonly known credit score, and it is used for
underwriting home loans, car loans, and credit cards.  While we do not know the exact formula, we do know key elements of your credit history that are used to generate the credit score. These areas include:

Your payment history. Approximately one third of your credit score is based upon whether delinquent payments have been noted on existing accounts.  Keep in mind that
recent missed payments and major delinquencies like collection accounts and judgments affect your credit score more than older problems.  This does not mean old debts do not hurt you because they do, but more recent deliquency hurts you more.  Get current on your bills, and stay current on your bills.

Your level of debt.  This element is the next biggest factor used to determine your credit score and is believed to be about 30% of the credit score.  If you maintain a lot of debt at or near the top of your available credit then your credit score will be adversely affected.  It is a better practice to refrain from maxing out a credit card and be careful that you do not carry many credit cards at or near the high credit limits.  You may also want to avoid signing up for excessive department store credit cards and then charging close to the maximum of your available credit after opening the account.

Your credit history length.  Another element of your credit score is the length of your credit history.  Obviously longer good credit history is better and more established then shorter credit files.  Lenders do not like “thin credit files” because they are smaller and therefore harder to rely upon because of the shorter credit history. Personally, I always keep my older credit lines open even if I use the credit line infrequently because I want to have a credit file that has older rather than newer credit accounts.

Your type of credit.  This is a smaller element of your credit score, but it does help determine your ultimate credit score.  Some lenders believe that getting a loan from a bank is better credit than obtaining a loan from a finance company.  Moreover, the scoring models are believed to prefer a mix of installment and revolving debt.
This element of a credit score is personally my least favorite as I believe this area is too subjective, but consumers should be aware that they could be penalized based upon from whom they obtain credit.

Your credit inquires.  Many consumers that I speak with regarding credit report inaccuracies in Virginia are overly fixated on their credit inquiries.  I have seen reports that credit inquiries are believed to account for as little as 10% of a credit score.  Credit inquiries are typically a problem when they are broad based across many different types of credit.  If you apply for a mortgage, car loan, department store account, and credit card all in a short time period, the frequency of the applications to different types of credit could negatively impact your credit score.  On the other hand, multiple inquires to shop for the best interest rate to purchase one car will probably not have that big of impact on your credit score.

Knowing how your credit score is calculated is important to increasing and protecting your credit score. By knowing the factors, periodically checking your credit file, and
correcting inaccurate credit reports, a consumer should receive the benefits of
better interest rates on loans for houses, cars, and credit cards.