• Is Your Credit Report Costing You Money?

    February 20, 2017 | blog
  • Everyone needs to take advantage of the new Federal Free Annual Credit report program, and everyone means you! Why? Because the odds are about 4 to 1 against your credit report being accurate at all 3 bureaus. That’s one of the things the big three credit reporting agencies don’t want you to know. A recent study did random pulls of credit reports from Equifax, Experian and Transunion, with the consumers involved prior permission. They then contacted each consumer and verified all information on those reports. In 79% of the cases, there were one or more errors on the reports from at least one agency! This indicates that there is about a 4 out of 5 chance that there may be an error on your credit report. Some estimates put the rate as low as 1 out of 3, while another puts the estimate at 90%, but no matter what the actual percentage is, even the low end is cause for concern.

    Now, some of these errors that are found are pretty harmless, such as incorrect past addresses or employers, but a lot them are not. And many of these errors can have a negative impact on the consumer's credit scores. This means you could be turned down for a loan or credit card, or charged a higher interest rate for your loan, all through no fault of your own. In our own experience in consulting on Florida mortgage loans, we’ve seen many instances of errors somehow appearing on clients reports. One client had several derogatory items listed, simply because he had once lived in the same apartment complex as a man who had the same first and last name, and who also had some problems with his credit. Even though their age and middle initials, and in fact their addresses, were different, the bad credit data had shown up on his report as well.
    And of course, they obviously had different social security numbers...

    In another case we had a customer who had a collection listed on their account for an unreturned cable box. After disputing it with the cable company for several weeks on the phone, and reporting the discrepancy to the bureaus, they finally dug through old paperwork from 3 years before and found the receipt for the unit's return. Only after carrying the receipt down to the cable company for their inspection was the collection removed from their account, and then it was simply posted as a collection that had been "satisfied"! It took another series of phone calls, letters to all three bureaus, and almost 2 months to get the incorrect item removed completely.

    In other instances, we’ve seen derogatory credit posting on a son’s account from his mother’s credit history, or on a daughter’s from her father, and vice versa. The bureaus "assumed" that since their addresses were the same, that there was a legally binding link between their credit. But this would normally only apply if they were husband and wife, or if they had applied jointly for the credit. In these cases, they had not applied jointly, and one would think that the 25-30 year age difference would give the credit bureaus a clue as to their real relationship, or would at least cause them to seek verification of a marriage through public records. But, of course they didn't.

    In my own case, one of my credit card accounts has now shown up on my wife’s credit bureau reports, simply because I mentioned her name on the phone to a credit card company representative, while I was declining their offer to add her to the account. In this instance, it does neither of us any harm, since we both have excellent credit, and as husband and wife are responsible for each other’s debts anyway, but it was an "intentional error", none the less. I would be willing to bet that the credit card company offers a bonus to their reps for getting co-signers added to an account, and the rep I was speaking to simply cross referenced my address to find my wife’s account.

    When confronted with the errors discovered in the study referred to above, all of the credit bureaus had basically the same response. Human beings help compile the data in these reports, and being human, may make mistakes. All of the bureaus have procedures in place for consumers to dispute erroneous items, and a fedreal law requires that they remove any that they cannot verify are correct within 30 days. But if any of you that are reading this have ever tried to have an erroneous listing removed from your credit report, you know what a frustrating and time consuming job it can be. Plus, in my experience in dealing with client’s credit reports, I have rarely seen good credit listings from another consumer magically appear on someone’s report, but I see derogatory ones that don’t belong there, show up all of the time.
    Somehow the credit bureaus manage to spot differences in consumers account details and social security numbers when posting good credit lines, but ignore them on a regular basis when posting bad ones. And some consumers would just as soon pay off a small delinquency, even if it isn’t theirs, rather than holding up buying a home or a car for 30-60 days (including mailing and processing time) while they dispute the item and get it removed. This of course benefits the company listing the delinquency, since they really don’t care who pays, as long as someone does.

    All of these problems are why the credit bureaus are now required by law to give you access to your credit reports for free on an annual basis. Even if you’ve never had a issue with your credit rating before, you need to take advantage of this free service. Do it before you need a new mortgage or other loan, so there are no surprises when you do apply. And do it every year, to insure that no new errors appear on your report. It only takes a few minutes of your time to order the reports, and it is time well spent. Consider this, at current fixed rates for an average $200,000 Florida mortgage, a half of one per cent increase in you interest rate, caused by an error on your credit report lowering your score, could cost you over $23,400 in interest over the life of the loan. If it takes you 1 hour a year to request and look over your credit reports to correct that error and save that money, (and it shouldn’t even take that long), you’ll have been paid about $780 an hour for that time.

    Now, maybe the credit bureaus are correct, and are being honest, when they claim that all of the mistakes in their credit reports are simply human error, but that doesn’t mean you have to be a victim of those errors. Find out NOW if your reports are accurate, and make sure to get any errors corrected before you need your next loan. Don’t be put in the position of having to pay for someone else’s mistake in order to buy your dream home. Or having to pay too much, year after year, for that home.

    I’ve mentioned in previous articles that dealing with a local, fully licensed Mortgage Broker, is the best way to get your home mortgage, and this is just another reason why. With most banks, finance companies and large, on-line lenders, all you’ll get is a standard turn down letter if you have problems with your credit. But a truly dedicated Broker will discuss your credit report with you (although they are restricted from actually giving you a copy of your reports), help identify any mistakes, and then help you get them corrected. Now I may well be prejudiced, considering I’m associated with the one of the best, if not the best, Florida Mortgage Brokers, but considering that about 4 out of 5 clients can use that help, and banks and on-line lenders usually don’t offer it, I think my opinion is actually fair and unbiased o this matter. Solving one problem with your credit report could save you 5-10 times the amount of a reputable Mortgage Broker’s average fee. And that’s not counting the lower interest rate you’re likely to get to begin with.

    To get a free copy of your credit reports using the federal program you can call;

    1-877-322-8228

    To contact any of the big three credit bureaus, if you have issues to be resolved, use the numbers below;

    Equifax 1-800-685-1111

    Experian 1-888-397-3742

    Transunion 1-800-916-8800