Credit Scams: Part 1 – Credit Reports

by Guest Contributor · 6 comments

This is part one of a two part guest post from Debt Lead, who has a debt consolidation website by Kimberly Credit Counseling.

Newspapers, radio, TV and the Internet are filled with advertisements that offer to erase accurate negative information in your credit file. The credit repair scam artists who run these ads can’t deliver. Only time, a deliberate effort, and a plan to repay your bills will improve your credit history record. Part 1 is to help you understand credit reports so you can be an informed consumer, while part 2 looks at credit repair scams.

Credit Reports

Does your credit report accurately represent you? A recent study conducted by the Public Interest Research Group (PIRG) found over 70% of credit reports contain errors. Among the principal findings of the report were the following:

  • Twenty-nine percent (29%) of the credit reports contained serious errors that could result in the denial of credit.”
  • “Serious” errors included false delinquencies, public records or judgments that belonged to a stranger, or credit accounts that did not belong to the consumer
  • Seventy percent (70%) of the credit reports contained mistakes or errors of some kind, also including the following:
  • Forty-one percent (41%) of the credit reports contained incorrect personal demographic identifying information
  • Twenty percent (20%) of the credit reports were missing major credit cards, loans, mortgages, or other accounts that are critical to demonstrating consumer credit worthiness.

One of the first steps to credit repair is to understand credit reports. When applying for mortgages, home loans and refinances, one of the most important factors in determining whether or not you will be approved is your credit. This is true for other important factors as well, such as obtaining lower interest rate auto loans and credit cards so it is extremely important to have good credit.

If you have had credit issues in the past, or are currently in a situation that will affect your credit, be prepared to address these issues upfront when applying for a loan.

The mortgage industry has its own language when it comes to your credit report. Mortgage lenders get their name from the grading system they use. Items that determine your credit rating (A+ to D-) are payment history, amount of debt payments, bankruptcies, equity positions, and credit scores. Credit scores are also known as “FICO” scores, and are used by the mortgage industry to determine credit risk. The higher the credit score, the better the credit risks.

FICO stands for Fair Isaac Company, the company that created the original scoring system. Each credit bureau has its own unique system that allows them to offer a score based solely on the contents of the credit bureau’s data about an individual. A numerical score at one bureau is the equivalent of the same numerical score of another. For example, a score of 700 from Experian indicates the same creditworthiness as a score of 700 from Trans Union or Equifax. However, the calculations used to determine these scores are different for each bureau.

FICO scores range from 375 to 900 points. A score of 650 or above indicates a very good credit history. However, lenders do not necessarily give the same value to a particular credit score, and they do not necessarily use credit scoring.

FICO scoring places a value on the types of accounts you hold, as well as your credit history. The formula that determines your scores, however, is not disclosed to the consumer.

The 5 most important factors to determining your credit score are:

  • Your payment history
  • The amount of outstanding debt you have compared to your credit limit
  • Your credit history
  • The types of credit you use
  • Negative information

Remember, FICO scores range from 375 to 900 points. A score of 650 or above indicates a very good credit history.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current AT&T DSL and U-VERSE promotion codes and promos and see if you can save more money every month from now on.

{ read the comments below or add one }

  • John says:

    Financial Advice Sucks…

    I don’t know about Dave Ramsey, but his staff that takes questions and screens calls, are just that, “Screeners” and nothing more-for all you know, they might be a good fit as Screeners at the Hartsfield Airport in ATL.

    I called Dave Ramsey’s number, hoping to catch him and ask him a question. Capital One, with who I had a $200 (Two Hundred) limit credit card jacked up interest rates, added penalty etc. to finally bill me for $2,000 – (I called Dave’s show since a caller with a Capital One Credit card of $800 limit was being pursued for $8000 by Capital One.)

    My specific question related to the legality of the Creditor, Capital One, to re-age my account. In the Credit Report I received from Equifax in June 2008, the date of 1st delinquency reported by Capital One to Equifax was Jan 2002. When I checked my Equifax Credit Report in Jan 2009, I was horrified to notice that Capital One had, around Dec 2008, updated, by providing another date to Equifax, had caused the date of 1st delinquency in the Equifax Credit Report to change to July 2002.

    To the best of my understanding, as per the FCRA, the Creditor is not allowed to re-age the account, ie., the clock starts ticking from the date of the first delinquency, and this date cannot be changed by the Creditor.

    When I called Dave Ramsey, I was shocked to hear the lady on the line state that “since I had not paid the debt, Capital One was at liberty to change the date of 1st delinquency to anything they wanted, and that this would continue till I paid off the debt.” I explained to her that the debt was no longer owed since it was over the 6 year period and that the Statute of Limitations governed this debt. The lady would not even listen, and like a broken record, continued to repeat what she had already told me, and then hung up. I felt like I had just got off the phone with a Collection Agency, and not a team-member of a person who is acclaimed as a Champion of the masses…

    I called again, and got a lady on the phone and explained the situation to her, and told her that the advice provided by the earlier person was not correct, and this lady (maybe it was the same lady-I couldn’t tell, since I was driving) repeated the exact same advice, quoting that per the FCRA, it is not illegal for the Creditor to re-age my account. When I tried reasoning with her, a guy (I am guessing he is the guy who heads Dave Ramsey’s call center) came on the line, interrupting my conversation and says:” Sir, you called earlier and we have been told to tell you what you just heard, and please do not call again”

    So much for Dave Ramsey and his team. It’s a pity. With a self-important and pompous voice, Dave Ramsey goes about his business as usual, selling his FPU, touting his books and audio material and tooting his horn to the unsuspecting, uninformed public. He and his team are indeed, a rare commodity.

    I emailed the link (http://www.ftc.gov/opa/2004/05/ncogroup.shtm) that I found on the question under discussion as soon as I got home that day, to an email ID I found on Dave’s site – am yet to hear anything from him or his team.

  • John says:

    Advice Sucks…

    I don’t know about Dave Ramsey, but his staff that takes questions and screens calls, are just that, “Screeners” and nothing more. I called Dave Ramsey’s number, hoping to catch him and ask him a question. Capital One, with who I had a $200 (Two Hundred) limit credit card jacked up interest rates, added penalty etc. to finally bill me for $2,000 – (I called Dave’s show since a caller with a Capital One Credit card of $800 limit was being pursued for $8000 by Capital One.)

    My specific question related to the legality of the Creditor, Capital One, to re-age my account. In the Credit Report I received from Equifax in June 2008, the date of 1st delinquency reported by Capital One to Equifax was Jan 2002. When I checked my Equifax Credit Report in Jan 2009, I was horrified to notice that Capital One had, around Dec 2008, updated, by providing another date to Equifax, had caused the date of 1st delinquency in the Equifax Credit Report to change to July 2002.

    To the best of my understanding, as per the FCRA, the Creditor is not allowed to re-age the account, ie., the clock starts ticking from the date of the first delinquency, and this date cannot be changed by the Creditor.

    When I called Dave Ramsey, I was shocked to hear the lady on the line state that “since I had not paid the debt, Capital One was at liberty to change the date of 1st delinquency to anything they wanted, and that this would continue till I paid off the debt.” I explained to her that the debt was no longer owed since it was over the 6 year period and that the Statute of Limitations governed this debt. The lady would not even listen, and like a broken record, continued to repeat what she had already told me, and then hung up. I felt like I had just got off the phone with a Collection Agency, and not a team-member of a person who is acclaimed as a Champion of the masses…

    I called again, and got a lady on the phone and explained the situation to her, and told her that the advice provided by the earlier person was not correct, and this lady (maybe it was the same lady-I couldn’t tell, since I was driving) repeated the exact same advice, quoting that per the FCRA, it is not illegal for the Creditor to re-age my account. When I tried reasoning with her, a guy (I am guessing he is the guy who heads Dave Ramsey’s call center) came on the line, interrupting my conversation and says:” Sir, you called earlier and we have been told to tell you what you just heard, and please do not call again”

    So much for Dave Ramsey and his team. It’s a pity. With a self-important and pompous voice, Dave Ramsey goes about his business as usual, selling his FPU, touting his books and audio material and tooting his horn to the unsuspecting, uninformed public. He and his team are indeed, a rare commodity.

    I emailed the link (http://www.ftc.gov/opa/2004/05/ncogroup.shtm) that I found on the question under discussion as soon as I got home that day, to an email ID I found on Dave’s site – am yet to hear anything from him or his team.

  • click4credit says:

    there really is a need to constantly monitor your credit report. There have already been cases of a stranger’s credit history mixed with another person’s simply because they had the same name.

  • luz says:

    I think one should really be extra careful on the bills being sent to you because you might be paying debts that you actually did not incur.

  • Mary says:

    Joe: Geez good for you that you actually checked your credit report.

    It’s sad to see that somehow they manage to always get something so important wrong.

  • Great post.

    I believe it is impossible to overstate the importance of checking your credit report at least once a year – hey it’s free for crying out loud.

    I’ve actually been a victim of erroneous credit report data. When I applied for my first mortgage I was told I had been given a (much) higher interest rate due to my bankruptcy. The problem was – I had never declared bankruptcy.

    I actually laughed when the lender showed me the report because I was in 10th grade at the time I supposedly declared bankruptcy.

Leave a Comment