Why? Probably because those agencies,
along with the much larger banking institutions which
depend upon them, desperately need consumers to buy
into a few oft-told myths which perpetuate their respective
businesses. Unfortunately, though, not knowing the
truth can cost a consumer tens or even hundreds of
thousands of dollars during an average lifetime.
Where credit bureaus are concerned,
there are essentially two sets of "truths."
On the one hand, there is the fairly meaningless happy
patter they want you to believe, which you can find
repeated in just about every credit-related book and
Internet site. And then, of course, there's the real
truth which I'll shortly elucidate.
Unfortunately, in
order to truly embrace stark reality we must first
peruse the prevailing fiction. So we'll examine both
here. This article will aim to demolish the social
psychosis perpetuated by companies like Equifax,
Experian, and TransUnion and transport
you to a veritable Valhalla of consumer mental health.
Even better, maybe you'll end up saving a few bucks
too.
Psychosis
#1:
There
are three official credit bureaus, and these
beloved and vital American institutions maintain
accurate records regarding the financial lives
of every adult citizen.
|
There's so much wrong with
practically every word of this fantasy that it's tough
for a consumer advocate to know where to begin.
First, the so-called "big three"
consumer reporting agencies with which most Americans
are familiar < Equifax, Experian, and TransUnion < truly want consumers to believe that they've each
been blessed with a sanctioned franchise. Actually,
the only reason such corporate behemoths now dominate
the landscape is because their progenitors simply
managed to swallow up each other as they battled for
preeminence through the decades. Greed, not official
dictum, paved their way. Suffice to say there is hardly
anything "beloved" about these privacy-busting
companies.
Moreover, there are indeed other, newer,
credit bureaus on the horizon (with names like Innovis,
Lakeside, and NCTDE) which hope to eventually eclipse
today's major players. In fact, anybody who so desired
could start their own credit reporting agency, collect
personal information about their friends and neighbors,
and then attempt to sell that data to whoever would
be nosy enough to purchase it. Sure, federal law puts
limits upon what can be reported and to whom, but
nothing bars any one of us from entering the field
outright regardless.
So contrary to the prevailing perceptual
reality, there are no official bureaus. And while
most Americans perceive their credit reports to have
at least the same legal standing as their driving
records, the truth is that the government had no role
in establishing the for-profit companies which produce
them. Put bluntly, no law mandates a credit report's
existence, and such documents deserve as much respect
as "The Weekly World News" supermarket tabloid
or any other similarly unproven list of allegations.
And what about the "accurate records"
idea? Every serious study to date has reached the
same conclusion: Credit reports are simply rife with
errors.
Psychosis
#2:
Potential
creditors, insurers, and employers carefully
review consumer files to help them qualify
applicants.
|
That used to be true.
Once upon a time in America, if you
applied for a credit account anywhere, a bookkeeper
in some dusty back room requested a credit report
from your local bureau. In fact, in those heady days
before the corporate titans took over, all credit
bureaus were local. Then every line of your file would
be assessed, and if there was a problem, you might
be telephoned or called in for more discussion. Lo,
you might even be asked for a personal pledge attesting
to your responsible intentions. Then a decision would
be rendered, usually, but not always, in your favor.
The problem with that business model
is that it isn't very scalable. Scouring an individual's
credit report takes time, and it also takes skilled
(with any luck, that is) human beings to render careful
judgments. Unfortunately for fair decision-making,
that's just not manageable if you want to extend credit
to hundreds of thousands or even millions of people
on a national scale. Automation, of course, must save
the day, and technology hasn't yet allowed that to
include an individualized reading and analysis of
everybody's credit reports.
That's where the credit score comes
into play. A seemingly wonderful solution, credit
scores actually introduce a boatload of other new
problems: click here to access our Credit Insider
article which suggests that the prevalent credit scoring
system may well be illegal and ought to be scrapped.
So quash Psychosis #2 here and now.
Of course the credit bureaus want consumers to believe
that things haven't changed, that life is as quaint
as it was decades ago, and that people actually pay
attention to the report itself rather than just a
glorified number. In fact, the bureaus need consumers
to believe that, which takes us to our next bit of
consumer psychopathology:
Psychosis
#3:
If a
consumer disagrees with an item on a credit
report, she can request that a 100-word statement
be inserted which will provide balance to the
file. |
What sheep they believe us
to be. In the early 1970s when the Fair Credit Reporting
Act first gave Americans the right to include such
statements on their reports, life was different. Prospective
creditors still actually perused consumer files with
authentic human eyeballs. (Read Psychosis #2.) So
in those halcyon days of yore, a plaintive comment
placed in the report by the consumer herself might
have made a difference at mortgage time.
No more.
Nowadays the 100-word statements can
only harm the consumer. First, as we've discussed,
such personal statements are essentially never read
by potential creditors anyway since the credit score
is the usual qualifying determinant. Second, those
statements only make it more difficult to embark upon
a credit repair effort later because they serve to
confirm what's already there. So, for example, let's
say a consumer attaches a statement that reads something
like this: "These late payments were made only
because I was suddenly laid off (or sick), but that
unfortunate situation changed very quickly, and we
have never been late with this or any other account
since." That may sound responsible, but unfortunately
it says only this in reality: "NOTE: yes I really
was late paying these accounts. Plus I'm not smart
enough to have an emergency fund to cover basic minimum
payments if something goes wrong financially. Therefore,
I am a bad credit risk."
Even worse, let's say a consumer subsequently
learns something about credit reporting and decides
to engage a law firm to help confront things legally
and technically. Whoops. The credit bureau is going
to dismiss any new challenge even faster than it would
have before because there's no need to even take another
look: After all, it's right there in the consumer's
statement which admits fault. Remember that extenuating
health or employment circumstances are viewed as little
more than lame excuses to these cold corporate entities
anyway.
Most consumer advocate old-timers will
advise that the first items to be disputed are those
silly 100 word statements if any were ever inserted.
The Credit Insider heartily concurs with that philosophy.
Psychosis
#4:
Negative
items must remain on reports for seven years
(or ten years for bankruptcy tradelines). |
That's sheer and utter balderdash.
Even so, consumers hear it every day when they telephone
creditors directly: "Sorry, by law that has to
remain on your report for seven years." The next
time you hear that, know this: The automaton posing
as a customer service representative is either spreading
lies or ignorance, neither of which is good for your
fiscal or mental health.
Sure, the bureaus want consumers to
believe the lie because they have based their business
plans upon reporting nasties to their subscribers,
and they don't want to run out of them. The truth,
though, is that nobody is required to report anything
about any of us for any minimum length of time to
anybody else. Put bluntly, relevant laws like the
Fair Credit Reporting Act only serve to place LIMITS
upon how consumer reporting agencies can and cannot
behave.
Psychosis
#5:
By definition,
helping someone else to straighten out their
erroneous credit reports violates the law. |
Such statements are the most
insidious and sickest lies of all. In fact, this is
the very same psychology a predator uses with his
victim: "Here, I'm abusing you, but follow my
rules. You can't talk to others about it. You can't
ask for help. If you do request or receive help from
someone else, you'll only suffer more damage in the
long run. Keep to yourself. Remember that I'll tell
lies about you if I wish. And if you have any problem
with any of this, speak only to me about it."
The facts cut straight to our constitutional
citizenship: All of us have a fundamental right to
legal representation. Whenever we are accused of anything,
whether that accusation appears in the newspaper,
on a rap sheet, on a credit report, or anywhere else,
we are guaranteed the right to request assistance
with both understanding and defending against such
allegations.
Credit bureaus occasionally (and vaguely)
suggest that using a third-party violates some law.
Sometimes, they'll send a letter to consumers who
have challenged one or more items on their reports
that basically accuses them of having sought outside
assistance with the problem. Note that they never
actually come out and say plainly, "Using outside
counsel is against the law," because it isn't.
Instead they simply invite the consumer to write back
and deny the charge or to implicate the third-party
somehow in some unnamed wrongdoing. The specific wrongdoing
is never spelled out, of course, but the effect is
the same: The credit bureaus, by donning the cloak
of artificial officialdom, hope to intimidate consumers
into backing down and getting right back into line
with all the other quiet people who are afraid to
challenge their faux authority.Clients are instructed
to simply send such letters to the firm, but even
those attempting to confront their credit reports
on their own are well advised to simply ignore such
provocations.
So long as consumers can be managed
through skilled deception, credit bureaus will continue
to unfairly profit at our expense. Reified credit
scores will continue to define our suitability for
home ownership. Credit acquisition, insurance, and
employment will continue to be lost as a result of
sloppy data maintenance. Fundamental changes will
only occur when consumers reject these untruths which
are propagated so successfully within our culture.
| Repairing
Credit Yourself |
The
Fair Credit Reporting Act gives you the right
to dispute any and all items on your credit reports
that you feel classify as inaccurate, unverifiable,
or misleading. If the bureaus can not verify that
the information on your reports is indeed correct,
then those items must be deleted.
Disputing items on your credit report
is easy. Getting results from the credit bureaus is
amazingly difficult, complex, and infuriating. It
is not a coincidence that the Federal Trade Commission
receives more complaints against credit bureaus than
any other type of business. Remember, the credit bureaus
are primarily interested in protecting their profits.
Investigating your challenge consumes these profits.
Short of sparking a mass number of lawsuits, the credit
bureaus seem to do everything in their power to discourage
consumers from making progress in their restoration
efforts.
Restoring your own credit is like repairing
your own transmission or representing yourself a court
of law; it is possible, but you must decide if you
are willing to take the time and assume the risks
of doing it yourself. Most people choose to allow
an attorney to represent them because an attorney
better understands the complexities of the legal system.
