Buy Now, Pay Later & Credit Score

Buy now pay later options do not generally affect peoples credit and do not yet routinely appear on most credit reports. The credit bureaus; TransUnion, Equifax, and Experian are each working through this relatively new system and how to report on these services in the context of credit worthiness and a borrowers financial obligations. 

This means that a good record of payment on your buy now, pay later accounts will not help build your credit. It also won’t hurt your credit unless your account is sent to collections. This payment option is popular with younger generations, as they are least likely to have built their credit. For now, it is a good way to practice building your credit. 

How Buy Now, Pay Later Works

When you purchase something online, some stores may offer to divide your purchase into smaller installment payments. Most often into four payments, every two weeks. The most used options are Affirm, Afterpay, Klarna, Paypal, and Zip. They partner with retailers who pay them commission. 

Approval is partially based on data that includes address stability, public records and previous history you may have with the lender and banking information. 

Opportunities for Credit Building

The credit bureaus are working hard to incorporate this method into their formulas. Consumers are using these accounts online more frequently than traditional credit cards and loans, especially young consumers. This could prove to be most beneficial to build up credit. 

There are Risks

Since buy now, pay later loans are new and unregulated they are often paid late, most often by consumers of the age group 18-30. BNPY lack the typical protections you would have under a credit card such as dispute resolutions. The easy access to the application causes the consumer to impulsively purchase and buildup debt faster than they normally would. The consumer may also rack up multiple BNPL accounts on multiple sites that could potentially lead to collection accounts. Once sent to collections, it will end up on credit reports. 

The Credit Bureaus

It has been decades since a new type of credit has been in the market. The BNPY system does not fit perfectly within the two categories they have in place now: Installment loans that span months or years and revolving credit like credit cards. 

The bureaus are working together to find a format that fits and are figuring out a common ground.

Current Plans:

• Experian has announced it plans a specialty bureau to hold buy now, pay later data. Information from the specialty bureau will be “promoted” periodically into the consumer’s core credit file.
  

• Equifax plans to add the information to regular credit reports.
  

• TransUnion has said it will partition off the data on core credit reports.

Changes in Medical Debt Reporting

The nation’s largest credit reporting agencies; Equifax, Experian, and TransUnion announced on Friday that many U.S. consumers will have their medical debt wiped from their credit reports. 

In a joint statement, they stated that nearly 70% of medical collection debt accounts from consumer credit reports would be removed after conducting months of market research. The changes will take effect July 1, 2022.

Paid medical debt will no longer be included on consumer credit reports. Credit bureaus plan to extend the timeline reporting how long a medical bill is sent to collections. Typically a medical bill is sent to collections after 180 days. Consumers will now be given up to one full year. This will give consumers more time to work with insurance and/or medical providers to address their debt before it is reported to their file without it impacting their credit score.

 Most medical debts in collection on consumer credit reports are under $500. Beginning in the first half of 2023 Experian, Equifax, and TransUnion will no longer include unpaid medical collection debt that is under $500, though that threshold may increase. 

This does not change the responsibility of the consumer to pay, but it may alleviate some of struggle consumers face when trying to apply for credit. 

Credit Bureaus Still Failing Consumers

Recently on November 10, 2021, U.S. Senators Senators Brian Schatz (D-HI), Sherrod Brown (D-OH), Ron Wyden (D-OR), Elizabeth Warren (D-MA), Jack Reed (D-RI), Chris Van Hollen (D-MD), and Ben Ray Luján (D-NM), urged the Consumer Financial Protection Bureau (CFPB), to take action to reform the credit reporting industry. 

They want the consumer reporting agencies (CRAs) to improve the accuracy of credit reports, minimize the hassle, and hold the CRAs accountable for errors. 

The smallest of errors could affect millions of people. This could prevent them from getting a job or housing at no fault of their own. These mistakes, consumers may pay more for credit and be denied loans, getting mortgage, or renting an apartment. 

A study that took pace in 2012 found that one in five consumers had an error on their credit reports and five percent had errors that were economically damaging. A followup in 2015 found that nearly 70% of the impacted consumers surveyed three years earlier continued to dispute information. 

If you need information on the disputing process or to seek legal action, contact us for help at anytime. 

What is an Inaccuracy in a Credit Report?

What is an Inaccuracy in a Credit Report? 

Many consumers misunderstand what an inaccuracy is considered on a credit report. 

Here are some examples of Inaccuracies you may find in a Credit Report: 

• Accounts that don’t belong to you

• Addresses that don’t belong to you

• Social security number that doesn’t belong to you

• A name that is not yours

• Current or previous employers you didn’t work for

• Old Records that should have been removed

Examples: 

• Bankruptcies can be reported for ten (10) years

• Civil suits, judgments, and records of arrest can be reported for seven (7) years

• Paid tax liens can be reported for seven (7) years from the date of payment

• Accounts placed in collections can be reported for seven (7) years

Here are some examples that consumers commonly confuse for inaccuracies:

• Accounts that belong to the consumer but claim they didn’t get the bill or didn’t get the chance to pay. 
  

• Being charged with a “Collateral Attack” *example* - an apartment complex charges a tenant  for various things written in the contract but tenant believes they do not owe the charges and refuses to pay - then charges show on credit report. 

• Filing for bankruptcy but still still having negative marks on credit accounts. 
  

• Having a loan extended but still having a late or non payment show up up. 

There are more examples that could effect your credit score. Don’t be afraid to reach out for questions. Many consumers are confused about how credit reports work. It’s a frustrating process.

Wells Fargo Fined $250 Million for Unsafe or Unsound Practices

Wells Fargo has been fined $250 million by the Office of the Comptroller of the Currency for “unsafe or unsound practices” related to the bank’s home lending business. Wells Fargo’s top federal banking regulator, OCC, imposed the penalty for misconduct “related to material deficiencies regarding the bank’s loss mitigation activities and violations fo a 2018 consent order issued by the agency. 

The order in 2018 required Wells Fargo to take actions to account for the deficiencies in its risk management program. This included a new risk management plan and forming an independent committee that would evaluate its progress. The 2018 order noted the misconduct related to mortgage, auto loans and other violations. 

The CEO of Wells Fargo, Charlie Scharf stated: “Building an appropriate risk and control infrastructure has been and remains Wells Fargo’s top priority”. 

The OCC had also issued a cease and desist order against Wells Fargo on Thursday that restricts the bank from acquiring certain third-party residential mortgage servicing and requires the bank to ensure that borrowers are not transferred out of the bank’s loan portfolio until remediation is provided. 

The OCC said it issued the order due to the bank’s failure to establish an effective home lending loss mitigation program. Loss mitigation refers to the process in which mortgage lenders and borrowers seek alternatives or work together to avoid foreclosure. 

The fine comes nearly fine years to the day after the discovery of Wells Fargo’s fake accounts scandal in 2016. The bank is still operating under the $1.95 trillion asset cap imposed by the Federal Reserve in the aftermath of the violations. 

Effective Wednesday, a Consumer Financial Protection Bureau’s consent order issued in September 2016 regarding the Wells Fargo’s  retail sales practices had expired, according to the bank. 

Scharf referred to the orders expiration as a reflection of the bank’s progress. He stated: “We have done substantial work designed to ensure that the conduct at the core of the consent order — which was reprehensible and wholly inconsistent with the values on which this company was built — will not recur.”

For more than a decade, hundreds of thousands of Wells Fargo employees opened millions of fake accounts in customers’ names, among other misconduct. 

At least 11 former bank executives have been charged by or settled with regulators since the misconduct was discovered. In early 2020, Wells Fargo agreed to pay $3 billion to resolved the criminal and civil probes of its phony sales practices between 2002 and 2016. The bank has also entered into a deferred prosecution agreement. 

What Caused Your Credit Score to Drop?

When you notice that your credit score had dropped, you start to question many things. We try to pay our bills on time, at the right amount, and keep our credit usage at a minimum but sometimes we fail. We aren’t perfect, but one small mistake can reflect on your overall credit score. 

If you notice a drop, it is most likely due to something specific. Here is a list of the most common reason this happens: 

1. You Were Late or Missed a Payment

Your payment history is one of the most influential factors to your overall credit score. Missing just one payment can negatively impact your credit. It is important to stay up to date on things such as due dates and minimum payment amounts. 

2. You Applied for a Loan or a New Credit Card

Maybe you found a new credit card that appeals to you or you just took our a loan for school, a vehicle, or home renovation. Unfortunately, as exciting as these can be, it can be less exciting for your credit score. Any time you authorize someone, such as a credit card company or lender to check your credit report, you may notice your score took a hit. This is known as an inquiry. It is important be sure the credit you applied for is worth the hit and will be valuable in the long run. It doesn’t have to be a scary process if you are prepared! 

3. Your Credit Utilization Has Gone Up

It is easy to make a charged payment and think that you will pay it off later. It is such an easy and convenient process that we don’t realize how charges can add up quickly. You may end up lowering your credit score depending on the card’s credit limit, maxing out the card, making larges purchases, or continuing to make small payments. You should monitor your charges and keep them below 30% of the credit limit. 

4. You Closed a Credit Card Account

Closing out a credit card, especially if it one of your oldest will reduce the age of your credit history. Your credit history is another factor that impacts your credit score. The longer you have a card or account open shows that you are able to maintain a credit card over time. You should consider keeping the card unless it has a high annual fee. Keeping it open will help maintain your overall credit limit and credit history. 

T-Mobile Data Breach

T-Mobile - the cellar service provider - has confirmed that hackers stole sensitive personal data of more than 40 million former and prospective customers (those who gave the company personal information to run credit check) during a data breach on August 16th. An additional 7.8 million current T-mobile customer accounts were also hacked.  The stolen data included information such as Social Security numbers, driver’s license information, birth dates and more.  

The company stated that phone numbers and financial information, such as bank account numbers and credit card numbers were not included in the hack. 

Protecting Yourself After a Data Breach

Although T-Mobile claims payment information wasn’t obtained during the breach, it is in the best interest of customers to assume their information is out there.  When personal information falls into the hands of criminals, identity theft and fraud quickly become a major problem that is difficult to counter. Acting quickly can save you a lot of grief down the road. 

Steps To Take: 

Freeze your credit

Freezing your accounts is one of the most important steps you can take if you believe your data may be compromised. Freezing your credit blocks lenders from being able to review your credit report to approve a new line of credit. That means you won’t see any surprise credit cards or loans taken out in your name. 

To freeze your credit, you need to contact each of the major credit bureaus - Equifax, Experian, and TransUnion - directly. The bureaus will require information to verify your identity, such as SSN, a copy of your photo ID and proof of residence to approve the freeze. Some bureaus assign a PIN that is required to unfreeze your credit report. 

It will not cost you anything to freeze your credit report and doing so will not affect your credit score. A freeze can be temporarily or permanently lifted at any time. 

Check Your Credit Report

Even if you freeze your credit report, it is a good idea to request copies of your reports from each bureaus to check if any fraudulent activity has occurred. Due to the pandemic, all three bureaus are granting free access to credit reports weekly through April 2022 at www.annualcreditreport.com  This site works directly with the three bureaus to allow customers to pull their reports via a simple web portal. 

Your reports show a detailed history of your payments and balances for various credit products, including credit cards, mortgages, cars, personal and student loans. The reports will not show your credit score. 

When reviewing your reports, you may find fraudulent or inaccurate information. In that case, you want to work with the bureaus to dispute the information and have it removed. If you believe that you are a victim of fraud or identity theft, you may also want to report it to the Federal Trade Commission at identitytheft.gov 

Monitor Your Bank Accounts

T-Mobile states that credit and debit card information isn’t included in the data breach, but it is important to keep a close eye on your bank accounts for suspicious activity. If you see charges that you haven’t made, call your bank immediately to report the fraud. 

If you are still having trouble with disputing information and you are a victim or fraud or identity theft, let us know and we can help! 

Build Credit From Every Day Expenses

There is a new app that can help users build credit from everyday expenses. 22-year-old Michael Brougthon is a CEO and co-founder of Perch Credit, a free mobile app that allows users to utilize common expenses like rent and Hulu payments to build credit. 

When Broughton was a college student, he realized how tricky the United States credit system could be. His experience with credit inspired him to create the Perch Credit app, hoping to make the experience of others less frustrating. Before starting his first semester at USC, he was informed that he was $10,000 short on his tuition. His family had no way to cover the costs and they had never had more than $3-4k in their family bank account at one time. His only option was to take out a loan, but he was getting denied due to lack of existing credit history. 

Broughton began doing some research on how to make building credit easier by utilizing common expenses that everyone uses instead of requiring people to go into further debt. 

In January 2021, Brougton launched Perch Credit. The app is completely free and allows users to utilize rent payments or subscriptions such as Netflix, Hulu, and Spotify to build credit. The company holds a mission to help 100,000 people build their credit in 2021. He hopes that users will feel a sense of financial empowerment by utilizing the Perch app. In addition to credit building, the app also provides financial literacy for users. 

Signing up is completely free and does not affect your current credit score. Visit https://getperch.app for more information! 

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Credit Bureaus are Failing American Consumers

A Resident of Virginia was left with a major error on one of her credit reports from TransUnion after her husband of 40 years died of a heart attack last August. While she was pushing through grief, she had to focus on finances. She had to downsize and sell her family home. She thought everything was settled, and had applied for a car loan. 

Upon applying she did not qualify for a low interest rate from the car dealership. The 12% interest rate she received would have cost her more than $100 extra a month. She is on a fixed income, so every dollar counts. 

TransUnion mistakenly showed that she had a PayPal credit card with a balance due of $1,200 — an error that really hurt her credit score. This account was paid off. Equifax and Experian correctly reported the account as paid off and closed. 

She filed multiple disputes with TransUnion, but like many others, the mistake was not fixed. This story comes from Consumer Reports - who reached out to the credit bureau about her situation and successfully got it corrected. 

Many Americans are unsure of what to do when they find a mistake in their credit report, especially after making multiple disputes to no avail. Consumer Reports created a recent analysis where they asked over 5,000 volunteers to get a copy of their credit report and check for errors. This study was not nationally representative, but it did find errors within these few volunteers that are alarming. Just over 1/3 of volunteers found at least one error. 

As in such case, mistakes can be serious and can dramatically lower a person’s credit score. In turn, this can make loans more expensive. Inaccurate information in your report can also affect decisions from insurers and employers. 

Consumers are often faced with roadblocks when trying to correct errors or even just obtaining access to their reports. The post-pandemic economy is coming back to life and consumers are having their life opportunities stripped from them. 

The large number of errors from this small study is an indication that the credit reporting system is failing American consumers. Credit reporting is a part of our public infrastructure which is a necessity for consumers to participate economically. The Big Three — TransUnion, Equifax, and Experian have all the power over our financial destinies. 

For about 1 in 10 people in Consumer Reports study, errors were related to their financial data: unrecognized payments, payments wrongly reported as late, or debt in collections that were mistakenly in their name. All of these could easily lower a person’s credit score. When a debt is reported as in collections or payments are reported as late, your score could drop as many as 100 points. 

More common were mistakes in personal information. One man stated that his bank account was hacked several years ago and an address that he never lived at wound up on his credit report. It took him several years to get the address removed from all three of his reports. 

A new rise are errors in reporting among people who had sought financial help during the COVID-19 pandemic. In the early days of the crisis, legislation offered forbearance to people with certain student loans and mortgages, meaning they could put off payment for several months with no penalty. But 15% of people who had an account in forbearance noticed that their accounts were reporting as “not current”. 

Trouble Accessing Reports 

Some people have found that obtaining their credit report was confusing or almost impossible. A few of them said that they were locked out for failing to answer the credit bureau’s security questions that were outdated. One lady failed an online security quiz and had to make copies of her drivers license and Social Security card and send a request for her report via mail. This caused her a lot of stress that her sensitive information could be stolen in transit. She stated that it took several weeks to get all of her reports back.  

Credit bureaus have turned to requiring more detailed information for security questions, but many people do not remember how much their mortgage payment was, or which bank may have serviced their mortgage 10 years ago. 

To make matters worse, some of the security information you are asked about is based on inaccurate data in your report. One woman reported that she answered the questions correctly but because the answer didn’t match the wrong information they had on file, they wouldn’t allow her access to her reports. 

Unexpected Charges 

The credit bureaus are allowing consumers to get a free copy of their credit report every week through April 20, 2022 and not just annually, as they did in the past. Some people reported that when they tried to access the free reports, they had to provide a credit card and pay anywhere from $1 to $30 to get their report.  A woman from Virginia was trying to sort out a credit card issue and accidentally signed up for a monitoring subscription for $30. The credit reporting websites and be sneaky at getting consumers to buy a product. 

How to Find, Dispute, and Fix Problems 

It is important to check your credit report often, and with the free weekly access this year, it makes it easier from www.annualcreditreport.com.

You should first look at your basic information. Make sure your name, address, SSN are all correct and spelled correctly. You should immediately dispute anything that you see in error. 

Next, you should make sure that your credit information is yours and that it is accurate. 

It is best to send a complaint/dispute through certified mail so that you know an actual person is looking into the information. The online disputes are convenient but are coded and may not get you the results you need. 

By law, the credit bureaus have 30 days to respond to your dispute. 

f you still encounter errors, or they are not fixing the errors, you can contact us for help and we can look into your situation. 

What is a Charge-Off?

Put simply, a charge-off is put in place when you miss too many payments and your account goes unpaid, a creditor may prevent you from making additional charges. Even if a creditor stops trying to collect on your account, you could still be responsible for the debt. 

A charge-off is the last resort that creditors take and decide that the debt is a loss for the company. You could potentially end up with an unpaid charge if your account becomes delinquent. This can happen with credit card debts and installment loans like an auto loan, personal loan or student loan.

This does not mean you’re off the hook. Even if your account is listed as a charge-off and the creditor is taking the loss, you’re still responsible for paying back the debt. A charge-off can remain on your credit history and show up on your credit reports for up to seven years from the date your missed payment was reported. 

How does a charge-off end up on your credit reports?

Once a creditor writes off your account, it may be reported as a charge-off to the credit bureaus, which translates to a derogatory mark on your reports. The derogatory mark can stay on your reports up to seven years. The creditor may sell your account to a third-party collections agency if the debt was unsecured. If this is the case, your account could appear as an “account in collections” on your reports. When this happens, your credit score may lower and it will become more difficult to qualify for credit or get competitive interest rates. 

The Difference Between a Charge-Off, a Write-Off, and a Transfer

A charge-off and a write-off are the same thing: A creditor decides that you are not likely to pay back the debt and prevents you from making additional charges on the account after the account becomes severely delinquent. This may have a negative effect on your credit. However, a transfer can be neutral. This means the original creditor has sold your account or moved it to a different creditor. The account may be transferred in good standing or listed as a charge-off. 

How does a charge-off affect your credit? 

Before your account was officially a charge-off — you probably missed a number of payments. These missed payments can significantly damage your credit because payment history is a major determining factor on your credit scores. Your scores will most likely suffer further if the account is listed as a charge-off because of the derogatory mark. 

If your account is in collections, it may also lower your credit scores. Not paying the collections agency can further damage your credit, because the agency can report missed payments to the credit bureaus. 

In positive news: if you show that you use credit responsibly from here forward — such as making on-time payments and being proactive about your debt — then the effects of the derogatory marks on your credit reports can begin to diminish after about 2 years. And, thanks to the Fair Credit Reporting Act, you have the right to have negative information like a charge-off removed from your credit reports after seven years. 

Should you pay a charged-off account?

You should first verify that the charge-off account is accurate. If there is a charge-off account on your credit reports, you should verify all of the information. 

Make sure to look at these things:

• Your account may be sold a few times through third-party collections agencies. Make sure each sold account is marked “closed” and has a zero balance. Only the most current collections account should be listed as open.

• Check the outstanding balance. If it’s more than you think it should be, ask the creditor to explain any additional costs or make the correction.

• Verify the charge-off date on the original account as well as any offspring accounts in collections. The charge-off date should be the date of your first delinquent payment on the original account.

Is the charge-off is legitimate

If you find that the charge-off is legitimate, it is important that you take action to pay it off. It may be tempting to to not pay the charge-off, since the lender has likely stopped trying to collect on the account. But as long as the debt is yours, you’re legally responsible for it until it is paid, settled, or discharged in a bankruptcy filing. Plus, the charge-off can ruin your chances of getting a loan. Some lenders require that you pay all outstanding debt before you take out a mortgage or other types of loans. 

If the charge-off is an error

Don’t pay the charge-off if you find that it was made in an error. If it was an error or if it isn’t removed from your reports after 7 years, you can file a dispute. TransUnion, Equifax, and Experian have a dispute option and are required to review them within 30 days. However, it is best to write a letter and send the dispute by certified mail. This method removes the computer generated checking and lets you know that a real person has investigated your information. 

How to pay charged-off accounts

• Communicate with the original lender.

If the debt hasn’t been sold to a collection agency, you can work with the original lender to make payment arrangements. Once it is paid off, the lender will change the status of the account to “paid charge-off” and update the balance to 0. Lenders usually see a paid charge-off as more favorable than an unpaid debt. 

• Settle the Debt 

If you decide to negotiate a settlement and either the original lender or collection agency accepts less money than originally agreed, keep this in mind: It should appear on your credit reports as a “settled” charge-off. This could negatively impact your credit scores, but the account won’t be sent to collections. 

• Pay the collections agency

If the creditor sold the account to a collections agency, the you would pay the agency. Before you do, write to the agency and ask for proof that it owns the account. After you have paid off the debt, the account will appear on your reports as “paid collection”, which is more favorably viewed by lenders than an unpaid account.  

Once you have paid off the debt, through the original creditor or the collections agency, or via a settlement, make sure you ask for a final payment letter. You should also keep tabs on your credit reports. If the account isn’t shown as paid, you will have the letter as proof that you can use to help get your credit reports corrected. 

Removing a Charge-Off 

If the charge-off listed on your credit reports is legitimate, there is not much you can do to remove it. You can try negotiating with the original lender. If the account hasn’t been sold, you can offer to pay the debt in full exchange for the charge-off note to be removed from your reports .

Some debt collectors may offer to remove the charge-off note from your credit reports — this is sometimes knows as a “pay for delete” offer. It is important to note that lenders are required to report accurate and complete information, so any “pay for delete” service is unlikely to be successful. Otherwise, a charge-off should be removed automatically from your credit report after 7 years. 

Final Steps

Once you have taken care of the charge-off, you should take healthy credit steps to improve your credit. There are credit counseling services that help you make a budget and avoid delinquent payments in the future. 

If you have found an error on your credit report and investigations have failed. Contact us for help. 

Real Example of Mixed Credit File

Siblings, especially twins are more likely to have their credit files mixed than most people. One man had realized that his credit file continued to be mixed with his twin sisters file. The US credit rating agencies can’t seem to tell them apart. Sometimes they associate his social security number with her name and vice versa.  

When he applied for a job, his background check listed his name as hers; and his actual name was listed as an alias. They have both been consistently rejected for credit cards, despite both of them having good credit. Mitchell was denied a car loan by a bank that he had used for years. However, they did have luck obtaining housing. 

This is a problem that they have to worry about anytime they apply for credit. They never know what information is coming up when their file is pulled. 

The problem doesn’t lie within the banks or lenders, but the credit system. In the United States, the Big Three: Equifax, TransUnion, and Experian have the most control over our information. These companies obtain hundreds of data sources to predict your credit score. In this mass of data, mistakes happen. 

When a credit system messes up, consumers are supposed to have a recourse in fixing the problem. Each agency has a dispute process. When a consumer disputes an error, the credit bureaus are required to do an investigation. When that fails, consumers are oftentimes unsure of what to do. The next step is to file a complaint with the Consumer Financial Protection Bureau (CFPB), which will forward your complaint to the appropriate ratings agency. 

Unfortunately, these situations go in circles. The furnishes will verify your information with the creditors and the creditors will verify your information with the furnishes. In the twins situation, the male pulled his files and mailed in physical proof of his identity, such as his social security card and drivers license. After investigation, his reports still listed his sister as an alias or a former name. 

These situations are rarely heard of, but happen often. In this situation, it is likely due to their social security numbers “matching” in the system. Since they are twins, they were likely given social security numbers that are one digit off. The credit bureaus consider this a match, since they only verify 8 out of 9 digits. They also have the same last name, and likely lived in the same household growing up, giving the bureaus verification that they are the same person. 

We recommend that you check your credit reports a few times a year. This is especially important if you may have a relative with a similar name. Many people do not realize their credit has been compromised until they are denied credit. You can check your credit reports for free once a week until April of 2022 at www.annualcreditreport.com 

If you have investigations that keep failing, contact us for help. You may be entitled to a settlement. 

The e-OSCAR System

When delving into the credit reporting world, it is easy to get lost in the terminology. You see a lot of acronyms in credit reporting such as: CRA, DF, FICO, and FCRA, but this blog will discuss e-OSCAR. 

What is e-OSCAR?

OSCAR stands for “Online Solution for Complete and Accurate Reporting”. The “big three”: Experian, Equifax, and TransUnion owns and created this software in 1993. 

Put simply, e-OSCAR is an automated credit dispute system. This system was created due to the mass amount of manpower needed to process consumers’ claims of mistakes on their credit reports.  According to the Federal Trade Commission, at least 1 in 5 consumers has an error on one of their three credit reports and 1 in 4 of these errors have a negative impact on the consumers’ overall credit scores. It is recommend that you check your credit report at least once a year and report anything that seems incorrect. As of now, consumers are able to obtain their credit reports for free once a week until April 2022 due to the pandemic. 

Consumers can submit a complaint to the credit reporting agency by phone, online, or by mail. It is best to submit your dispute by mail, using certified mail, so that you have verification that they received it and that a real person will look into it. 

The bureaus receive letters topping the thousands each day. The bureaus created e-OSCAR to streamline the dispute process. 

Credit Disputes and e-OSCAR

Credit disputes involve a 3-step process: 

1. The credit bureau receives a credit dispute letter.

2. An employee reads the letter and assigns one of e-OSCAR’s 29 three-digit codes to classify the type of error.

3. The employee enters this code along with basic information about the consumer and creditor. They may also enter one or two lines of explanation.

e-Oscar Coding

When the credit reporting agency receives a dispute they enter it into the e-OSCAR system. Next, an e-OSCAR representatives categorize the complaint in one of 29 three-digit dispute codes. These codes include:

• 001 — not his/hers.

• 002 — belongs to another individual with same/similar name.

• 008 — late due to change of address or never received statement.

• 010 — settlement or partial payments accepted.

• 019 — included in the bankruptcy of another person.

• 038 — claims account closed by consumer.

In addition to the code that best fits the dispute, the agency may enter a few lines of explanation. Once e-OSCAR receives this data, the system creates and records a formal dispute. It then distributes the information to the other credit reporting agencies and to the appropriate data furnishers.

Issues with e-OSCAR 

Credit disputes are unique and complicated. Critics of the e-OSCAR system believe that neither a 3-digit code nor 2 lines of explanation are sufficient. Attorneys encourage consumers to send as much evidence as possible to support their claim. This makes it harder to credit bureaus to later claim that the error is your fault because you didn’t send enough informational evidence. Critics also question whether e-OSCAR staff fully review additional documents that provide support to the consumers complaint. 

What to Know About Disputes

Under the Fair Credit Reporting Act (FCRA), the Consumer Reporting Agency (CRA) has up to 45 days to resolve a dispute. If the error involves an account with your organization, the credit bureau will usually reach out to investigate the item you reported. CRA’s resolve only 15% of complaints without involving the data furnisher. After you provide a response to the dispute, the CRA will notify you of the verdict. The error will either be validated and will be corrected, or they have determined there was no error and the item is reported as accurate. 

Credit Repair Myths

Credit repair companies are everywhere lately, but there are some myths to be aware of. Credit repair is difficult, but there are many things you can do yourself! 

Bad Accounts are Removed From Your Report

This myth is oftentimes promoted by credit repair companies. They are not able to remove negative accounts just because you paid them to do so. These companies are only allowed to remove accounts that are inaccurate. They can help you locate incorrect items on your report and will contact your creditors for you. If the company makes a promise to raise your credit score by a certain amount of points, you should be skeptical because this is a nearly impossible to fulfill or to predict. Most inaccuracies are easy to find yourself, because only you know your accurate basic information and accounts you may have. You can check your credit reports for free every week from www.annualcreditreport.com 

Closing old accounts boosts your credit score

Your credit score is influenced by the amount of time you have lines of credit reporting. Older accounts that are positive will generally give you a better credit score. The average age of all of your accounts also matter. So, if you close an old credit card that you no longer use, it can actually lower your credit score. The length of your credit history makes up 15% of your score based on the FICO Score. 

Paying off Collections Improves your Credit Score Immediately 

Even if you pay off your collection accounts, those accounts can still continue to hurt your credit history for up to 7 years. Paying it off will only stop the collection action from creditors and debt collectors, and it can increase your credit score a little, but because it was in collections it can still impact your credit score for 7 years. If you want a collection account removed, it needs to be proven as inaccurate. To do this, you must file a dispute to the credit bureau reporting it and provide them with proof of the inaccuracy. If you have an inaccurate collections on your account and they keep verifying it as correct, you should contact an attorney to take action, especially if you have been denied credit due to this inaccurate reporting. 

All your credit reports have the same information

here are three major credit reporting agencies: TransUnion, Equifax, and Experian. All three have their own credit report, and may all contain different information.  This is one important reason to review all three of your credit reports to make sure that they are consistent and accurate. 

Checking your own credit score or reports lowers your credit score

Checking your own credit reports and credit score does not harm your credit score. You are entitled to review your information without consequence. Your credit score is also not harmed when you receive an unsolicited preapproval from a lender, such as a letter notifying you that you’re prequalified for a credit card that you did not apply for. These are considered “soft inquiries” on your credit. 

Multiple credit pulls can harm your credit score

This is partially true, but it depends on how you are applying for new credit. When you apply for new credit, the lender will request your your credit reports and this is what is considered a “Hard Inquiry”.  This can harm your credit score by around 5 to 20 points for up to 12 months. If you apply for multiple credit lines over a span of just a few months, it can harm your credit score and cause points to drop. There is a way to minimize this impact and its called rate shopping. 

If you apply for the same type of credit within two weeks the credit-scoring models understand that you’re shopping for a good deal. When done correctly, only one hard inquiry impacts your credit score - all are reported but only one carries influence on your score.

Your employment status impacts your credit score

Whether you are employed, collect Social Security, or have never had a job in your life, it has no affect on your credit score. It is true that sometimes your employment history is listed on your credit reports, but it doesn’t have influence on your credit score. The credit scoring models care about how you’re handling repaying your loans - not where you work. On the other hand, lenders do care about your employment history because they want to have confidence in your ability to repay the credit that you’re taking on. 

Your and your spouse’s credit scores merge

When you get married, it is true that many things between you and your spouse become shared. However, your scores are still separate. Your marital status has no bearing on your credit score. 

If you apply for new credit with your spouse, such as a joint auto loan, your credit scores are also considered separately. Oftentimes, the spouse with the lowest credit score is the one that is used to meet credit score requirements. 

Having no debt is good for your credit score

If you don’t have anything currently being reported on your credit reports, then you likely have what is called a thin file. A thin file can create a lower credit score. The majority of your credit score is based on your payment history. If you don’t any loans or credit that you are actively paying on, you are not building a good credit score. 

However, having too much debt can also hurt your credit score. For example if you have credit cards that are over 30% of their borrowing limit, it will likely lead to a poor credit score. There is no real baseline for how much debt you should have. What is most important is that you are not overextending yourself and that you’re paying loans back on time. It all depends on your situation and what you can comfortable handle. 

Most lenders prefer that borrowers have active accounts because it proves that you are able to handle credit. Borrowers that have never taken on any credit can also be called no credit borrowers. It can be tough for new borrowers to get their feet wet in the credit world because they have not yet proven they can handle relying credit.

What is an ACDV?

The largest search we find on our page concerns ACDV’s. So, what is an ACDV? 

An ACDV is an Automated Credit Dispute Verification form that  is used by the credit reporting agencies to communicate consumer disputes to lenders and collection agencies. 

ACDVs are transmitted to furnishers via an electronic system known as the "E-OSCAR" system, which is an automated system that enables furnishers and credit reporting agencies (CRA’s) to create and respond to consumer credit history disputes.

The ACDV process tracks and manages an ACDV initiated by a credit reporting agency on behalf of a consumer and routes it to the appropriate furnisher.

The furnisher then, returns the ACDV to the initiating CRA with the updated information (if any) relating to the consumer's credit history.

In responding to an ACDV, a furnisher informs the CRA’s if the disputed information is "Verified" or if the disputed information should be "Changed" or if the disputed item of information should be "Deleted".  To do this the furnisher literally checks a box. 

Once checked, this will instruct the CRA that all information about the disputed tradeline is, in fact, accurate and that no changes should be made. If a furnisher chooses to change information, it will check a box called "Change Data As Shown" and then will input changes into the various fields of information that need to be changed. Whenever a furnisher directs a CRA to change information on a consumer’s credit file, that furnisher affirms to the CRA that it has made the same changes to its own systems.  This affirmation is made by the furnisher on the form used to process the dispute. 

What is a Credit Score?

Credit scores indicate your level of risk as a borrower. There are different credit scores that use unique formulas but they each will typically include factors such as: payment history and amounts owed. 

What Is a Credit Score?

A credit score is a number that measures how risky you are as a borrower aka your credit worthiness. Financial institutions use this score to measure how much they can trust you. Credit scores are calculated by your past behavior with loans, credit cards, and other financial products. The higher your credit score, the lower risk you pose to lenders. Higher scores usually mean that you can expect better terms and lower rates when you borrow money. 

You might not realize that you have hundreds of of credit scores, not just one. The FICO brand of credit scores used to be the only scoring system3. Established by Fair Isaac Corporation, FICO, remains the main type of credit score used by lenders to evaluate the credit ratings of applicants. When you hear about credit scores, it usually means the FICO Score. However, under the FICO brand there are different types of FICO Scores for different purposes. For example, when applying for a student loan or buying a house, the bank may use a different type of score than if you are applying for a credit card. 

Most recently, the three major credit bureaus (TransUnion, Equifax, and Experian) have banded together to create another scoring system called VantageScore. This score relies on a slightly different set of weighted criteria than FICO Scores. If you receive a free credit score on your credit card statement, you may read the fine print to find out what scoring model and credit bureau data they are using. 

Range of Credit Score

VantageScore 3.0, 4.0, and most FICO Scores range from 300-850. Older versions of VantageScore and some other types of FICO Scores have different numerical values. 

What isn’t In Your Credit Score

Your FICO and VantageScore credit scores only consider your account information on your credit reports. They do not consider things like:

• Your income (credit card companies will ask for this when you apply for new credit, though)

• Your specific place of residence

• Your age, race, gender, religion, marital status, or national origin

• Child support/family support obligations

• Whether or not you’re using credit counseling services

Criteria Used by FICO and VantageScore

FICO and VantageScore determine credit scores by evaluating similar factors that essentially boil down to the following:

• Your payment history

• Amounts owed, particularly versus your overall available credit

• The age of your credit history

• The types of credit accounts opened in your name (loans, credit cards, etc.)

• New/recent applications for credit

It is generally safe to assume that the biggest factor that impacts your credit score is your payment history followed by amounts owed and utilization of credit. 

Exactly how these factors impact a given score can vary, but it’s generally safe to assume that your payment history is the biggest consideration, and that’s nearly always followed by your amounts owed/utilization.

Here is an outline of a few of the more commonly used scoring formulas:

FICO Scoring Criteria

(Scores range from 300 to 850)

• 35% Payment history

• 30% Amounts owed

• 15% Length of credit history

• 10% New credit

• 10% Types of credit

VantageScore 3.0 Scoring Criteria

(Scores range from 300 to 850)

• 40% Payment history

• 20% Credit Utilization

• 11% Balances (total amount owed)

• 21% Depth of credit (length of credit history, types of credit)

• 5% Recent credit

• 3% Available credit

VantageScore 4.0 Scoring Criteria

(Scores range from 300 to 850)

• 41% Payment history

• 20% Credit Utilization

• 20% Age/Mix of Credit

• 11% New Credit

• 6% Balances

• 2% Available credit

Look for our next blog for the break down of these elements included in FICO Scores. 

You Can Repair Your Credit Without a Credit Repair Service

Credit repair companies can remove information on your credit report that is lowering your credit score but they cannot remove negative marks if the information is accurate, timely, and verifiable. Credit repair services can cost you around $100 a month, but everything the service does, you can also do on your own. 

Your credit score is calculated from information in your credit reports. A study from the Federal Trade Commission found that 5% of consumers had errors on their credit reports that could significantly lower their scores. 

Legitimate credit repair services check your reports for information that shouldn’t be there and dispute it on your behalf. They may also check to make sure the information does not reappear. Sometimes information that is accurate but cannot be substantiated is removed, but it could be reinstated if it is verified later. 

Errors that can be addressed: 

• Accounts that do not belong to you.
  

• Bankruptcy or other legal actions that were not yours.
  

• Misspellings, which may mix in negative entries that belong to someone with a similar name — or may mean positive entries aren't showing up when they should.
  

• Negative marks that are too old to be included.
  

• Debts that can't be validated and verified.

Using a credit repair service can cost between $79-$129, and the process could take several months to a year. You may also be required to setup a fee to begin. Credit repair services argue that you will save money because of lowered interest rates. It is true that lower interest rates go to borrowers with higher scores but it is also true that you can handle credit repair yourself. 

You can opt to fix your credit report on your own. Here is how: 

• Obtain your credit report: As of now you can retrieve your credit reports for free once a week at www.annualcreditreport.com until April 2022. Check all of your information and verify that it is accurate.

• Dispute errors: As a consumer, you can dispute errors directly with the three major credit bureaus. All three bureaus have an online dispute process, but it is more efficient to send in a complaint by certified mail. This provides proof of service and a real person will have to look at your information.

• Work on your payment history: The biggest factor affecting your credit score is your record of paying bills on time. If you have late or missed payments, that can drag your score down. It is important to bring your late accounts to current as soon as possible and consider writing a goodwill letter asking your creditor to remove the make from your credit reports.

• Use less of your available credit: How much of your available credit card limit you are using is known as your credit utilization ratio. The lower, the better for your score. If you can afford to do so, consider making multiple small payments in the billing cycle to help keep this ratio down.
  

Before deciding to use a credit repair service, know that you can do all of this on your own. It is as simple as looking through your reports and verifying the information without the cost. If you have inaccurate information on your credit report, you may be entitled to a settlement. 

If you find inaccurate information, be sure to dispute the information. If you need help, reach out to us for help in the process. We may also be able to obtain a settlement for you.