In a previous post, The Credit Reporting System is Tipped Against You, we pointed out a few facts on how and why this is so. Here we’ll go into just a few facts about how the system is made to bite you in the ass.
It is worth repeating that the credit reporting and scoring system was never made to help you. It was designed to maximize profits for the lenders. The credit bureaus and collectors are players in this “game”, albeit from the sidelines.
However please allow me to make a slight modification to my previous view that the system wants to keep you in “sub-prime” status. Actually, what they really want is to keep you at a level where they can milk as much out of you as possible with as little risk of you defaulting as possible. This is somewhere in mid-range credit scores. Not surprisingly, this is where the majority of people find themselves.
Now, here are a few more facts about how the credit reporting system is designed to take your lunch:
1. Allowing collectors to place hard enquiries on your credit file: For anyone to place a hard enquiry on your credit report, they need what is known as “permissible purpose”. You give someone permissible purpose when you apply for a loan or other form of credit or service, such as credit card or cell phone. A hard enquiry takes out points from your score. Debt collectors don’t have the right to place a hard enquiry on your report as you have not applied for credit from them. But they do it anyway.
2. Refusing to reinvestigate disputes: In this day of E-Oscar (a form of electronic verification) disputes get categorized and slotted into categories. Your dispute could get slotted in a category quite different from the real reason for it. You will then most likely get a letter saying the account was “verified as yours” though this may not have been your grounds for dispute. If you send another dispute letter you often will get a refusal to reinvestigate on the grounds that the item was “previously verified”.
3. Re-inserting deleted accounts: Credit bureaus are required to notify you when a previously deleted account is about to be re-inserted. Yet deleted items find their way into credit files all the time. This is the reason you should keep checking your credit reports regularly if you have had items deleted (or updated in your favor).
4. Re-aging accounts: The bureaus have been known to allow collectors to change account numbers of old accounts that are past the seven year statute of limitations for reporting and then report these accounts as new. This is known as re-aging. It is illegal. But it still happens.
5. Disregarding supporting documents: The bureaus do not forward supporting documents nor do they convey the full (or exact) reason for disputes. One bureau even told me that they are “not required” to view documents, or other words to that effect. As result, many legitimate disputes get verified against the consumer. You can expect more of this in this day and age of the diabolical electronic verification system known as E-Oscar.…