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Credit Inquiries

The Fair Credit Reporting Act (FCRA) specifies who can see your credit report. Businesses must have a “permissible purpose,” as defined in the FCRA, to obtain your credit report. Otherwise, only you and those you give written permission to can access your credit report.

Section 604 of the FCRA (Permissible Purposes) sets forth the purposes that permit a business or other person to gain access to your credit report.  Credit Bureaus can report only to a person who has a permissible purpose to receive that credit report. The permissible purposes include:

  • A court order or Federal grand jury subpoena
  • In accordance with written instructions from a consumer to whom the file relates
  • As part of a credit transaction involving the consume
  • To review and collect the consumer’s account
  • For employment purposes (only with the consumer’s written consent)
  • Underwriting of insurance for personal, family or household purposes
  • Government agencies for determination of consumer’s eligibility for a license or other governmental benefit such as a security clearance or gun license
  • In connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation
  • In connection with a legitimate business need relating to a business transaction initiated by the consumer
  • To review an account to determine whether the consumer continues to meet the terms of the account

Credit inquiries fall into one of two categories “hard inquiries” or “soft inquiries”.   Only hard inquiries have an effect on your credit score.

Soft inquiries are all credit inquiries in which your credit is NOT being reviewed by a prospective lender. These include inquiries by you checking your own credit, credit checks made by businesses to offer you goods or services (such as promotional offers by credit card companies), or inquiries made by businesses with whom you already have a credit account.

Hard inquiries are inquiries by a potential lender who is reviewing your credit because you’ve applied for credit with them. These include credit checks when you’ve applied for an auto loan, mortgage or credit card. Each of these types of credit checks count as a single inquiry.

When you are ready to make a major purchase using credit, the creditor may rate shop or “shotgun” your credit application to numerous financial institutions to get the best deal – or to even get approved.   These inquiries may be considered by the credit bureaus as one inquiry for calculation of your credit score if they fall within a certain time period.  This time period can vary from 15 to 45 days depending on the bureau or reporting agency.  The individual inquiries will still show up on your credit report.

 

Inquiries may or may not affect your score.  Again, it depends on the bureau or reporting agency.   If you initiate the request, (looking to make a purchase with credit) then these will most likely affect your score.

 Inquiries are all specifically coded by the credit bureaus to reflect the industry from which they came. That means if you apply for a mortgage, auto loan, credit card, personal loan, student loan, or any other type of loan the inquiry will likely clearly indicate the specific type of credit you’ve applied for. This is important because the type of inquiry plays a key role in how it’s evaluated.

 Mortgage, auto and student loan inquiries are treated differently from all other inquiry types.    These are the types of loan where you can shop around for the best interest rates and terms. As such, searching for any one of these loans can result in many lenders pulling your credit reports and scores. As such, your credit reports end up with multiple credit inquiries in a very short period of time because of your rate shopping activities.

THE MOST EFFECTIVE WAY TO ADDRESS YOUR ISSUES WITH CREDIT BUREAUS

THE MOST EFFECTIVE WAY TO ADDRESS YOUR ISSUES WITH CREDIT BUREAUS IS TO SEND LETTERS BY CERTIFIED MAIL.  

With certified mail you have clear documentation of when documents arrive at the credit bureaus and creditors.

It is NOT recommended that you use the automated tools provided by the credit bureaus or other credit reporting companies or used on numerous other credit sites such as Credit Karma ™.   These tools, known as e-OSCAR, make documenting your case more difficult.  If you need to escalate your issue to the Consumer Financial Protection Bureau (CFPB) or take legal steps against a creditor or credit bureau,  you will need to have full documentation of your communications with credit bureaus and creditors.

After you have sent a letter to a Credit Bureau addressing your issue(s) you will receive a response in one of the following ways:

  • A response stating changes that were made to your credit report.
  • A response stating that the data in your file has been validated and there is no change required.
  • A response stating your dispute has been forwarded to the appropriate creditor.
  • A response stating an investigation into your dispute has begun.
  • A response stating that the dispute is frivolous or irrelevant.
  • A response stating that the credit bureau believes you are manipulating the system or that someone else is trying to communicate with the credit bureau on your behalf.
  • No Response at all.

Credit Bureaus have 30 days upon receipt of dispute letter to respond to your letter in accordance with the Fair Credit Reporting Act!  This is why the certified mail receipt is important!

If you address multiple responses in one letter, then you will receive a response back to all issues in one letter.   The interpretation of these responses is:

  • A response stating changes that were made to your credit report. The credit bureau acted on your request for changes and implemented these changes.
  • A response stating that the data in your file has been validated and there is no change required. The credit bureau claims they investigated and their records are correct.
  • A response stating your dispute has been forwarded to the appropriate creditor. Additional time will be needed for a response (allow 2 to 3 weeks).
  • A response stating an investigation into your dispute has begun. The credit bureau is trying to buy more time.   Do not respond and watch for a response from the credit bureau.
  • A response stating that the dispute is frivolous or irrelevant. The credit bureau did nothing.
  • A response stating that the credit bureau believes you are manipulating the system or that someone else is trying to communicate with the credit bureau on your behalf. The credit bureau did nothing.
  • No Response at all. The credit bureau did nothing AND is in violation of the Fair Credit Reporting Act.

Credit Score Explained

A credit score is a number generated by a proprietary mathematical algorithm or formula the credit bureaus use to calculate or predict your future credit worthiness from your previous credit behavior.  Therefore, a credit scores is simply a “snap shot” of your risk at the time the report is pulled from a credit bureau. Credit scores range from 300-850. The higher your score is, the more likely you are to be approved for financing or approved for any of the other uses for which a credit score is now used. Conversely, the lower your score is, the less likely you are to get financing, and if possibly approved,  and you’ll pay a higher interest rate. Having a high credit score is important to reduce your cost of borrowing and ensure you are qualified for certain jobs.

Credit scores will vary depending on the use or type of loan you are applying for.   For instance, a score from a credit pull for a mortgage application may differ slightly from a credit score from a credit pull for a car loan.   This difference in scores is due to evaluation of risk factors on your credit report each type of loan uses.    Pulling your own credit report from a commercially available service will also differ slightly from reports pulled for credit applications for similar reasons.

Many people believe that their credit score is a fixed number that seldom changes.    In reality, your score can change multiple times a day depending on your revolving credit balances, payments made, or inquiries.       When you shop for a major item that requires the use of credit, there may be multiple inquiries on your report even though you may have only shopped in one place.  This is because the person trying to arrange the financing is exploring multiple options to get you qualified for the purchase.

Understanding the mechanism of how a score is generated and utilized is an important step in your credit education.

Credit Repair Dallas – Charge Offs

A charge off is an action taken by a creditor that must occur when debts go unpaid by the individual responsible for the debt.   For installment type loans, such as car loans, this must occur after 120 days of no payments and for revolving debt, such as credit cards, this must occur after 180 days of no payments.   When it comes to student loans, there are different criteria.   Private student loans, which are not subsidized by the federal government, will be charged off for nonpayment in a similar manner as unsecured debt.

When creditors charge off a debt, they are required to issue the debtor an IRS form 1099-C for any debt over $600.   The IRS is then expecting the debtor to report this on their tax return.  Creditors may then sell charge off debts to collection companies.   The collection companies are required to perform debt collection in accordance with the federal Fair Debt Collection Practices Act (FDCPA) and the individual state collection laws.

Each state has defined periods for which creditors may sue a debtor to recover a debt.    Debtors that are sued should immediately contact an attorney to respond to the suit.   Failure to respond will typically result in a default judgement for the creditor and this judgment is then also reported on the debtor’s credit report.

Charge offs will remain on the debtor’s credit report for a period of seven years from the date of last activity.   Your annual credit report will identify the date the charge off will be removed and the current holder of the debt.

What You Should Know About Credit Repair Companies

Like almost any industry dealing with the general public, there are good companies that honestly deal with the consumer and there are companies that operate unethically and sometimes illegally.     Finding a good and honest credit repair companies can be challenge with all the advertising and claims made.

In Texas, the place to start your search for an honest and affordable credit repair company is by searching the Texas Secretary of State database at https://direct.sos.state.tx.us/cso/csosearch.asp .   All credit repair companies operating in Texas, or accepting clients from Texas, are required to register with the Texas Secretary of State.   There are many thousands of credit repair companies operating in Texas – but only less than 200 of credit repair companies are actually registered with the Secretary of State.

After you down select to a short list of credit repair companies that are operating legally in Texas, you will want to review testimonies on the Better Business Bureau site.   BBB testimonies are verified by the BBB to ensure that they are generated by a legitimate email account.   The BBB also tracks performance of many credit repair companies and assigns a score to that company.

Finally, be sure to get a detailed quote from the credit repair company before signing any agreement.   This quote should identify the issues that will be addressed on your behalf, the number of months of service and the price per month.   You should stay away from a company that has automatic renewing monthly contracts as these simply stretch out the process of credit repair.

 

Your credit is used by creditors to understand the level of risk you are to them.   So the lower the risk level, the better financing terms you should expect.

Raise your credit score – Start by understanding what is impacting your credit report

To achieve what you want in life, such as purchase a home, buy a car, or land that great job may rely on your ability to raise your credit score.    A majority of consumers encounter some sort of financial challenge in their lives.   These challenges may include loss of job, divorce, illness or other difficulty.

At Covenant Credit Repair we understand these challenges because our owners and staff have personally encountered these same challenges.   As Franklin D. Roosevelt said “Smooth seas never made a skilled sailor”.     God never puts a challenge in your life that you have not been given the ability to overcome when you rely on Him!

If your credit score has been damaged by late pays, charge offs, bankruptcy or other issue, you have the ability to turn this situation around. Often times, collection companies aggressively pursue consumers and do not comply with state and federal regulations in reporting debts.   Other times the reported information is totally accurate and you need to determine a strategy for moving forward to resolve these issues.

The first step to raise your credit score is to understand the condition of your credit report, identify the negative issues affecting your report and then developing a game plan.    A detailed analysis of each trade line on your credit report is best approach for understanding your situation.   Credit report analysis can be intimidating for even the most educated people.   If you do not have the time or desire to develop the skill to understand your credit report, then you owe it to yourself to find a trusted partner that can provide you an honest assessment of your report.   Many credit repair companies provide a free review of your report which typically only consists of identifying if something is negative and adding it to a list of issues they want to “work on” on your behalf.   This is not an analysis.

A competent credit repair company, like Covenant Credit Repair, will take the time to dissect each derogatory item on your report to understand why it is there, what the correct reporting on your report should be and what, if any, action you might consider taking to resolve the issue.  Often times we find that consumers simply need to pay down the balance on their revolving credit accounts to see a significant score increase.    If you plan to make a major purchase or look for that new job, take the time to understand if your credit report is in the best condition it can be to help you move forward in life!

FICO Credit Scores vs FAKO Credit Scores

The first observation of the difference between either one of these scoring models is to state the value of either one. What we know is that FICO Scores are used in over 90% of lending decisions. While on the other hand FAKO Scores are most commonly used for “educational purposes” and not lending decisions.

The three major Credit Reporting Agencies (CRAs) Experian, Equifax and TransUnion have to pay Fair Isaac to license their proprietary FICO scoring algorithm. So the three CRAs banded together to create the Vantage credit score for their own use and specifically intended to save themselves money. However FICO was and still is the gold standard for lending/credit decisions.

What becomes even more interesting is that the CRAs also promote and use their own individual Brand of scores as well. TransUnion has the Trans Risk Score with a score range of 300 – 850. Experian developed and uses the Experian Plus Score that ranges from 330 – 830 and then there is The Equifax Credit Score that ranges from 280 – 850according to the Consumer Financial Protection Bureau (CFPB).

If the Vantage score is an example of the differences between what values are used to develop these differing scores then we can assume that the individual Brands of scores developed by each of the three Bureaus will then be organized in a same or similar way. Which makes the following comparison of the Vantage to the FICO scoring models and the values used an important point to make here.

The original VantageScore ranges from 501 to 990 and also gives consumers a letter grade from A to F. The newest model, Vantage Score 3.0, uses a scoring range from 300 to 850, just like a FICO score uses.

Vantage Score 3.0 criteria, ranks FICO Score criteria, ranks 

          Payment history (32%), Payment history (35%) 

          Credit utilization (23%), Amounts owed (30%) 

           Credit balances (15%), Length of credit history (15%) 

           Depth of credit (13%), New credit (10%) 

           Recent credit (10%), Types of credit in use (10%) 

           Available credit (7%) 

What’s interesting here is that the original Vantage scoring range was much higher than a FICO scoring range. What this did in practical terms was to elevate the consumer’s belief in what their own now inflated credit worthiness was. As a result the CFPB began looking into this impact on the consumer and then the Vantage model simply changed in order to better mirror a FICO scoring range.

In the end it’s clear that none of the CRAs are making any effort to inform the public that the use of the wording “Your credit score” would tend to indicate that the consumer is receiving the one and only scoring model most familiar to them, meaning a FICO Score. Leading them to believe that they are receiving a “valuable” score when in fact they’re receiving anything but that “for free”. Instead they receive a score that is significantly different from the FICO Scores that the CRAs are actually selling to lenders. From our position we believe that this is an intentional deception being perpetrated by the CRAs to pray on the average consumer’s simple lack of knowledge and understanding surrounding these significant differences. All in the interest of and designed to keep more profits in the hands of the CRAs.

For more info regarding credit scores and education about the real truth of CRA’s and scores, visit https://www.covenantcreditrepair.com/

 

Chad Melton
Account Executive
Covenant Credit Repair
chad@covenantcreditrepair.com
980-201-1131

Chad has over 20 years of experience in the 
Mortgage, Real Estate and Credit Repair industries

 

What Is Credit Repair Service

Dealing with credit report errors can be a difficult task for the average consumer.   We have clients at Covenant Credit Repair with a wide range of education and careers.   Since there are nearly sixty unique types of information on your credit report that can have a negative effect on your credit, it takes someone with training and familiarity with credit reports to fully understand these issues.

Consumers want to know what is credit repair service.    Credit repair service is the process of evaluating a credit report to determine if there is inaccurate, untimely or unverifiable information present.  After this analysis is performed, the credit repair company then addresses the identified issues with the credit bureaus and creditors.    The credit bureaus have an obligation to investigate the items for the consumer and correct or remove the inaccurate information.

If the bureaus refuse to remove the inaccurate information they are in violation of the Fair Credit Reporting Act (FCRA).   When these violations occur, the consumer is potentially harmed by the bureaus and may be entitled to seek compensation for damages.   It is critical that accurate and timely documentation be available should it be necessary to pursue violations of the FCRA with the bureaus.   A good credit repair company will understand the process and collect the necessary documentation.

The what is credit repair service question is also often asked by people that see that credit repair can be done on their own and wonder why a credit repair company is needed.   It is true that consumers can do credit repair on their and many do.   As we often tell our clients and referral sources, credit repair is a service industry in a similar manner as window cleaners, lawn care and any of the many other service companies that exist.   If the consumer has the time and desire to do credit repair then they can certainly do so.   Credit Repair companies exist to help those that simply do not have the time or desire to perform the task themselves.

This article is for information purposes only and is not intended to be legal or financial advice.

Inaccurate Personal Information On Your Credit Report

Many of our clients assume that when they find inaccurate personal information on their credit report that this indicates identity theft.   Identity theft is certainly rampant and there is always reason for concern about this problem.  This update discusses reporting errors that originate from the creditor or the credit bureau itself. So how can this happen?

Errors in your report occur when you complete a credit application incorrectly.  Errors can also occur when the person entering your information from the application makes a entry mistake.   When these types of errors are encountered the erroneous information is ultimately published on your report.    We have encountered multiple clients that have experienced poor credit as a direct result of identity errors like this.

To resolve these types of issues, you will need to provide the credit bureaus with proof of social security number, a form of government issued identification such as a driver’s license, and proof of your current address such as utility bill or insurance card.   Explain to the bureau the inaccurate information and request they remove the item(s).

Another mechanism for inaccurate personal information on your credit report can be the result of how the bureaus collect information about you.   While the bureaus keep their collection and reporting algorithms secret, there are indicators that point to the bureau’s use of partial information as a means of collecting data.   This could result in similar names to yours being reported on your credit report (such as Williams versus William), erroneous addresses or erroneous social security numbers.

Inaccurate personal information on a credit report can be frustrating at best.   These types of errors can lead to harmful inaccuracies on your report that may result in credit denial.

How Do I Repair Credit For Free

Credit Repair is a service industry, and like any other service industry, some people have the time and perseverance to do the work themselves, and others would simply prefer to pay someone to do the job. And like any other service industry, some credit repair companies do a much better job than others. To repair your credit report for free, you will need to have a system in place of keeping track of your documentation which is critical. We will give you an overview of the reports you need and how to set up a tracking system in this edition.

To start with, you will want to obtain copies of your annual reports from all three bureaus at www.annualcreditreport.com. You have the right to obtain a free copy of your report from each bureau once a year.

Second, you should get a copy of a tri-merge credit report. This is a credit report that shows each trade line on your report across all three bureaus. A tri-merge report is a good tool to use since it allows you to see the issues of each trade line across all three bureaus side-by-side. A tri-merge report service that provides monthly score updates is preferred. There are several services available from companies like Privacy Guard and Wells Fargo and many others.

To keep track of the information as your repair your own credit, you will want to have a summary table to enter the information about each derogatory trade line. We recommend you use a spread sheet system such as Microsoft excel or other similar tool. Enter column headings for account name, account number, type of issue (charge off, collection, etc), outstanding balance, date the item should be removed from the report, and postal service tracking number (you will want to mail your letters to the bureaus by certified mail).

Start by going through the tri-merge report line-by-line looking at each trade line to ensure that the information is accurate. When you come across trade lines that are accurate, but are negatively affecting your credit score (such as collection, charge offs, bankruptcy, etc) you will want to document those items as well.

For each item you listed on your summary spread sheet, you will then need to look at the annual credit report determine the date that the negative item will be removed from your credit report. Enter this information on your summary spread sheet as well.

We will start getting into the specific items that can be addressed on your credit report in the next edition.