Upcoming Changes to the Credit Industry: Part Three

When was the last time you checked your credit score?

  • This year?
  • This Month?
  • This Week?

Your credit score is more accessible now than ever before. There's a good chance your local bank or credit card company provides a free version of your credit score. Have you checked it recently? What's it look like?

We've discussed the differences in scoring models in previous posts, but as a quick recap, that "Free Score" that you got from your local bank may not be the same score that same bank is using to make decisions on your next loan. In addition, that "Free Score" that you ultimately paid for from Equifax or TransUnion (reference their recent $23.1M lawsuit) may not be close to the score you need in order to qualify for your upcoming home loan.

The point is, regardless of the ease or accessibility to your credit score, your setting yourself up for failure by basing your financial success on an arbitrary number. One of the most important things that I've learned in my tenure with Premier Credit Consulting, is that content is king, and credit scores are unreliable.

There's a relatively high likelihood that you are going to brush up against some type of life event that will leave a scar on your credit history. Divorce. Job Loss. Medical Emergencies. These are only a few examples of life events that wreak havoc on a credit report, and ultimately leave consumers scratching their heads in bewilderment on what the next step towards improving their credit looks like.

How Do I Fix My Credit?

In many cases, consumers are led to believe that time heals all wounds. There is truth that consumers are protected through both Federal and State Statutes, but as John Oliver recently discovered, there's limited accountability and oversight holding creditors to these rules. (Here's the link: Debt Buyers: Last Week Tonight)

Holding out and hoping your derogatory history won't keep up with you probably won't help you reach your credit goal anytime soon.

Instead, we advocate for consumers to get active in trying to resolve their credit challenges. The traditional credit repair process is highly focused on the process of disputing. As a consumer, you have the right to a complete and accurate credit profile, and the dispute process is the tool that allows you to validate or investigate any inaccurate, unverifiable, misleading, or outdated information.

But... this isn't your only option. The dispute process has been abused throughout the years, and frivolous or "blanket" disputing clogs the system. Remember, disputing inaccurate or unverifiable information is your right as a consumer, but it is not a magical wand that makes valid derogatory information disappear forever.

Consumer Advocacy and Education: The New Frontier of Credit Restoration

As many people will begrudgingly admit, not all credit challenges are mistakes, and you can't treat them as such. This doesn't mean that you can't be vigilant in resolving credit challenges. Most consumers face the unfortunate challenge of navigating a simple problem:

Why should I pay a collection if it is going to negatively impact my credit score?

For a lot of consumers, the challenge isn't why they should pay the debt, but how. Just this week, I had a client who received multiple threatening emails from an attorney for a software subscription fee that had gone 90 past due while he was closing his business. The attorney demanded $8500 and threatened to sue within 30 days. The client owed less than $1000.

Consumers who've experienced some type of life event that has disrupted their financial livelihood are faced with a flurry of threats, mistreatment, and sometimes even fraudulent collection efforts. One of the biggest needs for consumers who face challenges today is not simply found in the process of disputing, but rather in a complete service that protects the consumer's rights, while helping them navigate a reasonable solution to their legitimate credit challenges.

As clients are preparing for big purchases that will rely on credit, don't be fooled by the hundreds of credit scoring models found online. Instead, focus on your "Credit Health" as Barrett Burns, CEO of VantageScore, references in his recent interview on the status of consumer scoring models. Work to ensure that the information on your credit profile is accurate, and get educated on how to find reasonable solutions to your outstanding debt obligations.

Alex Grimnes