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Credit Scores Vary on Different Credit Reports - Consumers
Beware!
When you look at
your credit score and your credit report do you assume it is
correct? Do you also think that your credit score is the same with
each of the three major credit reporting agencies? Think again,”
said Paul Richard, a registered financial consultant (RFC) and
executive director of the nonprofit Institute of Consumer
Financial Education (ICFE), a San Diego based nonprofit group
helping people correct credit file mistakes and also improve their
spending habits, increase their savings and use credit more
wisely.
According to a joint report issued by the Consumer
Federation of America (CFA) and the National Credit
Reporting Association (NCRA); “Millions of Americans are
put in jeopardy by inaccurate credit scores and they may
have to pay more - or worse, be denied for credit,
utilities or insurance because of inaccurate credit
scores.”
“Research for the study, conducted during the summer of
2002, analyzed the credit scores of more than 500,000
consumers, and extensively reviewed the files of more than
1,700 individuals, maintained by the three major credit
repositories - Equifax, Experian, and Trans Union. Nearly
200 million Americans have credit files. The analysis of
the scores in 502,623 merged credit files reveals that 29
percent of these consumers had scores with a range of at
least 50 points, while four percent of the consumers had
score ranges of at least 100 points. The average range of
the three scores was 41 points, and the median range was
35 points. Credit scores range from approximately 400 to
800,” the joint CFA-NCRA report said.
“The analysis of credit files for consistencies and
inconsistencies revealed reasons for these differences in
scores. Common errors of omission were the failure to
report a negative event - (a delinquency or charge off) -
or a positive event - (payments on an account). 78 percent
of files were missing a revolving account in good standing
while one-third (33 percent) of files were missing a
mortgage account that had never been late. More serious
errors of commission appeared in a significant portion of
files. In 43 percent of the files, reports on the same
accounts conflicted in regard to how often consumers had
been late by 30 days. In 29 percent of the files, there
was conflicting information about how many times the
consumer had been 60 days late. And in 24 percent of the
files, conflicts existed about 90-day delinquencies.
Reported delinquencies have a large effect on credit
scores,” the report also revealed.
"While the sample of 51 is too small to generalize
reliably to all credit files, the frequency of errors in
these files strongly suggests that errors of omission and
commission exist in the credit files of millions of
consumers," said Terry W. Clemans, NCRA Executive
Director.
Consumers, and especially first-time home buyers, shopping
for a mortgage may have the greatest risk, according to
the study, because a score of 620 is necessary to qualify
for a prime loan at conventional rates. Consumers with
lowers scores will be charged more or denied.
Falling below the 620 cutoff point can impose significant
costs on mortgage borrowers. Over the life of a 30-year,
$150,000 mortgage, for example, a borrower incorrectly
charged a sub-prime rate of 9.84 percent instead of a
prime rate of 6.56 percent would pay $317,517 in interest
instead of only $193,450 in interest - a difference of
$124,067 in interest payments, according to the study’s
conclusions.
“People can reduce the negative affects of mistakes in
their credit files and the variance of credit scores by
checking their credit reports at least once a year. Active
credit seekers and users should probably check their
reports every six months,” says the ICFE, which makes free
‘Credit File Request Forms’ available on its Web site. “If
you are denied credit or told you may be a bad credit
risk, ask for more details, so you will know what to look
for when you check your reports. If you are denied credit,
you are entitled to a free copy of your credit report,”
the ICFE said.
If you discover errors of commission or omission on your
credit files and need help understanding the credit file
correction process and your consumer credit rights, the
ICFE's recently updated and best selling "Do-It-yourself
Credit File Correction Guide," (available in English and
Spanish) is still only $10 plus postage.
For free “Credit File Request Forms” and more information
on checking your credit files or correcting mistakes with
the ICFE’s popular “Do-It-Yourself Credit File Correction
Guide, please visit : www.icfe.info. OR send $1 and a
self-addressed, double stamped envelope to: ICFE Resource
Center PO Box 34070 San Diego, CA 92163.
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For More Information contact:
Institute of Consumer Financial Education's Executive Director
Paul Richard at: (619) 239-1401
"Do-It-Yourself
Credit File Correction Guide", Copyright 2003.
All Rights Reserved by Paul Richard -
PO Box 34070. San Diego, CA. 92163-4070
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