Why do I have different credit scores?

February 17, 2015 21:42 by Consumer Ed

Dear Consumer Ed:

I recently applied for a $6,000 loan to pay off some credit cards.  When the bank pulled my credit score it was 550, but when I pulled it from TransUnion, it was over 200 points higher. How is that possible?  Which is correct?

Consumer Ed says: 

In the U.S., there are three national credit bureaus (Equifax, Experian and TransUnion), each of which has a credit score for you.  The credit score from each credit reporting organization is based only on the data in your credit report files at that agency.  As a result, your credit score may be different at each of the three main credit reporting agencies.

Often, scores are different because the consumer pulls a score from bureau A, while the bank pulls a score from bureau B.  In your situation, your lender likely didn’t pull your credit score from TransUnion.  The best way to find out where your bank got the score it came up with is to ask which agency’s report it used. 

Making matters even more complicated is the fact that there are actually dozens of different credit scores out there, which weigh various components differently. For example, an insurance company is looking for a consumer’s likelihood to file an insurance claim, whereas a credit card company is interested in how you will handle a higher credit limit. Furthermore, banks and other lenders may customize scores, so even Experian credit reports pulled by two different banks might be different.

When comparing scores across bureaus, keep in mind the following points:

  • The scores should be accessed at the same time.  Credit scores pulled at two distinct points in time will be different.  The longer it is between when two credit reports are generated, the greater the chance that the score will have changed.
  • All of your credit information may not be reported to all three credit bureaus. The information on your credit report is supplied by lenders, collection agencies and court records.  Don't assume that each credit bureau has the identical information pertaining to your credit history.
  • You may have applied for credit under different names (for example, Robert Jones versus Bob Jones) or a maiden name, which may cause fragmented or incomplete files at the credit reporting agencies.  While in most cases, the credit bureaus combine all files accurately under the same person, there are many instances where incomplete files or inaccurate data (Social Security numbers, addresses, etc.) cause one person's information to appear on someone else's credit report. Lenders report credit information to the credit bureaus at different times, often resulting in one agency having more up-to-date information than another.
  • The credit bureaus may record, display or store the same information in different ways.

You should check your credit reports and scores from all three credit bureaus regularly. If you notice that a score has lowered significantly, review your credit report.  If there are unexplainable discrepancies, there’s a possibility that you’ve been the victim of identity theft, or that your report contains inaccurate information.  If you do spot an inaccuracy, contact the applicable credit bureau.  Federal law gives you the right to challenge information on your credit reports.  If the creditor or credit bureau cannot verify the information in question, the credit bureau must remove it from your report.  For more information about how to correct inaccurate information on your credit report, visit www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports.

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Credit Repair

January 5, 2015 16:14 by Consumer Ed

Dear Consumer Ed: 

I’ve noticed a number of credit repair signs on the side of the road on my drive home.  Is there a new law that will help me repair my credit?

Consumer Ed says: 

With very few exceptions, Georgia law prohibits people or entities from claiming they can improve your credit history or credit report, or even to offer assistance in doing so.  First, you should understand that these companies cannot remove negative information from your report if it’s accurate. Further, they almost never deliver on the claims they make.  There is nothing they can do that you can’t do for yourself, at far less cost.

Before turning to a person or company that charges for such services, anyone having difficulties with their credit (due to high debt, unpaid debt, etc.) should speak with their creditor(s) directly to work out an arrangement that will allow them to pay back the debt, while easing the burden on their household.  Many creditors will negotiate lower interest rates, or agree to alternative payment plans, to assist you in making the required payments.

If you need more help, there are some organizations in Georgia that can help you gain control over your debt.  Since 2003, Georgia has permitted the practice of debt adjustment under a statute offering significant safeguards to debtors.  Debt adjustment includes budget counseling, debt management, and debt pooling to assist in managing your debt.  Under our current law, these organizations are highly regulated and must comply with strict rules set by the Legislature.  Fees for these services cannot exceed 7.5 percent of the monthly amount to be paid to the creditors, and the service provider must begin to distribute payments to creditors within 30 days.

Once your debt is under control, there are some simple things you can do to improve your credit score on your own.  First, check your credit reports for false entries or other items you may not know of. Occasionally, credit reports will contain reporting errors or even evidence of fraudulent activity.  Each credit reporting agency is required to offer you one free credit report each year.  Residents of Georgia, however, are also entitled to two free credit reports each year.  You can get a free report from each of the three credit reporting agencies by going to www.annualcreditreport.com.  If you discover any errors in the report, contact the agency to dispute the entry and have it removed.

Second, pay your bills on time.  You may have existing delinquencies on your report, but paying future bills on time is crucial to improving your score.

Third, minimize your debt on credit cards and other loans.  When determining your score, credit companies factor in how much credit you currently have in relation to the amount you are approved to borrow.  Keeping your balances low will improve this ratio and, ultimately, your score.

Fourth, don’t open up new lines of credit unless it’s absolutely necessary.  Each time a company checks your credit, or a credit card is opened in your name, it affects your credit score.  While having one or two credit cards with minimal balances could show a responsible use of credit, opening new cards and/or having numerous inquiries will actually lower your score.

The final factor in improving your credit score is simply time.  Delinquencies stay on your credit report for seven years and will lower your score until they’re removed.  It may seem like an impossible task to improve your credit when you’ve had some negative credit history, but those who offer a quick fix are not the solution.  These companies cannot deliver the fast results they promise.  If instead you take the simple steps outlined above, you’ll see your rating increase with time.

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Will a credit freeze prevent my credit card company from increasing my credit limit?

June 18, 2014 22:42 by Consumer Ed

Dear Consumer Ed:

If I place a credit freeze on my credit report, will it prevent a credit card company from increasing the credit limit on my credit card?

Consumer Ed says: 

A credit freeze will prevent most parties from accessing your credit report or credit score, but it probably wouldn’t prevent your current credit card company from increasing the credit limit on a card that you obtained prior to putting the credit freeze in place.

Credit freezes, also known as security freezes, are regulated on a state-by-state basis.  Georgia law allows consumers to place a security freeze on their credit reports by sending a request in writing to a credit reporting agency.  Generally, a credit freeze prevents credit reporting agencies from releasing your credit report or credit score unless you first remove the freeze by providing your password.  There are, however, exceptions to this general rule. 
One of these exceptions is for companies with which the consumer has a pre-existing account, contract, or debtor-creditor relationship for the limited purposes of reviewing the active account, or collecting the financial obligation owing for the account.  Your current credit card company is an example of this.  Therefore, your credit card company and its employees will be able to view your credit report for the purpose of reviewing your active account.  Your credit provider would likely make a determination of whether to increase your credit limit from the information it gathers from this review.  This exception also means that putting a credit freeze into place wouldn’t prevent your credit card company from increasing the credit limit on your card.

If you’d like to put a credit freeze into place, you should send a written request to all three of the major credit bureaus—Experian, Equifax, and TransUnion--because different credit issuers may use different credit bureaus.  Your request should include the following information:

  • Full name (and former name if applicable)
  • Current address and former address if it changed in the last 5 years
  • Social Security number
  • Date of birth
  • Photocopy of a driver’s license, state ID card or other government-issued identification
  • Proof of current residence, such as a copy of a phone or utility bill
  • If you are a victim of identity theft, include a copy of either the police report; investigative report, or complaint to a law enforcement agency concerning identity theft;
  • Georgia residents who are not victims of identity theft and are under age 65 should include payment by check, money order or credit card in the amount of $3.00.  Do not send cash in the mail.

You can contact the credit bureaus at the addresses below:

Experian Security Freeze
P.O. Box 9554
Allen, TX  75013

Equifax Security Freeze
P.O. Box 105788         
Atlanta, GA  30348  

TransUnion LLC
P.O. Box 2000
Chester, PA 19022-2000

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