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7 tips to credit sanity. Maybe.
It was only a short time ago when I discovered that we had a nearly perfect credit score. It was combined around 810. 850 is as high as it goes. We have gone to great lengths to be perfect in our payments and be responsible in our financial obligations. Truthfully, we've had a few close calls. A nearly 30 day late here or there. Forgotten payments with late fees and the like. But, fortunately, we've always been able to keep our credit tidy. Until recently. I've spent the last 8 months trying to recover from credit problems, most of which were not of our making or out of our control. In the last couple of months, I've learned more than I ever wanted to know about credit. And in the end, I've discovered that it's similar to a savvy poker game, where the house has the ultimate advantage. In this case, the house is whatever lender you need at the moment. Here are the high points of what I have learned. And I'll share an article at the end that tells you a little more about how your score is weighted.
#1. If you EVER plan on taking out a loan, especially a mortgage, be VERY CAREFUL about making disputes. If you do not want a dispute on your credit history, make sure you make it clear that YOU DO NOT WANT A DISPUTE ON YOUR REPORT. I almost literally had to scream this at Equifax the other day because I had spent 3 days trying to get 2 disputes off my report so we could get a home loan. One of them, we have no idea where it came from. It was with Home Depot who we have a perfect payment record with. I learned from reading online, that a dispute can be recorded simply by calling in and disagreeing with for example, a payment recorded, the amount, a product return; anything you could possibly complain about COULD be recorded by the debtor as a dispute. Disputes can have a positive or negative effect when taken off. Because until they are resolved, that item is not calculated in their score.
#2. If you are working with anyone to fix problems on your credit and raise your score, check your score YOURSELF! Because every time your credit has a "hard" check, it dings your score. I had no idea every time I had a previous lender check it, that it would be on my report for TWO YEARS, whether I got a loan or not. So, shopping for a car? Make sure you've chosen ONE LENDER and find the car before you are ready to do the loan.
#3. If you move, BEFORE YOU MOVE, make sure anyone you owe money too, knows exactly where you are going. In the middle of a crazy life and a crazier moving circumstances last fall, we changed address and phone number. The next thing we knew we had a collection for a medical bill. Sigh. That one was painful. But even so, we were able to pay it off quickly, work around the collector, and get it removed.
#4. Equifax is a horse's patoot. Experian is AWESOME. Transunion is somewhere in between. Home Depot worked really well with fixing the non-dispute. JC Penney, GREATEST CREDITOR OUT THERE. They report to the agencies EVERY SINGLE DAY. The importance of that, is that if you pay off a balance, or close the account, or do anything, you are not held hostage by the standard 30 day blah, blah, blah, your living changing score is at the mercy of time and everyone who really doesn't care much that you are being held hostage by their policies. I propose an American Credit Reporting Law that requires all creditors to report at least WEEKLY. That way you don't have to wait so long for what you need. Everything is digital these days. Why is credit reporting in the stone age?
#5. Length of time of credit. I've closed a lot of accounts over the years because I don't want unnecessary credit open that others might want to try to use. Apparently this is a bad thing. They want to see a long history of open credit. Find one or two you like and charge OCCASIONALLY and keep a SMALL balance.
#6. Large balances kill you. They almost wipe out your good history. If you have more than one account with more than a 50% balance of your available credit, BAD NEWS. Lowers your score. Even if you are making home repairs for a few months and pay it off in full after a few months. For those months it's higher, you get stinky scores.
#7. DON'T EVER BE LATE. Kiss of death. Enough said. We had a 2 month 30 day late showing on a payment that was an incorrect reporting. Because I was dealing directly with the debtor, human error (bad memory and follow through on their part), it took EIGHT MONTHS to get it perfectly corrected and in the end, one of the credit bureaus was still reporting it wrong and I had to start all over again. That same company though saved the day when the credit bureau got it wrong.
Final thought. Long ago when lending wasn't so brutal, you could write a little note of explanation or have the debtor send a letter verifying facts. I know this because we did it. Not now. The credit score is the law, and no explanation will change it. EVER. Until it's changed. Until you put in the blood, sweat, tears, and time to get it changed. It is completely skewed to the benefit of the lenders. That's all. The end.
Here's the article about scoring and how it works.
Credit Score Nirvana
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