Investigates: ‘Flawed’ credit reporting system creating high costs and low scores
Action New Jax found the credit reporting system is ‘flawed’ creating low scores and higher costs for consumers.
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Houses, cars and credit cards - Americans have never held more debt than they do right now. The collective debt is more than $17 trillion.
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How well you manage that debt, impacts your credit score.
Some people like Deborah King are crushing it with a 790 score. “At 790 you can buy anything you want,” said Action News Jax Ben Becker. “I know we did,” King replied pointing to her recently purchased a new car.
HOW YOUR CREDIT IS SCORED
But not all FICO credit scores are created equal or are accurate.
“The system is flawed,” said Evan Hendricks who is the author of “Credit Scores & Credit Reports: How the System Really Works, What You Can Do”.
Your records are compiled by the big three credit bureaus - Experian, Equifax and Transunion while FICO determines a score from those reports.
Credit scores range from 300 to 850 and are broken down into five categories from poor to exceptional.
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A “good” score is between 670 and 739 while a “very good” score is between 740 and 799, but according to a 2021 investigation by Consumer Reports, aspects of the credit reporting system “appear to be fundamentally broken.”
34% of volunteers studied discovered at least one error on their credit reports.
29% found errors related to their personal information.
10% reported it was difficult or very difficult to access their credit reports.
Hendricks said your profile is not identical among the big three because their source data can be different, and perfection is not possible.
“The credit reporting system has records on 250 million Americans so there’s a lot of variety,” said Hendricks.
WAYS TO RAISE YOUR CREDIT SCORE
Hendricks said there are ways to protect yourself and raise your credit score like paying bills on time, keeping your credit utilization below 30% and limiting hard credit inquires.
There’s also hidden tricks that include:
1. Make two payments per month. Once when you get your bill and again closer to when your balance is reported to the credit agencies especially if you have made additional purchases. You can find out the date by calling your credit card company.
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2. Take on additional credit cards. While it’s a hard inquiry, your utilization numbers will go up and it gives you the opportunity to establish a strong payment history, which is the No. 1 influence on your credit.
“The credit scoring system wants to see you have available credit, but you don’t need to use it… kind of ironic,” said Hendricks.
CREDIT REPAIR SERVICES
If you go online there are no shortage of credit repair services but be careful.
Action News Jax first reported in May 2022 about The Credit Game. A Federal Trade Commission complaint accused Mike and Valerie Rando of Jacksonville of scamming hundreds of customers while operating an unlawful credit repair business.
The FTC reported through YouTube videos, websites, telemarketing and email, the couple claimed they would quickly and legally improve your credit score by getting rid of negative items bringing it down. The FTC said those claims are false.
In December 2022, the government and the Randoes reached a settlement whereas the couple agreed to pay an $18.9 million judgement and accepted a lifetime ban from operating any credit repair services.
“Things to watch out for [with credit repair services] if they promise we can remove all negative items or we can improve score by 90 points in 90 days, it’s unrealistic nobody can do that,” said Hendricks.
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As for Deborah King, she said “just keep on top of your bills and don’t go over your whatever you’re spending and to stay within your means.”
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Experts say the good news is you don’t actually need an 850-credit score to be seen by lenders and banks as having perfect credit. In fact, a score of 760 and above is often enough to qualify you for the lowest rates and best lending terms.
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