Credit Score: Cottage Industry
I’m not sure which is more true. Necessity is the inventor of business practices, or business practices invent necessity. However you look at it, a recent change at Experian has given rise to a cottage industry.
Experian has changed how they calculate credit scores. They are introducing rental payments as a part of their formula for credit score evaluation.
It is this business practice change that has attracted the profiteering vultures. I say that tongue in cheek. There is nothing wrong with making an honest living.
The business opportunity is simply a new spin on offering bill paying services. Companies are offering two services. And of course there is a nominal cost involved.
Cottage Industry Services
- Pay Your Rent – In this situation a company offers to make timely rent payments. They will do a direct withdrawal from your bank account and pay your landlord. This assures you of timely payments as well as proof that you have made your payment on time.
- Payment Reporting – In this scenario a company will send notice to FICO that you have made your payment on time. FICO is a financial information gathering service which disseminates your credit information to the three major reporting agencies: Experian, Equifax, and TransUnion. This will assure that your credit score remains in good standing.
More than ever, consumers are becoming more informed about the importance of credit scores. For those that don’t know, The Fair Credit Reporting Act was established in 1970. This law regulates the collection, dissemination, and use of consumer information. More recently, The Fair and Accurate Credit Transactions Act of 2003 made it law that all American citizens could receive a free copy of their Credit Report once every 12 months.
The Fair Credit Reporting Act: Knowledge Is Power
The Fair Credit Reporting Act regulates what personal credit information can be collected, stored and distributed about an individual. When you apply for a credit card, car loan or mortgage, the lender will review your credit report and score to make a determination about your account. If the information included in your report is incorrect then you could be declined – through no fault of your own. The credit reporting agencies, creditors and debt collectors are required to furnish correct information about your accounts, and to remove items that are not correct or verifiable.
The U.S. has three main credit reporting agencies: TransUnion, Equifax and Experian. If you have ever purchased a home, had a car loan, credit card or other loan, then you will have information on file with each of these agencies. As part of the FCRA, you are entitled to a free copy of your report from each agency once a year; you are also entitled to a free copy if you have applied for credit and been turned down. Checking your credit report at least every few months is the ideal way to make sure that both the reporting agencies and your creditors are following the FCRA; you’ll discover mistakes and violations quickly if you are familiar with your report’s contents.
Credit reports contain information that can impact you positively or negatively; the positives should generally be left alone. Negative points can include late or missed payments, judgments, defaulted accounts and accounts placed by debt collectors. Under the FCRA, you have the right to ask for validation of any debt, and to dispute items that are not correct.
When to Consider Hiring a Credit Attorney
Credit attorneys are legal professionals who deal specifically with consumer protection laws, like the Fair Debt Collection Practices Act. They are well-versed in the areas governing collectors and can help to build a case against them if you have been treated illegally.
Before hiring one, it is wise to ensure that you have a strong case. Most of them will offer you a free initial consultation where they will look at your case and you will hear what services they have to offer. This consultation will help them to determine if you have been the victim of illegal practices.
If you should choose to sue, and you win, the judge can require the collector to pay damages as well as legal fees. This will not erase your debt, but could be used towards relieving your financial obligations.
On the reverse side, if you are being sued, it is always a good idea to hire legal representation. They will most likely have a team of professionals at your disposal and you will need their knowledge and expertise to properly defend yourself.
They can also assist with removing negative items on your reports; however, there is nothing they can do in these areas that you can not do for yourself. Hiring one can save you time and hassle, but you can negotiate debt with your lender or third-party agency and submit disputes repeatedly to the bureaus at no charge. These lawyers also offer financial education courses to prevent clients from finding themselves in these types of situations in the future.
Understanding All 3 of Your Scores
The world of credit can be a very scary place to navigate through. We all know how hard it is to build good, substantial credit, but it can be very easy to make one wrong step and hurt your credit. By hurting your credit you ruin your chances of achieving things that you want. Hopefully by understanding the three agencies that monitor your credit and receive your credit alerts, you will be able to better understand how to protect your credit from further trouble.
Equifax was founded in 1899 and is the oldest of the three agencies on the list. Equifax is centralized in Atlanta, Georgia and operates in over 14 countries worldwide. Originally named the Retail Credit Company, Equifax became the largest credit agency in the US and Canada through the 1960s. They came under fire shortly after for selling their information holdings. All of their troubles led to Congress enacting the Fair Credit Reporting Act. This change also led to their name change in 1975.
Transunion is third on the list in terms of size between the credit agencies. TransUnion was created in 1968 by Union Tank Car Company as their holding company. In 1969 the credit agency purchased the Credit Bureau of Cook County. In 1981 Jay Pritzker and Robert Pritzker acquired the company. After Jay died the family sold the company and their majority stake of TransUnion in 2010 to Madison Dearborn Partners. Currently the company owns 51% while the Pitzkers maintain 49% ownership. Currently, the agency is located in Chicago, Illinois and operates in 25 countries.