Contesting credit blemishes

Why phone calls alone won't fix errors

By Tom Kelly, Wednesday, March 18, 2009.

Flickr photo by <a href="http://www.flickr.com/photos/thetruthabout/2720239113/" target=blank>TheTruthAbout...</a>.

Credit is king. Don't even think about that terrific interest rate -- let alone that dreamy Craftsman home or upscale downtown condo -- if your FICO is out of whack.

It seems that even veteran loan officers are being forced to ask you for the minutest of details before submitting your loan package to underwriting. "I only need two more pieces of information" can easily be a daily request with even the most complete files still drawing intense lender scrutiny.

A friend of mine who happens to be the most thorough loan representative I know says his biggest challenge of the past six months is explaining to existing customers that they "can't even qualify for a mortgage under 5 percent."

Why did things get so tight? A decade of cheap money and incredibly flexible loan programs offered by many lenders sparked overbuilding by developers, a flip-and-run mindset for speculators and unrealistic expectations for first-time homebuyers blinded by the low payments of a short-term loan.

John Tuccillo, national housing analyst and former chief economist for the National Association of Realtors, said that lenders became so lax between 2003 and 2006 that "as long as you could breathe on a mirror, you could get a loan."

Last week, we examined the case of the Seattle-area woman who was dinged $2,364 at closing under the secondary market's new "risked-based" rules when her "middle" credit score dipped to 706 due to a late company credit-card payment. Most lenders take the middle of three credit scores when considering mortgage financing.

The three credit-reporting agencies (Experian, 888-397-3742, experian.com; Equifax, 800-685-1111, equifax.com; and TransUnion, 312-408-1077, transunion.com) evaluate a consumer's credit and provide a score that reflects that status. The scores typically range from a high of 850 to a low of 300 and are generated by a complex formula crafted by Fair Isaac Corp. (FICO).

What happens if your score is influenced by false claims? Some of us have common names, and errors do occur. ...CONTINUED

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Submitted by Catherine Read on March 18, 2009 - 4:35am.

If ever there was a time for a total uprising over this archaic, flawed, inaccurate and hidden process of credit scores, it's now. At what point did we all agree that there is no alternative and we are stuck with a system and data that provides no real value either to the consumer or to lenders? Just how good are these random credit scores at predicting a borrower's behavior? When the input is flawed, the output is useless. Given the current economic meltdown, I don't see that FICO scores were any better than a psychic reading tea leaves when predicting credit worthiness, but the mortgage and credit industries go along because "that's the way it's always been done."

I can't believe with the highly sophisticated technology available today and the detailed real-time information about what we do with our money - when, where and how - that some smart company has not come up with a better alternative to this broken system.

Where are the great minds that have innovated the technological revolution of the past decade? How come no one has seen the opportunity to overhaul this mess of a system? And lastly - if not now, WHEN?

Catherine S. Read
Creative Read, Inc.