Even People With Good Credit Are Penalized

The following is a guest post. See details at the end of the piece for author information.

By now everyone is aware of the Vantage credit scoring system developed by the three major credit bureaus: Equifax, Experian and TransUnion. The system grades consumers on a scale of A-F. I have done extensive research, but have yet to find out how lenders will use this score, or which lenders will choose to use the Vantage score as opposed to the FICO score. Will they be flexible in their analysis and look at the actual score or just look at the grade of A-F.? Unfortunately, no one knows for sure. For now, when applying for a loan, ask the lender which credit score they are using.

I recently refinanced my home and the lender used the FICO score. Well, I recently obtained a copy of my credit report and credit scores from the three major credit bureaus. I have not made any late payments in the past 10 years; therefore, I expected to get the highest credit score possible or at least very close to it. My scores were 760 and above. When I ordered my Experian report I wanted to order a FICO score, yet I only had the option of getting a Vantage score. My Experian Vantage score was 819. To my surprise, all of these ridiculous reasons were given to explain why my credit scores were not higher:

1. Your report does not show real estate loans – this was incorrect, I have had a mortgage for the past 7 years.

2. Your report shows that available credit across your open revolving accounts is too low – I only have one credit card with a limit of $3,000. They are telling me that if I had more credit cards my score would be higher.

3. Your report shows that the ratio of balances to credit limits across your open revolving accounts is too high – My balance on my credit card was approximately $900, which is only 30% of the credit limit - the suggested balance that consumers should have on their credit cards.

4. Your report shows that the time since your oldest revolving account is too short –wrong. I have one revolving account, my credit card which I have had for the past 10 years.

5. Your report shows one or more inquiries on file – I had one inquiry in June 2005. One inquiry in February 2006 and one in October 2006. Inquiries should be obtained no more than twice a year unless you are doing comparison shopping. I am being penalized because I had two inquiries within one year.

Well, needless to say, I wrote each credit bureau and disputed all the reasons they provided. I received two responses back and am waiting for the last response. After I receive it, I will order a copy of my credit report again to see if my scores have increased. I have struggled to find out how one obtains an 800 FICO credit score or higher. From the looks of things, it doesn't seem like an 800 is possible anymore because the credit bureaus will find ways to make sure your credit score is not as high as it can be.

I advise everyone, whether you have bad credit or good credit, to order a copy of your credit report once a year, read every single line on your credit report and read all of the information provided along with your credit report. Make sure everything listed on your credit report is accurate. Even a few points on your credit score can make the difference between getting approved or getting declined, and we all need those extra points. Good luck!

Harrine Freeman is the CEO of H.E. Freeman Enterprises, a credit repair and personal finance services company. She is a member of the American Association of Daily Money Managers, a credit repair expert and the author of, "How to Get Out of Debt: Get an ‘A’ Credit Rating for Free Using the System I’ve Used Successfully with Thousands of Clients.” For more information visit http://www.hefreemanenterprises.com.

Comments

[Lord]

760 is excellent but higher credit limits, up to a limit proportional to income, would help. They also like checking and savings accounts, preferably with the same institution. Higher incomes can probably increase it as well.

[Adam]

There are always stupid reasons like that. They have to provide some reason because a perfect score is not possible. They range from 2350 to 850 but nobody actually has a 350 or 850. FICO scoring math is unlike any math I have ever seen!

[Pam]

I know someone who has a score of 820. Her husband had a 810. So yes, over 800 is possible.

[Victor]

It is only a matter of time before a group or groups of people/lawyers get together and file a mega class action lawsuit against FICO. This may be the reason why they are beginning to change the way they run their scores.

FICOs are the basis of so many things now: insurance, jobs, loans, security clearance, etc that it's only a matter of time before the whole thing comes unraveling down. Of course, I wouldn't be surprised to see the best bought Congress step in and protect FICO with some sore of blanket immunity for their incompetence.

Perhaps the best way for everyone to protest is to to cancel all your credit cards then the system will really be in for a shock!

[EMF]

""760 is excellent but higher credit limits, up to a limit proportional to income, would help. They also like checking and savings accounts, preferably with the same institution. Higher incomes can probably increase it as well."

For those who have checked your credit reports, from which FICO credit scores are calculated:
Have your ever seen any of these on your credit report:
-- Income?
-- Checking accounts?
-- Savings accounts?

I have been checking my reports for several years, and have never seen any of these items reported. So how is that these factors will effect your FICO score?

"I know someone who has a score of 820. Her husband had a 810. So yes, over 800 is possible."
I also once had a credit score over 800. But that was before I paid off my mortgage. Since then, my score has declined to the upper 700s.

[Steve Herman]

I absolutely agree. It's rediculous how they rate our credit score between the different credit bureaus. Not to mention how inqueries can really ding your score.

Steve Herman
www.financialadvantages.com

[PaulD]

First, I doubt that there is any practical difference between a rating of 760 and a perfect score. Whenever I've applied for a loan, I've been told that a score above about 740 will give you the best terms.
As I recall a score in the 780 range puts you in about the top 10% of all credit scores. So it is hard for me to imagine than a company is going to distinguish between to someone in the 90th percentile and someone in the 99th percentile.
If someone knows more than I do, I would like to hear from them. But it seems to me that once you are in the range of having excellent credit, there is not much point in trying to improve your score.

[Brad]

800+ scores are not common, so the author shouldn't feel bad about not having one even if he has exemplary credit.

As for lenders choosing the Vantage score over the FICO score . . fat chance. Breaking into the credit scoring market is very tough even on a small scale . . . replacing FICO would mean rising to the top of the heap and replacing an industry standard. It's not going to happen. People trust FICO, rightly or wrongly (wrongly IMO), and their score will continue to dominate the landscape. I have personally seen and tested a score that "works better" than FICO, and do you know how much market share it has taken among actual lenders? Almost none.

Also, ask your CC lender to raise your limit. Your credit is great, so they will. That will help your credit score right away ($3000 revolving limit is quite low, and 30% balance is higher than you think). #2, #3, and #5 are genuine reasons that your score is not higher, and there are very good reasons that they count against you. #2 and #3 you can help remedy with a quick phone call (or online request).

[William Tanksley]

You know, although I recognize the value of a good credit score, I'd like to point out that the author of this is plugging her company's task in an area where it's pretty clear that the task isn't needed. It's like trying to kill ALL the bacteria in your house -- not possible, not worth the effort, and in the real world, dangerous.

She should stick to credit repair for people who actually need it, not people who have 819 and want 850.

This post is nothing but an unpaid commercial.