Top Five Ways to Avoid Credit Card Debt

Top Five Ways to Avoid Credit Card Debt

Top Five Ways to Avoid Credit Card Debt

Anybody with credit cards risks carrying a lot of credit card debt. Once you have accumulated too much debt on credit card, it might take years and a lot of sacrifices pay for it. As you use credit cards, you should keep these 5 ways in mind to avoid credit card debt:

  • Pay Bills in Full

Using credit card to pay for budgeted items may be a convenient and safe way to handle your money. You do not need to worry about losing money that cannot be replaced and you do need to experience the hassle of writing on a check. See to it that you pay off purchases you make at the end of the month. If you carry a balance, do not extend it out for more than 3 months. You should know when your grace period ends. If you pay your bill in full, you do not incur debts.

  • Make Your Own Workable Budget

Knowing how much money that comes in and out is important when managing your finances. Workable budget is like a monetary crystal ball as you can find. Your budget will show you how much money available, when to expect to have more, when bills are due, and so on. It will also tell you how much money you’ve left over at the end of the month. Budget enables you to plan your purchases instead of reaching for plastic if you feel the impulse.

  • Charge Durable Goods Only

The golden rule is not to use credit card to purchase items that will not exist by the time your bill arrives. You can use debit card or cash to pay for movie tickets, eating out, and gas. You can save your credit card for emergency situations. Once you use credit card for major expenses that you will not be able to pay off within the grace period, include repayment expense in your budget.

  • Read Fine Print

It is important to look at the conditions and terms of credit card offers always. Never assume that introductory interest rates are permanent. The offers that you get in mail could not be credit’s actual terms. In many cases, such offers are based on the best-case scenario. If you do not have a perfect credit, your terms might be different.

  • Employ Cool-Down Strategy

Other people freeze their credit cards in blocks of ice, so they need to wait for the ice to melt before they can use the card. The idea is that if you need to wait for several hours before you could make a purchase immediate lust has time to pass. Then, you can calmly assess whether the product is worth putting your credit card. While freezing card could be a little extreme, you require some type of cool-down trigger. Try knowing your personality in terms of money. Others are more prone to impulse buying compared to others. If you are one of them, consider keeping your credit card in a secure and safe place once you go shopping so you aren’t tempted to use it.

The post Top Five Ways to Avoid Credit Card Debt appeared first on Creditmergency.

This Is How a Rapid Rescore Can Boost Your Credit Score Fast - Pinterest

This Is How a Rapid Rescore Can Boost Your Credit Score Fast

This Is How a Rapid Rescore Can Boost Your Credit Score Fast - PinterestIf you’ve just resolved some errors on your credit report or paid down your balances and you’re wondering how to update your credit report information fast so that you can improve your credit rating quickly, you may be interested in something called a rapid rescore. You can find the answers to all of your questions about rapid rescores in this article.

What Is a Rapid Rescore?

A rapid rescore is a process that mortgage lenders use to manually update your credit report information with the credit bureaus so that your score can be recalculated quickly. Instead of waiting for your creditors to report your information to the bureaus periodically, your mortgage lender can provide the information to the bureaus and request that they update your credit report right away. 

When Would You Need a Rapid Rescore?

Since mortgage loans are time-sensitive, a rapid rescore can definitely be a useful tool in certain situations. If you are in a situation where there’s been a change to one or more of your tradelines that has not yet been reflected in your credit report, and you need to rapidly increase your credit score in order to qualify for better mortgage terms, you may want to consider requesting a rapid rescore.

Rapidly increasing your credit score before getting approved for a mortgage could mean qualifying for a lower interest rate and therefore huge savings in interest over the term of your loan.

For this reason, the best candidates for a rapid rescore are consumers who have credit scores between the mid-600s and the 720s who are five to 10 points shy of their target score, according to Bankrate. The maximum benefit of a rapid rescore is gained by borrowers who are able to get bumped up to the next credit score “tier” in order to qualify for a lower interest rate, which can ultimately save them thousands of dollars over the course of the mortgage.

If you have recently paid down some of your revolving balances, a rapid rescore could get your credit score to reflect your lower credit utilization sooner.

If you have recently paid down some of your revolving balances, a rapid rescore could get your credit score to reflect your lower credit utilization sooner.

Of course, it’s always best to plan ahead well in advance of applying for a mortgage so you have plenty of time to get your credit score in great shape first. However, sometimes situations may arise in which a rapid rescore would be beneficial. Some examples of situations that might call for a rapid rescore include:

  • If you have recently received a credit line increase
  • If you have just paid down the balance of an account
  • If you have been added as an authorized user to an account in good standing or removed from a derogatory account
  • If you need to dispute inaccurate negative items on your credit report, such as late payments that were being reported in error

Remember, credit utilization makes up 30% of your credit score, so any action you take to improve your credit utilization ratio, such as paying down account balances, may help boost your score and get you a better deal on your mortgage.

How to Get a Rapid Rescore

If you need to know how to improve your credit rating quickly through a rapid rescore, keep in mind that not just anyone can request one. Rapid rescores are only offered by mortgage lenders, so, unfortunately, you cannot get a rapid rescore on your own. If you are in the process of applying for a mortgage, ask your lender if they can complete a rapid rescore for you.

How Long Does a Rapid Rescore Take?

The great thing about a rapid rescore is that it can get the credit bureaus to update your credit report within just a few days, instead of waiting for weeks or even months for it to happen automatically. Once your mortgage lender submits all the necessary documentation to initiate the rapid rescore, you should see your new results in three to seven business days.

A rapid rescore can update your credit report in days instead of weeks, which can be useful when applying for a mortgage.

A rapid rescore can update your credit report in days instead of weeks, which can be useful when applying for a mortgage.

How Much Does It Cost to Do a Rapid Rescore?

According to creditcards.com, the cost of a rapid rescore typically ranges from around $25 – $30 for each account that needs to be updated. However, the mortgage lender should be paying for the rescore, not the consumer. 

The reason for this is that a rapid rescore is considered an expedited dispute process, and the Fair Credit Reporting Act says that consumers cannot be charged to dispute inaccurate information.

Does Rapid Rescore Really Work?

When it comes to rapid rescore results, they will likely be the same as if you had gone through the normal channels to submit a dispute. Remember, a rapid rescore is essentially an accelerated credit report dispute. The rescore itself is not guaranteed to make your credit score increase.

If you are using the rapid rescore to remove inaccurate information that has been dragging down your credit score, then you should see positive results from the rescore.

However, just as in traditional credit repair, a rapid rescore cannot be used legitimately to try to remove information that is accurate. If the derogatory items on your credit report are accurate and timely (from within the past seven years), then a rapid rescore won’t be able to help you.

Rapid Rescore Companies

Companies that offer the rapid rescore service to borrowers include mortgage lenders such as banks and credit unions. Not all mortgage lenders offer the service, though, since it can end up being expensive and lenders are not allowed to charge borrowers for a rapid rescore.

If you are getting ready to apply for a home loan and you think you may want to have the option of doing a rapid rescore, ask the banks or mortgage lenders you are interested in whether the companies offer the rapid rescore service to borrowers.

If you find any rapid rescore companies advertising their services to individual consumers, use caution and watch out for possible scams.

You can use our tradeline calculator or a credit score simulator to get a general idea about whether a rapid rescore could benefit your score.

You can use our tradeline calculator or a credit score simulator to get a general idea about whether a rapid rescore could benefit your score.

Rapid Rescore Calculator

To calculate your rapid rescore results, you don’t need a specific rapid rescore simulator. Just use your favorite credit score simulator and plug in the numbers that make sense for your situation.

If you are planning to do a rapid rescore after paying off $5000 in credit card debt, for example, you could enter that information into the credit score simulator to calculate what the results of your rapid rescore might be. You could also try our Tradeline Calculator to see how your credit utilization ratios would change as a result of paying down some of your accounts or transferring balances.

However, keep in mind that any credit score simulator is likely not going to produce the exact same results that your lender will see. Online credit score calculators typically use simplified credit scoring algorithms to produce estimates, which may not always match up with the numbers the mortgage lender sees when they pull your FICO scores.

How to Do a Rapid Rescore Yourself

Unfortunately, it’s not possible to do a DIY rapid credit rescore on your own, since only mortgage lenders can perform this service on your behalf. 

What you can do is prepare thoroughly to ensure your dispute will be accepted. As with a normal credit report dispute, you’ll need to provide proof to support your claim. This often means obtaining a letter from the creditor verifying the change that you can then provide to the credit bureaus.

For example, if you have just paid down the balance on one of your credit cards, you can ask the credit card company to send you a letter verifying the updated tradeline information. Your mortgage lender can then submit this to the credit bureaus to get you a rapid rescore.

How to Update Credit Report Information

To update your credit report information yourself, you can obtain a letter from your creditor and forward it to the credit bureaus.

To update your credit report information yourself, you can obtain a letter from your creditor and forward it to the credit bureaus.

Although you can’t officially do a DIY rapid credit rescore yourself, you can trigger a manual credit report update by submitting your documentation directly to the credit bureaus. However, your tradeline may not be updated as quickly as when your mortgage lender pays for the privilege of an expedited update.

To summarize, follow these steps to manually update tradelines in your credit report:

  1. Contact the creditor and request that they send you a letter that verifies the updated account information.
  2. Send this letter to the credit bureaus and request that they update the information in your credit file.

Once they receive your information, the credit bureaus should then update the information for that tradeline in your credit profile.

In addition, some banks may report a tradeline in the middle of a reporting cycle if you pay down the balance to zero.

Rapid Rescore Success Stories

If you’re interested in reading some rapid rescore success stories, you can find plenty of them online. Try searching in some online credit forums to see the rapid rescore results other consumers have been able to achieve.

Some consumers may see a credit score boost of up to 100 points after a rapid rescore, although results vary widely based on what information is being changed.

Some consumers may see a credit score boost of up to 100 points after a rapid rescore, although results vary widely based on what information is being changed.

Some sources say they have seen credit score increases of up to 60 points after a rapid rescore, while others claim that a rapid rescore could potentially boost one’s credit score by up to 100 points. However, keep in mind that the result of a rapid rescore is going to depend on what information in your credit report is being updated and how severely it had been affecting your score.

Conclusions on Rapid Rescores

Although a rapid rescore won’t necessarily raise your credit score per se, it can be a very useful tool if you need to get your credit report and credit score updated within a few days rather than waiting weeks or even months for the credit bureaus to update your information normally.

When applying for a mortgage, a rapid rescore may be used to increase your chances of getting the best possible rate on your loan by getting positive changes to reflect on your credit report and in your credit score quickly.

Only some mortgage lenders offer this service, so check with your lender to see if they provide rapid rescores to their clients.

In addition, it’s a good idea to check your credit reports several months in advance so that you have plenty of time to correct any errors and pay down your balances. That way, you can decrease the likelihood that you will have to rely on a rapid rescore when applying for a mortgage.

For more tips on how to prepare to buy a home, check out “What You Need to Buy a House in 2020” from Redfin.

Over to you: have you ever used the rapid rescore tool to rapidly increase your credit score? What did you learn from this article? Let us know below!

Ideal Neighbourhood

How To Budget For Your First Home

Your first home is one of the biggest decisions you will make in your life. But don’t let this scare you! There is a simple way to make sure you make the right decision with your first home and budgeting for your first home is not that hard. Know how to budget for your first home?

So, how to budget for a new home? These tips assume that your first home is NOT an investment property, either for cash flow or appreciation. They assume that your first home will be a primary residence and nothing else.

First Tips

Your first home is not going to be your last, so don’t buy your home with your long-in-the-future needs in mind! If you’re buying your first home with your significant other, and you aren’t currently trying to have a child, don’t purchase a 4 bedroom home. Buy something that fits your current or near-future needs. One should know how to budget for your first home.

Ideal Neighbourhood

Choose your ideal neighborhood, then your ideal size. Where you live is usually more important than what you live in! This will affect your commute to work, who you live around, and possibly what you pay in taxes and utilities.

“If you have to ask, you can’t afford it.” That is, you know budgeting for your first home; if you have any questions about whether or not you can afford something, treat it as if you can’t.

Your Down Payment

Before buying your home, you should know how to budget for your first home and decide how much you’re going to spend on a down payment.

If you don’t have much available for a down payment, it’s possible to get a mortgage with as little as 3.5% down with a FHA loan. Read out does credit matter if i’m not applying for a loan?

Down Payment

If you put 20% or more of the purchase price down, you won’t have to purchase private mortgage insurance (PMI), which will save you thousands of dollars over the long run. For this reason, if you don’t have 20% to put down, you may want to save up and hold off on purchasing a home until you have it.

Do not borrow money for a down payment on a primary residence!

Your Mortgage

There are a lot of terms used in mortgage calculation that confuse most people! Many people don’t understand what the difference is between a 30-year fixed 5 year term compounding semi-annually and a 15-year fixed 5 year term compounding monthly.

  • Amortization: the expected life of the total loan.
  • Term: the life of the contract. Once the term ends, the mortgage has to be refinanced at a different interest rate.
  • Principal: the amount of money left on the loan to pay back, not including the added interest. This is NOT the same as the total amount paid or due.
  • Interest rate: the added proportion of a loan that is charged as interest to the borrower. Often expressed as an APR (annual percentage rate).
  • Compounding: how often interest is calculated and added to the principal.

The mortgage you’ll be able to afford will depend on your income and how your income is structured. Subtract your down payment from the purchase price of a home that you want, and you’ll have the mortgage principal that you’ll have to borrow.

Mortgage

Ideally, you can safely afford a mortgage that is 50% of one of your household income sources.

However, you may decide to go up to 50% of your total income. A mortgage payment higher than this exposes you to unnecessary risk.

Read out our previous article on Credit Problems Which Can Ruin Your Mortgage Application

Use an online calculator to figure out your mortgage payments given an APR, amortization term, and compounding. You will get all this information from your mortgage lender. Keep reading how to budget for your first home.

Additional Expenses

Initial Cash Outlay

  • Inspection costs. Usually small in comparison to the down payment, around $500-1000.
  • Closing costs. Expect to pay your agent a percentage (1-4%) of the purchase price in closing cost. These can vary widely and are significant.
  • Renovations, if any.
  • Furnishing. Furniture is often an underestimated expense, and you’re not likely to choose the same furniture for a different space.

Regular Payment Changes

  • Utilities rates. They’re likely to be different from what you were paying before, especially if you rented a much smaller space. If necessary, ask people in the neighborhood what they pay for their utilities as typically, people in one neighborhood use the same companies for their basic utilities.

Payment Charges

  • Property taxes, generally rolled into your mortgage payment.
  • Changes in cost of commuting. You may be moving closer to, or further from, work. This will likely change a significant daily cost.

By taking into account all of these costs, you will be able to effectively figure out what you can afford, budgeting for your first home and how you will be able to pay for it.

The post How To Budget For Your First Home appeared first on The CreditPros.

What To Do If You Are a Victim of Identity Theft

What To Do If You Are a Victim of Identity Theft

What To Do If You Are a Victim of Identity Theft

 

It is never easy to find out that you’re a victim of identity theft. You’ll have feelings of shame and anger, yet the best thing to do once you find out is to begin the process to clean up your credit. Once you catch and dispute errors, the easier the cleanup would be. With that in mind, you’ll require patience as disputing credit report entry take time.

Below are some of the things you must do once you find out you’re a victim of identity theft:

  • Put Credit Freeze and Fraud Alert on Your Credit Reports

For you to safeguard your credit, you have to put either fraud alert or credit freeze around your credit. Once you do fraud alert, expect that it will last for 90 days and if you like to renew it, you could. You may also have an option to do an extended one that lasts 7 years. If you want to do an extended one, you’ll have to get in touch with every 3 credit reporting agencies and request it over the phone. You may also do it online.

If you think fraud alert isn’t enough protection, you may do credit freeze. It would put your credit on lockdown and nobody can access it. See to it that you keep that in mind if you are planning to apply for loans where you know they’ll have to check your credit. If you want to lift credit freeze for some reasons, you may do so.

  • Close Out Any Debit or Credit Cards

Call every card company and debit cards to report about fraudulent charges as well as request that they close your account. You may then have them open new account for you with a new card. The faster you do this, the faster you could put stop to the spending spree of the theft.

  • File a Police Report

For you to complete your Identity Theft report, you will have to get in touch with local police department about your theft. Make particular to ask for a police report’s copy and report number. Your FTC Identity Theft Affidavit and police report make up Identity Theft Report.

  • Provide Your Creditors with an ID Theft Report Copy

Notify every creditor in writing that you’re the victim of fraud and make sure to add a copy of your own Identity theft report. You might also like to ask every creditor to give you and police department with documents that show fraud transactions. They might not just hand it over to you, yet fight for that if you want to. This information will assist you when tracking down the one that stole your identity. At times, although this is a legitimate claim, credit bureau still give you problems so consider hiring a professional credit repair company like us to do this for you.

  • Change Every Account Password

You must go through with your accounts and consider changing the password. Ensure to avoid using some obvious things for your passwords. A password must be a combination of lower and upper case letters with special characters and numbers.

The Bottom Line

Safeguarding personal information must always be at your mind. You have to take note that identity theft is rampant and you have to be aware on how you share your personal information. If you fall victim to this crime, those tips above can help you back on track.

The post What To Do If You Are a Victim of Identity Theft appeared first on Creditmergency.

The Surprising History of the Credit Bureaus - Pinterest graphic

The Surprising History of the Credit Bureaus

The Surprising History of the Credit Bureaus - Pinterest graphic

Most of us have credit reports assembled about us by the credit bureaus, yet few of us know about the surprising history of credit reporting.

The credit bureaus as we know them today grew from small, local organizations that formed as far back as the 1800s. In contrast, modern credit bureaus market themselves as expansive repositories of consumer information that can be used for an ever-growing number of applications.

Unfortunately, the early credit bureaus were known to use unethical tactics to collect information on consumers and sell this information to businesses.

While it may seem that the problems of these early credit bureaus have been addressed by legislation such as the Fair Credit Reporting Act, the credit reporting system still has serious flaws, some of which we highlight in “What Happened to Equal Credit Opportunity for All?

In this article, we will explore the story of how the credit reporting industry came to be, how the credit bureaus evolved into what they are today, and the many controversies that have taken place along the way.

What Is a Credit Report?

A credit report contains information about a consumer’s credit history. This includes a list of current and past credit accounts, along with the age, credit limit, balance, and payment history of each account. It also contains identifying information such as your name, address, and social security number.

This information helps lenders evaluate the creditworthiness of potential borrowers so they can decide whether to extend credit and what the terms of the loan should be.

For more information on credit reports, see our article “Credit Reports: What You Need to Know.”

What Are Credit Bureaus?

Credit bureaus, also known as credit reporting agencies or CRAs, are the companies that gather credit-related information about consumers and distribute it to lenders—and increasingly, other types of businesses who have an interest in checking people’s credit history.

In the United States today, there are three major credit bureaus: Experian, Equifax, and TransUnion. While there are many other credit bureaus, these three companies dominate the industry.

But it wasn’t always this way. The first credit reporting organizations were a far cry from the modern credit bureaus of today, and the unsavory tactics they used to run their businesses may surprise you.

Early Credit Reporting Agencies

The first recorded group that shared credit information about consumers was the colorfully named “Society of Guardians for the Protection of Trade Against Swindlers and Sharpers,” which was founded in London in 1776. The Society produced reports for its members on the credit history of individual customers, which were often full of gossip in addition to credit information.

The earliest credit reporting "agencies" were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore.

The earliest credit reporting “agencies” were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore, public domain.

Credit bureaus would check local newspapers for news about consumers.

Credit bureaus would check local newspapers for news about consumers.

Like the Society, the early credit reporting agencies were small, local organizations that were essentially groups of merchants sharing information about consumers. This allowed them to offer credit to more people and avoid lending to high-risk individuals.

These organizations were industry-specific and did not share information with each other. In 1960, it is estimated that about 1,500 independent local credit bureaus were in operation in the United States.

According to the Philadelphia Federal Reserve Board, these bureaus were “working with local lenders with incomplete and often unverifiable information.”

The bureaus didn’t just collect the information you might expect, such as name and loan information. They also gathered sensitive personal information such as marital status, age, gender, race, religion, employment history, and driving records.

The credit bureaus didn’t stop there. They checked the local newspapers for announcements of promotions, marriages, arrests, and deaths, and attached news clippings to consumers’ credit reports. They would even go so far as to ask someone’s neighbors and colleagues for testimonies about that person’s character.

Even the local “Welcome Wagon” was working undercover for the credit bureaus. This organization would surreptitiously gather information on new residents of an area under the guise of welcoming them to the neighborhood.

The "Welcome Wagon" would secretly collect information on new neigbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The “Welcome Wagon” would secretly collect information on new neighbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The credit bureaus were focused solely on serving the local creditors that belonged to their respective organizations. As such, they typically only reported derogatory information.

Furthermore, there was no standardized way to evaluate a person’s creditworthiness. It was all based on the subjective whims and prejudices of the creditor looking at their credit file.

What’s worse is that the credit bureaus did not allow consumers to view the information that was being reported about them. There was no way for consumers to verify whether the information was correct or where it came from.

Modernization of Credit Reporting

According to the Harvard Business School paper, over the course of the 1960s, many of these small, local credit bureaus started to join together, forming networks that spanned the nation.

In 1971, the Fair Credit Reporting Act (FCRA) was passed to ensure the “accuracy, fairness, and privacy of information in the files of consumer reporting agencies.”

By establishing requirements as to the accuracy and of consumer credit files and access to their information, the FCRA was intended to protect consumers from the unfair practices that were rampant in the credit reporting industry.

The Fair Credit Reporting Act

The FCRA enacted the following rights for consumers:

  • Consumers must be notified if negative action is taken against them because of the information in their credit file.
  • Consumers must be able to find out what is in their credit file.
  • Consumers must be able to dispute inaccurate information and have it corrected or deleted.
  • Outdated information (generally more than 7-10 years old for negative information) cannot be reported.
  • Consumers must provide consent for employers to check their credit reports.
  • Consumers must have the option to request to be excluded from lists for unsolicited credit and insurance offers.
  • Consumers who appear on a list of prospects requested by a lender must be extended a firm offer of credit.

As a result of the passing of the FCRA, credit bureaus stopped recording events such as marriages and arrests and started focusing more on verifiable credit history information. They also started reporting positive information in addition to negative information.

In 1996, the FCRA was amended to extend additional protections to consumers, including the following:

  • Consumers have the right to take legal action against anyone who obtains their credit report without a permissible purpose.
  • Credit bureaus can be held liable for knowingly reporting misinformation.
  • Credit bureaus must investigate disputes within a certain period of time, usually 30 days.
  • Banks can share credit information with affiliates, but consumers must be given the opportunity to prohibit this sharing of their information.
The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The advent of computer-powered databases allowed some credit reporting agencies to become more efficient and do more business, while smaller agencies that could not afford to make the change got out of the industry.

This consolidation eventually led to the domination of the market by the three major bureaus we know today.

Experian

While Experian did not officially come about until 1996, according to creditrepair.com, the story of Experian can be traced back almost 200 years.

The Manchester Guardian Society was formed in England in 1826 to share information on customers who didn’t pay their debts. This organization eventually became a part of Experian, as did a group of merchants that later formed in Dallas for a similar purpose.

These groups were both acquired by TRW, an engineering and electronics conglomerate that also launched their consumer credit reporting branch as Experian.

Experian was acquired by the British retail company Great Universal Stores Limited (GUS) and became part of their consumer credit reporting arm. In 2006, it demerged from GUS and began trading on the London Stock Exchange.

Although Experian as we know it today did not come along until after the FCRA was passed, the bureau has certainly not been free of controversy.

In 1991, a TRW investigator incorrectly reported that 1,400 people in Vermont had not paid their property taxes, which ruined the credit of those consumers. Several similar cases were discovered throughout New England.

Experian became infamous for their atrocious customer service and was hit with several lawsuits.

Later, Experian settled with the Federal Trade Commission (FTC) for operating a credit reporting scam in which consumers were led to believe they were signing up for a “free credit report” and were not told that they would automatically be enrolled in Experian’s $80 credit monitoring program.

The offending for-profit website, FreeCreditReport.com, is still in operation. As a reminder, the only site authorized to provide free credit reports as required by federal law is annualcreditreport.com.

They settled with the FTC again in 2005 for violating their previous settlement.

In 2015, Experian announced a data breach that existed for over two years and affected as many as 15 million consumers.

The bureau was then fined $3 million in 2017 for deceiving customers about their credit scores, along with TransUnion and Equifax.

TransUnion

TransUnion originally began as the holding company for a rail transportation equipment company in 1968. One year later, they entered the credit reporting industry by acquiring regional credit bureaus. The bureau has expanded steadily since then, although it is the smallest of the three major credit bureaus.

TransUnion has also been guilty of taking advantage of consumers.

Two consumers have sued TransUnion for refusing to remove inaccurate information on their credit reports.

They have also been accused of scamming consumers by not notifying them that they would be charged $18 a month for having a TransUnion account.

In June 2017, the largest FCRA verdict to date forced TransUnion to pay $60 million in damages to consumers who were erroneously included on a government list of terrorists and security threats.

Later in 2017, one of TransUnion’s websites was hijacked and made to redirect consumers to websites that attempted to download malware onto visitor’s computers.

Equifax

Equifax was started by a grocery store owner as Retail Credit Company.

Equifax was started as Retail Credit Company by a grocery store owner. Photo by Charles Bernhoeft, public domain.

Equifax was started in 1898 by a grocery store owner who created a list of creditworthy customers and sold the list to other businesses. This business grew and became known as the Retail Credit Company.

The company expanded quickly throughout North America, amassing credit files on millions of Americans by the 1960s.

The Retail Credit Company developed a reputation for collecting extensive personal information on consumers and selling it to just about anyone who wanted it.

Critics accused them of reporting “facts, statistics, inaccuracies and rumors’…about virtually every phase of a person’s life; his marital troubles, jobs, school history, childhood, sex life, and political activities.”

Buyers of these reports would use them to judge the morality of individuals and avoid lending to those who they perceived as morally corrupt.

Consumers were not allowed to see their information, and many had no idea that the company had files on them in the first place.

When the company started planning to computerize their records, which would make consumer information more widely available, the U.S. Congress intervened, holding hearings that led to the Fair Credit Reporting Act being passed.

Equifax had to stop scamming consumers by lying about their identity and their motives when collecting information, among many other changes.

The Retail Credit Company changed its name to Equifax in 1975, which many speculate was a move to improve their damaged reputation after the congressional hearings.

Unfortunately for consumers, Equifax’s issues didn’t end with the Fair Credit Reporting Act. In recent years they have betrayed consumers’ trust even more egregiously.

Equifax ruined their reputation again in 2017, when their systems were breached by hackers twice, impacting hundreds of millions of consumers in the United States, Canada, and Britain.

The scam left the names, social security numbers, birth dates, addresses, driver’s license numbers, and credit cards numbers of consumers exposed for months, from May 2017 until July 2017.

Not only that, but Equifax did not disclose the breach until September of that year, giving top executives plenty of time to sell their shares of the company before going public with the announcement.

They continued to bungle their response to the breach by setting up websites that were supposed to allow consumers to determine whether they were affected by the Equifax breach but instead returned random results.

In addition, Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Nearly two years later, Equifax has still not been penalized or held accountable for this horrific failure in any way. In fact, they just went back to selling credit monitoring, and they are now making more money than ever.

For a fascinating in-depth investigation of the 2017 Equifax breach, listen to the podcast “Breach.”

There is virtually no end to the list of disastrous errors committed by Equifax, but here are some more of the highlights:

  • The bureau repeatedly tweeted a link to a fake Equifax phishing website, directing consumers to enroll in fraud prevention services at the imposter site.
    Equifax left their systems vulnerable to a series of attacks.

    Equifax left their systems vulnerable to a series of cyberattacks that affected hundreds of millions of people.

  • Equifax left the private data of approximately 14,000 Argentinian consumers and staff members open to anyone who entered “admin” as the username and password for one of its online portals.
  • The company removed its mobile apps from app stores in 2017 because they had security flaws that left them vulnerable to cyber attacks.
  • A website operated by Equifax exposed the salary histories of tens of thousands of people to anyone that had someone’s Social Security number and date of birth, both of which were in the hands of criminals after the security breach.
  • In October 2017, Equifax’s website was hacked and made to serve malware disguised as a software update, leaving visitors to the site at risk of having their computers infected by the malware.
  • The company has been sued hundreds of times and fined millions of dollars by the Federal Trade Commission for violating the FCRA.

Sadly, it seems Equifax has not changed for the better since their early days of selling people’s private information to anyone and everyone, since they have allowed criminals to easily access consumer data on a massive scale.

Innovis: The Fourth Credit Bureau

Many people are completely unaware that there is actually a fourth major credit bureau called Innovis. It was founded as Associated Credit Bureaus in 1970 and changed its name to Innovis in 1997. The company is now owned by CBC companies, which purchased Innovis in 1999.

In contrast to the other consumer reporting agencies (CRAs), credit reporting is not the primary function of Innovis. In fact, Innovis does not even offer credit scores.

Innovis instead serves businesses by providing “consumer data solutions” such as identity verification, fraud prevention, receivables management, and credit information. According to finance writer Sarah Cain, Innovis’ credit reports are used primarily to compile lists of pre-approved consumers to sell to lenders for marketing pre-screened offers.

Innovis also states on their website that as a CRA, they “enable” personal solutions such as credit reports, credit disputes, fraud alerts, active duty alerts for consumers in the military, credit blocks, security freezes, and opt-outs.

What Is In Your Innovis Credit Report?

Your Innovis report, like your other credit reports, contains your personal information as well as your credit history. However, they do not receive credit information from all of the same lenders that report to the other three major credit bureaus. If you pull your Innovis credit report, you may notice that some of your credit accounts are missing, particularly revolving accounts.

Your credit report will also show inquiries if any businesses have pulled your file from Innovis.

While you can’t get your Innovis credit report from annualcreditreport.com, you can order a copy directly from the company for free once a year.

Who Uses Innovis Credit Reports?

While there are some anecdotal reports of credit card companies pulling consumers’ Innovis credit reports for lending decisions, it seems that their reports are used mostly for pre-screened marketing offers. Innovis’ services are also used by companies such as cell phone service providers.

Is CBCInnovis the Same Company?

Confusingly, there is another company owned by the same parent company as Innovis called CBCInnovis. Although CBCInnovis and Innovis share similar names, they are different companies with different functions.

Unlike Innovis and the other credit bureaus, CBCInnovis does not maintain a repository of consumer credit data. Rather, it serves as a third-party company that pulls consumers’ credit reports from Experian, Equifax, and TransUnion and compiles the information into one “tri-merge” credit report. These tri-merge reports are sold to lenders such as banks and mortgage companies.

Discrimination in Credit Reporting

Unfortunately, historical discrimination is still baked into the credit reporting system.

Unfortunately, historical discrimination is still baked into the credit system.

You might think that discrimination in the credit system is a thing of the past, left behind with the shady information-gathering tactics of the earliest credit bureaus.

Unfortunately, although discrimination is officially prohibited by the Equal Credit Opportunity Act, inequality is still rampant in the credit industry today.

Past and present discrimination against minorities in the United States affects consumers in ways that have dramatic effects on credit scores. A study by the Federal Reserve Board revealed that on average, blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, even after controlling for personal demographic characteristics, location, and income.

The credit system further burdens those who are less privileged and provides very few opportunities for disadvantaged consumers to improve their situation.

Conclusion on the History of Credit Reporting

Credit reporting agencies have a surprisingly long and sordid history. From the 1800s to today, the consumer credit reporting industry has been plagued with bias, inaccuracies, and serious security issues.

While technological advancements have allowed the credit bureaus to expand and improve,  and government regulation has been enacted to protect the rights of consumers, the system is still far from perfect.

Ultimately, the credit bureaus were built to serve lenders, not consumers, and that remains their primary purpose. We are reminded of this every time consumers are harmed by the incompetent or even outright malicious actions of the credit bureaus.

Have you been affected by a credit reporting scam or a security breach? Let us know in the comments, and please share this article if you liked it!