3 Credit Scams That Are Hurting Your Credit Score
The Credit and Debt Summit is exposing one credit scam after another. This time, credit expert Brian Diez exposed three credit scams that could be hurting your credit score and your ability to secure a loan.
Are you a victim?
Here are the three scams:
Credit Scam #1: Lenders oversee themselves.
Lenders report information to the credit bureaus. If you submit a claim that disputes this information, guess who is responsible for verifying the information? Lenders.
Imagine that you were to file a lawsuit against a doctor. You arrive at court to prove your case, and the doctor is sitting on the jury responsible for deciding whether your case is valid.
Such is the system of repairing errors on a credit report.
Credit Scam #2: Lenders benefit from errors.
And it gets even worse. Lenders benefit from sloppy records. If a lender causes an error to appear on your credit report, your credit score could drop. In turn, the lender can charge you more in interest.
“This scam is propagated by a system that almost guarantees errors,” Diez told attendees at the Credit and Debt Summit. It works like this:
The computer systems that collect information from lenders and then report this information to the credit bureaus do not require an exact match. If a Social Security number matches a last name, the system considers it “good enough,” even if the first name and address don’t match.
You can see how easily a mistake can appear on your credit report. In fact, 44 percent of reports of identity theft are nothing more than a merged credit file.
Credit Scam #3: Unless you are a politician, celebrity, or attorney, your complaint will not be taken seriously.
Making matters worse, if you try to correct an error on your credit report, you will have to jump through hoops … unless you are “someone important.”
Let’s imagine that you are one of the many people with an error on your credit report. (About 80 percent of people have at least one credit report error.) You contact the lender to report the mistake. The lender tells you to send a letter, which you promptly drop in the mail.
If you are a celebrity, politician, or lawyer, your letter will be handled immediately. Otherwise, your letter will be sent through a computer system that is responsible with determining whether your complaint is frivolous. If the computer says the letter is frivolous, your complaint won’t even be processed.
If the computer decides that your complaint has merit, your letter will be outsourced to Costa Rica, the Philippines, India, or Jamaica. A foreigner who most likely speaks English as a second language will be responsible for reading your letter and assigning a two-digit code, which determines the next action that should be taken on your complaint. Now a computer will spit out a letter telling you what will happen next.
Instead of doing actual research, Diez says the lenders just take the easy way out. So unless you are a celebrity, lawyer, or politician, you will be treated like a commoner. The worst part, your credit score just keeps dropping.
