In the past, I’ve written that I felt that credit repair was a tool for economic recovery, and I’ve found few that don’t see the logic in that assessment, given our potential impact on the housing market. Few, that is, except for those in the business of providing the very information we find ourselves correcting for consumers… the credit bureaus. And because they don’t share my perspective, they have a stranglehold on your local mortgage loan originator.
When the loan officer takes your loan application, he or she orders what’s called a “tri-merge” credit report. Third-party companies purchase your credit file information from the three main credit bureaus (Equifax®, Experian® and TransUnion®), and merge the reports into a single, more reader-friendly report that can be easily uploaded into automated underwriting systems that approve loans for mortgage companies.
Many of these third party resellers offer what’s called “rapid re-scoring.” It’s a system that analyzes a consumer’s credit data, and suggests things a consumer can do to make fast improvements in their scores. For example, paying down the balance on a particular credit card would yield a potential improvement of [X] points. In some cases, where inaccurate data exists, the rapid re-score system can be used to make corrections too. And therein lies the part I find most troubling.
In essence, the reseller offers –for a fee – the opportunity to correct misinformation on consumer credit reports… Sounds good, right? Yeah. But it also sounds a lot like credit repair . This practice is considered perfectly acceptable by the credit bureaus. But credit repair..? Hardly! In fact, the credit bureaus will literally shut down a lender’s ability to obtain credit reports, and thus, his ability to do business, if they find out that the credit reports the lender has purchased are being used by the consumer, or worse, by a credit repair company, to make the exact same types of changes. It’s simple… The bureaus make money from the resellers making these corrections. And it’s actually pretty pricey, when compared to credit repair.
What if a major pharmaceutical company closed down your family physician’s practice, because he or she prescribed an equally effective, yet less expensive generic drug, instead of their branded version of the same medicine..? And what if that decision was motivated by the fact that the pharmaceutical company stood to make money on the name brand drug? Would that be fair to your physician, or more importantly, to you? Yeah… I don’t think so either.
Allowing lenders to share consumer credit reports with legitimate credit repair companies, without fear of losing their livelihood, so that necessary, lawful changes can be made on inaccurate, incomplete, untimely or unverifiable information, is a good thing. But if you believe the credit bureaus, there really aren’t that many errors anyway. And so would the people who furnish the questionable information to begin with… Their clients, the banks.