“Credit Score Whack-a-Mole” for Mortgage
Applicants
You may have wondered why there are credit
repair companies out there, since the credit reporting agencies have to allow any
consumer to dispute incorrect line items on their own. The big Credit Reporting
Agencies (“CRAs”) even have online systems for challenging erroneous
information. The Agency must act speedily to investigate and correct any false
information. Soooo, why pay someone else to just fill out their form?
The answer seems to be the same one that
makes practitioners in the legal profession permanently in demand: it’s in the
fine print. And in this case, it could be that some of that fine print is written
in invisible ink.
As you can well imagine, speed is vital when
a would-be mortgage applicant finds a credit score that’s lower than expected. The
mortgage companies will decide whether you qualify (and how much interest to charge) based largely on that credit score.
The actual details about how speedily the CRA must act are all contained in the
fine print located in the FDIC’s Consumer Protection regulations, “Procedure in case of disputed accuracy”
(6500, § 611). Once you notify the CRA, they have to investigate the
validity of your claim and (without charging you a dime) determine within 30
days whether the item is accurate. More fine print describe further protections
you have—
PARAGRAPH 2: The
CRA has but 5 days to notify the company or person who provided the information
about your challenge.
PARAGRAPH 6: The CRA has to provide you the results
of their investigation in writing, and, if you’ve asked for it, describe
the steps they took to arrive at their decision.
PARAGRAPH 7: If you didn’t know that you had the
right to receive the above description, they must furnish it within 15 days
after you later request it.
Those sound like pretty solid protections—vitally
important, since the CRA can’t just sweep your dispute under the rug, stall, or
ignore you altogether. After all, they have to detail in writing how strenuously
they worked to protect you! Right?
Except for one problem, which is in PARAGRAPH 8. If
the CRA simply drops the disputed item from your current report within the
first 3 days, that’s officially considered an expedited dispute resolution. Since the item has been dropped, that
might seem to be a solid win. But PARAGRAPH 8 says that if the CRA does that, it
no longer has to do anything demanded in Paragraphs 2,6, and 7! It’s as if
those protections were written in invisible ink…so that next month, if the
company or person just reports the same thing, voila! your credit report might once again go back to Square One. The
CRA is supposed to notify you 5 days in advance; but let’s face it, the phrase
‘Catch-22’ comes to mind…or ‘Credit Score Whack-a-Mole’…
What can you do, short of hiring repair agency experts
to fix your credit score? Most commentators are in agreement: just stay away
from the online dispute forms. Send a registered letter with your dispute,
because it usually takes the CRA longer than three days to act on it, so they
can’t skip the protections.
And while you’re waiting, why not give me a call? We
can start scouting for your new home!
