Derogatory entries on your credit report, such as 30-day late payments, 60-day late payments, collections, and more, can seriously damage your credit score. Is there a way to get derogatory items removed from your credit report so that your score can bounce back? Let’s find out.
What Are Derogatory Entries on Your Credit Reports?
The term derogatory simply means negative, so derogatory items on your credit report are any items that reflect negatively on your credit. In other words, they indicate that you have failed to make timely payments on your debt.
Derogatory entries can be divided into two categories: minor derogatories and major derogatories. They both can hurt your credit substantially and contribute to bad credit, but major derogatory items have a greater negative impact on your credit score than minor derogatory items.
Examples of Derogatory Items on Your Credit Reports Minor Derogatory Entries
30-day late payments 60-day late payments
Major Derogatory Entries
90, 120, 150-day late payments, etc. Charge-offs Collections Foreclosures Settlements Short sales Repossessions Public records (bankruptcies)
A bankruptcy on your credit report counts as a major derogatory entry.
The Good News: You Can Dispute Inaccurate Derogatory Information on Your Credit Reports
As a consumer, you have the right to have your credit reports be accurate, as dictated by the Fair Credit Reporting Act (FCRA).
Therefore, if there is information on your credit reports that is wrong, then you have the right to ask for the incorrect information to be either corrected or removed from your credit reports.
In order to challenge inaccurate information on your credit reports, you can file a direct dispute with the party that furnishes your data to the credit bureaus (e.g. a lender, financial services company, debt collector, etc.) or an indirect dispute with the credit reporting agencies (CRAs).
If you choose to go the route of an indirect dispute, you contact the CRAs about the problematic information and they then investigate the dispute with the company that is furnishing the data.
You can use either type of dispute to ask for the inaccurate derogatory information on your credit report to be corrected or deleted altogether.
The Bad News: You Do Not Have the Right to Have Accurate Negative Information Removed From Your Credit Reports
According to the FCRA, accurate and verifiable negative information can remain on your credit reports for up to seven years.
Unfortunately, that means if the derogatory information on your credit reports is accurate and verifiable, then the CRAs are under no obligation to remove it before the 7-year clock runs out.
Derogatory information that is accurate and verifiable can stay on your credit report for up to seven years.
How to Dispute Derogatory Entries on Your Credit Reports
It is free to dispute inaccurate information on your credit reports, and you can do this process yourself. Another option is to hire a reputable credit repair company to do this work on your behalf.
If you choose to complete the dispute process yourself, you can do this in a few different ways:
Go to the CRAs’ websites and file your dispute online
Mail your dispute through the postal services Contact the CRAs over the phone Dispute the information directly with the furnishing party
You can submit your disputes online on the CRAs’ websites.
Which Dispute Method is Most Effective?
While there is not necessarily a “best” way to file a dispute, often, plaintiff’s lawyers advise consumers to file their disputes with the credit bureaus because this method may leave you in a better positioned to take legal action if the credit bureaus fail to remove the incorrect information.
The Benefits of Disputing Directly With the Furnishing Party
When you file a direct dispute with the company that is furnishing the inaccurate information to the credit bureaus, you are addressing the information at its source. For this reason, the data furnisher has an obligation to correct the error with all of the CRAs they report to.
If a mistake is showing up on more than one of your credit reports, the direct dispute strategy can save you some time since you are only filing one dispute to have the information corrected on each of your credit reports where it is applicable.
Working With a Credit Repair Company to Remove Derogatory Information
Although the consumer credit dispute process is free to use, some consumers may choose to work with a credit repair company to accomplish their goals.
In this case, the credit repair company goes through the dispute process on your behalf.
While a credit repair organization cannot charge you in advance of providing a service as per the Credit Repair Organizations Act (CROA), if they successfully get the information corrected or removed, they can then charge you for this service that has been fully performed.
How Do You Know if You Need to Dispute Incorrect Information on Your Credit Reports?
To find out if there are errors on your credit reports, you need to get copies of your own reports.
Typically, you can do this for free once every 12 months with each of the three credit bureaus. However, due to the COVID-19 pandemic, the CRAs have made it easier to check your credit more often by making it free to check your credit reports every week until April 20, 2022.
To order your free credit reports, go to annualcreditreport.com, which is the only website that is federally authorized to provide your free credit reports, and request them there.
How Long Does the Dispute Resolution Process Take?
The credit bureaus are technically allowed to take 30 days to complete their dispute investigation process, but this rule is decades old. These days, with the technology we have now, it is more likely that your dispute will be resolved in only 10-14 days.
Consumer disputes are usually resolved within two weeks.
We hope this article has been informative for those wondering about how to get derogatory information removed from your credit reports! To learn more about how to use credit report disputes effectively, check out our article on How to Fix the Most Common Credit Report Errors.
Want to see the video version of this article, featuring credit expert John Ulzheimer? Watch it below and then subscribe to our channel on YouTube to see more helpful videos about the credit system!
The “date of last activity,” also known as the DLA, is often discussed within the field of credit repair in a way that is inaccurate or misleading. Because of this, many consumers do not understand the true significance (or lack thereof) of the DLA as it relates to their credit reports and credit scores.
Credit expert John Ulzheimer busted some myths about DLAs in a Credit Countdown video on the Tradeline Supply Company, LLC YouTube channel. Here’s what he had to say about DLAs on your credit report.
What Is a DLA (Date of Last Activity)?
The date of last activity is exactly what it sounds like: it is the most recent date on which activity was reported for an account.
It is a “legacy” data point that used to be included on credit reports for users (lenders), but this is not the case anymore, In fact, DLAs have not been shown on credit reports for lenders in decades, according to John.
Why Does a DLA Appear on Your Credit Report?
If John is saying that DLAs do not appear on credit reports, then why do you see DLAs when you pull your own credit report?
Two Types of Credit Reports
If you’ve watched our other Credit Countdown YouTube videos, then you may recall that there are two types of credit reports: “real” credit reports, and credit report disclosures.
Credit Report Disclosures
When you check your own credit report from annualcreditreport.com or from the credit bureaus, you are actually looking at a credit report disclosure.
Disclosures are provided to consumers and presented in a format that consumers can understand.
This is not the same as the version of your credit report that lenders see, and it contains different types of information, such as DLAs, that may be helpful to you as a consumer.
Credit Reports
Real credit reports are written in code using software known as Metro 2 and these documents are provided to “users” such as lenders, insurance companies, collection agencies, credit unions, credit card issuers, and mortgage brokers.
Actual credit reports do not contain DLAs. If you were to search the Credit Reporting Resource Guide (CRRG), which is essentially the Metro 2 manual, you would not find any information about DLAs because they do not exist within this credit reporting system.
Credit reports provided to lenders are communicated using the Metro 2 language.
Conclusion: Do DLAs Affect Your Credit?
You can rest assured that you do not need to worry about DLAs as they pertain to your credit reports and your credit scores (although they may be important for legal reasons, such as determining the statute of limitations for old debts).
Since DLAs do not appear on your actual credit reports that your credit scores are based on, they cannot impact your credit.
If you’d like to watch the video version of this post, hit play below. You can find the rest of our Credit Countdown videos over on YouTube!
Myths about credit, unfortunately, are extremely common, even among people who purport to repair credit. We’ve previously compiled a list of common credit myths, which you can find in our Knowledge Center.
In this post, we’re going to focus on the top three credit myths that just won’t seem to go away, according to credit expert John Ulzheimer in a Credit Countdown video on the topic. Check out the video version at the end of this post.
Myth 1: Your revolving utilization ratio is worth 30% of your credit score.
While the general category of how much debt you owe does contribute 30% of your FICO score, the specific metrics regarding revolving utilization are just part of that category, not the whole thing. There are several other metrics included in this category, which FICO lists on their website. These include:
The total amount you owe on all of your credit accounts. The amounts you owe on different types of accounts, such as installment loans and credit cards. The number of your accounts that have balances on them. The ratio of how much you still owe on your installment accounts, such as auto loans and student loans.
Therefore, your revolving utilization must necessarily be worth less than 30% of your credit score, although it is true that it is a highly valuable metric.
Myth 2: Closing an old credit card means the age of the card no longer counts toward your credit score.
Prominent sources in the credit arena often advise consumers not to close their oldest credit cards, claiming that this will cause consumers to lose the benefit of the card’s age. In theory, this idea makes sense because your credit age is worth 15% of your credit score and it is directly connected to your payment history, which is worth an additional 35% of your score.
However, the problem with this advice is that you actually do not lose the age of a credit card once you close the account. In fact, according to John, credit cards continue to increase in age and contribute to your average age of accounts even after they have been closed.
Still, it is important to remember that closing a credit card is not completely free of consequence. When you close a credit card account, you no longer get the benefit of the unused credit limit that was associated with the account, which was likely helping your credit score.
Myth 3: Employers can check your credit scores.
In truth, this myth likely exists because employers can check your credit reports, but credit reports and credit scores are not the same thing. Your credit report contains information about your credit accounts, while your credit score is a three-digit number that represents how creditworthy you are deemed to be by the credit scoring model.
Furthermore, the credit reports that employers receive are different from the versions that are provided to lenders, and these credit reports do not come with credit scores.
If there are other credit myths you think we should cover, leave a comment on this article or the accompanying video on our YouTube channel!
Most of the time when I’m asked about credit scores the line of questioning is commonly about how to improve scores. It’s equally often, and equally enjoyable, when I receive questions from people about how many points certain things from your credit reports are worth to their credit scores. The questions generally go something like this… “How many points is a charge off worth” or some variation of that question.
Not only are these questions common but they are also reasonable. We grow up in an academic environment where questions on tests are worth a certain number of points toward our final grade. For example, if you have a test with 25 questions then each question is worth 4 points for a possible grade of 100. Credit scoring systems, however, are not designed such that entries on your credit reports are worth any specific number of points.
That’s Not How Credit Scores Work
If you ever read a book or blog or hear someone suggest that credit report entries are worth a specific number of points, you can ignore it because it’s factually inaccurate. Nothing on your credit report is worth any specific number of points, either positive or negative. Scoring models do not assign points like that because they’re not designed to do so.
Instead, credit scoring models assign points based on how well you have performed in certain credit scoring categories. Without getting highly technical and jargon-heavy, points are assigned based on how your credit reports answer questions asked by the credit scoring models.
Buckets, Bins, Variable Classing…They’re All the Same Thing.
Credit scoring models are made up primarily of three things…characteristics, variables, and weights. These three things can also be described as…questions, answers, and points. These three work in concert as part of the scoring process. Here is an example of how it works:
Characteristic (aka, a question asked by the scoring model)
Example: How many credit card accounts do you have with a balance greater than zero?
Variable/Bucket (aka, the answer from your credit report)
Example: I have 4 credit card accounts with a balance greater than zero.
Weight (aka, the points assigned by the credit scoring model based on the answer)
Example: If you have between 3 and 6 credit card accounts with balances, you earn 20 points. As such, because you have 4 cards with balances you have earned 20 points.*
*This fictitious example isn’t meant to mimic the points you’ll earn for having four credit card accounts with balances. It’s simply meant to illustrate how scoring models work.
The variable or “answer” component is also commonly referred to as a bucket or bin. It’s essentially a range where the answer to a credit scoring characteristic/question falls. And, the weight or points are assigned based on which bucket/range your answer falls.
I recognize that this is complex and it might take you a few times reading through this to understand how it works. But, at the very least what this should expose is the truth that no item on your credit report is worth “x” points.
Instead, the bucket/range where your answers fall is what’s worth the points. And, you may have several answers that would cause you to fall into the same bucket, meaning multiple consumers with different credit reports can have the same credit score.
In the above example, the variable bucket was “between 3 and 6 credit card accounts with balances.” And, that bucket was worth 20 points to your credit score. So, if your credit report had either 3, 4, 5 or 6 credit cards with balances your answer would have fallen in the same bucket and you would have earned the same 20 points.
This is precisely why the people who try to assign a specific value to any one credit report entry are universally incorrect. In this example, you would have earned an equal 20 points toward your score even if you had 4 different credit reports.
Your Never “Lose” Credit Score Points
Here’s another one that’s going to blow your mind. Your credit score doesn’t start out at a perfect 850 and then go down based on your credit reports. You instead start low and accumulate points.
Nothing on your credit report is worth negative points. So, collections are not worth negative 50 points. Charge offs are not worth negative 100 points. It doesn’t work that way. Your score doesn’t go down because of negative information, it just simply isn’t as high as it could be because you’ll accumulate fewer points during the scoring process.
If you have any of those negative items, like collections and charge offs, you would fall into a bucket that would be worth fewer points than you would have fallen into if you did not have those types of negative entries. That’s why people who have negative entries have lower scores, generally, than people who do not. They earn fewer points, rather than lose more points.
You can apply these examples to every scorable entry on your credit reports. This includes inquiries, the presence or lack of negative information, debt and debt-related ratios, the age of your credit report information, and the diversity of your credit report entries.
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.
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 credit reporting began, including how the credit bureaus originated and evolved into what they are today, and the many scandals 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.
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, public domain.
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.
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 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 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 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.
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 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 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!
In the world of consumer credit, there are a number of Federal laws or “statutes” which help consumers in regards to their personal credit. Two such notable statutes are the Fair Credit Reporting Act, more commonly referred to as the “FCRA”, and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, more commonly referred to as the “CARD Act.”
Both of these laws are consumer protection statutes, meaning they were designed to protect consumers from supposed big bad industry players. But do they really help consumers to better manage or even to establish or re-establish credit? If you dig deeper into the fine print of some of the so-called “protections” you might answer, “no.”
The Fair Credit Reporting Act
The FCRA has been around since the early 1970s, is some 90 pages long and has been amended dozens of times. In the world of consumer credit reporting, the FCRA is essentially the Bible. The FCRA is best known for providing the following protections to consumers, complete with its shortcomings;
Right to free credit reports: Since 2003 every U.S. citizen with credit reports has had the right to see those credit reports at no cost once every 12 months. The website where you can claim those Federal freebies is www.annualcreditreport.com. I’ve often made the point that while “once every 12 months” may have made sense in 2003, it doesn’t make sense in 2019. Given the number of large-scale data breaches and expanding consumer awareness of credit reporting it seems like once every 12 months has become insufficient.
You have the right to dispute inaccurate information on your credit report.
Right to dispute: If you believe something on your credit reports is incorrect, you have the right to dispute that information, for free. When you dispute the information the credit reporting agencies and the companies that furnished the information must perform a reasonable investigation. Many years ago I was critical of this process, but my stance has evolved.
The dispute process has become much more consumer-friendly and is normally completed within a couple of weeks rather than the allowed-for 30 days. Consumers can now add supporting documents/attachments to their dispute communications and the credit reporting agencies can and do override responses from their data furnishers, disproving the assertion that the credit bureaus simply “parrot” what’s reported to them.
There are many other protections afforded to consumers by the FCRA, but some argue it falls short of helping consumers to establish or rebuild their credit. The reason is that the entire credit reporting system is voluntary.
Voluntary System
The FCRA does not require any lender or service provider to report information to the credit bureaus. That’s why you generally don’t see things like rent or utilities on consumer credit reports. And, even in the lending environment, there’s no requirement that any lender must report your account or accounts to any or all of the credit bureaus. And while I’m not criticizing the Act’s silence on this issue, unknowing consumers may think they’re building credit by paying rent and utilities when they really aren’t.
Even in the world of authorized user tradelines, a common and effective method of building or rebuilding credit reports and credit scores, there are some card issuers that do not report to the credit reporting agencies. There’s no obligation in the FCRA for issuers to do so. As such, it’s important that if you’re being added as an authorized user to someone’s credit card that you do so with an issuer that does, in fact, report to the credit reporting agencies.
The Card Act
Let’s get something on the record…I really don’t like the CARD Act. The Card Act is the statute that makes it illegal for credit card issuers to grant credit to a consumer who is under 21 unless they have a job or a co-signer. The same consumer can get themselves into five or six figures of student loan debt, but they can’t open a credit card.
Additionally, many large credit card issuers don’t allow co-signers any longer. As such, the “co-signer” exclusion to the under-21 restriction of the CARD Act isn’t even an exclusion any longer, unless you want to limit your credit card options. Further, the under-21 rule also seems to suggest when someone turns 21 their financial or employment situation will immediately change, which isn’t a guarantee and certainly not tied to an age.
Those who are under 21 can still begin to build credit using the authorized user strategy.
The under-21 restriction also puts everyone who doesn’t have a job or a co-signer three years behind the curve as to building their credit reports. Before the CARD Act, someone as young as 18 could have opened credit accounts in their name, no problem. This eventually served them well as they would start building credit at an earlier age.
Authorized Users Are Still A Good Option
The one way around all of this statute silliness is the authorized user strategy. There is no restriction to being added as an authorized user to a credit card, regardless of your age. As such, people who are under 21 can still begin to build credit, improve their credit scores, and enjoy the benefits of using plastic.
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.
When consumers ask me questions about their credit reports it’s normally about how to get an item removed or corrected. Sometimes, however, I do get questions about having information added to a credit report. This type of question brings up an interesting concept, which is whether or not consumers have the right to certain credit report information or even the right to a credit report at all.
The Fair Credit Reporting Act
The Federal statute that governs the credit reporting agency’s actions, the use of credit reports, and the furnishing of information to the credit reporting agencies is the Fair Credit Reporting Act or “FCRA.” The FCRA is a consumer protection statute that has been around since the early 1970s and confers rights to consumers as it pertains to their credit reports. The Act has been amended dozens of times.
There is no language in the FCRA that affirmatively gives consumers the right to have a credit report. And, there’s also no language in the FCRA that gives consumers the right to demand that they do not have a credit report. The act is silent on those two issues.
The Voluntary System
What this means is you cannot demand that a credit reporting agency push a button, delete your credit report information, and then never again collect information about your credit obligations. Conversely, you also cannot force a credit reporting agency to reach out to your bank or other service providers, get information about how you manage your accounts, and then add them to your credit reports.
Your credit scores might not be the same.
There are some very limited scenarios with federally guaranteed student loans and their servicers. The loan servicers may be required by the Department of Education to credit report debtor obligations, but that’s not the same as a lender choosing to report, or not to report. That’s entirely voluntary.
From a more granular perspective, you also don’t have the right to identical credit reports and certainly, you don’t have the right to identical credit scores across the credit reporting agencies and the various brands of credit scores. So, you cannot demand that your credit reports at Equifax, Experian, and TransUnion be the same and you cannot demand that your FICO and VantageScore credit scores are identical.
In fact, you don’t even have the right to a credit score, at all. There are certain minimum criteria that must be met before your credit report will even qualify for a credit score. When your credit report is created, a process that normally occurs the first time you apply for credit, it will not qualify for a credit score because there isn’t enough information to make it scorable.
Consistency, or Inconsistency
Another interesting aspect of credit reporting and our control (or lack of control) over what goes on and what does not go on our credit reports is the issue of consistency. For example, I can be added as an authorized user on Credit Card A and also added as an authorized user on Credit Card B, and there’s no guarantee that both card issuers will choose to report the account on my credit reports.
There’s also no guarantee that the issuer of Credit Card A will credit report all of their authorized users. They may choose to report some of them, and then choose to not report the rest. There’s nothing I can do about this. There’s nobody to complain to about the consistency issues and you can’t leverage your rights to consistency, because you don’t have any.
You also cannot control whether or not any of your lenders report to all three of the credit bureaus. For example, you may have a lender that reports to Equifax, but not to Experian and TransUnion. You can come up with any number of other combinations, and those would be true as well.
Not all credit card issuers report authorized user data to the credit bureaus.
This can be an issue with the use of secured credit cards, which are a common tool used by consumers to build or rebuild their credit. Notwithstanding the fact that becoming an authorized user on a loved one’s credit card is a much better alternative, there’s no guarantee that your secured card issuer will report to any of the credit bureaus.
Users of Credit Reports
There’s one final issue to cover on this topic of consistency. The users of credit reports, as in lenders and debt collectors, also don’t have the right to use credit reports or to furnish information to any of the credit bureaus. All users of credit reports had to apply for service with the credit bureaus and then go through a process of consideration and evaluation by the credit bureaus before their accounts were approved.
And even if a company has an account with the credit bureaus, buys credit reports, and furnishes information to the credit bureaus there’s no guarantee that they will always have that account. The credit bureaus can choose to stop doing business with a lender or a debt collector. They can also choose to purge data provided by a former client. And like consumers, there’s nothing they can do to force a credit bureau to change their mind.
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.
I was speaking to a consumer group recently and the topic of credit repair came up as a discussion point. I fielded questions about whether or not credit repair is legal, how to identify good credit repair companies, and whether the process of traditional credit repair is better or worse than adding tradelines to your credit reports. It occurred to me that there was a considerable disconnect between what is traditional or garden-variety credit repair versus adding tradelines to your credit reports, thus the purpose of this writing.
Traditional Credit Repair
While I have no dog in the fight between credit repair companies and the tradeline industry, it appears some credit repair companies misrepresent their services. Credit repair is often positioned as a way to get inaccurate or unverifiable information removed from your credit reports. It appears, however, that traditional credit repair is built more around getting negative information removed from your credit reports, whether it is accurate, verifiable, or not.
Some credit repair companies “jam” the credit bureaus with repetitive dispute letters.
While some credit repair companies are more surgical in their approach when communicating with credit bureaus and lenders, some credit repair companies choose to simply bury them with repetitive dispute letters. This process is commonly referred to as “jamming.” Sometimes jamming is successful in getting negative information removed while other times it isn’t. And, of course, if you’re successful in getting negative information removed from your credit reports, your credit scores may improve.
Traditional credit repair comes with a price tag. The price tag, frankly, is what makes credit repair credit repair. If a company charges you a fee for a service represented as one that will help you to improve your credit, that meets the definition of a credit repair organization in the Federal statute known as the Credit Repair Organizations Act. If there is no fee or valuable consideration, then it’s not credit repair.
Adding Tradelines
There are only three ways to add tradelines to your credit reports, and two involve associating your name with a credit card account. You can certainly apply for and open a new credit card account. If you are approved the lender will likely report the account/tradeline to your credit reports.
You can also have your name added to an existing account as an authorized user. An authorized user is someone who is authorized to use the credit line of a credit card account, but doesn’t have any liability for the debt. Credit card issuers often report credit card account information to the credit reports of the authorized user. And, if the account is in good standing and has a low balance relative to the credit limit, the result can be an improvement in your credit score.
You can add tradelines to your credit report by becoming an authorized user on someone’s credit card.
Being added to someone’s credit card as an authorized user is free, meaning the card issuer isn’t going to send you a bill for adding someone to your credit card account. There are, however, companies that will broker the authorized user process and they do normally charge a fee for their services.
The third option is fairly new, Experian Boost. Boost is an Experian service whereby they will add your utility accounts to your Experian credit report if you pay them from your bank account. The service, as of the date of this article, is free.
Boost requires a leap of faith as you will be asked to provide the name of your bank and your login credentials, including your username and password. Using that information Experian will gain access to your utility payment transactions and add them to your credit report. If you do not pay your utilities with your bank account, you cannot add them to your credit report using Boost.
It appears the difference between traditional credit repair and tradelines is really the difference between addition and subtraction. Garden variety credit repair is built around getting negative information removed or “subtracted” from your credit reports. The tradeline or authorized user strategy is built around adding positive credit card accounts to your credit reports.
Because there is no single path to a lower credit score, there is also no single path to a higher credit score. As such, both credit repair and tradelines can result in higher credit scores. However, there is no guarantee that either will lead to higher scores as the impact of removing information or adding information is highly individualized and difficult to predict with a great deal of precision.
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.
Nearly half of Americans believe a credit score and a credit report are the same thing, according to a study by the American Bankers Association. That’s a big problem because it means many of us are seriously misinformed about how the credit system works.
Since credit is such an integral part of our financial ecosystem, it affects nearly all of us at some point in our lives. Your credit health can determine not only your access to credit and the cost of using credit but also employment opportunities, housing options, and more. Not understanding how credit works, therefore, can have serious consequences.
We want to help address this problem by making it easy to understand what your credit report is and why it’s important, the difference between your credit report and credit score, how to get a free credit report, and how to dispute errors on your credit report.
What Is a Credit Report and Why Is It Important?
A credit report is a detailed report on your credit history prepared by a credit reporting agency, also known as a credit bureau. The three main credit bureaus are Experian, Equifax, and TransUnion, and we’ll discuss each below. What is in your credit report can be different for each bureau, since they are private companies that do not share information.
What Is in a Credit Report?
Credit reports contain identifying information such as your name, social security number, and current and previous addresses. They also contain a detailed summary of your credit history, which includes items such as the following:
Credit reports include a list of your credit accounts and financial records.
A list of current and past tradelines (credit accounts), along with the date opened, credit limit, balance, and payment history of each account Inquiries into your credit history Public records of bankruptcies, foreclosures, tax liens, etc. Accounts in collections
How Far Back Do Credit Reports Go?
The information in your credit report usually goes back about 7-10 years. Current accounts should show up on your credit report as long as they are open. Negative information, such as collections, will fall off your credit report seven years after the delinquency occurred. Closed accounts that were closed in good standing fall of your credit report in 10-11 years.
What Is the Difference Between a Credit Report and a Credit Score?
A list of all your credit accounts and related personal information A three-digit number between 300 and 850 meant to represent your creditworthiness
Information in your credit report is used to calculate your credit score Reflects the information in your credit report
You are legally entitled to get a free credit report from each bureau once a year You are not legally entitled to check your credit score for free (although some credit card companies may offer this to customers)
Does not include your credit score Does not include information on your credit history
Does Checking My Credit Report Hurt My Score?
While this is a common misconception, you can rest assured that checking your credit report won’t lower your credit score. Checking your own credit is what’s known as a “soft inquiry” or “soft pull,” which doesn’t hurt your credit. “Hard” inquiries can ding your score, but these are used by creditors when making lending decisions, not for checking your own credit report.
How to Get a Free Credit Report
By law, everyone is entitled to receive one free credit report from each of the three major credit bureaus once every 12 months. You can order all three at the same time or order each individual report one at a time.
Some people like to spread them out and get a free credit report from a different bureau every four months so that they can regularly check their credit reports for errors and inconsistencies. Each credit bureau is a private, for-profit company, and they don’t share information, so you could have errors on one of your credit reports but not the others.
Free credit monitoring websites like CreditKarma provide free credit reports and scores.
The best way to check your credit report for free is to order your free credit report from annualcreditreport.com. In fact, this is the only website authorized to provide the annual free credit report you are legally entitled to, according to the FTC—so beware of other sites claiming to offer free credit reports or free trials, especially if they ask for your credit card information.
However, there are now several free credit report websites that earn money through advertising and are thereby able to offer free credit monitoring services. Sites that offer completely free credit reports include:
You can also check your credit report for free if you have been denied credit because of the information in your credit report. You are entitled to get a free credit report from the bureau who provided the report that the lender used to make their decision.
You are entitled to a free credit report if you are unemployed and applying for jobs.
For example, if the lender who denied you credit looked at your Experian credit report, you can request your Experian free credit report. The adverse action letter informing you of the reason for your denial should have instructions on how to request your free credit report.
There are a few more cases in which you can qualify for an additional free credit report, including:
If you are unemployed and planning to look for work. If you receive government assistance. If you are a victim of identity theft.
Although experts recommend checking your credit reports at least once a year, the Consumer Financial Protection Bureau (CFPB) estimates that less than one in five consumers get copies of their credit reports each year. Don’t miss out on this opportunity to get your credit report for free so you can make sure your credit report is accurate and identify any problems before they get worse.
Can I Get a Free Credit Report Directly From the Credit Bureaus?
You can also get your credit report directly from each of the credit bureaus, but you may have to pay a fee if you go this route. If you want to get a credit report for free, your best bet is to order from annualcreditreport.com.
However, some people may want to check their credit reports more than once a year, so we’ll discuss additional options for obtaining your credit reports below.
Experian Credit Report
You can get a free Experian credit report that refreshes every 30 days through Experian’s website. They also offer paid options that come with additional information. The Experian free credit report does not include a free credit score.
Equifax Credit Report
You can get your TransUnion and Equifax free credit reports on third-party websites.
While you cannot get an Equifax free credit report from the bureau directly, you can pay a fee to access your Equifax credit report and score. To get your Equifax credit report, visit their website.
You can also view your free Equifax credit report and score through CreditKarma, which updates once a week.
TransUnion Credit Report
Accessing your TransUnion credit report requires signing up for a paid monthly subscription service with TransUnion. However, you can get a free TransUnion credit report from CreditKarma or NerdWallet.
How to Dispute Errors on Your Credit Report
Unfortunately, studies have shown that as many as one in five consumers may have errors on their credit reports, and about one in 20 have errors that are significant enough to potentially lower their credit scores. This means it is crucial to monitor your credit reports regularly and be aware of how to fix errors on your credit report.
The credit bureaus offer online forms to submit credit report disputes, but experts warn against using this option, as it does not allow you to write a detailed explanation of why you are disputing the information or provide sufficient supporting evidence. This leaves room for the credit reporting agency to deny your claim because you did not provide enough information.
The best way to dispute a credit report is to write a detailed credit report dispute letter and mail it to the bureau along with plenty of documentation verifying your identity and supporting your claim.
Once a dispute has been filed, the bureaus typically have 30 days to investigate the claim. If they verify that the item is accurate, it will remain on your report; if not, they must either update the item with the correct information or delete it entirely.
Errors on your credit report can, unfortunately, lead to bad credit. For this reason, checking your credit report regularly and disputing any errors is an essential step in maintaining your financial health.
It’s important to check your credit report for errors regularly.
If you have a lot of errors on your credit report or if you have been the victim of identity theft, it may also be worth considering hiring a reputable credit repair service to assist you in the dispute process.
Which Errors Can You Dispute?
The law requires that the information in your credit reports must be accurate, complete, timely, and verifiable. Anything that does not meet these requirements can be disputed.
Technically, you can dispute anything in your credit file, but that doesn’t mean you should try to dispute things that you know are accurate. The credit bureaus are allowed to ignore “frivolous” claims, and if they verify something to be true, it will stay on your credit report.
For more tips on how to dispute a credit report, check out this article from creditcards.com.
Quick Credit Report Facts
A credit report is a detailed report on your credit history prepared by one of the credit bureaus: Experian, Equifax, and TransUnion. The information in your credit report is used to calculate your credit score. Checking your credit report does not hurt your score. You are entitled to a free credit report from each of the three bureaus once a year, which you can order from annualcreditreport.com. You can dispute errors on your credit report by mailing a credit report dispute letter and supporting documentation to the credit bureau.
One of the more common questions I receive from consumers is how they can best establish credit or improve their credit scores. It’s a hard question to answer without seeing their credit reports. There are many paths to poor credit scores so the advice isn’t as simple as one universal answer. The answer is going to vary based on each consumer’s individual credit situation.
As to the “how can I establish credit” question, that one is certainly easier to answer because there is a finite number of options to choose from when building or rebuilding a credit report and a credit score. My favorite option is the same one my parents used some 33 years ago when I was 18 years old and headed off to college. My father added me as an authorized user on one of his credit cards.
If you’re not familiar with authorized users, you can read more about them here. Or, I can save you some time; an authorized user is someone who is added to the credit card account of another person. The authorized user has the same spending permissions as the primary cardholder, but without any of the payment or debt liability. Almost all large credit card issuers will allow their primary credit card holders to add authorized users to their accounts.
The upside to being an authorized user is most credit card issuers will report the history of the credit card account to your three credit reports as maintained by Equifax, Experian and TransUnion. This means not only will lenders see the account on your credit reports but, also, credit scoring systems will consider it when calculating your credit scores.
Authorized Users and Credit Scoring
All commonly used credit scoring systems will consider an authorized user account or “tradeline” as a scored attribute. In English that means if you’re an authorized user on someone else’s credit card account and that account is reported or “furnished” to the three consumer credit reporting agencies, and it ends up on your credit reports, then it will be considered in the calculation of your credit score.
In most scenarios an authorized user credit card account is treated no differently than if you were the primary cardholder. The balance, the credit limit, the age of the account, and the account’s payment history would be treated no differently. If all of those credit card attributes say good things about you, the card will likely help your credit scores. And conversely, if the card is mismanaged then you too will likely suffer a credit score impact, just like the primary cardholder.
There was a time many years ago when authorized users were being abused as a credit repair strategy to temporarily boost consumer credit scores. The response…in June of 2007 the primarily used credit scoring company announced that they would no longer count authorized user accounts in their upcoming credit scoring system. The reason they gave was that by no longer counting authorized user accounts in the calculation of a credit score they would be protecting lenders from the practice of piggybacking on someone else’s credit card account.
Thankfully the company reconsidered their position after consulting with the Federal Reserve Board and the Federal Trade Commission. Instead of simply ignoring authorized user tradelines, the company instead implemented logic into their future credit scoring models that reduced the potential impact from piggybacking. [1] The specifics as to the exact treatment of authorized user tradelines by these newer credit scoring systems have never been publicly disclosed.
How Authorized User Tradelines are Helpful
Assuming an authorized user tradeline makes its way to your credit reports, it can be helpful in a variety of ways, which I alluded to above. First and foremost, lenders like to see positive information on credit reports, and that has nothing to do with your credit scores.
If the authorized user account is old, it will help to increase your average age of accounts, which is an important factor in your credit scores. If the authorized user account has a clean payment history, that is helpful to your credit scores. And, maybe most importantly, if the authorized user account has a low balance relative to the credit limit, that is very helpful to your credit scores.
Really the only way an authorized user account can hurt your credit scores is if you choose to associate yourself with a poorly managed account. For example, you’d never want to have your name added to an account that had a history of late payments. And, you’d never want to associate your name with an account that has a large balance relative to the credit limit. These are score damaging qualities of a tradeline, which would certainly point your credit scores in the wrong direction.
[1] From the Written Statement of Fair Isaac Corporation before the U.S. House of Representatives Committee on Financial Services Subcommittee on Oversight and Investigations.
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.
Derogatory entries on your credit report, such as 30-day late payments, 60-day late payments, collections, and more, can seriously damage your credit score. Is there a way to get derogatory items removed from your credit report so that your score can bounce back? Let’s find out.
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In the world of consumer credit, there are a number of Federal laws or “statutes” which help consumers in regards to their personal credit. Two such notable statutes are the Fair Credit Reporting Act, more commonly referred to as the “FCRA”, and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, more commonly referred to as the “CARD Act.”
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