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Credit Education
Credit Revolution
Chapter 5

Credit Reports and Credit Scoring Made Much More Complicated

The obvious question is: How do I make my score higher than it is? That's the big question, isn't it?

In fact, you DO have an enormous amount of control over your credit score. Your control over your credit score requires either; a) a tremendous education in how the consumer credit system works; or b) someone with that knowledge to guide you.

The landscape of credit report correction and improvement has become increasingly complicated over the years. You have a huge stack of consumer rights. That's really good news for you because you're accumulating more and more opportunity to improve your credit. However, the flipside is that those same rights are becoming harder and harder to understand. Isn't that just like government: the more rights you're given, the harder they are to access. Again, an informed coach will make all the difference in the world.

The whole credit repair enchilada began with the 1971 passing of the Fair Credit Reporting Act (known as the "FCRA,") when Senator William Proxmire and other statesman banded together to do something about the tsunami of consumer complaints building against the credit bureaus. Proxmire started with high hopes, but after the FCRA passed, he was plagued with a sense of defeat. The law had been so thoroughly modified by credit bureau industry lobbyists that Proxmire feared that the statute had succeeded in nothing at all.

But Proxmire might feel differently if he lived today (he passed away in 2005). Since the first version of the FCRA, many amendments have built up a wall of consumer protection that, while not simple by any means, still provides an interesting and fertile array of rights badly needed by Americans.

During the Clinton Administration in 1996, the FCRA seemed to be going the wrong direction. Amendments were added giving some protection to credit bureau industry practices such as pre-screening and federal pre-emption of sometimes-tough state laws against the credit bureaus. Other additions strengthened the FCRA such as specific limits to the duration of an investigation (thirty days).

But the 108th Congress under the second Bush Administration would see the FCRA take a new leap toward consumer rights. With the 2003 passage of the Fair and Accurate Credit Transactions Act, several things would shift decidedly in the American citizen's favor. Credit bureaus were required to provide one free credit report per year (instead of only having to provide them if a person was turned down for credit.) Also, information providers (banks, credit card companies, mortgage companies, collection agencies, etc.) were required to accept disputes from consumer and were placed under the same penalties as credit bureaus if they failed to handle disputes efficiently.

With all these twists and turns, the FCRA has grown more powerful for people. But, it has also become more complicated and more difficult for the average Joe to get his arms around what he's supposed to do when his credit report comes up bad. That's just the way it is with government: every silver cloud has a dark lining.

At the same time as your credit rights are expanding, the commercial side of credit scoring and credit reporting has been getting more sophisticated as well. As a matter of fact, the credit bureaus themselves are breaking ranks with the credit scoring companies by creating their own scores and their own credit models. Moreover, the credit bureaus are breaking ranks with each other, with bureaus like Trans Union becoming increasingly consumer-friendly while other bureaus stick to their pro-business, anti-consumer guns.

In this environment of confusion and sophistication, smart folks have huge opportunity to take hold of their own destiny and shape their credit scores. Even a little work toward a good credit score makes a big difference. It's important to understand that the credit card companies and banks make most of their money on the lower margin of their borrowers. In actuality, American...


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Credit Revolution: Path of the Smart Consumer 2007 John C. Heath, Esq., Dr. Randy Padawer, Jayson R. Orvis. All Rights Reserved. Published by Far Cliffs Multimedia, LLC

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