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How Often Are There Errors On A Credit Report? All The Damn Time!

Updated: 04/09/2021 by Financial Samurai 20 Comments

credit report errors

One of the most important things in maintaining good financial health is a strong credit score. One of the easiest ways to avoid a bad credit score is regularly checking for credit report errors. How often are there errors on a credit report? Surprisingly all the damn time!

Check For Credit Report Errors Often

It is best practice to check for credit report errors at least once a year. If you can check quarterly, fantastic. Better yet, utilize technology that can monitor your credit report and credit score daily for any errors or anomalies.

An Oregon lawsuit awarding a woman $18.6 million in punitive damages from Equifax is a big reminder why we should check for credit report errors regularly.

Julie Miller contacted Equifax eight times between 2009 to 2011 to fix mistakes including her social security number and birthday on file. She didn’t make much progress.

The Federal Trade Commission found in a 2013 study that 21% of the 2,968 credit reports they investigated contained errors. The survey also found that 5% of the errors represented issues that lead consumers to be denied credit. Various other studies have also shown that 25-30% of credit reports have errors. Pretty high if you ask me.

The purpose of checking your credit score before applying for a mortgage or a loan isn’t only to assess the viability of getting such a loan and figuring out the expected interest rate. The main reason why I check my credit score once a year is because of identity theft and errors. If I’m not taking out credit, someone else better not be using credit in my name!

My Painful Experience With A Credit Report Mistake



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The Average Credit Score For Approved Mortgages

Updated: 12/12/2020 by Financial Samurai 24 Comments

The average credit score for approved mortgages is finally declining a little bit. As thousands of homeowners smartly refinance their mortgages during the global pandemic, banks are getting more competitive.

Before the 2008 – 2009 recession, the average credit score for approved mortgages averaged around 720. 720 is actually the cut-off point between “Good” and “Excellent” credit.

Given the housing market collapsed nationwide anyway, one shouldn’t be too impressed with a 720 credit score. A 720 credit score should be viewed as average, at least from this loan officer’s perspective.

The Average Credit Score For Approved Mortgages Is Declining

After the housing bubble burst, the average score for approved mortgages shot up to 769 from 2009 until the end of 2012. A 769 credit score beats out 80% of all other credit scores out of 850. In other words, banks weren’t lending to hardly anybody. The upside is that the probability of a similar type of housing crash in the future has declined.

The “good news” for borrowers is that according to Fannie Mae the average credit score of an approved mortgage applicant is now down to 741 as of December 2020. I say “good news” because it’s brutal for even good income earners to get a mortgage nowadays. Many renters I know have been shut out of the housing market simply because they can’t get a loan.

Although credit standards are loosening, a credit score of 741 is still a pretty high hurdle to overcome given you still need a good income and a healthy balance sheet to cover borrowing ratios. But at the margin, a lower credit score hurdle should allow more people to borrow money to further support the housing market recovery.

I still see little signs of sub-prime mortgages or negative amortization mortgages returning. But one thing we should be concerned with is the latest Federal Housing Administration initiative to get Boomerang Buyers back in.



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What’s Hurting My Credit Score And Why Is It Fluctuating So Much?

Updated: 12/23/2019 by Financial Samurai 29 Comments

Fluctuations In Credit ScoreAnd just like that, I’m no longer in the 800+ credit score club full of beautiful people. As part of my mortgage application process, the bank had to pull my credit score. The big white envelope in the mail with the results reminded me of my college acceptance letter way back in 1994. When I opened it, I was disappointed to discover my credit score dropped to 790 from 805.

Since September, 2013 when I first broke the 800 credit score mark when I applied for my Discover It credit card for travel and double the rewards points, I’ve done nothing different. Every single mortgage, utility, and credit card bill has been paid in full without fail. Actually, that’s not true. I was a week late on one credit card payment because I was traveling. I gave them a ring and they dropped the late fee and said no problem. (See: How Does A Late Credit Card Payment Affect My Credit Score)

So I wonder, what could have hurt my credit score in just six short months. Perhaps you, too, have seen a decline in your credit score without any apparent reason. Let’s think things through.

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Should A Credit Check Be Allowed Or Required By An Employer?

Updated: 02/18/2021 by Financial Samurai 87 Comments

Mexico Sunset

Should a credit check be allowed or required by an employer? Perhaps. However, times are so difficult already for millions during a pandemic, legislation might outlaw such a thing.

Further, after the economy collapsed in 2008-2010, it’s not uncommon for people to have lost their homes to foreclosure or short-sale. One’s credit score usually gets demolished by 200 points or more, and stays that way for 3 years or longer.

A Credit Check After A Foreclosure

One of my close friends named Tom, decided to follow through on my getting laid off plan because he’s burnt out and no longer has the desire to work in software sales anymore. He’s got enough income saved up to last him for about 2 years if he maintains his current lifestyle, which is not lavish by any means.

If Tom successfully engineers his lay off, he wants to travel for 6 months, and then see if he can find a job in sales at one of the big internet/tech companies such as SalesForce or Google.

Given his income will literally go to 0, except for his 6 months severance, and $1,800/month in unemployment benefits, he no longer wants to keep paying for his underwater condo he bought at the top of the market.

Tom’s payment is around $4,500 a month (includes property taxes and HOA), which was digestable when he was making $10,000 a month after taxes.  But now that he has barely any income, he finds it a big waste to spend so much to live in a 2 bedroom, 2 bathroom condo now that he wants to go travel.

Without a job anymore, Tom no longer feels morally obligated to pay his mortgage, since the bank did agree to lend him the money based on the colateral value of the property. Besides, California is a non-recourse state, meaning that the bank can’t go after Tom’s other assets.

Credit Checks Appropriate For ew Hires?

Six months from now, Tom will want to re-enter the workforce. With the relationships he’s cultivated and the skills he’s developed over the past 8 years, he strongly believes he has a good chance of finding another similar-paying job. His only real worry is whether or not a company will decide not to hire Tom due to his poor credit score if he short-sales his condo.

Tom’s current credit score is “somewhere in the 700’s“. He doesn’t know for sure because he hasn’t checked his credit since he bought his house 5.5 years ago. Anything above 720 is considered excellent.  

If Tom short-sales, he expects his credit score to drop to the 500’s range, which is absolutely horrible. Yet, Tom himself, is a hard working, honest, and nice guy.  

Should he be punished for making a bad investment with a bank, given how ferocious the downturn was? Not many people forecasted such a big collapse. Did you? I guess I did in March 2020!

Arguments For Why Credit Checks For New Hires Are Appropriate

1) If you can’t handle your finances, you might not be able to handle the job.

2) One datapoint of many that gives insight into one’s character.

3) Might demonstrate a level of financial literacy, which is important with finance-related jobs.

4) Could be a signal that demonstrates reliability and responsibility.

5) Gives the employer insight into whether the candidate is desperate or not for money.

Arguments For Why Credit Checks Are Inappropriate

1) It’s none of a company’s damn business what one’s personal finances are, so long as one does a great job for them.  Nobody likes an invasion of privacy.

2) Unfairly penalizes people for deciding to buy a home during a time when they simply just needed to buy because of a growing family and a desire to establish roots.  Most underwater homeowners are not speculators and millions of people have lost their jobs in the downturn.

3) What if one doesn’t get the job and has a very poor credit score? A company could open itself up for a potential lawsuit by the applicant claiming discrimination based on credit score, despite the reason being very hard to prove.

What Is Your Credit Score?

The fact of the matter is, more and more employers are checking potential job applicant’s credit scores to determine employability. A credit score is not the main factor, but it is one of many variables which can serve as a tie-breaker among many candidates.

It’s important you check your score once a year. I’ve found a couple errors on my score before which kept my score down by an important 60-80 points! As soon as I cleared the errors, my credit score at the time went up from about 715 to 785.  

This jump was huge, because at the time 10 years ago, it was went I bought my first rental property. If I didn’t check, I would literally have paid tens of thousands of dollars more in interest over the life of the loan had my erroneous credit score been used.

I found out my average credit score is 798, which is considered “excellent.” However, I’m kind of annoyed why it can’t just be 800.  Call me greedy I guess!  

It doesn’t really matter what your credit score is after about 760, because lenders provide the best interest rates for that score and above. But in order to not really matter, you must first check.

Related: How To Improve Your Credit Score To Over 800

WEALTH BUILDING RECOMMENDATIONS

Check Your Experian Credit Score Today. Check your latest Experian credit score straight from their website. Experian is the most commonly sourced of the big three. It’s a good idea to see what your credit score is before applying for a loan. If it’s below 720, you won’t get the best rate, but at least you can spend time to improve your score.

Furthermore, 1 out of 4 credit reports have errors, negatively affecting one’s credit score. I had a $8 late electric bill that crushed my credit score by 100 points and almost derailed my mortgage refinance. The scary thing is, I had no idea! A FTC study reported that roughly 25% of credit reports have inaccuracies. Check your credit score today.

Manage Your Money In One Place. Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. You can use Personal Capital to help monitor illegal use of your credit cards and other accounts with their tracking software.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms.

Personal Capital Retirement Planner
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See more of my top financial products to help you achieve financial freedom sooner, rather than later.

Photo: Mexican Fisherman’s Sunset, SD.

FICO Score Open Access: You Now Get A Free Credit Score When You Apply For A Credit Card

Updated: 04/09/2021 by Financial Samurai 19 Comments

light-bulb-moment

I recently had a connect the dots moment I’d like to share with you. In a program called FICO Score Open Access, FICO announced on November 4, 2013 that it plans to allow any lender who uses FICO scores to determine an applicant’s creditworthiness to allow the score to also be available to all applicants for free.

So far only Barclaycard US and First Bankcard have signed up, but surely a tremendous amount more credit card companies will sign up once the word gets out to consumers.

When I applied for the Barclaycard Arrival World MasterCard, I received my latest credit score in the mail of 805. At the time, I didn’t think it was strange because I always got my credit score in the mail during all my previous eight mortgage refinances.

Apply For A New Credit Card, Get A Free Credit Score

I also hadn’t applied for a new credit card in a decade. So I thought receiving my score was just status quo or at least a nice gesture by Barclaycard. The reality is that most credit cards don’t send you your credit score if you apply for their card.

The reason why we do get our credit scores during a mortgage refinance is because we’re paying to refinance or take out a new mortgage. Nobody pays to apply for a credit card!

As any proud personal finance blogger would do, I proceeded to write a post on how to improve your credit score to 800+ with this newfound information. We know that pulling your credit score too often may bring down your credit score. The idea is that if there’s a sudden rush of credit inquiries, it may signal the person is in a cash crunch.

Related: Credit Card Approval Standards On The Rise: Excellent Credit Scores Still Get Denied

FICO Score Open Access Helps Consumers

Can you imagine getting your credit score pulled, getting denied by the credit card company, and being left in the dark as to why? That would be as aggravating as getting a college or work rejection letter in the mail with no reason for denial.

The new FICO Score Open Access plan will supposedly allow participating banks to show applicants their credit history, any late payments, and debt levels.

You can still get your latest TransUnion credit score for free from a trusted company like AnnualFreeCredit.com if you aren’t looking for a participating rewards credit card. Just make sure you cancel the credit monitoring service before the grace period is over if you don’t want to get charged for such a service.

I’m predicting Barclaycard US and lesser known First Bankcard are going to gain outsized market share of new credit card applicants until every other credit card company participates as well. The FICO Score Open Access system is a great step for consumer rights.

Further Reading

If you enjoyed this post on the FICO Score Open Access program, here are some more related reads.

  • Yes, You Need A Credit Report AND A Credit Score To Rent An Apartment!
  • How One Late Payment Can Kill Your Credit Score
  • What Doesn’t Affect Your Credit Score? Dispelling Common Misconceptions

Recommendations

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I was paying $1,700 a year in fees I had no idea I was paying. After you link your accounts, use their Retirement Planning Calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms.

I’ve been using Personal Capital since 2012 and have seen my net worth sky rocket during this time thanks to better money management.

 

Planning for retirement when paying for private grade school
Are you on the right retirement path? There is no rewind button.

Would You Rather Have A Perfect Credit Score Or Perfect Grades?

Updated: 01/29/2020 by Financial Samurai 40 Comments

The Perfect Credit ScoreThe corollary between straight A’s and a perfect credit score is beautiful.  With straight A’s in high school, the chances of you getting into a top university with a merit scholarship increases drastically.  After all, how many valedictorians do you see go to Chico State?

With straight A’s in college, you’ll be invited back to interview at all your favorite companies and undoubtedly get a job so long as you aren’t some deranged lunatic with crazy eyes!  With a nice job usually comes nice pay and a nice bank account years down the road.

Five years out of college at your wonderfully rewarding, high paying job, you develop a fantastic credit score of 800.  It’s not the perfect credit score of 850, but it’s 60-80 points higher than the level which is considered “Excellent” (720-740).

When you go to apply for a car loan, the dealer offers you 0% financing on that hard to get 2013 BMW 335is coupe. When you look for an apartment in a hot job market, landlords actually call you back and give you one month free rent in order for you to be their tenant!  And when you live in a nice apartment in a nice neighborhood, sexy ladies and beefcakes take notice and want to get to know you more!

Which do you choose?

ARGUMENTS FOR A PERFECT CREDIT SCORE

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Corporate Greed By PG&E Killed My Friend’s Family And My Credit Score

Updated: 02/16/2021 by Financial Samurai 23 Comments

PG&E San Bruno Gas Explosion

Corporate greed by PG&E killed my friend’s family. It is a sad sad story.

Pacific Gas & Electric (PG&E), your San Bruno gas pipeline blast killed my friend’s wife of over 20 years and his daughter in 2010.  Thousands of people depend on you for energy to heat their homes and cook their food.  How can you let this negligence happen?  Is this a case of profits before safety?  What the hell.

We have been silently grieving for the past two years, and we were healing until I get a notification from my refinance bank that you guys screwed me on my credit score due to a $7 late payment from 2009 which was never sent to my correct address.

The $7 late payment, as later explained to me was due to a “landlord service continuation fee” where I take over all PG&E charges between the time my tenants vacate the property and when a new tenant arrives.  News to me guys.

Corporate Greed – PG&E TOO LAZY TO DO THE RIGHT THING



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