At the start of the credit score calculation process, Equifax, TransUnion, and Experian – the Big Three credit bureaus operating in the western hemisphere – each request their own individual data from lenders regarding the secured (home mortgages and vehicles, primarily) and unsecured (revolving lines of credit, charge card, student loans) debts that borrowers hold, alongside information regarding any other significant financial matters (tax debts, past due alimony, utility bills that have gone to collection).
In theory, every single lending institution to hold title to a loan should submit monthly updates to the credit bureaus about all pertinent details up until the moment that the debt is fully satisfied. In practice, however, with more than a billion credit reports pulled each month by American lenders and several times that amount of data passing back and forth between the creditors and the credit reporting agencies, glaring oversights are extremely common, particularly as regards final compensation of the loans.
The credit bureaus will not only list the sum total of funds that you currently owe to each different lending institution but also the age of the account, the number of the account, the minimum payment amounts, and the balance limit or amount of money that could potentially be borrowed upon given the contractual agreement. Late payments are recorded in increments of thirty, sixty, or ninety days.
The amount of time that evidence of such items as a Chapter 7 or Chapter 13 bankruptcy declaration, charged off loan, or court ordered lien will appear on a borrower's credit report shall be determined by the legislature of his or her state of residence: though, typically, the statutes of limitations last seven years after the judicial sentence or the last recorded account activity.
The credit scores from each bureau are then derived from inputing the constantly updated consumer data through certain mathematical algorithms designed to estimate an individual's credit worthiness and the eventual risk to lenders. Each credit bureau report will most likely contain slightly different figures – since the three agencies all maintain slight discrepancies regarding the representation of borrowing histories – and the credit scores (based, after all, upon the amassed data) will change as well. As a result, the loan officers will want to make sure and pull all three credit scores for evaluation before approving a debt of any size such as a home mortgage or automobile loan.
When all three reports are pulled, the underwriter or credit analyst will put aside the highest and lowest; the resulting number's called the mid score. In general, the three credit scores should only differ by ten or twenty points. Any serious outlying figure will most likely indicate an omission of satisfied compensation or similar clerical error on the part of either the lender or the credit bureau.
While mistakes of this sort used to be an incredible headache for consumers – many of whom were forced to hire on legal assistance at great expense to see the proper changes – federal legislation over the past decade has made a tremendous impact upon accuracy and the speed of responsiveness by the credit bureu representatives. If any of the details regarding loan payments or current obligations are disputed, the credit reporting agencies must now receive verification directly from the lending institution within one month or else remove the item in question.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
