Part 1: Trans Union FICO score 738 with two charge-offs

The client’s credit reports contained only 4 accounts:

A positive student loan, two charge-offs with $0 balances and a Palisades collection.

Due to the low number of accounts, it is easy to document how FICO scores rate accounts.  Tradelines reported by creditors as disputed are NOT rated as derogatory, but DO count for the so important account history.   In part 2 I will document that Equifax FICO scores STILL contain entirely fictitious late payments —  myFICO (formerly Fair Isaac) IGNORED my 2/26/07 notice:

Open Letter to Fair Isaac Regarding its Addition of FICTITIOUS Derogatory Data to Credit Reports and Sale of Defective myFICO Reports

More on the myFICO fictitious lates in my next post and for now we’ll focus on the GOOD news, the client’s 738 Trans Union FICO score after Palisades deleted from her reports.

Palisades had filed suit and its attorney notified the client that she would be served.  That’s when she contacted me and she then submitted her FACTUAL disputes to Palisades and to its attorney.  Palisades deleted from all credit reports shortly after receiving the dispute.  It’s been several months now and she has not been served yet.

So she now has 3 accounts on her credit reports, the two charge-offs and one paid as agreed student loan. 

The myFICO Trans Union score factors:

Trans Union

Top Negative Factors

There is no recent activity on your revolving accounts.

Your credit report shows no open revolving accounts [?] or it does not report recent information (such as balance or credit limit) about any of your revolving accounts. Your FICO score evaluates your mix of credit cards, installment loans and mortgages. People who demonstrate responsible use of different types of credit are generally less risky to lenders.

What to do about this: You might want to show new activity on any credit card. If you already have a credit card, you can do this by using it and paying it back on time. If you don’t have a credit card, consider opening one. However, be aware that the credit inquiry associated with applying for a new card may lower your FICO score in the short term.

— They forgot to mention that opening a new account will likely also lower the scores because the account is NEW and it will lower the average account history. However, there’s no way around that (aside from becoming an authorized user or joint account holder on an account with good history) and hopefully she’ll soon get pre-approved credit card offers as she recently opted in.

The balances on your non-mortgage credit accounts are too high.

Total amount you owe on all non-mortgage accounts $9545

— The student loan and a “non problem” as the score is fine.

Top Positive Factors

You have no missed payments on your credit accounts.

Number of your accounts with a missed payment 0 accounts

— We have two charge-offs, but they are NOT rated as derogatory because they are reported as disputed by the CREDITORS.

HOWEVER, when applying for a mortgage, the dispute notations may have to be removed due to FNMA requirements and the score will be much lower.

You’ve limited the use of your available credit.

Ratio of your revolving balances to your credit limits Unknown

— This is odd.

You have an established credit history.

Your oldest account was opened 7 Years, 10 Months ago
Average age of your accounts 6 years.

— The charge-offs noted as disputed by the creditors are NOT rated as derogatory, but they ARE rated for the account history (similar to AU accounts). The only positive account was opened in 2/05 and that’s how we know that the charge-offs ARE rated for account history

Two charge-offs, only one positive account and a 738 TU FICO due to the creditors’ dispute notations:

These notations have NOTHING to do with credit bureau investigations after consumers disputed, but they are reported by the CREDITORS, usually after receiving disputes from a credit bureau or from consumers directly.  They usually update or verify the accounts, but presumably report with this dispute notation to avoid liability for incorrect credit reporting.  I see this notation most often on Citi accounts, followed by Chase and Wells Fargo.

The dispute notations are often reported for YEARS.  

Due to FNMA and other agencies’ requirements, lenders now often require the deletion of dispute notations for obvious reasons:

The resulting FICO scores have nothing to do with reality.  Of course FICO scores often have little to do with reality, as you’ll see in my next post about the late payments CREATED by myFICO.

If you have dispute notations on your report and their removal would lower FICO scores, you need to find out the current rules / procedures regarding the disputed accounts for your mortgage.  If they require that the dispute notation has to be deleted (very likely with such an artificially high score), you should have the dispute notation removed BEFORE applying to avoid being declined or receiving a higher rate at the last minute.

How to get the dispute notation deleted:

If you have TIME, start with a simple dispute to the credit bureau:

[Creditor] account # …:  Please remove the description “account information disputed by consumer.”   This is incorrect because I am NOT disputing this account.  Please delete this description as it prevents me from obtaining  a mortgage.

If they don’t remove the dispute notation, you can call or write to the creditor directly.  Of course RECORD all calls if your mortgage is important.

If the removal of the dispute notice is a lender’s loan condition, you should contact the credit bureaus AND the creditor immediately by phone AND in writing.

How to get the dispute notation ADDED to an account:

Submit a LEGITIMATE dispute to the credit bureaus and/or creditor.   If you falsely claim that it is not your account, you might have trouble getting a mortgage later as they often ask what was disputed.  There is NO reason why a creditor couldn’t give the exact copy of your dispute to the lender.  Lenders already contact creditors about payment histories for mortgages and they could simply request copies of your disputes from any creditor.

Frivolous disputes are not going to help you get your mortgage approved!

However, it is perfectly ok to dispute an incorrect balance or any other incorrect or incomplete data.

OTHER credit scores such as the scores provided by credit bureaus to lenders and the FAKE scores (no lenders use them) sold to consumers directly use different formulas and might well be 100 points lower  because they rate the disputed accounts.  That’s why it’s SO important to get the myFICO reports when you’re looking for a mortgage.

I’m NOT trying to create business for myFICO and their increase to $20 per report is truly outrageous, but you can start with the free trial for the Equifax score monitoring and you can use up to 30% discount codes for their products.

NEXT:  Part 2, the fictitious late payments created by myFICO.

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