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Credit Reports Bad News Continues

By Faye Mergel
Published: Saturday, July 17th, 2010

102059903Mortgage Meltdown: Past Revisited. No one can forget what happened during the mortgage meltdown. In 2008, FICO scores were said to be unreliable and their creator corporation have had a hard time defending itself when many homeowners and banks accused the scores for the crisis. Credit scores are calculated based on the information details contained in the credit report. Thus, the FICO scores controversy affected cardholders and lenders’ reliance on the credit reports. Many banks who rely mostly on the scores claim that the credit reports can’t be trusted anymore and that they are now having problems on managing their risk. Cardholders on the other hand, complain that their credit reports aren’t accurate and have errors on it.

Some FICO scores supporters do not look at Fair Isaac Corp. the same way the bankers do. Inaccurate credit reports do not basically happened due to calculation flaws, they pointed. Inaccurate reports can be processed due to other factors such as identity fraud and certain economic factors.

Free Credit Reports: By law, cardholders can check their credit reports for free annually in each of the three main bureaus – Equifax, TransUnion and Experian. If the holders check their credit reports for the second day within the one-year time frame, they will be charged for that. This can be a little expensive to holders especially for those who have the habit of checking their reports quarterly or monthly. No wonder there are websites who offer free credit reports in their banners.

Holders are conceptually convinced that these “free reports” can make it easier for them to check their reports more frequently. The downturn was that these reports are tied to free trial services that would be soon tagged with a price if the customer doesn’t cancel the service once the trial period expires. In April, the government has passed a law requiring these “free reports” providers to place a large ad banner on their sites and indicate therein that what they offer are not mandated by the federal law. The websites ignored the new regulation and placed a banner on their webpage placing “free scores” instead. Customers have glinted eyes again but found themselves in the same situation. Tied-up free scores and trial services. Lawmakers and experts saw that the ads made the customer more confused on the reports and scores being free or not.

(Bad) Credit CARD (Report) Act – Though the new act provided protection to charging cardholders excessive penalties but did not set limits on the price settings and on how high the interest rates can go. Credit card holders claim that the act would cause very high increased rates and low credit limits to customers with bad credit history. This means that the cardholders with a bad credit history will be having a hard time managing their report. Since they will be required to pay higher finance charges later and they can’t apply for loans with satisfactory credit limits, they might end up more financially distressed.

The act has also provided the possibility for cardholders to make more difficult decisions says Will Black, an analyst for Moody’s Investors Service, a New York credit rating agency.

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