What Credit Reporting Agencies Say About Fixing Your Credit

Getting credit advice from a blog, book, or magazine is great depending on the advice. But sometimes it’s best to go right to the source and get your information there.

When it comes to military credit (or consumer credit issues in general) you should know what the three credit reporting agencies say about credit repair, and maintaining your credit score once it’s gotten back to where you need it to be.

Military Credit Repair

Some credit issues related to military service should be addressed at the source. As in, contacting the individual creditor to work things out. But that can, as you’ll read below, take the form of something quite different than simply working out a payment plan.

Sometimes, credit repair for military members requires some actions that don’t appear to be related to raising your FICO scores. But these steps help, and one of the first to take is to explore your rights and options under the laws addressing credit relief for U.S. troops.

There is financial relief for military members under the Servicemembers’ Civil Relief Act (SCRA) for debts that were incurred prior to military service. That relief includes a 6% interest rate cap on loans military members closed upon (again, before starting active duty).

This six percent interest rate limit is not automatic, must be applied for with the credit agency, and must be applied for with all credit card companies with which you need to claim rights under the SCRA.

There is a time limit. You have only 180 days after the end of military service to file the SCRA notice with your creditors.  Your creditors will, under the law, be compelled to fully forgive, rather than defer until later, the amount of interest greater than six percent per year on all qualifying debt under SCRA regulations.

This relief mentioned above is not credit repair. But it can go a long way toward credit repair in cases where a borrower needs to cut her debt-to-income ratio as part of a strategy to raise FICO scores.

Military credit repair is a lot like civilian credit repair; on-time payments and your debt ratio are huge factors in your FICO score. If you have trouble with late or missed payments, you should consider setting up an allotment, auto-deduction, or other instant transfer payment options to eliminate all missed or late payments going forward.

Until you have one year of on-time payments for all financial obligations, your FICO scores will suffer. All three credit reporting agencies say the same thing about missed payments. Don’t let them happen.

Military Credit Repair Resources

Aside from the advice you will find at the official sites for the three major credit reporting agencies, you should take advantage of on-base resources for currently serving military members and VA state resources for veterans.

For example, the on-base options you have to get help learning how to fix your military credit scores include Military and Family Readiness Centers.

Joint Base San Antonio has one such program offering “individual strategies…seminars, classes and individualized counseling sessions are offered in the areas of budgeting, credit & debt management, home and car buying, investing, consumer protection,” and much more. Most bases have resources like this.

For veterans, state VA offices may have financial counseling options available. Call your nearest VA office, VA regional office, or headquarters to learn what options are available near you. You can call the VA central number at 1-800 827-1000 for more assistance with local VA options.

What Equifax Says About Credit Scoring

What follows is a description of how one credit reporting company evaluates your credit data to assign you a FICO score. Fixing your credit means learning how credit works, how credit reporting agencies interpret the data, and how that data affects your score.

The credit scoring process may vary from company to company and is not necessarily standardized in ways consumers might assume; it’s best to review best practices advice from all three major credit reporting agencies to get an idea of how your data is interpreted by each one.

Equifax describes its scoring procedures on its official site. Those procedures include the following information, which are described as “factors used to calculate your Equifax credit score”:

• Payment history is the top factor listed by Equifiax. This makes up 35% of your overall FICO score. Credit history review involves an examination of how the consumer has managed credit already extended to them. Late and missed payments will be shown in your record, and all negative credit activity will be reflected here unless it has “aged out” of your credit report.
• Used credit and available credit also known as credit utilization, which makes up another 30% of your credit score. How much you currently owe is important, but how much you owe compared to your credit limit is a very important factor.
• Type of credit used makes up another 15% of your score. Do you have a mortgage? Installment loans? Revolving credit? Your lender wants to know you can manage a variety of different types of credit.
• New credit data can make up as much as 12% of your FICO score. How many new credit accounts have you opened? Is there potential for your lender to view such activity as excessive? Something to consider if you are still planning your loan and not actively applying for one. Equifax documents say your credit score, “will factor in the length of time since creditors made credit report inquiries.”
• Credit History makes up as much as 7% of your score. The age of your credit is important and the older your accounts are, the better.

What TransUnion Says About Credit Repair Issues

There are two basic things veterans, military spouses, and active duty troops need to know about credit repair. One is that you DO NOT have to pay a third party to repair your credit. You can take these simple steps yourself (pay on time every time, lower your debt ratio, and reduce your outstanding credit card balances to well below 50%) and see results over time.

The second thing you need to know is that it is impossible (no matter what so-called credit repair companies may try to have us believe) to remove ACCURATE negative credit information from your report before it “naturally” falls off after seven years.

It IS possible to remove inaccurate information, information that should have fallen off your report but didn’t, and other errors. But the accurate negative credit information sticks until it ages out of the report.

And how long does that negative credit information remain? TransUnion says “Typically, the negative information on your credit report tends to fall off after 7 years, or 10 if you’ve been through bankruptcy.”

Good credit information goes into your credit report “for an average of 10 years from the day its corresponding account is closed”. TransUnion says this is true of loans including home mortgages, auto loans, and other “types of agreements that have fixed terms on the number of years for repayment.”

TransUnion also reminds that with your revolving credit accounts (credit cards), the positive credit data stays in your report as long as the account is active.

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What TransUnion and Experian Say About Disputing Your Credit Reports

Soldiers, Sailors, members of the Coast Guard, Airmen, and Marines all carry elevated risk for becoming victims of identity theft, scams, fraud, and other problems. That is why it is vital to regularly examine your credit reports.

If you notice evidence of identity theft (accounts you don’t remember opening, charges you don’t remember making, etc.) you will need to contest that with the three major credit agencies to prevent lasting damage to your FICO scores.

TransUnion advises regular credit report review and immediate reporting of suspicious activity. “Because inaccurate, derogatory information can lower your credit score and may indicate fraudulent activity, it’s best to dispute any potential inaccuracies as soon as you spot them.”

Remember that not even the credit agencies themselves are immune from hacking, identity theft, and other problems.

Experian was hacked in 2012, 2013, and again in 2015 according to several sources including the business and personal credit advisory agency North Shore Advisory. The personal data compromised in these incidents affected literally millions of consumers.

There are certain issues on your credit report that may look like something you should dispute, but in reality may be perfectly accurate and acceptable. Experian’s list of frequently asked questions about credit report disputes includes a query about accounts that do not show a balance, but are not listed as “paid” or “paid in full” on the credit report.

That may seem like an error, but according to Experian,”Revolving lines of credit, retail charge cards and bank credit card accounts are open-ended lines of credit. This doesn’t mean that you still owe a balance; it only means that you have credit available.”

Any credit card account listed as “current” is basically telling the credit agency the account is not delinquent or past due.

Some have concerns about collection activity that they paid off. Why does the collection still appear on your credit report after it has been paid?

Experian’s official site advises that when creditors send a past-due account to a collection agency, “your credit report will show the status of the account as a ‘collection’” or that the account is “in” collection. Consumers who pay off a collection action have this reflected on their credit report accurately as being a “paid collection.”

And while we’re discussing credit reporting agency policy, what about those claims made by certain third-party credit repair agencies that negative credit data can be removed from your report before it falls off “naturally”? From the Experian official site:

“We store information from credit grantors, public records and other reliable sources following the guidelines in the Fair Credit Reporting Act. Your payment history is stored in the records of credit reporting agencies.”  But that’s not all.

There is one last line in that statement that should interest consumers most. According to the Experian official site, “Accurate information cannot be deleted.”

Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News