The three credit reporting agencies in essence control the economic destiny of every American with their holy FICO score. And it’s quite a scam they have going. Take what happened to me as an example of why, even with stimulus money pumped into the economy, banks still won’t lend.
Over a year ago I wanted to purchase a piece of land. As far as I knew I had great credit: long history of always paying my bills on time. Except, when I applied for the loan it turns out that, unbeknownst to me, a $175 medical bill that I had actually paid seven months before was listed has being in collection. This one single item—which was actually false—tanked my credit score by 120 points from its previous level which disqualified me for a loan. No matter that there was 35 years –that’s right 35 years -- of on time payments on mortgages, car loans credit cards. The ONLY thing lenders consider is the all holy FICO score. That one tiny mistake which eventually took two months to resolve meant I was disqualified for a loan. Now, imagine what happens when a person with great credit losses a job, or has a medical disaster. Miss a few credit card payments, or car payments and it will literally take years to recover that precious FICO score.
And here’s how the credit reporting agencies can double scam you. After my disaster with the error of the medical bill, I signed up for Equifax’s “Credit Watch” in which for a monthly fee of $14.95 automatically withdrawn from my credit card, they would “guard” my credit and notify me of any issues via email. It sickened me to pay what is essentially a blackmail payment but I didn’t want to risk another disaster. Each month I got an email notice telling me my “Plus Score” remained the same, no changes etc. My interpretation was that the Plus Score was a compilation of all three credit reporting agencies FICO.
Then I get a letter from American Express stating they are lowering my credit limit because of excessive outstanding balances on other credit cards, including the Amex card and because of “negative public record items” in my credit report. In fact, they lowered my credit limit to just $50 above my current balance. Meaning that if, I had charged $100 the day before I received the letter, I would been over my credit limit leading to extra charges. No matter that every single payment is one time for all my credit cards. What raised my credit card balances? It must have been all the recent luxury purchases in these tough economic times, like $380 a month for medical insurance, $500 co-payment for surgery, propane, gasoline and doctor visit co-payments. I called American Express about the “negative public record items” thinking it must be that—now two years old—medical collection item. I explained that I get a monthly report from Experian (the credit reporting agency used by AmEx) that says my Plus Score is 738. Now, here’s the real kicker: The AmEx rep told me, “Your Plus score doesn’t mean anything. It’s not your FICO score.”
So, even if banks have money to lend, how will average Americans who have struggled through job loss, medical bills, who through no fault of their own, tanked their FICO score, ever be able to take advantage of that money to say, buy a car or a new refrigerator? Until the credit reporting agencies are regulated the average American consumer will always be held economic hostage to a system that benefits no one except the credit reporting agencies.