When it rains, it pours.

For nearly three years, homeowners have faced job losses, which ultimately resulted in late mortgage payments. What many don’t realize is just how much even a single missed payment can affect your credit score. In an effort to shed light on this situation, FICO has pulled back the curtain to show what the potential impact of missing just one payment can have on your credit report.

 

FICO examined the effect of a missed payment for what they describe as “representative profiles” that reflect typical reports. Perhaps because they do not have as far to fall, the impact for someone with a lower score is surprisingly less painful than for someone with an impeccable credit score. For lower credits scores, consumers are looking at up to 80 point decline. For the consumer who began with 780 score, however, one missed payment can shave over a 100 points off his or her FICO score. The remainder of the chart tracks how the score changes if a consumer proceeds as far bankruptcy. For the individual with the better credit rating, up to 240 points can be erased from the final FICO score. FICO’s report also probably surprises consumers when they discover that a short sale with an outstanding balance has the same impact as a foreclosure.

 

The second chart shows how long it can take for the consumer’s FICO score to fully recover from the hit of late mortgage payments, short sales, foreclosures and bankruptcies. Again the consumer who began with the higher credit score suffers the most, since it can take up to three years to recover from one late mortgage payment.

It is important to note that these scenarios assume everything else about a credit file remains the same: specifically that no new accounts are opened and that there are no delinquencies on payments, in addition to the mortgage. Given the unemployment rate – especially the long-term employment challenges many are experiencing – the likelihood of all these factors remaining constant, is not high.

This information may seem downright scary if you once had a good credit rating, but thanks to job loss and other extenuating circumstances, it has taken a beating over the course of the past few years. Thankfully, you don’t have to suffer from the negative consequences of a bad credit score. The trained staff at Score Crafters can help you navigate your path back to a positive credit score. Call our office today at 386-734-6670 to schedule a consultation appointment.

Last month, a lawsuit was filed against ConsumerInfo.com, a company owned by Experian, alleging that they were falsely giving consumers the impression that they were purchasing access to their FICO credit score. In reality, what the consumer actually was receiving was an estimation of their credit score based on Experian’s in-house scoring model. This is not the same FICO score Experian and other credit bureaus send to lenders running credit checks – and therefore does not accurately reflect what your local bank or lender is using to determine your creditworthiness.

 

A visit to the website shows “Now when you order your Report for only $1 you’ll also get your Credit Score for FREE!”

Click on the Terms and Conditions page and you will see a notation that it was revised on April 26, 2011 most likely in response to the lawsuit. In an effort to insulate themselves from the accusations, the PLUS SCORE® description reads:

“. . . a user-friendly credit score model developed by Experian to help you see and understand how lenders view your credit worthiness. It is not used by lenders, but it is indicative of your overall credit risk.”

How likely is it that their target market takes the time to actually read the Terms and Conditions page? Is the customer not simply inclined to assume they are receiving the same information provided to potential creditors, especially when they discover it is affiliated with Experian? In the mind of the consumer, does that not virtually imply they are purchasing the right to see the same information as potential lenders? In fact, why would the average consumer think Experian is selling one number to the lenders and another to the consumers? Furthermore, why does Experian sell different numbers to the two segments?

These questions are precisely why the lawsuit alleges Experian is engaging in false advertising.

If the litigants are successful in their efforts to gain class action status, this case could be very costly for Experian, as they have successfully sold the $14.95 monthly subscription under several names including Triple AdvantageSM, TripleAlertSM, CreditCheck®, Credit ManagerSM, CreditCheck® Deluxe, CreditCheck® Premium, CreditCheck® Total, ChildSecureSM and CardSafeTM. The program is perhaps better known via FreeCreditReport.com, which has run a successful marketing campaign for several years thanks to the commercial featuring the singing guy lamenting the fact he should have checked his credit report (by the way, does anyone else find him as annoying as I do?).

Perhaps now Experian will begin to sing a different tune… Only time will tell.

On a more positive note, Score Crafters can help you improve your REAL FICO score – no beating around the bush or false advertising here. Call us today to discuss the first steps you need to take to start improving your credit rating.

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