Was the low FICO score really your fault?

Are you still steaming because an inaccurate credit report has sent your FICO score spiraling downward, causing major problems with your efforts to refinance your home?

A few months ago, some friends became victims of credit-card fraud. Some scammer got access to their account and charged thousands of dollars of computer equipment on their card, via telephone, at a popular outlet in the San Francisco Bay area. They discovered the bogus charges after they had returned from a short vacation and quickly informed the bank that issued the card. Our friends also stipulated that they would not pay the charges that they did not make.

By the time the mess was sorted out, they were judged to have been late on a credit-card payment for the month that they refused to pay the phony charges. That blemish, coupled with another late charge when the bill-paying husband was out of town, sent their FICO score lower.

FICO scores (generated by Fair Isaac Corp.) typically range from a high of 850 to a low of 300. These numbers are compiled by the three national credit agencies. Most of the time, consumers who grade out above 760 get the best mortgage rates, those between 760 and 700 are in the middle and those under 630 usually pay the highest rates, if they can get financing.

To compound the problem, the husband chose to apply for a new credit card late last year when the preferred airline carrier tied to his card had a bad stretch of on-time service. He wanted to shift his frequent flier miles to another carrier, so he received another card supporting a different airline.

Really bad timing. When you apply for credit, or have lenders-creditors-companies inquire about your credit, your FICO score tends to go down. The lender for the proposed line of credit basically said “what have you guys been doing?” after the application had been filed and the new FICO score had arrived.

The good news is that many states, including Washington, have specific timelines in which creditors and reporting agencies must act on credit challenges. For example, a credit agency has 30 business days to reinvestigate any contested blemish on your credit report and then contact you with the findings. If the credit bureau cannot verify the delinquency in question, the delinquency must be removed. You must contest to delinquency to begin the 30-day clock.

The Washington law was passed in an attempt to get creditors and reporting agencies to clean up their files and speed up processing. It also requires that the credit-reporting agency contact the creditor within five days to verify the debt.

Before the law passed, my wife and I had a similar experience and spent months getting the challenge squared away. Several years ago, we had applied for a mortgage. We quickly received a credit report showing two delinquent payments to department stores. The “30-day lates” had occurred nearly seven years before then – about the time we were moving into a new home. I wrote the stores, explained what happened, and both companies removed the delinquent notices.

However, the letter from one store did not get to the credit bureau. The same delinquent notice showed up on my report the next time I considered a refinance. I dug out the original letter, called the credit agency, and demanded an explanation. Needless to say, I also called the department-store chain and spoke to a credit agent. I read her my letter over the phone and explained someone had dropped the ball. What added fuel to my fire was the long-distance call (no 800 number) and the time it took away from work.

Credit reports are powerful vehicles. Jobs, homes, reputations and future credit often depend on them. If an incorrect item appears on a credit report, it’s up to the consumer to see that it is corrected. For example, I once had two mortgages with the same lender. Both payments were once credited to one account, and I got a delinquency notice on the other. It took two letters and numerous phone calls to get the 30-day delinquency removed from my credit report.

Merely telling the agency is not enough. You should submit the explanation or proof in writing. People often don’t understand that a credit agency cannot remove something from a credit report without the authorization of the company filing the delinquency. Delinquencies include tax liens, judgments and repossessions.

(For a copy of your own credit report, contact the reporting agencies: Experian, (888) 397-3742, experian.com; Equifax, (800) 685-1111, equifax.com; and TransUnion, (312) 408-1077 transunion.com). The Fair Credit Reporting Act (FCRA) requires each of the companies to provide you with a free copy of your credit report, at your request, once every 12 months.

If you have additional problems regarding your credit report, contact the Consumer-Protection Division of the state Attorney General’s office. The telephone numbers are 1-800-551-4636 and 464-6684 (Seattle).

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