Psychosis #1: The nature of credit bureaus.

Psychosis #2: Your credit report is reviewed carefully.

That used to be true.

Once upon a time in America, if you applied for a credit account anywhere, a bookkeeper in some dusty back room requested a credit report from your local bureau. In fact, in those heady days before the corporate titans took over, all credit bureaus were local. Then every line of your file would be assessed, and if there was a problem, you might be telephoned or called in for more discussion. Lo, you might even be asked for a personal pledge attesting to your responsible intentions. Then a decision would be rendered, usually, but not always, in your favor.

The problem with that business model is that it isn't very scalable. Scouring an individual's credit report takes time, and it also takes skilled (with any luck, that is) human beings to render careful judgments. Unfortunately for fair decision-making, that's just not manageable if you want to extend credit to hundreds of thousands or even millions of people on a national scale. Automation, of course, must save the day, and technology hasn't yet allowed that to include an individualized reading and analysis of everybody's credit reports.

That's where the credit score comes into play. A seemingly wonderful solution, credit scores actually introduce a boatload of other new problems.

So quash Psychosis #2 here and now. Of course creditors want consumers to believe that things haven't changed, that life is as quaint as it was decades ago when customer service meant "personal service," and that they actually pay attention to the report itself rather than treating potential customers as little more than impersonal credit scores. In fact, such mythology begs a mention of the next item on our list of consumer psychopathology:

Psychosis #3: Including a credit statement is helpful.

What sheep they believe us to be. In the early 1970s when the Fair Credit Reporting Act first gave Americans the right to include such statements on their reports, life was different. Prospective creditors still actually perused consumer files with authentic human eyeballs. (Read Psychosis #2.) So in those halcyon days of yore, a plaintive comment placed in the report by the consumer herself might have made a difference at mortgage time.

No more.

Nowadays the 100-word statements can only harm the consumer. First, as we've discussed, such personal statements are essentially never read by potential creditors anyway since the credit score is the usual qualifying determinant. Second, those statements only make it more difficult to embark upon a credit repair effort later because they serve to confirm what's already there. So, for example, let's say a consumer attaches a statement that reads something like this: "These late payments were made only because I was suddenly laid off (or sick), but that unfortunate situation changed very quickly, and we have never been late with this or any other account since." That may sound responsible, but unfortunately it says only this in reality: "NOTE: yes I really was late paying these accounts. Plus I'm not smart enough to have an emergency fund to cover basic minimum payments if something goes wrong financially. Therefore, I am a bad credit risk."

Even worse, let's say a consumer subsequently learns something about credit reporting and decides to engage Lexington Law to help confront such matters legally and technically. Whoops. Any new challenges will likely be dismissed because there's no need to even take another look: After all, the answer resides right within the consumer's statement which admits fault. Remember that extenuating health or employment circumstances are viewed as little more than lame excuses within the consumer credit industry in any case.

For these reasons, consumer advocate old-timers practically always advise that the first items to be disputed are those silly 100 word statements if any were ever inserted. The Credit Insider heartily concurs with that philosophy.

Psychosis #4: Negative items must remain for 7 years.

That's sheer and utter balderdash. Even so, consumers hear it every day when they telephone creditors directly: "Sorry, by law that has to remain on your report for seven years." The next time you hear that, know this: The automaton posing as a customer service representative is either spreading lies or ignorance, neither of which is good for your fiscal or mental health.

Sure, creditors want consumers to believe the lie because they can charge higher rates of interest to those who have nasties on their credit reports. As far as they are concerned, the longer the stuff remains on consumer credit reports collectively, the larger their profits. The truth, though, is that nobody is required to report anything about any of us for any minimum length of time to anybody else. Put bluntly, relevant laws like the Fair Credit Reporting Act only serve to place LIMITS upon how long items can remain on reports.

Psychosis #5: Seeking help in repairing credit is unlawful.

Such statements are the most insidious and sickest lies of all. In fact, this is the very same psychology a predator uses with his victim: "Here, I'm abusing you, but follow my rules. You can't talk to others about it. You can't ask for help. If you do request or receive help from someone else, you'll only suffer more damage in the long run. Keep to yourself. Remember that I'll tell lies about you if I wish. And if you have any problem with any of this, speak only to me about it."

The facts cut straight to our constitutional citizenship: All of us have a fundamental right to legal representation. Whenever we are accused of anything, whether that accusation appears in the newspaper, on a rap sheet, on a credit report, or anywhere else, we are guaranteed the right to request assistance with both understanding and defending against such allegations.

Some companies occasionally (and vaguely) suggest that using a third-party violates some law. Sometimes, they'll send a letter to consumers who have challenged one or more items on their reports that basically accuses them of having sought outside assistance with the problem. Note that they never actually come out and say plainly, "Using outside counsel is against the law," because it isn't. The specific wrongdoing is never spelled out, of course, but the effect is the same: By donning the cloak of artificial officialdom, they hope to intimidate consumers into backing down and getting right back into line with all the other quiet people who are afraid to challenge such faux authority. Lexington clients are instructed to simply send such correspondence to the firm, but even those attempting to address their credit reports on their own are well advised to simply ignore such provocations.

So long as consumers can be managed through skilled deception, creditors will continue to unfairly profit at our expense. Reified credit scores will continue to define our suitability for home ownership. Credit acquisition, insurance, and employment will continue to be lost as a result of sloppy data maintenance. Fundamental changes will only occur when consumers reject these untruths which are propagated so successfully within our culture.


Entire contents © 2005, 2007, Randy Padawer, Ph.D.