Inaccurate Credit Ratings

Consumers can feel cheated after spending hard-earned money on credit scores only to find out that their lender has a completely different score for them, but this is normal. The United States has one dominant credit scoring system (the Fair Isaac or FICO model). Some firms, such as the national credit bureaus, sell scores that look like a FICO score.

Causes

Credit ratings are not "inaccurate," because they only calculate risk based on data in a consumer's credit profile. Missing or false data can cause a higher or lower than normal credit score and is the root cause of consumers seeing several different scores. A falsely reported public judgment, for example, can drop a score several dozen points on a report. Different credit scoring models also can cause variance among scores. Most lenders choose the FICO system for credit scoring, but the major credit reporting bureaus sell scores that are based on the FICO system.

Disputing Credit Ratings

Federal law does not allow a consumer to dispute his credit rating if he thinks it is too low. Instead, he can dispute information in his credit report that causes an inaccurate credit score. The preferred method of a credit report dispute is for the consumer to send a certified letter detailing which information he questions, proof of his claim and proper identification. The bureaus also offer online disputes and creditors can resolve a dispute by sending a correction to the bureaus.

Legal Considerations

Section 609(f) of the Fair Credit Reporting Act -- the main piece of legislation that regulations the consumer credit industry -- gives lenders the right to use a credit score different from that sold by the credit bureaus. However, when a consumer purchases a credit score from a credit bureau, the bureau must inform a consumer that the credit score the company sells can be different from that used by a lender.

Tip

Most credit scoring systems use the same factors when calculating risk but weigh them differently. Thus consumers should put their efforts toward checking their credit reports for errors and practicing good borrowing habits. The Annual Credit Report website is the only site that offers free reports and is the federally mandated site set up by the major bureaus for consumer credit reporting. Always paying at least the minimum on all accounts every month, keeping debt to a minimum and applyimg for new accounts no more than one or twice per year should give customers a high score in any system.