Everyone makes mistakes. Especially the credit bureaus. Unfortunately, when the credit bureaus make mistakes it can be very costly for YOU, not the credit bureau. This is why it is important that consumers really know what is on their credit reports and monitor it like a hawk. Consumers should get a tri-merge copy of their credit report at least once per year. A tri-merge report is a credit report that shows tradelines and FICO scores from all three credit bureaus: Equifax, Transunion, and Experian.
I had a very good client of mine ask me to start the process for an investment property he is looking to purchase. Having worked on several transactions with this client, I know his credit is pretty flawless. Nevertheless, when I pulled his credit he had a 50 point drop in FICO scores from the previous transaction. Sure enough, I went through all the tradelines and Wells Fargo reported a 30 day late on a credit card last month. I immediately called my client because this one little late payment could increase his rate by more than 1 point. Sure enough, the client didn’t make a late payment. He had a dispute with Wells Fargo over a $3.00 fee on a credit card. They reported to the bureaus that he didn’t pay it after he closed the account. Three Freaking Dollars!
To Wells Fargo credit, they corrected it after my client left a few nasty voicemails. Fortunately, we were in the pre-approval stage, so we have time to get it fixed before too much damage was done. Nevertheless, these types of errors are why it is important you get yourself pre-approved prior to entering into contracts on home purchases. You want to ensure you have enough time to fix any issues before they wind up costing you money.
The mortgage business has become overly reliant on FICO scores when making judgments about borrower’s credit history. While this has helped lower costs, it has also removed a lot of common sense and logic from the business as well. Your FICO score can be off by one point due to a mistake and many lenders will not do the loan or use that as a reason to raise your interest rate.
Consumers can get real time monitoring of their credit reports from the three major bureaus. I receive emails from Equifax (www.equifax.com) monthly about any changes on my credit report. The service is only a few bucks per month, but the savings and piece of mind from having an accurate credit report more than make it more than worth the cost.
Very well-written article! I tell my clients that such things can happen, but your story is far more compelling. If I were you, I might convert it to PDF and give it to new clients as part of your welcome package.
Russ
This is a really good article. To me, the best point is when you state, “Nevertheless, these types of errors are why it is important you get yourself pre-approved prior to entering into contracts on home purchases.” Pre-approval means so many things, and in your case it means saving your client.
And I agree with Jefferson. Put this in a PDF and give this to clients.
Richard
Thanks guys! I appreciate the feedback. Fortunately, we have plenty of time to correct the error, but I have seen more than one case where time isn’t on the buyer’s side. It definitely underscores why consumers need to get themselves preapproved.