Click the links below to watch the video replay or read a transcript of our credit reporting Q&A with Experian in its entirety or in six separate parts.
On Thursday, May 6, 2010, Experian director of public education Rod Griffin answered your questions on credit scoring and credit reporting live via a video stream from the CreditCards.com studio in Austin, Texas.
Below is the fourth of six parts of the video replay of that event — which was moderated by CreditCards.com editor-in-chief Dan Ray — as well as a lightly edited transcript of the video.
Griffin covered a wide range of topics in the 45-minute chat. If you missed it or just want to see it again, you can watch it below or check out our event page at CreditCards.com/AskExperian.
And don’t forget, we’ve also got dozens of helpful videos in our complete video archive here at CreditCards.com. That includes a reply of our first live video event — a question-and-answer session on credit card reform with one of President Obama’s key economic advisers.
The following is a lightly-edited transcript of the above part of CreditCards.com’s recent question and answer session on credit scoring and credit reporting with Experian. User questions are in bold.
(0:06) RAY: Nicole from Vermont asked: “I have a couple of public records on my report that were from an ex husband that was purchasing fuel in my name. I have a court signed document that states I’m to be removed and a letter from the fuel company requesting the court to remove me. How do I get this done?”
GRIFFIN: Sure, divorce is so so difficult. I think the majority of questions we get from people with problems stem often from divorce. And the challenge is that if we have joint accounts, the divorce decree does not separate your responsibility. Under the contract, you’ll need to go back to the lender to have that done. So the divorce, very simply, is an agreement between you and the court so that could be the first issue if you have joint accounts with your ex-spouse. You need to go back to lender and have them agree to change the contract responsibility. I’m not sure exactly what’s happening in this particular situation in terms of what’s being reported so it’s really hard for me to comment on that specifically.
(1:02) RAY: Patty asks a follow up to an answer earlier that is part of the reporting problem: “In a dispute, it is a given that the bank is reporting accurately; who checks their record keeping?”
GRIFFIN: Well they have the responsibility under federal law to report accurately to us and most often they are, and we’re confident of that. If they didn’t report accurate information, it would undermine the whole purpose of the credit reporting industry: lenders rely on us and you rely on us to gather accurate information to help lender’s make accurate decisions and risk-safe decisions and to grant you credit. So I think the vast majority are, but the responsibility again is with the lender to make sure that their information is accurate. We do have very specific contractual requirements, we do audit the lenders periodically to ensure that the information they reported is in compliance of Federal Law and we find that they are not, we will no longer allow them to report to us.
(1:57) RAY: Jill wants to know: “What’s the equation, the weight of the determining factors in determining your credit score for both FICO and Vantage?”
GRIFFIN: Those would be proprietary to VantageScore and to FICO. The credit score developers, again the formulas, the algorithms are proprietary to the developers. So to Vantage Score, and to FICO, and to others, however it’s not quite that simple. It’s not quite like 2 plus 2, you know, people have this image that an inquiry is always worth five points and a late payment is always worth ten and that’s not really how a credit scoring works. Credit scoring looks at your entire credit history and how everything relates to everything else. So if you have no late payments and low balances, and have a great credit history and have for years, and you apply for new credit and there may be an inquiry that may have zero impact on your credit score, just a couple of points. On the other hand, if you have charge offs and collection accounts, and other late payments and now you’re applying for new credit- there’s an inquiry and that represents potential debt. That’s why an inquiry is important in terms of risk; it could be a few more points, so there’s no two plus two, no set amount, it really is specific to the individual and how your entire credit history looks. And how everything relates to everything else so it’s really impossible to say this five or is this 10 and if you hear someone say, “If you do this, your score will change by this much for everybody,” they probably don’t really fully understand how credit scoring works.
(3:22) RAY: Our audience has answered the question, “What do you think impacts your credit scores the most?” And 92% of you say is whether I pay my bills on time, is that about right?
GRIFFIN: That’s absolutely true. That’s absolutely true.
(3:33) RAY: OK, Scott wants to know: “Consumers have a difficult time finding contact information for creditors on their credit report, often times it’s due to the name of the creditor being listed differently in the contact information than on the credit report listed item. Is there anything that can be done to help consumers with this?”
GRIFFIN: Sure, well ,one of the things, and you’re right — one of the things that we see often that I have seen most often with department store credit cards, for example, is that the name of the store is not the same as the credit card or the parent company. So the credit card will be issued under the parent company and so you may not recognize it. That’s the first thing to look for, but in terms of contact information, we try and if we have customer service numbers provided to us we will include that on your credit report. We don’t always have that but we try to include that. The best thing you could do is contact your lender if you have a credit card or the bank statement, the account statement, should include contact information for the lender. Call that lender and ask them for that information; they should be able to get them. And, again, we try to have customer service numbers whenever we possibly can.
(4:39) RAY: OK, and Steve says that “his ING direct account, where he’s got a savings account offered him a loan for $7,000. He agreed to accept it as it’s a revolving account and just there in case of an emergency. Will this help or hurt my credit score even though I’m not using it?”
GRIFFIN: Again, it depends on your credit history. It most likely would help it to have an account that you used periodically and that’s important; if you have a credit account today, make a small purchase from time to time and pay it in full each month. You know, just to show that you have some history that you manage that account well and that will help improve your credit score. So this account probably would help and again I can’t be certain without seeing your personal credit history and overall but it probably would help
(5:25) RAY: Howard asks, “What’s a secondary credit number?”
GRIFFIN: A secondary credit number. What I suspect he’s referring to is that most lenders don’t just use one credit score in the process of reviewing your credit history and making a lending decision. So they would have a primary score that they use and a secondary score. For instance, there are scores that predict a likelihood of default, the standard ones that we’re all familiar with, but there are also scores that predict things like the likelihood a person is in a position that they might declare bankruptcy in the next few months. So that they maybe a secondary score and they do what we call matrixing; they compare the scores and help use that to help make their decision. So if you have a primary score, that will help you give you the information you need to measure your credit history and the lenders, you know, they may today provide that to you, not all do, not all can, but if they do that’s the number you should be concerned with.
(6:22) RAY: Tim is clearly seeking financial nirvana; he asks “How do you get a perfect credit score?”
GRIFFIN: (laughs) Very, very few people that I know of have perfect credit scores and the reason is that if you have a credit account, there’s always some risk that you won’t be able to repay. You can be in an accident, you can get sick. Lots of things can happen that could cause you to be late or not be able to repay the debt. So, most, very very few people that I’m aware of have perfect credit scores and you really shouldn’t make that a goal because you’ll just you’ll have more gray hairs than I do if you do that. Or less hair, you could start losing your hair because it’s almost impossible to do. I don’t have a perfect credit score, I don’t worry about that, in fact I bought a car last year and my wife is a joint holder and her scores were better than mine; which took me about six months to quit hearing the end of. But it’s not perfect, but it’s good enough. Lenders aren’t looking for a perfect score, they’re looking for scores that say you’re a good credit risk and they all have their own sort of level that they’ll accept- so don’t worry about a perfect score. Instead, worry about managing your credit well; making your payments on time, keeping your balances low, and your scores for the most part will take care of themselves.
See related: The 5 basic elements of a FICO credit score, How to improve your credit score, An interactive, step-by-step look at a credit report, 10 things you must know about credit reports, scores, How to dispute credit errors, mistakes, Protect your credit card, score, 8 steps to picking a credit counselor, Get the REAL free credit report, 5 things you should know about business credit scores, 10 ways students can build good credit, How credit card reform will impact you,
Find the terms you must know in our credit card glossary