Why all three credit bureaus need your payment history

If your bank only reports to one bureau, your FICO score will be skewed

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert Dear Opening Credits,
For 30 years prior to 2011, my wife and I paid off two mortgages though our local savings bank. Since that bank only reports to one credit bureau, our FICO score is low, even though we never missed a payment. Living in a new large city and trying to get a VA refinance, we are constantly frustrated with having a too-low FICO score (since the high and low are thrown out) and having an insufficient mortgage history with two of the credit bureaus. I have tried to talk to the two credit bureaus that were not reported to. They are deaf to this injustice, saying that the old savings bank we used would have to join their credit bureau for a report to be accepted. What do we do? -- Michael

Answer for the CreditCards.com expert Dear Michael,
Kudos to you for three decades of responsible borrowing and repaying! Now you're reaping the rewards with a credit report that shows your impressive history.

However, evidence of your wonderfulness is being reflected on just one of the reports, but it's still there and you can probably work around the other two.

First, know that creditors are not required by law to report to the consumer credit bureaus at all. It's their choice, and they may do so with one, two or all three of the reporting companies. Most financial institutions report to all three, but there is a cost involved, so if they want to save money, they can pare it down to a couple or none.

I've said it before and I'll say it again: This credit reporting business is fascinating! As a subscriber, a lender pays to report the monthly activity that you are making. The credit bureaus then take the data from all subscribers and compile it into files that they then resell to the subscribers -- and any other company or person that has a legitimate business need for it. Another source of revenue for them is you. Consumers may receive free reports once per year (at AnnualCreditReport.com) and when fraud is suspected, but if you want more you'll have to cough up a fee. 

Now, on to your question. What can you do about a bank that only reports to one bureau? Your FICO scores are looking rather strange because of it. After all, such scores are generated from the information on a credit report, so if only one has the mortgage payments on it and the others don't, you'll see radically different numbers among them.

I spoke with Sonya Smith-Valentine, founder of Financially Fierce and an attorney who specializes in banking and credit reporting issues, about your situation. Her suggestion is to forget appealing to the bureaus, because they just list what's given them. Instead, reach out to the president of the local savings bank you've been dealing with all these years and ask to communicate with someone high up in management. When you get that person on the line, explain your dilemma (being sure to emphasize how fantastic a customer you've been) and request that they add your account to the other two credit reporting bureaus. They may, and if they if they do, all your FICO scores will soon be about the same.

If that doesn't work, Smith-Valentine recommends that you look for a mortgage company that will do their own rescoring. You've got proof that you have repaid a couple of home loans, so ask them to include your satisfied mortgages in their own mathematical mix.

In the end, remember that all banks want is to lend money to people who have been great borrowers in the past, and who have an income that shows they have the capacity to repay future loans. If you've got those two qualities, you'll get the refinancing deal you're seeking.

See related: FICO's 5 factors: The components of a FICO credit score, 10 surefire steps to get errors off your credit reports

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Updated: 10-15-2018