The credit reporting system as it stands is inherently corrupt and flawed. It is also unfair and prone to errors. Abusive practices continue, despite the Fair and Accurate Credit Transaction Act (FACTA) that was meant to protect consumers.

The credit system was never created to help you, but to make money for the lenders. It is driven by one motive, profit.

Imagine this. Two individuals need drugs. One of them is sick and the other one is addict just looking for a “fix”. The former needs drugs to stay alive; the other uses them to ruin it (most of the time affecting many others).

Now, let’s say both have accumulated debts that they simply cannot pay. Both will equally get their credit files damaged. Is that unfair or what?

Did you know that it took intense pressure from congress and interest groups for Fair Isaac (the creators of the FICO credit scoring system) to disclose its credit scoring model? You were not supposed to know something that has such a heavy impact on the quality of your life.

Lenders and the bureaus don’t care about you. Lenders have one thing on their minds; to find as many excuses possible to charge you more for loans and credit cards. Meanwhile the bureaus make a great deal money selling the lenders information about you.

Some of the tactics lenders use so as to hit you with higher interests rates include “universal default” clauses and failing to report your true credit limit(s).

Universal default is simply means that a lender can increase your interest rates when you get late on another non-related item (even if you’re on time on all other payments!).

Now, by increasing your interests rates (sometimes doubling or tripling it), the creditor has just made it difficult for you to keep your payments up, or worse, made you likely to default or declare bankruptcy. How brilliant is that?

Some creditors fail to report your limit. Others report your balance as limit so as to keep your balance to limit ratio high, which brings down your score. In turn this keeps your credit rating at “sub-prime” level, which means high interest rates.

Another nasty practice that continues unabated, despite being against the law, is re-aging of derogatory accounts. This is mainly done by collectors, whereby they re-set the date of your last transaction to a later date.

Re-aging extends it beyond the seven year statute of limitations (after which it should cease to show on your report except in certain special circumstances).

Credit bureaus also allow debt collectors to place hard enquiries (the type dings your score) on your report. Cases have been reported where deleted accounts were re-inserted into credit reports, without the consumer’s knowledge (which is against the law).

What’s even worse is when paid-off accounts get reported as delinquent many years later, such that the consumer may have long forgotten the respective account.

What should you, the consumer, do? The answer is knowledge. An educated consumer is the bureaus’ and lenders worst nightmare. Armed with the right knowledge, you can use the law and lenders’ (including debt collectors) to your advantage.

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