Credit Rating Agencies can be very confusing, especially for a regular person simply interested in getting a better interest rate on a loan. While it is not necessary to know how credit rating agencies or credit bureaus operate, the knowledge can make securing a lower interest rate easier. An important part of getting a higher credit score may be to repair your credit. Credit repair may not be necessary in you case, but most of our customers have misleading or false information on their credit reports. Credit repair will help remove negative items on your credit reports, thus increasing your credit score by submitting the new correct information to the credit rating agencies.
There are many credit rating agencies out there. The are usually separated into three categories, government, business, and consumer. The credit bureaus, Transunion, Equifax, and Experian (also sometimes CSC) are the credit rating agencies that relate to consumers. Basically what happens with every bank, credit card companies and a variety of other credit lending institutions is they submit and request information from the credit bureaus. A very common misconception is the credit bureaus are government institutes. This could not be farther from the truth! The bureaus determine your credit rating or credit score for profit. They are private companies that make an enormous amount of money. In fact, the Security Exchange Commission (SEC) is currently investigating the credit bureaus for conflicts of interest. It is not surprising that almost 50% of credit reports have false information. While it is the credit bureaus that banks and credit card companies trust to determine your credit worthiness, they are in fact very unreliable.
As reported by the Guardian:
http://www.guardian.co.uk/business/2003/jan/28/usnews.internationalnews
The credit rating industry is facing sweeping regulatory changes in the wake of the scandals that have beset Wall Street during the past year.
US financial watchdog the Securities and Exchange Commission has submitted a report to Congress detailing plans to launch an investigation into anti-competitive practices and issues including conflicts of interest.
If your credit rating or credit score may seems low, such as below 700, you may need credit repair. Credit repair is primarily about contacting the credit rating agencies to demand legal proof of their credit reports. The way the credit agency operates is to determine a credit score by looking at a bunch of variables that are details of your private life. For example, how many times you have been late for a credit card payment or the amount of credit cards you possess along with the credit limit. Based on these factors, the lender will determine a “fair” interest rate for your loan.
There are many justified complaints about credit rating agencies (CRAs) that really makes me wonder why they are so important for getting a loan. Credit repair can be a tricky process when the CRAs are doing things like this:
http://en.wikipedia.org/wiki/Credit_rating_agency
* The lowering of a credit score by a credit reporting agency can create a vicious cycle, as not only interest rates for that company would go up, but other contracts with financial institutions may be affected adversely, causing an increase in expenses and ensuing decrease in credit worthiness. In some cases, large loans to companies contain a clause that makes the loan due in full if the companies’ credit rating is lowered beyond a certain point (usually a “speculative” or “junk bond” rating). The purpose of these “ratings triggers” is to ensure that the bank is able to lay claim to a weak company’s assets before the company declares bankruptcy and a receiver is appointed to divide up the claims against the company. The effect of such ratings triggers, however, can be devastating: under a worst-case scenario, once the company’s debt is downgraded by a CRA, the company’s loans become due in full; since the troubled company likely is incapable of paying all of these loans in full at once, it is forced into bankruptcy (a so-called “death spiral”). These rating triggers were instrumental in the collapse of Enron. Since that time, major agencies have put extra effort into detecting these triggers and discouraging their use, and the U.S. Securities and Exchange Commission requires that public companies in the United States disclose their existence.
* Agencies are sometimes accused of being oligopolists,[9] because barriers to market entry are high and rating agency business is itself reputation-based (and the finance industry pays little attention to a rating that is not widely recognized). Of the large agencies, only Moody’s is a separate, publicly held corporation that discloses its financial results without dilution by non-ratings businesses. The high profit on Moody’s revenues (>50% gross margin), which are consistent with the high barriers to entry, do nothing to allay market fears of monopoly pricing.
* Credit Rating Agencies have made errors of judgment in rating structured products, particularly in assigning AAA ratings to structured debt, which in a large number of cases has subsequently been downgraded or defaulted. This has led to problems for several banks whose capital requirements depend on the rating of the structured assets they hold, as well as large losses in the banking industry.
However, Credit Bureau Experts can help navigate through the finer complications of credit repair. If you need help with credit repair, please contact us at 1-866-371-3536. We have been leaders in credit repair for over 10 years.
If you need help with credit repair or wish to sign up for our credit repair services go to www.creditbureauexperts.com