If they want a war

A recent Bank Rate story on early mortgage relief plan reports that credit scores are used to determine eligibility for governmental help.  Credit scores are based on the information in credit reports.  However, studies show credit reports are notoriously inaccurate.

The announcement that the government was going to accord decisive effect to credit scores pushed me over the edge.  In my bankruptcy practice, I discourage people who are mired in overwhelming debt from using "the effect of bankruptcy on my credit score" as a decision making criteria.  Look at your balance sheet, I say;  consider whether without bankruptcy you can ever repay this debt and move away from living paycheck to paycheck.

My thinking has shifted a bit.  I still believe that  there is something defective about a system that says that my bankruptcy clients have a stellar credit score, which some of them do.  What is it that the FICO measures, if the highly rated individual has debt they can never repay, yet looks like a good prospect for more debt?

I now intend to focus on the clean up of credit reports as an element of recovery from bankruptcy.  Once the balance sheet issues are remedied by the bankruptcy discharge, then it’s time to correct each and every inaccuracy on the credit report. 

The Fair Credit Reporting Act gives consumers the right to modest statutory damages and their attorneys fees if credit reporting agencies do not correct errors in their credit file.  The credit industry has a business model that too often brushes off consumer complaints.  I hope that the resurgence of attorneys schooled in consumer law coupled with a public that knows how to fight back can "incentivize" the industry to actually publish a credit report that is correct.

When that happens, the credit score might mean something.