Credit Scores Held Hostage

Michelle Singletary's talking today about the new VantageScore credit scoring system that the credit reporting agencies have cooked up to try to devise more uniform credit scores (right now there's a big variance from agency to agency). My boss has already given an opinion on the plusses and minuses of this system, so I won't bother, but Singletary actually spends more time in her column discussing how to make sure your credit report is accurate, and that's what I'd like to discuss.

Your credit scores are used by a variety of lenders to judge whether you get credit from them and at what rates. Credit cards are obviously one financial product that would use credit scores to determine rates, but more important are the rates you get on your home mortgage and to some extent your auto loans. So it's important to keep a good score.

Singletary talks about how to get your score fixed if credit agencies have the wrong info, and she says you need to go to the source -- namely, the financial institution or merchant that supplied the credit agency with the faulty info. And here's where the problem potentially comes in.

Suppose you send in your credit card payment 10 days before it's due but when your next bill comes you see a late payment fee on your statement. You call the credit card company and dispute the charge. The company says your payment didn't make it on time. You say "bullfeathers" and refuse to pay the fee and while you're at it, you tell them you want to cancel the card altogether. They say they'll cancel it just as soon as you pay that late fee otherwise it will stay open. And as long as you refuse to pay that late fee they'll keep your account open--to a certain extent holding your credit score hostage by continually telling the credit agencies that you are not paying your bill, even though you dispute the fact that the late fee should be on the account at all.

Do you think the next potential lender is going to be interested in this brouhaha or are they just going to look at your credit report and say "this one's untrustworthy" and turn you down or give you a crappy rate?

I'm not saying this happens very often, but I've had experiences like this where I just paid the fee because I didn't feel like putting up the fight and potentially damaging my credit. I felt taken advantage of, powerless.

There oughta be a law.