Interview: Evan Hendricks
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A point made in your book is that students and graduates who have student loans should check their credit reports. Why is this necessary if the student or graduate is making payments on time?

Credit scores & credit reports 1. Why check your score? 2. Are you getting a FICO score? 3. Preapproved offers & scores 4. The problem of mixed files 5. When to call an attorney 6. Student loans & credit reports 7. Are credit scores colorblind? 8. Credit scores & insurance rates 9. Consumer protections

They should check firstly for the same reason as anyone else, to make sure that their payments are reported correctly because inaccuracies can creep in anywhere in this huge, automated system. The second thing is that student loan information will sometimes multiply like rabbits on the credit report because student loans are sold from one company to another and the old company continues reporting and then the new company continues reporting it and it might make it look like you have more loans than you actually do. Then if they're showing any late payments, you can get hit with double whammies on late payments as well.

And they can get those duplicate entries removed?

Yes. When you dispute, they're supposed to investigate -- or, I guess the statutory term is reinvestigate -- your dispute, and make a decision in 30 days. Either remove it or modify it or tell you that it's been verified. And so, when the dispute process works the way it's supposed to, it's a good system. It's just I can see the cases where it doesn't work the way it's supposed to.

Where do you stand on the issue of whether credit scoring disadvantages minorities?

That gets into a wonderfully philosophical debate about where people stand in society. I would agree that in one sense that credit scoring is colorblind because it's based entirely on information in the credit report. That way I would agree with industry's defense of credit scoring. But on the other hand, different people from different cultures have different ways of looking at their finances. And, there's been a low trust of the financial system among significant segments of the African-American community, the Hispanic community, the Asian community, just to name a few. And some of the people who are most suspicious in those communities, and even Caucasians who are suspicious of the way the financial system and consumer finances work, are actually very responsible with their money. They pay their rent or their loans, they just don't like having a lot of credit cards or they don't like having a lot of loans out. But when something happens in their life and they actually need to buy a home or help a relative buy a home, then they're going to be at a disadvantage because they don't have a thick enough credit history to produce a good credit score. And so, the philosophy in my book is that yeah, there are definitely philosophical reasons to question how powerful the system has become. But there's no question it's a powerful system, and that you need to know about it so you can make the right decisions for yourself and your family.