The Government Has Its Own System for Tracking Your Credit, and You’ve Probably Never Heard of It
Craig Donofrio — Break It Down
When it’s time to make a big financial move, you probably know all too well how your FICO credit score could affect your future plans. But if you’re looking to get a government-backed loan—say to buy your first home or open that gourmet mayo shop—you also have to worry about another credit-reporting system: CAIVRS (Credit Alert Verification Reporting System), a database that keeps tabs on any debts you may still owe Uncle Sam. The problem is, you’ve likely never heard of CAIVRS, and even if you have, as a consumer, it’s almost impossible to get your own report until you’re actually applying for a government loan.
What’s on this report?
Think of CAIVRS as a really long list the government uses to keep track of your federal financial dealings. Most people only need worry about CAIVRS when they’re getting a government-backed mortgage, although if you’re getting any loan from the government—say, from the Small Business Administration—it’s going to check your CAIVRS report. Big Brother’s big system pulls data from the SBA, Federal Deposit Insurance Corporation, Department of Education, Department of Justice, Department of Agriculture, Department of Housing and Urban Development, and Department of Veterans Affairs to decide whether or not it wants to loan you money.
Not everything is tracked on the report. Delinquent tax payments to the IRS are often reported to your consumer credit history through TransUnion, Equifax, or Experian, not your CAIVRS report, for example. But other government-related financial mishaps will show up on your CAIVRS report. Here are some examples:
Delinquent or defaulted federal student loan payments.
Lien judgements, like liens on a property where you owe money to the feds.
Defaulted or delinquent loans you owe to the government from the SBA, like if you took out a microloan to start a business
How does it work?
“CAIVRS checks your Social [Security number] and sees if you’re delinquent on any government debt,” says Matt Hackett, operations manager of Equity Now, a lending company in New York City. Your lender inputs some data—consumers don’t have access to CAIVRS, although there’s nothing forbidding your lender giving you a copy—and “it tells you right away” if you have any problems. Your report will come back with a letter grade. You can see what they mean in the image below:
As you can see, if you get anything less than an “A” you could be in trouble, because the government is apparently a very strict parent.
How worried should I be?
If you’re using a conventional mortgage or looking for a business loan that is not backed by the government, the lender should not be using CAIVRS at all. Also, according to Hackett, failing your CAIVRS report appears to be somewhat rare. He notes that in his 13 years at his company, he hasn’t seen one instance where someone’s CAIVRS report prevented them from getting a mortgage.
Maybe his clients have been lucky because it’s certainly not impossible to fail your CAIVRS report. If you’ve had a foreclosure or short sale on a government-backed property, you’ll need to sit out the required waiting period before you can get a government-backed mortgage again. That’s typically two years for a VA loan and three years for an FHA loan. If you try to skirt the rule, CAIVRS will catch it.
If you have a delinquent federal debt, you’ll need to get on the appropriate payment plan. Often that means bringing your delinquent debt current and subsequently proving a track record of timely payments. Depending on your lender or the loan’s requirements, you may need to make payments for several months or even a year before getting cleared for the loan. Other delinquencies, like federal liens, may need to be paid in full before you can get another government loan.
Fact-checking the government
Like those nagging credit report errors, mistakes can get corrected on CAIVRS.
Maybe you’re one of the 10 million Americans who had trouble repaying student loan debt. You’ve gotten back on track after falling behind and you’ve been making payments on time for a while now, but you’re getting less than an ‘A’ on your CAIVRS report. Now what?
Fixing errors on the CAIVRS report is similar to fixing errors on your credit report: gather evidence and contact the agency reporting the error. However, since you can’t check your CAIVRS yourself, it’s up to your lender to provide you with information on the error and the agency reporting it. From there, the burden of proof (and correction) is largely on you.
Let’s say your federal student loan is being serviced by Navient. Hackett says, “You start there [with Navient], call them and find out what the steps are needed to be taken” in order to remove that blemish. Theoretically, once you’ve done the damage repair, the loan servicer (or the government agency handling your debt) should update your file in CAIVRS. Since you can’t just order a consumer copy of the report, the only way to know for sure is to have your lender run it again—or ask the agency to provide you with proof of the correction.
If there is an error, action on your part is crucial—unlike most negative marks on a traditional credit report, government-reported debts may not fall off after seven years.
If you’ve ever had a federal debt or trouble with government-backed loans of any kind, double-check your paperwork to make sure everything is in order before you go out for another federal loan. But keep in mind: even if you can prove there shouldn’t be a black mark on your CAIVRS report right in front of your lender, they can’t do anything until the government clears you. That means you (and probably your lender) will need to work through setting up a repayment plan if the mark is legitimate or disputing the file with the agency if it’s not.