Why credit bureaus fail to fix errors

January 26, 2015 by · Leave a Comment 

Trying to fix a mistake in your credit report by providing a detailed set of documents to credit bureaus could be a waste of time.

The Consumer Financial Protection Bureau, in a report released (in 2013), suggested that the three major credit-reporting firms–Equifax Inc. EFX -0.69%  , TransUnion LLC UK:EXPN +1.60%  and Experian PLC –may not be giving adequate consideration to information submitted by consumers disputing their credit reports.

Federal law requires credit-reporting firms to send suppliers of consumer data — including credit-card companies, banks and collection agencies — notice that includes “all relevant information” supplied by the consumer.

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But rather than pass along documents, the industry uses a computerized coding system to describe the complaint. The big three credit-reporting firms “generally do not forward documentation that consumers submit with mailed disputes or provide a mechanism for consumers to forward supporting documents when filing disputes online or via phone,” the report said. See the full report.

For example, if a consumer has evidence that a debt has been paid off, the credit bureau may not pass along that information to his or her credit-card company or a debt collector.

Norm Magnuson, a spokesman for the Consumer Data Industry Association, which represents credit-reporting firms, said the industry’s system is adequate and handles a huge volume of complaints quickly and efficiently.

“The lenders are getting all the information they need to resolve the dispute in a timely manner,” he said.

An industry-funded study from last year that found that 95% of consumers were satisfied with the dispute-resolution process, Magnuson said. Representatives of Equifax, TransUnion and Experian either declined to comment or couldn’t be reached for comment.

The report didn’t come to any conclusions about whether the credit bureaus are out of compliance with this piece of the law.

The consumer bureau found that credit-reporting firms resolve 15% of complains on their own, passing along 85% to the financial institutions that provide reports on consumer activities, known in the industry as “data furnishers.”

Credit reports are used by lenders to evaluate potential borrowers for home loans, auto loans and credit cards. Earlier this year, the consumer bureau began overseeing the industry, and plans to evaluate whether the firms are providing accurate consumer information, handling consumer disputes appropriately and preventing fraud.

The consumer bureau’s report “sheds light on a process that’s tilted against the consumer,” said John Ulzheimer, president of consumer education at SmartCredit.com, a credit-monitoring site.

The CFPB report also found that fewer than one in five consumers get copies of their credit report every year.

By Alan Zibel http://www.marketwatch.com/story/why-credit-bureaus-fail-to-fix-errors-2012-12-13

6 More Credit Myths Debunked

January 23, 2015 by · Leave a Comment 

 

6 More Credit Myths Debunked

I know what you’re thinking, didn’t you already send out an article like this? Yes, I did. But this list is different. Here are 6 new Myths that are uncovered for you:

Myth #1: FICO, the company, calculates your FICO scores
In order for your FICO score, or any of your credit scores, to be calculated two things have to be married; your credit report and a scoring model. FICO, the company, does not maintain your credit reports. As such, FICO cannot calculate your FICO scores. The FICO scoring software is installed at Equifax, Experian and TransUnion. This gives the credit reporting agencies the two things needed to calculate a FICO score. That means your FICO scores are calculated and delivered to lenders by the credit bureaus.

Myth #2: The credit bureaus grant or deny credit applications
Believe it or not, this is a pretty common myth. It’s so common that Federal law requires lenders who have denied your credit application to communicate with you that the credit bureaus had nothing to do with their decision. The credit bureaus simply provide lenders with your credit reports and credit scores. That’s where their involvement with the loan approval (or denial) process ends. If you’ve been denied, it was the lender that denied you. You can plug FICO into this myth as well, as they also have nothing to do with the approval or denial process.

Myth #3: Equifax, Experian and TransUnion are credit rating agencies
These companies are legally defined as “Consumer Reporting Agencies” and more commonly referred to as credit bureaus or credit reporting agencies. Credit rating agencies are companies like Moody’s, Standard and Poor’s or Fitch Ratings. They’re the guys who assign letter grades to certain types of debt obligations. Sometimes, FICO gets lumped in with the credit bureaus and the incorrect designation of a credit rating agency.

Myth #4: Credit reports and credit scores are the same thing
This myth is so prevalent that it has lead to the most common misunderstanding relative to credit scores, which is that they’re used for employment screening. Think of credit reports as a car and credit scores as the stereo upgrade that doesn’t come standard with the car. A credit score is a product sold along with credit reports, just not to employers. The interchangeable use of the terms is improper.

Myth #5: FICO is a credit reporting agency
FICO is a lot of things, but none of those things is a credit reporting agency. The credit reporting agencies gather, maintain, and sell credit-related information to lenders, insurance companies, consumers and other parties. FICO does not have a credit file database. They’re an analytics company.

Myth #6: A charge card and a credit card are the same thing
The only thing similar between charge cards and credit cards is that they’re both made of plastic and you can buy stuff with them. A credit card allows you to roll or “revolve” a portion of your existing balance to the next month, a process that will result in the assessment of interest. A charge card is a “pay in full” product, in that you have to pay off the balance, in full, every month.
Charge cards almost always have annual fees, which help the issuer to make money in the absence of interest. Credit cards generally rely on interest and fees for their financial contribution to the issuer’s bottom line. Charge cards are not nearly as common as credit cards but they’re a pretty decent option if you want the convenience of plastic without the possibility of getting deep into debt.

By; John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.

7 Steps to Buying a Home You Can Actually Afford

January 22, 2015 by · Leave a Comment 

 

 

 

 

 

 

 

So you would like to take advantage of the current housing market but you don’t know where to begin? Here is a quick 7 step list I discovered that can help you get started. Happy house hunting!

 

1) Get your credit in as good shape as possible. Your credit score can make a big difference in your interest rate and lenders are  a lot stricter than they used to be. You can start by ordering a free copy of your credit report from each of the credit bureaus at annualcreditreport.com as long as you haven’t done so in the last 12 months. One study showed that about 70% of credit reports have errors in them so check to see if there are any in yours that could be hurting your credit score and if so, be sure to have them corrected.

You can also use a site like creditkarma.com to see your credit score for free and more importantly, figure out what steps you can take to improve it. The key things are to make sure you make your debt payments on time, pay off as much of your debt as possible (except perhaps car and student loans, which tend to be relatively low interest), and be careful of closing accounts. If you have a credit card that is charging you an annual fee, see if you can convert the card into a no-fee card rather than close it.

2) Be ready with your down payment. Ideally, you would be able to put down 20% of your home’s purchase price to avoid having to pay PMI (private mortgage insurance). If you can’t put down 20%, mortgage companies will usually offer you a smaller “piggy back loan” to help bridge the gap but those loans have higher interest rates.

Don’t dip too far into your savings though. Try to keep at least 3-6 months of expenses set aside for emergencies. If you don’t have enough money available in your regular accounts, you can access up to $10k without penalties from IRAs for a first-time home purchase and your employer’s retirement plan may allow you to borrow from your retirement account with a longer time to pay off home loans. There’s always the “family and friends” route too.

3) Try to pick a mortgage with a fixed rate for the longest time that you think you’ll be keeping the home. That’s because you could see your monthly payments jump up on a variable rate mortgage when interest rates eventually start climbing. On the other hand, fixed rate mortgages have higher interest rates so it may not make sense to pay more to lock in a fixed rate for longer than you need it.

4) Choose the right loan term for your needs. A 30-yr loan has lower monthly payments and can be advantageous if you’ll make good use of the savings by investing them or paying down high interest debt. You can always make extra payments if you want to pay the loan off sooner. But if you’re honestly more likely to splurge the money you save each month, the 15-yr loan could be better since it will cost you less in interest and be a form of forced savings every month.

5) Shop around for a mortgage. Even a slightly higher rate can mean paying significantly more over the life of the loan so don’t just talk to your existing bank. Consider credit unions, which often offer lower loan rates because they’re non-profit. Some brokerage firms like Charles Schwab offer mortgages and sometimes provide discounts for people who keep a lot of money with them. You can also try Web sites like bankrate.com and eloan.com or an independent mortgage broker who can shop around from multiple mortgage companies to find the one that can offer you the best deal. You can then use this calculator to compare the loans.

6) Figure out how much home you can afford. Remember, just because the mortgage company will loan you the money doesn’t mean you should take it. There are rules of thumb like not spending more than 28% of your income on mortgage payments but every person’s situation is different. Two people may have the same income but one may need to save more for retirement or have to make large private school tuition payments for their kids. Take a look at your current saving and spending needs to see how much you can realistically afford to pay each month and don’t forget to leave some room for the potential “hidden expenses” of home ownership like utility bills, HOA fees if applicable, and repairs and maintenance.

7) Start house hunting. Once you’ve gotten pre-approved on a mortgage, work with a real estate agent experienced in the neighborhoods you’re interested in and look at homes that are within your affordable price range. Make sure you look at several places even if you fall in love with the first one you see as you may change your mind with more perspective. Finally, don’t forget to have fun. If you’ve made it this far, you’ve earned it!

From Newswire
Liz Davidson,
Financial Finesse

 

4 tips to raise your credit scores

January 21, 2015 by · Leave a Comment 

 

 

 

 

 

 

 

 

 

4 tips to raise your credit scores

1)  Check your credit reports for errors

a. Annual Credit Report.com

b. Bureaus

c. Online Websites

2) Review your credit reports with a professional

a. Credit Analysts

b. Mortgage Loan Officer

  1. Loan Advisers

3) Keep your CC balances below 30% of limit

a. Example

b. Keep your cards active

4) Before paying any collection accounts, ask a pro

a. May re-age the account and it will show as a newer derogatory account

b. If you do negotiate, use your balance as leverage for a removal/deletion

Effective Credit Report Repair Tips

January 20, 2015 by · Leave a Comment 

 

Credit repair, done right, can do wonders for your credit report and your scores too! Here are a few tricks of the credit repair trade that will really make your scores move fast. Put them to work individually, or all at once, depending on your own needs, and watch the magic happen.

1) Open Accounts Right Now!!!
The FICO scoring model will give you bonus points for opening new accounts after a period of bad credit. It is all in the timing. Those old cards that survived the tough times are still worth something, but when it comes to credit repair FICO wants you to prove that you still have what it takes to get back in the swing of borrowing money. If your credit is crummy, secured credit cards are ideal. Small is good! Open now, pay on time, keep your balances low, and your scores may rise over 100 points in the next six months.

2) The Balance-Limit Connection
This credit repair tip is just as urgent for those opening new accounts today as it is for those managing already well seasoned revolving accounts. A little change in your balances can send your credit scores flying or diving. Have you maxed out a card lately and then checked out your scores? This is a fairly recent FICO tweak which can work for or against you. Try to use less than 30 percent of your limit for the best result.

3) Take a Look!
Have you seen you credit report lately? If not, why not??? There may be errors lurking and a simple dispute or challenge to the credit bureaus may be all it will take to get your scores back on track. Not sure how to check your report or how to dispute? Contact a professional right away. Good luck!

By Cesar Marrufo
ELITE FINANCIAL, LLC.com

Consumer Protection Through Education.

VIP Treatment

January 19, 2015 by · Leave a Comment 

vip
Sen. Dick Blumenthal wants explanations from the three credit rating bureaus about a New York Times report about a VIP list they allegedly keep that favors the rich and famous over everyone else.
The Connecticut Democrat wrote a letter Monday to Equifax, Experian and TransUnion about the reported separate system in which errors and disputes are resolved faster and with more attention than with other consumers, who must rely on an automated system and outsourced customer support to clear up mistakes.
“I am deeply troubled by the implication that your companies are neglecting the majority of consumers and providing preferential treatment for wealthy, famous or well-connected persons, and I ask you to confirm or deny these reports and provide more information on your dispute resolution process,” he wrote in the letter.

“An error-free credit report is vital to a consumer’s financial health, and consumers must be able to quickly resolve disputes and mistakes with the cooperation of the credit reporting bureau,” he wrote. “Every consumer deserves this cooperation, not just the rich and powerful.”
But the credit bureaus deny keeping VIP lists.
“We did respond to the senator, and to be as clear as possible, we do not have VIP lists that provides preferential treatment to anyone,” Tim Klein, a spokesman for Equifax, told FoxNews.com.
“We received the letter, and will be providing a response to Sen. Blumenthal,” Gerry Tschopp, a spokesman for Experian, said in an email to FoxNews.com. “As we’ve stated before, Experian does not have a VIP list.”
The New York Times interviewed an Arkansas resident who said she had been denied employment and credit because her filing was mixed up with a felon who had the same name and birthday, and a Louisiana consumer struggled to remove errors from her credit report that stemmed from a mix-up with a less credit-worthy person with the same name, similar address and Social Security number.
The newspaper also interviewed a number of consumer lawyers and advocates who accused the credit bureaus of lacking an incentive to improve the system because their main clients are the creditors, not consumers.
But Klein cited a new study from the Policy and Economic Research Council that showed less than 1 percent of all credit reports reviewed by the consumers prompted a dispute that resulted in a credit score correction and an increase of a credit score of 25 points or greater. It also showed that one half of one percent of all credit reports reviewed by consumers after the dispute process ended had credit scores that moved to a higher “credit risk tier” as a result of the dispute.

“We’re not perfect by any stretch, but we get it right a preponderance of the time,” he said.

Published May 17, 2011 | FoxNews.com

What to do if your credit card has been compromised

January 16, 2015 by · Leave a Comment 

Here is some sound advice on what to do if you feel your credit card has been tampered with. Recent security breach teaches us all a lesson.

What Does the Credit Card Company Breach Mean for You?: MyFoxATLANTA.com

Authorized-user credit card plans can be useful, and abused

January 15, 2015 by · Leave a Comment 

Authorized-user credit card plans can be useful, and abused

“Authorized user” sounds like a term you’d find on the warning label of a heavy-duty power tool. (Authorized users only! All other users risk injury or death.)

But in the world of credit reports, an “authorized user” is someone who is allowed to use another individual’s credit card without being responsible for the bill.

That sounds like a sweet deal for the authorized user. But millions of people with good credit use this strategy to help their children or spouses build a solid credit history. Thanks to a recent turnaround by Fair Isaac, developer of the widely used FICO score, this avenue to good credit will continue to be available.

First, some background: When a credit card holder designates a child, spouse or other individual as an authorized user, the card holder’s payment history appears on the authorized user’s credit report. If the card holder has stellar credit, it will boost the authorized user’s credit score. More than 50 million consumers are listed as authorized users on another person’s credit card, according to Fair Isaac.

But in recent years, some credit-repair outfits have exploited authorized-user accounts in ways that Fair Isaac never intended. These companies arrange for people with good credit to “rent” their histories to strangers with tarnished credit.

“Some consumers were paying thousands of dollars to be added to someone’s account to get a short-term increase in their credit rating,” says Tom Quinn, vice president of scoring solutions for Fair Isaac. Fair Isaac officials were concerned that the practice, known as piggybacking, allowed consumers with bad credit to artificially inflate their scores.

In an effort to stop this practice, Fair Isaac announced last year that its new scoring formula, known as FICO 08, wouldn’t recognize authorized-user accounts. Critics said the change would lower credit scores for millions of consumers, forcing them to pay more for everything from mortgages to car loans.

About 1% of consumers would no longer have enough of a credit history to get a score at all, according to a survey by Credit.com, a consumer website. Without a credit score, it’s very difficult to qualify for a loan.

Lenders, meanwhile, raised a regulatory concern. They told Fair Isaac that they used FICO scores to comply with the Equal Credit Opportunity Act, which requires lenders to consider a spouse’s credit history when weighing a potential borrower’s credit risk. If Fair Isaac stopped recognizing authorized users, lenders said they wouldn’t be able to use FICO scores to meet that requirement.

In response, Fair Isaac sent its scoring model back to the laboratory. Company analysts came up with a new version of FICO 08 that will continue to recognize authorized-user accounts but make it more difficult for credit-repair agencies to manipulate credit scores, Quinn says. Fair Isaac declined to provide details on how its new formula will close the piggybacking loophole. The company says it’s working with the three credit-reporting agencies to get FICO 08 adopted as quickly as possible.

“This is great news,” says John Ulzheimer, president of educational services for Credit.com, an outspoken critic of the original proposal. “I’m thrilled with Fair Isaac’s willingness to take a second look at this.”

A credit-building tool

Ulzheimer believes the authorized-user designation offers a valuable way for parents to help children learn how to manage credit without giving them their own credit card. “It’s like a credit card with training wheels,” he says.

There’s no downside for the child, because an authorized user has no liability for the account, Ulzheimer says. If the parent falls behind on payments, the child can ask to have the authorized-user designation removed from his or her credit report.

“When you have someone as an authorized user on a credit card, you give them an escape route,” Ulzheimer says. “If you lose your job or get into a horrible financial mess, you’re not dragging them down with you.”

Still, credit cards, like power tools, can cause a lot of havoc if they’re handled improperly. For that reason, Quinn says, parents who name children as authorized users should set clear limits on how the card should be used.

“When I went to college, I was listed on my dad’s credit card as an authorized user, but I was strictly told it could only be used for emergency purposes and not to buy a round of beer for everybody,” he says. “When it’s done in a family environment where the practices of sound credit are taught, it’s very beneficial.”

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. Click here for an index of Your Money columns. E-mail her at: sblock@usatoday.com.

 

Credit 101 Part 6 – Filing a Complaint

January 14, 2015 by · Leave a Comment 

This is part 6 in a series of videos on basics of credit, which is Credit 101. What are my avenues of recourse? Where do I file a complaint? How do I challenge this information? Dispute to the credit bureaus and more is explained. This is something that should be taught in high school. A brief explanation of credit. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California. Learn how to fix your bad credit report and position yourself to purchase a home. I do NOT own rights to this music and am not claiming that I do.

New to the U.S? Here are credit building options, and hurdles…

January 13, 2015 by · Leave a Comment 

New to the US? How can you build credit?

Dear Credit Card Adviser,
My son and his family recently moved to the U.S. after living abroad for 11 years. His wife does not have a Social Security number. Can she qualify for a credit card? Are there other actions she can take to boost her credit history?
– M.

Dear M.,
This is a trickier question than it seems, with many parts. Let’s start with your son’s wife, or your daughter-in-law, and discuss how to get her a credit card.

Depending on the creditor, she may or may not need a Social Security number to apply for a credit card. Capital One and Chase require this number on their credit card applications. Discover and Bank of America accept Social Security numbers, but they also will take a taxpayer identification number issued by the Internal Revenue Service.

American Express accepts several forms of identification: Social Security, taxpayer ID, a foreign driver’s license or a foreign-issued passport. Citi doesn’t require a Social Security number, but applicants who don’t have one may be asked to show a government-issued ID at the closest Citi bank branch.

Your daughter-in-law also can be added as an authorized user on many credit cards without an SSN.

Now, let’s look at her credit history. Unfortunately, your daughter-in-law’s foreign credit history can’t be transferred to the U.S. But she can start building one here even though she doesn’t have a Social Security number. It’s best to have one, though, to ensure her credit information is recorded accurately, says Maxine Sweet, vice president of public education at Experian.

“Name and current address are the minimum requirement, but we strongly encourage the lender to provide the SSN, date of birth and previous address if it was within the last two years,” she says. “That additional information can be very important in helping us match the account to the correct consumer.”

TransUnion also builds credit histories on individuals without a Social Security number. Equifax didn’t respond to emails asking about their minimum identification requirements for a credit report.

Getting a Social Security number isn’t easy. Generally, only immigrants OK’d to work in the country by the Department of Homeland Security qualify for an SSN, according to the Social Security Administration website. There are exceptions, so contact the agency for more information.

Now, here’s a potential problem you probably didn’t anticipate: Your son may have a hard time getting a credit card, too. If your son didn’t maintain any open or active U.S.-based credit — such as a mortgage, credit card or other loan — while he was abroad, a lender probably won’t be able to pull his credit score. He may not even have a U.S. credit file anymore.

A U.S. credit report from Experian, Equifax and TransUnion is based on payment history on mortgages, car loans, student loans, personal loans, credit cards and other loans he got here. If he doesn’t have any activity on these types of accounts in the past year or so, his credit report has gone stale, says John Ulzheimer, president of consumer education at SmartCredit.com.

“At that point, the credit report will cease to be scoreable under any credit score criteria,” he explains. Credit scoring models need recent activity to calculate a credit score. No activity, no credit score. No credit score, no new credit in most cases.

That’s not all. The credit reporting agencies don’t maintain credit files indefinitely. By law, negative credit information must fall off credit reports after seven years. Bankruptcies disappear after 10 years. Sounds good, right? But Ulzheimer says credit reporting agencies will eventually drop the good stuff, too. After 11 years, your son’s credit history may have vanished.

Your son should see if he has a credit report. If he does, he should give it a thorough read and make sure there aren’t any errors. He can pull his credit reports from each of the bureaus for free once every 12 months at AnnualCreditReport.com. If he finds he has little or no credit history, he will need to start building credit again the same way a young adult does: through a secured credit card or as an authorized user.

Secured credit cards require an upfront deposit to act as collateral against the line of credit. The deposit equals the credit limit, and it’s placed in a money market account or certificate of deposit while the account is open. Typical deposits run between $300 and $500. The problem is that you need at least six months’ worth of activity on the card before a FICO credit score — the most widely used score out there — can be created.

This is where you, as a parent, can help out, if you have good credit history. Adding your son (and daughter-in-law) as an authorized user on a credit card (or two) will immediately populate his credit file with the card’s payment history. That means he’ll have a calculable credit score, too. He’ll be able to apply for credit in his own name and build from there. Good luck to the whole family!

By Janna Herron | Bankrate.com