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

August 26, 2016 by · 1 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, 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, 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:


4 tips to raise your credit scores

August 25, 2016 by · Leave a Comment 










4 tips to raise your credit scores

1)  Check your credit reports for errors

a. Annual Credit

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

VIP Treatment

August 24, 2016 by · Leave a Comment 

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
“We received the letter, and will be providing a response to Sen. Blumenthal,” Gerry Tschopp, a spokesman for Experian, said in an email to “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 |

Never Dispute Online

August 23, 2016 by · 3 Comments 


In my daily grind, I come across many real estate professionals trying to lend a helping hand to their clients in helping with credit issues. In some cases it can be considered as “minor” work. But for most, I find that they prefer using the online websites for generating a dispute to the credit bureaus. This is a Big NO-NO!  For several reasons detailed below, this online dispute does very little to help you out. Not to mention most real estate professionals, unfortunately, are handling the dispute process incorrectly to begin with. But when  they do go beyond their scope of expertise, the following usually happens;

1)      Time – The credit reporting agencies do not have to process an online request. The online dispute gets tracked automatically and a request to verify is automatically forwarded to the data furnisher through e-oscar. The restrictive 30 day clock is accomplished easier if everything is automated.

2)      Paper trail- with online disputes there is no paper trail to evidence the details of the dispute, and creating a paper trail during credit repair is essential.

3)      Limited Dispute Reasons- With the limitations of dispute reasons, an accurate description of the dispute is difficult in most cases. It will all get broken down to its most simple form.

4)      Expeditious Dispute Resolution- The Fair Credit Reporting Act section 611a(8) changes the standard requirements and protection afforded to the consumer by the FCRA.

When the Fair Credit Reporting Act was amended, they put in a section for “Expedited Dispute Resolution” Section 611a(8) the on-line dispute system. It reads as follows…

“…the agency shall not be required to comply with paragraphs 2, 6 and 7 with respect to that dispute if they delete the tradeline within 3 days.”

Paragraph 2 requires the CRA to forward your dispute and all related documentation you provide to the furnisher. They rarely forward the documentation.

Paragraph 6 requires the CRA to provide you with written results of the investigation.

Paragraph 7 requires the CRA to provide you with the method of verification on request from the consumer.

What they are doing is…

The Credit Reporting Agency (CRA) can delete a disputed trade line for 30 days, then, the trade line can reappear when the furnisher (creditor or collector) reports it again in the next cycle. That is because the CRA is not required to tell the furnisher you disputed it thanks to section 2 being omitted.  This is sometimes called a “soft delete” and it is not permanent.

Furthermore, you lose your rights to request “Method of Verification” (MOV) so you lose this powerful tool in the dispute process thanks to Paragraph 7 being omitted.

Finally, another powerful tool we use often is the five-day written notice of re-insertion.  Essentially, what that means is that if a credit bureau is going to re-insert a previously deleted item, they must inform you in writing five days prior to re-inserting it. I have rarely ever seen them give that notice.

That five-day notice is only required if the credit bureau takes longer then 45 days to complete. IF it is deleted via the expedited system, often completed in three days, the five-day written notice is no longer required.


So, let’s let the experts handle their own respective expertise and call a professional credit repair company when help is needed.

Which Credit Cards Should I Close?

August 22, 2016 by · 1 Comment 

Which Credit Cards Should I Close?

One of the most common questions I get has to do with the impact of closing credit cards, “Which card or cards should I close?”  Most consumers are aware of the fact that closing credit cards can lower your credit scores but that’s really where the facts end and the fiction begins…

Sometimes the relentless pursuit of those great credit scores causes us to do things that might seem foolish or even silly.  Some of these are going to be situations where the smartest move might not be the best move for your credit scores.  Please keep that in mind as you read on.

First and foremost, if you’ve conceded that you simply can’t properly manage credit cards then you shouldn’t have them, period.  But, if you simply want to prune your wallet of some unused or expensive plastic then there is a right way and a wrong way to go about it.  Each strategy has its pros and cons.

The Most Financial Benefit

If you want to get the most financial bang for your buck then rank your credit cards by their interest rate from highest to lowest and then slice off the top card/s.  This strategy, which you didn’t need to hear from me because it’s so fundamental, is only useful if you revolve a balance from one month to the next.  If you pay your cards off each month then the interest rate is irrelevant.

The annual fee associated with a card can also seem to be a reason for closing it.  But, most annual fees are well below $100 so if you think about the other things you’re spending money on, a credit card annual fee doesn’t seem so bad.  Having access to thousands of dollars of unsecured capital has value.  Remember that before you close cards just because they have annual fees.  You might regret your move.

The Most Credit Score Benefit

The above header is purposely deceptive.  There is no credit score benefit to closing credit card accounts.  When you close an account you lose the value of the unused credit limit, which can really slam your scores.  If you close credit cards that have a balance the damage will be less than if you close cards that have no balance.

If you do choose to close accounts that have no balance then choose the card with the lowest credit limit, which is probably going to be a retail store credit card (those will also likely have the highest interest rates).  Or, alternatively, close charge cards since they have no credit limits and are not counted by newer scoring models in the infamous “debt utilization” category.

The Biggest Myth About Closing Credit Cards

Here goes…”Close the newest card because if you close old cards you’ll lose the value of their age in your credit scores.”  No, no, no.  That’s incorrect.  The only way you lose the value of an old account is if/when it’s removed from your credit reports.  As long as the account is still on your credit reports then the scoring models see how old it is and your scores will continue to benefit from its age. The incorrect assumption is that credit-scoring models only look at open accounts when considering age related factors.

The Fair Credit Reporting Act doesn’t require the removal of closed accounts that are positive (void of negative information).  We know at least one of the credit bureaus will allow a closed account to remain on file for 10 more years.  Point being, when you’re going through the process of choosing which accounts to close don’t worry about how old they are.

By John Ulzheime

Student Loans, Credit Reports and Credit Scores

August 19, 2016 by · Leave a Comment 

student loans

Student Loans, Credit Reports and Credit Scores
“John, I have 8 student loans on my credit reports. Can you tell me how these loans are affecting me? Will the loans hurt or help my credit scores?”

The answer to the question, “Will student loans hurt or help my credit scores” is a bit complicated and actually depends upon a variety of factors. It is equally possible for student loans to have a positive impact upon credit scores as it is for the loans to have a negative impact. The ingredient which determines how student loans affect your credit is…YOU. More specifically, the way you manage your student loans determines how they impact your credit scores. For a deeper explanation, take a look at these examples.

Positive Impact

The FICO credit scoring model treats student loans the same way it treats installment loans. Installment loans, such as auto or mortgage loans, have fixed monthly payments for a set period of time. It is true that the amount of debt a consumer carries does factor into credit score calculation. However, FICO and other credit scoring models are not nearly as concerned with the amount of student loan debt a consumer owes as they are with the amount of credit card debt the consumer owes. A consumer can actually have a large amount of student loan debt (and other installment debt) and still be awarded stellar credit scores as long as the loans are being paid on time. In fact, if you establish a history of on-time monthly payments then your credit scores might even benefit from your student loan accounts.

Negative Impact

Having 8 student loans may seem a bit excessive and even unbelievable to some people. Yet, it is an entirely common occurrence since student loans appear on credit reports on a disbursement by disbursement basis. If you took out 1 student loan for every semester of your undergraduate study, you would rack up 8 student loans.
Credit scoring models pay a lot of attention to how consumers pay their bills. This fact applies to all accounts which show up on credit reports – student loans included. When consumers make their student payments habitually late or when they do not pay the bills at all, they should expect some seriously negative consequences where their credit scores are concerned. Plus, if a consumer has a group of student loan accounts which are not being paid in a timely fashion the credit score damage can be multiplied even further.

Protect Your Credit – Play Defense!

Former college students are currently sharing nearly $1 trillion dollars of student loan debt according to a recent study by the Federal Reserve Bank of New York. If you currently have outstanding student loan debts here are a few tips which may help you to protect your credit scores from potential damage.

1. Don’t ignore your loans.
If you find yourself in a position where you cannot afford to pay your student loan payments, pick up the phone and give the lender(s) who carry your loans a call. You might have deferment, forbearance, forgiveness, or income based repayment options available to help you.

2. Consider consolidating.
Student loan consolidation has several potential benefits. Consolidation might increase your credit scores since only one outstanding student loan would be reporting to the credit bureaus instead of multiple accounts. Also, you might be eligible to receive a lower interest rate on your consolidation loan than you received on your original student loans. Finally, if you consolidate a large number of student loans into just one new loan and, God forbid, you experience the inability to make your student loan payment at sometime in the future then you would only have late payments show up on one account instead of multiple accounts. Don’t get me wrong, late payments on even one account can cause your credit scores some serious damage – though possibly a little less damage than late payments on multiple accounts would cause. Consolidating your student loans might just be a win-win-win situation for you to consider.

Posted By: John Ulzheimer  |  September 4, 2013  |

For: bestcreditrepaircompanys

Divorce and Your Credit

August 18, 2016 by · Leave a Comment 

Divorce and Credit

Unfortunately, in our day and age, Americans are divorcing at a higher rate than 50 years ago. With divorces comes great responsibility in protecting your credit from massive damage. So often, a Bankruptcy follows a divorce and it shouldn’t. Here are some ideas I found to be helpful if you find yourself going through a costly divorce.

Divorce decrees do not relieve either party of joint financial responsibility. The purpose of divorce is to split off emotionally, and financially, from your ex-spouse. If you aren’t careful, your spouse’s handling of your once-joint accounts can haunt you for years. If you had joint debts which existed before your divorce, and these accounts are not both paid off and closed, you are just asking for trouble.

Also, although some divorcing couples definitely are out to get each other, most problems with joint accounts prior to divorce are caused by ignorance, not malicious intent. Don’t think that just because your split is amicable problems can’t occur. Taking precautions can protect BOTH of you.

Here are the typical joint accounts which many married couples share and what you need to do with each before you get divorced.

Your Home/Mortgage This should be your first priority. It is vital to not walk away from a divorce with the mortgage in both of your names. Here are possible ways to cope with joint home ownership, listed from most preferable to least:

  1. Sell the home. Make sure the sale occurs before the divorce, especially if your ex is living in the house during the divorce proceedings. If you have an agreement to sell (the house has not yet sold) at the time of your final divorce, and your spouse is secretly opposed to selling it, he can make it very difficult for a realtor to show or list the home, dragging out the sale indefinitely. In the meantime, you are responsible for the payments and your credit is in jeopardy. It’s actually best to have the house empty during the sale of the home; if possible, both of you should be out of the house before it goes up for sale.
  2. Have one spouse refinance the home in his/her own name. If one spouse is to keep the house after the divorce, insist that your soon-to-be-ex obtain new financing in his own name. You can’t just call up the mortgage company and say, “Hey, I’m getting divorced, can you take my spouse off the loan?” Your lender is going to insist on having your ex go through the formal loan process to qualify. Do not let the final gavel sound on your divorce papers before the house has been through the refinancing process. Having your spouse show you loan approval papers is not enough; last minute glitches that prevent loans from closing occur every day.
  3. If selling or refinancing isn’t an option. This is the worst possible option. Try to avoid it at all cost. If moving out of your joint home is going to cause hardship to your ex (and/or your kids), and he is unable to refinance the home on his own, here are some things you can do to protect yourself:
    • Don’t take your name off the title. If you take your name off of title (using a quit claim deed), you are removing ownership but not loan responsibility, a very dangerous situation. This also means that you will not be able to split the equity in the home at the present time.
    • Place a limit on how long your ex can stay in the house before it will be sold or refinanced.
    • Notify the mortgage company of your change of address and have all statements and coupon booklets sent to your new address (also, see if you can get your ex to mail the payments to you). At the very least, inform the lender that you wish to be notified if the payments get in arrears. In this way, if your ex is late on payments, you will be notified and have the chance to make up the payments.

Car Loans This is the second most important item in need of your attention, because car loans are the second most important kind of financing on your credit report after your mortgage. As you will notice, my suggestions for handling joint car loans are very similar to those for a joint mortgage. Here are possible ways to cope with joint car ownership, listed from most preferable to least:

  1. Sell the car. Make sure the sale occurs before the divorce. If you just have an agreement to sell (the car has not yet sold), you are responsible for the payments and your credit is in jeopardy. If the car is upside down (meaning you owe more than it is worth), it’s still better to sell the car at a loss than to risk your credit. The difference between good and bad credit can be worth thousands of dollars in interest and fees per year on future financing.
  2. Have one spouse refinance the car in his/her own name. If one spouse is to keep the car after the divorce, before you get divorced, insist that your soon-to-be-ex obtain new financing in his own name. As with a mortgage, your lender is going to insist on having your ex go through the formal loan process to qualify. Do not let the divorce process complete before the car loan has been completely through the refinancing process.
  3. If selling or refinancing isn’t an option. This is the worst possible option. Try to avoid it at all cost. If selling the car is going to cause hardship to your ex (and/or your kids), and he is unable to refinance car on his own, here are some things you can do to protect yourself:
    • Don’t take your name off the title. If you take your name off of the title, you are removing ownership but not loan responsibility, a precarious situation to be in.
    • Place a limit on how long your ex can have possession of the car before it will be sold or refinanced.
    • Notify the car finance company of your change of address and have all statements sent to your new address (also, see if you can get your ex to mail the payments to you). At the very least, inform the lender that you wish to be notified if your ex isn’t making the payments.

Joint Credit Card Debt Most people think that “closing out” joint credit card accounts is the end of the headache. Unfortunately, they forget that the account is not really closed out until any balances are paid off. Even worse, it’s very easy to reopen accounts if the accounts are being paid on time – credit card companies encourage this. If you cannot pay off and close the balances immediately (it may be difficult to legally divide up debts that have not been paid off, check with your lawyer), here are some solutions for getting rid of it, listed from best option to worst:

  1. Sell a joint asset (perhaps your home – kill two birds with one stone) and pay off the debt, then close the account.
  2. Apply for a separate credit card for each of you and have agreed-upon amounts transferred into these sole and separate accounts from the joint debt accounts.
  3. If your spouse can’t qualify for credit on his own, get one of his relatives to co-sign on a new card, then transfer the balances.

Note: If you have debts that don’t fit into the above categories, use this simple rule of thumb: After a divorce, all of the joint debts you had should be closed and paid off; all of the assets you owned jointly should be sold. No exceptions.

Finally, above all, work on your relationship. Try to avoid this situation. I am not a marriage counselor, but I do know a very good one. In fact he even has a great tagline: “Marriage is grand, divorce is 10 grand! – Let me help you save yours.” Ask me for his number and I will gladly send it over to you!

Life After Bankruptcy: 5 Steps for a Newer, Healthier YOU!

August 17, 2016 by · Leave a Comment 

Life After BK
Life After Bankruptcy: 5 Steps to Rebuilding Your Credit, Finances and Emotions

Rebuilding your life after bankruptcy – including your credit rating, finances and your emotional well-being – can sometimes seem like an overwhelming task.

But if you’ve recently filed for Chapter 7 or Chapter 13 bankruptcy protection, it’s important to realize that there is life after bankruptcy. And it doesn’t have to be a life where you’re treated like a financial outcast and banished to years of credit exile.

On the contrary, life after bankruptcy can be enormously rewarding – but only for those who strategize properly and commit themselves to not wasting the second chance that bankruptcy can offer. Ultimately, how well you rebound from a bankruptcy filing depends on the post-bankruptcy steps you take to safeguard yourself against future financial calamities.Here are five steps to speed up your recovery after bankruptcy – and help you get on with the business of living life well without the stigma of the bankruptcy process.

Let Go of the Guilt and Shame

If you’ve gone through bankruptcy – or are contemplating it – you’re certainly not alone. In 2010, personal bankruptcies in the U.S. rose by 9% to 1.53 million filings. Also, a May 2011 survey from revealed that one in eight adults in the U.S. – 13% of the population – admit they’ve considered bankruptcy. These sobering statistics are telltale signs that many Americans are still battling the lingering affects of the Great Recession.

Nevertheless, people who’ve filed for bankruptcy protection are often wracked by guilt and shame. It’s not uncommon for bankruptcy filers to say things like “I feel like a failure” or “I’m so disappointed in myself.”

But beating yourself up about your predicament won’t make your situation any better. In fact, succumbing to a steady stream of negative emotions about your bankruptcy can even be harmful to you by preventing you from moving forward in a positive way.

A better strategy: Resolve to make peace with the past by letting it go, and don’t dwell on negative thoughts or wallow in self-pity.

“Sometimes things just happen,” says James Feazell, who has counseled scores of financially challenged consumers over the years in his role as vice president of education at the National Foundation for Debt Management in Clearwater, Fla.

Feazell notes that job loss, divorce, medical bills and other personal setbacks can drive people into excessive debt and force them to declare bankruptcy. “So the challenge now is to adopt the right attitude,” says Feazell. “You have to get yourself mentally back in the right place where you can become more disciplined and better educated, and where you can learn from life and not make the same mistakes.”

Reflect and Regroup

How do you get to a healthier place emotionally if you’re disappointed about the past and perhaps experiencing regrets about choices you made?

Once the dust has settled after your bankruptcy, do some soul searching, recommends Chris Bridges, owner of Vision Credit Services LLC in the Washington D.C. metropolitan area.

“You really need to ask yourself several key questions,” Bridges says, “including ‘How did I get here? What could I have done differently? And what have I learned from all of this?’ ” Your answers will help you create a better financial afterlife in the wake of bankruptcy.

Additionally, enlist a great support system, Feazell suggests. “Friends, family, your church or members of civic organizations can all provide you with an emotional charge when you need it, or even just a shoulder to lean on,” he says.

It’s important to have the right people around you, Feazell adds, because “positive people who are in your corner, telling you that you can overcome this, can help you deal with all the bumps, plateaus and valleys you may experience after bankruptcy.”

Create a Realistic Budget and Pay All Your Existing Bills on Time

After a bankruptcy, you must become extra vigilant about your finances. Even if you’ve never created – or stuck to – a budget in the past, now is the time to get serious about doing so. Your budget will act as your spending plan, helping you to manage cash flow and preventing you from racking up unnecessary debt.

“Understanding your budget means you try to live below your means and stop keeping up with the Joneses,” says Dawn Brown, a certified financial planner and senior financial advisor with Altfest Personal Wealth Management in New York City. “Your budget should also have a line for saving, so you can pay yourself first.”

Brown and other experts say having an emergency fund is vital to deal with future emergencies or unexpected events that can derail even the best of budgets.

Also, make it a priority to pay all your current bills in a timely manner. Set up automatic bill payments, and remember to pay your rent on time since rent payments are now being tracked by the credit bureau Experian and will affect your credit score.

Repaying your existing bills as agreed will be one of the single, most powerful things you can do to restore your finances and your credit, according to Bridges, who has also written the free e-book Your First Step to Credit Restoration.

If you can’t pay everything that’s due, says Bill Hardekopf, CEO of, “prioritize your expenses. Pay the ones necessary for survival first, such as food, housing and utilities. This also helps protect your credit score, because a missed mortgage payment can hurt your credit score.”

Pick a Credit Card That Will Help You Rebuild Credit

Experts agree that another key strategy to rebuilding your credit rating after bankruptcy is to obtain a secured credit card. With a secured card, you deposit a given amount of money, such as $500, into a bank account and that $500 becomes your credit limit. By charging small amounts each month and repaying your debts as agreed, you can gradually rebuild your credit.

“Some of these (secured) cards will reward responsible borrowers by upping the limit without an additional deposit,” Bridges says. “Some will even convert the account into a traditional credit card.”

A few caveats about secured cards: First, recognize that at some banks, not everyone qualifies for a secured card, particularly if your bankruptcy is less than a year old. Also, stay away from secured cards that charge high fees, that don’t report your payment history to the credit bureaus, or that ask you to call a 900 number (you’ll be charged for the call).

Separate Fact From Fiction About Bankruptcy

Bankruptcy filers are often force-fed a host of myths and misconceptions about how horrible their lives will be in the wake of a bankruptcy proceeding. While life after bankruptcy certainly won’t be a cakewalk, unfortunately, much of the information doled out is flat out wrong, according to credit experts as well as people who’ve successfully and quickly bounced back from a bankruptcy filing.

First, there’s the incorrect notion that bankruptcy will automatically disqualify you from getting a mortgage for at least 10 years. Wrong! You can actually be in the middle of a Chapter 13 bankruptcy proceeding and still get an FHA home loan.

There’s also the false assertion that getting a credit card will be next to impossible for at least seven years. But this is untrue as well: Most bankruptcy filers receive a slew of credit card offers from banks almost immediately after their bankruptcy is discharged. One study showed that 96% of consumers were offered new credit within a year of declaring bankruptcy.

And then there’s the wrong-headed idea that car dealers and lenders will only approve your application at sky-high interest rates. Not so. As many people who’ve gone through bankruptcy will attest, there are numerous auto companies and lenders willing to finance a vehicle or approve loans at reasonable rates after a bankruptcy.

And while it’s true that bankruptcy will remain on your credit report for up to 10 years, it’s definitely not the case that it will take a decade to re-establish a positive credit rating. In fact, many people’s worst credit problems – even bankruptcy – are often not as bad as they think.

“Because credit scoring models typically lend more weight to your recent activity than to the mistakes you’ve made in the past, you can change your habits right now and begin reestablishing yourself as a good credit risk for a purchase or refinance loan in just six to 12 months,” says Bridges, who offers free credit report consultations to consumers.

FICO credit scores range from 300 to 850 points. Roughly six months after a bankruptcy is discharged, Bridges notes, “it’s not uncommon for people to see their credit scores skyrocket up into the 700s, if they have absolutely no late payments or collections” following the bankruptcy.

On the other hand, says Bridges, “if you do have a late payment or a collection following bankruptcy, you get dinged double by the credit scoring system, because it’s like: Didn’t you learn your lesson?”


By Lynnette Khalfani-Cox

Why credit scores are different

August 16, 2016 by · 1 Comment 

Why credit scores are different

Many consumers go beyond getting their free annual credit report from the nationwide credit reporting agencies, Equifax, Experian and TransUnion. These consumers pay for monthly subscriptions to a credit monitoring service with the goal of knowing their credit score at any point in time and receiving alerts when someone uses their personal information or accesses their credit history. It takes many people by surprise when they purchase credit scores just before applying for credit only to find the lender’s credit score disclosure does not match. Why is that the case, and what can you do?

What Credit Scores Tell Consumers and Lenders
Credit monitoring services and nationwide credit reporting agencies make money by selling credit scores to consumers, lenders and other businesses that use credit scores for decision-making. You, as a buyer, borrower or consumer, can buy educational credit scores from a credit monitoring service. Educational credit scores help you prepare to apply for loans, manage your debts and eliminate fraud or identity theft. Mortgage lenders, auto loan companies, credit card providers, insurance companies, landlords and employers buy credit scores from credit reporting agencies. Credit scores help them determine if you will pay your bill on time, in full, every month; predict if and when you might fall delinquent on your accounts; or evaluate if and when you are likely to default on your credit obligations. Whatever they’re being used for, credit scores should be based on the same information for both lender and customer, so why are scores from different sources so different? Two reasons credit scores differ are discrepancies in reporting methods and different scoring models.

Issues with Reporting Methods
Common discrepancies in reporting methods include:

  • Consistency – not all data furnishers give information to all credit reporting agencies.
  • Timing – data furnishers may provide the same information to all agencies but at different time schedules.
  • Accuracy – changing personal information, i.e. names or addresses, has to be matched to the correct credit file.
  • Privacy – Credit reporting agencies do not cross-share details on inquiries and information with each other.

Lenders and other creditors can choose what information to report, when to report it and which agencies to report to. Some lenders report monthly to all three agencies. Other creditors, like collection agencies, may report quarterly or only when there is activity on your account. Some agencies only report to a single credit reporting agency. A one-week difference in reporting information to the agencies could make a difference in your score from each one. Since reporting agencies do not cross share information with each other, the report and score you buy may not contain the same information that the lender report and score contains.

Scoring Models
Each credit reporting or monitoring agency uses a different method to calculate your score. They base these calculations on complex mathematic, statistical or algorithmic models. Scoring models are proprietary systems and are protected by trademarks, patents and copyrights.

There are three types of credit scores that credit providers purchase:

  • Generic scores – predict general payment performance
  • Industry scores – predict performance on specific type of credit
  • Custom scores – predict performance by company’s customer base

Generic credit scores are used by credit monitoring services to educate you, the consumer. You can use a credit monitoring service to learn how to get your score from what it is today to where you need it to be in the future. You can also use this service find out how late payments, opening new accounts or paying off debts may change your scores over time. Again, these are educational items and there is no guarantee you will achieve a certain score at any time.
Industry credit scores tell, for example, car lenders how you have paid your car loan, but that score may be different from a mortgage or credit card score. If you have had an automobile repossession, your auto industry score may be low in comparison to your mortgage industry score if you have never had mortgage delinquencies. Lenders may have their own in-house system to calculate a custom score based on their specific credit products and customer base. These scores often rank you in comparison to other customers and may work more like a grading curve than a general purpose credit score.

Take an Active Role in Providing Your Own Credit Information
You cannot control what credit scores you or a lender will get at any time, but you can know what information is in your credit file and keep it up to date. Make sure your name, address, birth date, Social Security number and employment information are current and correct. If you have a common name make sure other people’s information is not in your credit report. If you have received collection agency notices, check for reporting with the original creditor. Duplicate items can affect your credit score. When you correct or dispute an item, make sure you do it with all three bureaus, Equifax, Experian and TransUnion.

The Bottom Line
Finally, educate yourself about the different types of credit scores, credit reporting agencies and credit monitoring services in the market. Visit their websites to learn about their scores and services. Here is a list of providers most often used by consumers and industry.

CreditXpert Score Affinion
Experian PLUS Score Experian
Equifax Credit Score Equifax
FICO Score EquifaxFICO
VantageScore TransUnionVertrue

Original Article



5 Questions to Ask Before Your Apply for Credit

August 12, 2016 by · Leave a Comment 

The 5 Credit Questions You Should Ask Before Your Next Application

I was going to write a “do these 5 things before the end of the year” article for this week but I’m sure you’re being overrun with those right now.  So, in lieu of “piling on,” I figured I’d give you something more practical and something that can save you a boatload of money.  Before you fill out your next job, credit or insurance application, be sure to ask the appropriate questions from this list.

“Mr. Credit Card Issuer, do you report credit limits to the credit bureaus?”

Missing credit limits can lead to lower credit scores and some credit card issuers do not report your credit limits.  The problem used to be much worse years ago, when Capital One used to withhold credit limits on their accounts.  They started reporting limits in 2007 and have largely been forgiven for withholding the important data.  There are, however, still some cards where limits won’t be reported.  The so-called “no limit” cards don’t report limits and charge cards don’t report limits.

This is important because the credit limit (as reported on your credit file) is denominator in the “revolving debt utilization” calculation.  And, if it’s missing, the “highest balance ever” figure is used in lieu of the limit.  If the highest balance ever figure isn’t as high as the credit limit, and it generally isn’t unless you’ve maxed out your card, then your utilization percentage will be higher, and your credit score could be lower.  So, asking the question up front could save your scores.  Here’s a really damaging example…

Credit Limit – $10,000

High Balance – $1,000

Current Balance – $900

In that example the REAL utilization is 9% ($900/$10,000), not bad at all.  But, if that limit were missing then the utilization would be 90% ($900/$1,000), which is terrible.   This measurement is taken on a line item (card by card) basis AND an aggregate (all cards) basis, so there’s no escaping the damage.

“Mr. Employer, do you review credit reports when you screen potential employees?”

Employers are allowed, in most states, to review your credit reports as part of employment screening.  They’re required by law to get your permission to do so.  It still is a good idea to ask up front if they intend to do so.

Millions of American’s credit is in the tank these days:  35% of the population has FICO scores under 650 and while scores are NOT used by employers (reports yes, scores no), the data underlying a 650 (and below) score isn’t flattering, which means that 35% of the population has poor credit.  The worst thing that could happen would be to not get a job, or waste time and energy pursuing one, if your credit is going to disqualify you for consideration.

Knowing in advance will give you the opportunity to work on your explanation.  And, if your report contains damaging errors, it will give you time to get them corrected.  And if the company is hiring for multiple positions, it might even allow you to choose a role that is “credit free.”

“Mr. Lender (or Insurance Company), which credit bureau do you use?”

Why would you want to know this before you applied for a loan or insurance?  The answer is very simple: strategic applying.  If you knew that your FICO score from Equifax was 700 and your FICO score from TransUnion was 645, and you knew the lender used TransUnion for their credit reports… wouldn’t you want to maybe find a lender who used Equifax?

You would be more likely to get approved, and more likely to get approved with better terms.  Many consumers assume that lenders won’t tell them what credit bureau they use.  Some don’t, but some do.  It’s not a matter of national security for Joe’s Bank to tell you that they use Equifax for their credit reports.  They might even tell you what minimum score they require to approve the type of loan you’re interested in.  Arming yourself with this information can save you the embarrassment of a denial AND the potential damage of the wasted credit inquiry.

“Mr. Lender, what score exactly are you using?”

This is different than knowing what minimum score your lender requires for an approval.  This is finding out what VERSION of score they’re using.  There are many different versions of the FICO scoring software and not all lenders are using the most current version, to your detriment.

The newest version of the FICO score is still called, unofficially, FICO08.  This version does NOT count collections that have an original balance of less than $100.  This version also scores low risk consumers higher than older versions.  Point being, if you’re a good borrower, you REALLY want your lender to use the 08 version.

You can’t force your lender to use this version and the entire mortgage industry is still years behind when it comes to adopting newer scoring models.  Fannie Mae and Freddie Mac (that’s about 70% of all mortgages today) are still using older, much older, versions that were built well before the credit crisis.  There are lenders who are using current scoring versions and you should take your business to them.

“Mr. Lender (or Insurance Company), what is the minimum score required to get approved at the best rate?”

In July 2011, the FACS (Fair Access to Credit Scores) Act goes into effect.  And boy, oh boy, am I counting the days! This law requires lenders and insurance companies and anyone else who uses a credit score to make a decision about you, to give you, for free, the actual score they used if they declined you.

This will lead to a new era of score transparency. Within a few months we should have enough data to put together tables for every lender and insurance company that answers the above question.  If XYZ Bank declines you at 647, it won’t be a secret any longer.  Point being, we’ll be able to cobble together a really good understanding of minimum score requirements.

So don’t be shy the next time you’re about to fill out that application.  Asking one or two questions can save you money on a loan, save you some embarrassment and make you sound like a well-informed consumer.

By John Ulzheimer for Mint: