Credit Inquiries: Everything You’ve Ever Wanted to Know
First things first, let’s define “credit inquiry.” A credit inquiry is simply a record of someone gaining access to your credit reports. The inquiry record has two meaningful components, the date of the access and the name of the party doing the accessing. The credit reporting agencies maintain a record of inquiries from anywhere between six months and 24 months, depending on the inquiry type.
All inquiries fall neatly into two categories, hard and soft. Hard inquiries are usually generated when you apply for something (there are exceptions though). Soft inquiries are generated when access to your credit report is granted for a reason other than the underwriting of an application. Below are just a few examples of each type.
|Hard Inquiries||Soft Inquiries|
|Mortgage applicationsAuto loan applicationsCredit card applicationsPersonal loan applicationsCollection agency skip-tracing||Consumers pulling their own credit filesLenders sending you a pre-approved credit offer in the mailLenders with whom you have an existing relationship viewing your credit periodically|
Hard inquiries are what we in the credit-scoring world refer to as “fair game,” meaning they are viewed and considered by credit scoring models, lenders and anyone else who has access to your credit reports. These are the types of inquiries that CAN lower your scores. Notice the obnoxious bolding of the word “CAN.” Hard inquiries don’t always lower your scores but they certainly can.
Soft inquires are off limits. They’re off limits to credit scoring models and off limits to lenders. In fact, they aren’t shown to anyone other than you when you ask for a copy of your own credit reports. Most credit reports are polluted with soft inquiries so thankfully they have no impact to your scores, at all.
Just like everything else on your credit reports, there is no fixed value per inquiry. So, when you read things like “My score went down 12 points because of an inquiry” or “Inquiries are worth 6 points each” you can ignore what you’ve read because it’s incorrect. The number of points you earn in the “Inquiry” category is based on how many hard ones you have on your file over the previous 12 months. That’s right, hard inquiries over 12 months old don’t have any impact on your FICO scores despite the fact that they’ll be on your files for another 12 months.
Now, let’s address the method which FICO uses to count inquiries. This is complicated, which is why there’s so much incorrect information on the subject floating around in the web world. Remember, we’re just talking about hard inquires at this point and only those that have occurred in the previous 12 months.
30-day “Safe Harbor” period
Mortgage, Auto and Student loan related inquiries that are less than 30 days old have no impact, at all, on your FICO scores. That’s why the date of the inquiry and the party accessing your reports is so important, because that’s how the inquiry is dated and categorized. So, if you want to split hairs, these types of inquiries only count for a maximum of 11 months because they’re ignored for their first 30 days on file and then only counted while they’re up to one year old.
45-day “Rate Shopping Allowance”
Over a decade ago FICO changed how they treated multiple inquiries caused by lenders in the mortgage and auto lending industries. And more recently, they’ve changed how they treated student loan inquires. The issue was how to not penalize consumers who were interest-rate shopping and, thus, filling their credit reports with multiple inquires in a very short period of time. The 45-day logic considers inquiries from mortgage, auto and student loan lenders, which occur within 45 days of each other as 1 inquiry. So, you can apply for 15 auto loans in as long as the lenders pull your reports within a 45-day period the 15 inquiries will be counted by the FICO score as only one search for credit. The idea, which makes perfect sense, is that the shopper is really only looking for one loan, not 15. There was a time when the 45 day period was only 14 days, but that was in much older versions of the scoring software.
You’ve probably noticed that credit cards, retail store cards and gasoline cards are not protected. That’s because people don’t generally shop for plastic like they’d shop for an auto loan. You don’t apply for credit cards with Capital One (COF), Discover (DFS), American Express (AXP), Bank of America (BAC) and Wells Fargo (WFC) and then choose whichever issuer gave you the best deal. What you’ve actually done is to open new cards with Capital One, Discover, American Express, Bank of America and Wells Fargo and opening so many accounts in a such a small period of time is indicative of elevated credit risk, so no dice my friends.
The same is true for retail store cards. You don’t rate shop at Macy’s stores at every mall in your city. The rate you get is going to be the same regardless of which store you apply at. This is very troubling news for the people who use their credit reports as “15% off” coupons at the mall and apply for instant credit at the register just to save a few bucks. Each of those is really an application for a new store credit card, and those inquiries can sting.
There are also some notable exceptions to the hard inquiry rule (that they are always seen and considered). For example, employment inquires do not count in your credit scores. Neither are insurance or utility inquiries counted in your scores. As you can imagine, it’s hard to argue that applying for a job, insurance (which is generally a legal or lender requirement) or utilities leads to a debt obligation and you certainly don’t want to penalize people for applying for these basic needs.
There you have it. Everything you ever wanted to know about inquiries but were too afraid to ask.
Sep 20, 2010 / By John Ulzheimer for Mintdotcom
OG Article here: http://www.mint.com/blog/credit/credit-inquiries-09202010
Credit Score Recovery…
Wondering how long it will take your credit score to recover from a home foreclosure or short sale? That depends on how good your credit was in the first place, says John Ulzheimer, a credit score expert who blogs on the subject for mint.com.
Somewhat depressingly, the better your credit score was before your mortgage woes started, the longer it will take you to recover. Citing data from credit reporting firm FICO, Mr. Ulzheimer said it would take roughly three years for a consumer with a 680 FICO to recover to that level after a foreclosure, compared with seven years for someone with a 780 score. That’s because high scores require “pristine” credit files, he said, while a middling 680 doesn’t.
Late mortgage payments follow the same pattern. A person with a 680 score who pays 30 days late can bounce back to that level in about six months, compared with three years for someone with a 780 score. His (somewhat obvious) advice? Don’t miss payments.
This is where we can help. Want to get back to that status from earlier? Simply contact us for information on how to get your credit life back on track.
4 Mistakes Your Credit Card Issuer Wants You to Make
If I asked you to describe the profile of the riskiest (most likely to default) credit card borrower, what would you say? Would you say things like they pay their bills on time, revolve small balances, and never approach their credit limits? Or, would you describe them as maxing out their card, missing payments, and exceeding their credit limits? Clearly, the latter is going to be the riskiest profile.
Now, describe to me the profile of a credit card user who is going to be the most profitable to the issuer. Would you say things like they pay their bills on time, revolve small balances, and never approach the credit limits? Or, would you describe them as maxing out their card, missing payments and exceeding their credit limits? Again, the latter is going to be the most profitable to the issuer.
What we’ve just identified in our little exercise is this: the riskiest credit card users are also the most profitable credit card users. And even though no credit card issuer would ever admit to this, they really do want a mixture of card users who trip up from time to time. Their biggest risk management dilemma is being able to tell the difference between a cardholder who is going to default and one who is simply going to remain a cash cow.
1) Missing Payments
A missed payment is very profitable to the card issuer if the consumer “cures” or catches back up. Not only has interest been incurred but a late fee of approximately $35 has also been assessed. And, in some cases, the late payment can trigger an increase in the cardholder’s interest rate, thus making any future revolving balances more expensive.
Keep in mind that missing payments if very different from refusing to pay or defaulting on your obligation. This is what we refer to as a non-default delinquency, and most large credit card issuers have between 1.8% and 10% of their population in this stage of delinquency.
2)Exceeding Credit Limits
The credit limit on your card is the upper bounds of your spending limit, but that doesn’t mean it’s a hard and fast cap on your spending. Some credit card issuers are actually fine with you exceeding your credit limit by a small amount. Today, over-limit fees run around $35 but you have to give the card issuer permission to charge it.
And while this might make you sound like you’re in control, you really aren’t. Thanks to the CARD Act the credit card issuer has to get your “opt in” before they can charge you the over limit fee but if you choose to withhold permission they’ll just deny your transaction.
3)Ignoring Grace Periods
I’m not referring to the grace period you have before your bill is due. I’m talking about the grace period before your introductory rate or teaser rate expires. There are more 0% balance transfer and 0% on purchases offers hitting mailboxes than I’ve seen in the past 20 years. But, that 0% only lasts for between 6 and 18 months, depending on the card. If you’re still carrying a balance after the introductory grace period expires, you may have to pay interest retroactive to when you opened the card.
4)Applying For Credit With Poor Credit
This might seem counter intuitive, but credit card issuers don’t mind you applying even if you’ve got poor credit. First off, if you’ve got poor credit but still qualify, then you’ll be what’s referred to as “adversely approved.” That means you got approved but with less than stellar terms. This means you won’t be getting even an average interest rate, which is about 13% to 15% right now. You’re more likely to be approved in the 20 percent plus range.
And, if your credit is so bad that the creditor denies you, it’s not the end of the world for them either. Many credit card issuers have a subprime subsidiary that can approve you for a subprime credit card alternative. Of course, the terms include very low limits and rates in excess of 30%. For some of these folks, it might be best to wait until their credit is in better shape.
May 21, 2012 / By John Ulzheimer
For mint.com /blog/credit/4-mistakes-your-credit-card-issuer-wants-you-to-make-052012/
‘Cheat’ your way to better credit
Great credit scores mean a healthy financial future. If your scores are less than ideal, here are some quick, legal ways to push them up.
To err is human, to forgive takes time — at least when you’re dealing with credit scores.
Even small missteps can deal big blows to your scores that can take months or even years to heal. Bigger screw-ups can keep you in the credit-score basement even longer.
Fortunately, there are ways to speed up the recovery process. Each of the methods described below is perfectly legal, even though we’re calling them “cheats.” They’re more like shortcuts to get better credit.
None of these methods will work for long, though, if you don’t have your financial act together. You’ll quickly lose any improvements in your scores if you miss a payment or wind up with new collection accounts.
Once you’re in a position to pay all your bills and start using credit responsibly, though, you might consider some of the following:
Cheat No. 1: Piggyback on someone else’s credit
Being added as an authorized user to someone else’s credit card can raise your own scores, if the credit card issuer is cooperative. Many issuers will export the cardholder’s history with that account to your credit reports.
Some issuers won’t do these exports, and some credit-score formulas ignore authorized-user information in their calculations. But the leading credit score, the FICO, still takes authorized-user information into account.
You’ll need to first find a cooperative person with good credit (obviously), and that person will need to check with his or her issuer to make sure the information will be exported to your credit reports. If all systems are go, you don’t need to have access to the card — the other person’s responsible use of that plastic will help your scores.
Caveat: The flip side is that your scores can suffer if the other person suddenly skips a payment or maxes out the card, so make sure you find someone you can trust to continue handling credit well.
Cheat No. 2: Make your credit card debt disappear (Option 1)
A big part of the FICO credit-scoring formula is credit utilization: how much of your available credit you’re using at any given time. The formula is more sensitive to balances on your revolving accounts, such as credit cards, than it is to balances on your installment loans, such as mortgages, auto loans, student loans and personal loans. When it comes to credit cards, the less of your available credit you use, the better. Using less than 30% is good, less than 20% is better and less than 10% is best.
If you have big credit-card balances, consider paying them off or down with a fixed-rate personal loan from a bank or credit union. These loans, which typically last for three years, can not only help you get out of debt but can transform the nature of that debt in the eyes of credit-scoring formulas. A balance that is hurting your credit scores because it’s on a credit card could be a neutral or even a positive factor in your scores if it were transferred to an installment loan.
Caveat: Lender policies differ, but not everyone will be able to qualify for a personal loan.
Cheat No. 3: Make your credit card debt disappear (Option 2)
If a personal loan isn’t an option, you can consider paying off your cards with a loan from your 401k or other retirement plan. Retirement-plan loans typically don’t show up on your credit reports and aren’t a factor in your credit scores. As far as the credit bureaus are concerned, that debt just disappeared.
It didn’t really, of course. You’ll still owe the money, just to a different account. And retirement-plan loans are risky: If you lose your job, you may have to pay back any outstanding balance quickly, or the loan will turn into a withdrawal — and that’s very, very bad. Not only will a withdrawal trigger a hefty tax bill, but you’ll lose all the future tax-deferred compounding that money could have earned. If you’re in your 30s, a $10,000 withdrawal could cost you $100,000 or more in lost future retirement income. If you’re in your 20s, you could be out $200,000 or more.
There’s another downside: If you’re in over your head with debt, your credit card bills could be erased in bankruptcy court. A retirement-plan loan isn’t eligible for the same treatment. In essence, you’re taking money that would be protected from creditors to pay a debt that would otherwise be wiped out.
Caveat: Consider a retirement-plan loan only if your job is stable and you’re not a financial basket case.
Cheat No. 4: Spread your debt around
The FICO formula looks at how much of your total available credit you’re using, but it also looks at the credit utilization of each individual account. A big balance on a single card can hurt you more than the same debt distributed over several cards.
So spread your debt around. You don’t want to open a bunch of accounts at once, because that can hurt your scores, but see if you can transfer some of your debt to your other cards.
Caveat: Your ultimate goal should be to pay off your debt, not keep moving it around. And if you’ve already maxed out all your cards, it’s way too late for this tip; you should be talking to a legitimate credit counselor (you can get referrals from the National Foundation for Credit Counseling) and a bankruptcy attorney (referrals from the National Association of Consumer Bankruptcy Attorneys).
Cheat No. 5: ‘Bribe’ your creditors
The FICO formula treats a collection account as a “severe negative derogatory,” in credit-scoring parlance. That means “seriously bad news” for your credit scores.
Many collection agencies, however, can be persuaded to wipe a collection from your credit reports with the right motivation. That means cash.
This is a technique called “pay for deletion,” where the borrower settles the debt, usually with a lump-sum payment, in exchange for its deletion as a collection account.
You may not have to pay 100 cents on the dollar to settle the debt, because chances are good the collection agency paid only a few pennies on the dollar to buy it. But whatever deal you negotiate, make sure to get the agency’s promise — in advance and in writing — that the account will be deleted from your credit files and that the collection agency won’t sell any unpaid portion of the debt to another collector. (You may wind up with a tax bill for any “forgiven” portion of the debt, however.)
Caveat: Erasing a collection account won’t erase what the original creditor has to say about you. If the account was charged off before it was turned over to collections, for example, the charge-off will remain on your credit reports and have a larger negative impact on your scores than the collection did. But even so, getting rid of the collection certainly won’t hurt your scores and could help them considerably.
Cheat No. 6: Disavow all knowledge
About a third of us have a collection on our credit reports, and many of those are for piddly amounts: a small doctor bill, an unpaid parking ticket, a tiny balance on a cellphone account. Those small amounts can have outsized effects on our credit scores.
The good news is that collection agencies think those amounts are piddly as well and may not bother to verify the information if you dispute it. Typically, this works for collections that are small (less than $100) and old (close to the seven-year mark where it will fall off your reports anyway). After pulling your free credit reports at AnnualCreditReport.com, you can try disputing small, old collections as “not mine” and see what happens.
Caveat: A collection agency might fail to verify an account within the required 30 days after you dispute it, but the company could report the account again later. You’ll need to keep checking your reports to see if it pops back up. Also, this technique is unlikely to work on larger and more recent accounts. It really is meant for those who screwed up in a minor way once, long ago, and just want to hurry the black mark off their reports.
Cheat No. 7: Erase the evidence
Defaulting on a federal student loan has serious consequences. Your tax refunds can be seized and your wages subjected to garnishment, and you’re shut out of future student aid. Student-loan collectors don’t need to get a court order to make this stuff happen; they can just do it.
If you can get back on track with your payments, however, you have an option not available to most other borrowers: Your default can be erased from your credit reports and thus your credit scores.
How do you make this miracle happen? It’s called rehabilitation, and it’s available on a one-time basis with federal student loans only. If you default again, you won’t be eligible for rehabilitation. Private student loans aren’t eligible.
To rehabilitate most federal student loans, you’re required to make nine out of 10 consecutive payments on time. (“On time” means within 20 days of the due date.) With Perkins loans, you must make nine out of nine consecutive payments on time. The required monthly payment must be “reasonable and affordable,” as worked out between the borrower and the student-loan collector.
Caveat: You’ll have to pay collection costs of up to 18.5% of the unpaid principal balance, as well as accrued interest, which can be substantial if the loan has been in default for a while. But even if you didn’t enter into rehabilitation, you’d still owe that interest, plus collection costs that are likely to be higher.
How Many Credit Cards Should You Have?
I’m asked this question on a weekly basis and have been for years. The infatuation with the optimal number of credit cards makes me smile because I know a secret that not many other people know. That secret is this… there is no right number of credit cards to have.
The basis for the question is purely credit score driven. Consumers rightly care and want to earn and maintain solid credit scores. One of the ways to do so is to become familiar with the things that matter, and by how much. The assumption is that you should have an exact number of credit cards, which would help your scores.
Haters Keep Hating
The hater crowd will undoubtedly suggest that 0 credit cards is the optimal number and that debt is evil… blah blah.
And while I respect the right to have your own opinion on the topic of consumer credit, I’ll be the first to point out when it’s wrong. Having credit cards is an easy and inexpensive way to establish, build, maintain, or rebuild credit. In fact, the vast majority of you started your consumer credit lifecycle by opening some form of plastic.
I’ll give you the same answer I gave for 7 years while I was at FICO and have given for the 7+ years I’ve been gone. As it pertains to your FICO score, the number of credit cards you have isn’t remotely as important as how you’re managing them. And while you can have too many inquiries or too many accounts with balances, it’s hard to have too many credit cards.
Same Numbers, Different Impact
Having only one credit card that also happens to be maxed out is incredibly damaging to your credit score. Having only one credit card that also has a very low balance relative to the credit limit is very helpful to your credit score.
Having fourteen credit cards, like me, that are all paid on time and have $0 balances is very helpful to your credit scores. The last time I checked my FICO scores, my lowest was an 801. Having fourteen credit cards that all have balances is very damaging to your credit scores. Same numbers, different impact.
As For a Hard Number…..
If you really want me to give you a number of cards to have, fine… how about five?
If you can end up with five general use credit cards (those issued with a Visa, MasterCard, Discover, or American Express logo) that each have $20,000 credit limits, then you’ll be in great shape.
First off, you’ll have $100,000 of capacity or buying power (that’s probably enough for most of us). Next, you’ll have a large aggregate credit limit, which means you can charge as much as $10,000 in any one month and still not be over 10% “utilized.” That’s what I call “utilization insurance” because it’s unlikely you’ll cause any serious credit score damage simply because you had one month of expensive charges.
Finally, and this might be my favorite reason, you’ll have a diverse enough set of cards that you won’t run into any situation, in the United States anyway, where you’ll hear “we don’t take that kind of card.”
If five sounds like too many, then have fewer. If you’re responsible with your plastic and you want more, then have more. If you don’t want to have any credit cards, then don’t have any credit cards.
Opinions about how many credit cards to have are just that, opinions. None of them are fully correct and none of them are fully incorrect.
By John Ulzheimer
For mintdotcom /blog/credit/how-many-credit-cards-should-you-have-052012/
How $5 ruined my credit score
Even a small bill can hammer your credit rating if it goes to collections. Fortunately, there are ways to protect yourself.
CardRatings.com asked readers to tell us how they helped or hurt their credit scores. This story from reader Melinda Graham of York, Pa., shows how a little bill can cost you big money.
“In the fall of 2008, I got a flu shot at my doctor’s office. A few weeks later, I got billed $5 for my co-pay on a ‘blood draw’ on that date. I procrastinated a bit on calling in to ask my doctor’s office to fix what was probably just a miscoded procedure. Eventually I called and went through the usual ordeal of explaining the situation to person after person before finding the one who said they could take care of it.
“In the fall of 2009, I got a notice from a collection agency that my doctor’s office had turned over a $5 unpaid bill for collection. I racked my brain for another bill that might have fallen through the cracks and couldn’t come up with anything but the co-pay. So, there I was, looking at this collection notice and remembering the time spent on the phone the first time around, and I decided $5 wasn’t worth the hassle. I mailed a check to the collection agency.
“Fast-forward a few months, when my fiancé and I decided to really get into discussing our finances in preparation for merging them after we got married. I told him about AnnualCreditReport.com, and how I like to review my credit report every few months. I hadn’t checked it in a while, so we thought we should get our reports and pay for credit scores, too. And then I nearly fell off my chair when I saw that because the $5 medical bill had been reported by the collection agency, my score had dropped from 785 to 689! I was shocked: $5 = 96 points?! Boy, did I ever regret my decision to avoid the minor hassle of a phone call to straighten out the billing error.
What to do about a damaged credit rating
“Subsequently, I did contact the doctor’s billing office and got it all straightened out. They also notified the collection agency of the billing error and had that entry removed from my credit report with the credit bureaus. Unfortunately, my score only went back up to 764.
“No more collection agencies for me!”
Here’s what every consumer should do to protect or improve a credit score:
- Pay all bills on time, and keep your credit usage low. To improve your score, try to use only 1% to 10% of your available credit line.
- Check credit reports regularly. Federal law allows you to get a free report once a year from each of the credit-reporting agencies — Equifax, Experian and TransUnion. Log on to AnnualCreditReport.com to order or download yours.
- Fix mistakes on your credit report. While lenders and credit card issuers report your activity to the credit bureaus, you are responsible for the accuracy of your credit report. Errors can be as simple as a wrong name or address or as complex as a line of credit that has been opened in your name, meaning you may be the victim of identity theft. Follow these six steps to fix errors on your credit reports.
- Pay for your credit scores. If you anticipate applying for a loan such as a mortgage, you should get your credit scores a few months in advance so you can work on raising them. The higher your scores, the lower your interest rate will be. You may also want to subscribe to a credit-monitoring service, which will give you access to your scores on a regular basis. Knowing how much your scores go up or down based on your financial behavior may help you improve your money-management skills. Also, keeping an eye on your credit report and scores means you can jump on a problem before it gets out of hand and destroys your credit.
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.
Each credit reporting or monitoring agency uses a different method to calculate your score. They base these calculations on complex mathematics, 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||www.privacyguard.com www.identitysecure.com|
|Experian PLUS Score||Experian||www.experian.com www.freecreditscore.com www.freecreditreport.com www.familysecure.com|
|Equifax Credit Score||Equifax||www.equifax.com|
|FICO Score||EquifaxFICO||www.equifax.com www.myfico.com|
|VantageScore||TransUnionVertrue||www.transunion.com www.truecredit.com www.privacymatters.com
Read more @:sfgatedotcom
Denied credit? Maybe you’re dead
Lots of people ‘die’ every year, at least on paper, and untangling the mistake can be a big headache. Here’s what to do if you learn you’ve ‘died.’
Rejected for a loan because your credit history was shut down? It might be because the credit bureaus think you’re dead.
About 1,000 people per month get mistakenly declared dead by the Social Security Administration, according to government estimates. Many more get falsely reported as deceased by their bank or credit card issuer, or by one of the big three credit bureaus — Experian, Equifax and TransUnion.
Often, when victims find out that they have been mistakenly declared dead, they assume that proving they’re alive and well will be easy. Instead, they find they will have to wait a month or more before lenders will acknowledge their living, breathing, bill-paying status.
Or, in more extreme cases, they’re told that they must be mistaken. They can’t possibly be alive right now because investigators have looked into their case — and records show they’ve passed away.
“There’s a sense of powerlessness, a sense that you are disenfranchised,” says James Willis, a California journalist and professor who was mistakenly declared dead by Capital One two years ago. Willis had started a new job and was getting ready to buy a house when he learned that, according to credit-reporting agency Experian, he had recently died.
“The news of my demise came in the form of a credit alert from Experian,” Willis recalls. “It said a potentially negative item had just been posted to my credit report.”Are debt protection policies worth it? FEATURED
When Willis followed up, he learned that one of his lenders, Capital One, had written off his charges as uncollectible because they believed that he was dead. Experian then froze his report, shutting out the mortgage company that Willis had enlisted to help him buy his house.
“When a credit card company declares you dead, then they send that notice on to the credit-reporting agencies, and then your credit history gets locked down,” explains Willis. “You cannot access it. Nobody can access it, because of the fact they assume you’re dead.”
At that point, being mistakenly declared dead shifts from minor annoyance to potential big, costly problem, says Jim Francis, a consumer lawyer in Philadelphia who has represented clients who have been declared dead on paper.
“The real problem with being marked as deceased on a credit account is you can’t get a credit score,” says Francis. “It’s impossible to get credit to the extent that most banks, mortgages (and) car dealerships require a credit score to assess risk. They have no possibility of getting that, and so there’s no way of getting credit.
“That’s the real problem and the real harm,” he adds.
Getting resurrected takes time
The amount of time it takes for “dead” consumers to be brought back to life can also hurt, say consumer advocates. Credit bureaus have 30 days under the Fair Credit Reporting Act to investigate a credit dispute and check on whether the information they have on file is correct.
However, that’s a long time to wait if a consumer is in the midst of applying for a time-sensitive loan, such as a mortgage, or is applying for a job and needs an immediate credit check, says Todd Mark, vice president for education at the Consumer Credit Counseling Service of Greater Dallas. “Those are situations where you don’t want to have to wait 30 days or longer for a dispute to be initiated,” says Mark.
In the meantime, customer-service representatives are rarely able to help speed up the process, which can be frustrating for a consumer who’s on a tight deadline, says Willis, the customer mistakenly declared dead by Capital One.
Short on time and anxious to erase Capital One’s mistake, Willis says he spent several hours on the phone, trying to get someone to help him in time to close on his home loan.
However, the workers at Capital One told him there was nothing they could do. Instead, Willis had to wait for the bank’s computers to process an investigation into the mistake and report back to the credit bureaus, he says.
“I don’t think you’re dead,” Willis says one customer-service representative told him over the phone. “I know you’re alive, but our computer is in control and our computer has 30 days to rectify the situation.”
“That’s when it took kind of a leap into the twilight zone for me,” says Willis. “Even though the individuals at Capital One believed I was alive, no one seemed to be able to do anything about the computer.”
Eventually, Capital One figured out that it had mixed up Willis with his deceased father, James Willis Sr., and restored his account. However, by that time, Willis had already spent countless hours trying to resurrect his credit.
“That’s what started weighing on me,” says Willis of the time spent trying to get the mistake corrected. “I was starting a new job at the time, and it was just a lot of time devoted to it — a lot of distraction that was caused by this.
“One of the frustrating things is to try to get them to understand that your time is valuable,” he adds.
It may take months — or years — to resolve
Willis was lucky. He was able to get his dispute resolved in less than a month and closed on his house just in time. However, other consumers have had to wait much longer to get their financial lives back on track.
Francis, the consumer lawyer in Philadelphia, says that many of his clients came to him in desperation after submitting their disputes through the credit-reporting agencies’ automated dispute process and getting nowhere.
“They tried sending detailed disputes, documentation (saying), ‘Here I am. This is my Social Security number. This is obviously not me.’ And surprisingly, in a bizarre fashion, the credit-reporting agency verified them as being deceased,” he says.
That’s when their lives turned upside down. Not only could they not get credit, but they had no idea how long it would take the credit bureaus to figure out the mistake.
If you, too, find that you are having trouble proving to lenders that you’re alive, don’t panic.
Prepare a detailed, notarized dispute for the credit-reporting agencies that includes documentation proving you’re alive, and send it by certified mail, say experts.
Also send a notarized copy of your dispute and copies of supporting evidence to any furnisher or creditor that you believe may be responsible for the mistake. If you believe the Social Security Administration is responsible for the mistake, contact your local Social Security office.
In addition, write down the name and number of every person you talk to over the phone, including what the person promised he would do for you, says Mark. “Create your own paper trail at home, and don’t be afraid to step up who you talk to,” he says.
If nothing works and your credit information is still shut down, seek legal help. Under the Fair Credit Reporting Act, you are entitled to seek legal action when legitimate errors — such as being mistakenly declared dead — aren’t corrected in a reasonable period of time.
Finally, remain calm, says Willis. If you believe you’ve located the source of the error, try calling repeatedly until you get a sympathetic voice on the line, he says. “I found one of those individuals with Capital One, and I found one with Equifax,” says Willis.
Explain your situation and understand that the person is at the low end of the totem pole and may not be able to do much to help you, he adds. “The natural tendency is just to boil up, but it doesn’t help anyone to do that. You just have to try to reason with them. Try to remain calm and reasoned, and try not to appear like a nut.”
Credit-reporting agencies are required by the Fair Credit Reporting Act to thoroughly investigate any item on a credit report that a consumer says is wrong. However, in many cases, Francis says, the original furnisher of the information got the record wrong, not the credit bureau, and the credit-reporting agencies don’t follow up.
“The credit-reporting agencies don’t conduct any type of independent investigation,” says Francis. Instead, they send a consumer’s dispute to the organization that supplied the information and rely on it to look into whether a consumer is really dead. “That’s how things are getting verified,” he says.
If a creditor looks at its records and sees that the consumer is listed in its files as deceased, it might not dig further, says Francis. “They’re not really that interested in conducting investigations,” he says. “It’s not really a profit center for them, so they are doing the bare minimum.” As a result, the creditor sometimes ends up repeating the same inaccurate information to the credit bureaus.
At that point, consumers have few options but to wait and try again.
Banks and other creditors are required by law to thoroughly investigate whether the information they have on file is correct, says Francis. “They have the same duty that the credit-reporting agency has,” he says. “Both the credit-reporting agency and the furnisher must conduct a reasonable investigation.” So consumers have the legal ammunition to fight back against credit-reporting agencies’ and furnishers’ claims that they are dead.
However, they have little power to speed up the process and get their credit reports unlocked when they need them.
“It takes a really persistent effort” to get a dispute resolved, says Nina Heck, the director of the Consumer Credit Counseling Service of Maryland and Delaware. “Sometimes (a dispute) has to be resubmitted and resubmitted.”
Heck has worked with multiple clients who have been mistakenly declared dead, and she says it often occurs because a client’s name was mixed up with someone else’s.
When that happens, proving you are who you say you are can be a challenge, she says. “First, you have to prove that you are you, and then you have to be able to validate that this (other) person is deceased,” says Heck.
Beware of the Death Master File
Consumers who have been accidentally declared dead by the Social Security Administration, rather than a creditor, have it even worse. The Social Security Administration keeps a master list called the Death Master File that lists everyone in the United States who has died. Sometimes, a person will get mixed up with someone else, or a typographical error will cause that person to be listed as deceased.
Once a consumer is listed as dead in the Death Master File, numerous stakeholders are notified, including the credit bureaus and other government agencies. Soon after, that individual’s credit reports are shut down, his or her benefits are cut off, and the person can’t get a new job (that requires a valid Social Security number for a living person).
Getting taken off the Death Master File, meanwhile, can sometimes take years, financially devastating those involved.
“As many news reports have accounted, incorrect death reports have created severe personal and financial hardship for those who are erroneously listed as deceased,” said U.S. Rep. Sam Johnson of Texas in February, announcing a congressional hearing on the Death Master File’s accuracy. “Those affected have experienced termination of benefits, rejected credit, declined mortgages and other devastating consequences, while their personal and private information is publicly exposed.”
By Kelly Dilworth for CreditCards.com
Found at money.msn.com/credit-rating/denied-credit-maybe-youre-dead
Are Serious Errors Lurking in Your Credit Report?
How accurate is the all-important data in your credit report? It depends on whom you ask.
Previous estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. But according to a recent study paid for by the Consumer Data Industry Association, the trade group for the credit bureaus that assemble and sell credit reports, that rate is much lower. Consumer advocates, meanwhile, were skeptical of those results.
The study, conducted by the Policy and Economic Research Council, found potential errors in 19.2 percent of credit reports examined. But once consumers disputed potentially problematic errors and got the bureaus to fix them, less than 1 percent of these corrected reports led to meaningful increases in credit scores.
And what is meaningful in the credit score context? Well, very few of the corrections led to a big enough credit score gain to push those consumers into a better “credit risk tier,” where they would have access to cheaper loans and such.
But that’s a pretty narrow way to view the results. Consumers typically want to hang on to every last point they can — especially at a time when lenders are reluctant to extend credit.
Score wise, the report found that less than 1 percent of all credit reports examined, or 0.93 percent, prompted a dispute that resulted in a correction that boosted scores by 25 points or more. About 1.2 percent of reports resulted in a score increase of 20 points or more; nearly 1.8 percent of reports saw scores climb 10 points or more; and slightly more than 3 percent had an increase of 1 point or more.
Keep in mind we are not speaking in FICO terms, or the popularly known credit score scale that most lenders use. Instead, the study measured scores using the bureaus’ VantageScore credit score, whose scale ranges from 501 to 990. The higher the score, the better the credit rating.
Consumer advocates pointed out that even seemingly low error rates can affect millions of consumers because each of the big three credit bureaus — Equifax, Experian and TransUnion — have at least 200 million credit files. So a 1 percent error rate would translates into two million consumers per bureau, noted Chi Chi Wu, a staff attorney at the National Consumer Law Center. For those consumers, “the credit bureaus should conduct real and meaningful investigations of disputes, which they do not,” she said.
Here’s how the researchers arrived at their numbers: Over all, the study, which included 2,338 consumers, found that 19.2 percent of credit reports had one or more pieces of information that a consumer believed could be inaccurate and disputed. Of those reports, 63 percent, or 12.1 percent of all reports examined, were found to contain errors that could potentially have “material impacts” that could lead to “possible adverse consequences.” Ultimately, 7 percent of reports in the study were disputed.
Consumers received their credit reports from one or all of the three bureaus, along with a credit score. They were instructed to identify any errors and then to file disputes with the relevant bureau, which then calculated scores based on the corrected report too. The study found that most changes were consistent with the consumers’ requests and that 95 percent of participants who lodged disputes were satisfied with the outcomes.
But satisfaction is almost certainly easier to achieve when you have a dedicated phone line for the participants making disputes — and one of the big bureaus did. Michael Turner, president and chief executive of PERC, said there wasn’t a meaningful difference in the results from the bureau that had the special phone number versus those that did not.
Experts also questioned the way the study participants were found. Instead of being randomly selected from the population at large, they were recruited through the Synovate Global Opinion Panels, where one million consumer members are compensated to complete an average of 12 to 14 surveys annually. But Mr. Turner said that the study’s sample “looks very much like an adult population on every sociodemographic metric.”
“We are transparent and are making available to academics and regulators the underlying data and the results from our independent peer review,” he added.
Still, it wasn’t enough to completely quiet the study’s critics. “To claim less than 1 percent have meaningful errors is kind of like trying to change an “F” to an “A” on you report card,” said John Ulzheimer, president of consumer education at SmartCredit.com, who also pointed out that the study thanks the three credit bureaus for providing “numerous insights, guidance, and invaluable assistance with the implementation of the research.”
The Federal Trade Commission is conducting a nationwide study of its own that also examines the accuracy of credit reports. It’s expected to deliver its results next year, and, it may include recommendations for legislative action. Perhaps that study will provide more clarity.
Have you discovered any serious errors in your credit report? What did you do to fix them? And what do you think of the study?
By TARA SIEGEL BERNARD
Now is the time of year for Promotions and Graduations and preparing for the future.
Do you know someone that needs to prepare for their financial future?
A recent graduate?
A newly engaged couple?
A prospective Home Buyer?
Here are 3 simple ways to improve your credit sores:
1) Review a copy of your credit reports and scores
There are many reasons you may have no credit history (A thin file). Maybe you’re just starting out, maybe you pay cash for everything and have never needed a loan. In any case, if you have no credit history, your FICO score is likely to be low. Get a copy of your report to view the facts about your personal history.
If you need help in understanding your credit, adding positive credit or on any related topic, just ask!
2) Maintain a GOOD credit history
Good job – you have paid your bills on time, and do not have high credit card debt. Here’s some ideas to keep your FICO score as high as possible.
Keep your old accounts OPEN. One part of your credit score is based on the amount of credit available verses amount of credit used. Closing old accounts can lower this part of your score, as well as close the age of your active accounts.
Something to think about. The day of the month you pay off your credit card may have a lot to do with your FICO score. Try changing the payment dates you pay it if your reports show that you are carrying over a balance each month. …just be sure NEVER to pay late.
3) Fix negative information on your reports
Start with making on time payments. The next largest portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down your credit cards. Next, challenge any and all erroneous, disputable and obsolete credit information with the 3 major credit bureaus.
Elite Financial, LLC is a credit services organization that offers the
* Credit Repair
* Restoration & Rebuilding credit for clients affected by divorce,
bankruptcy or foreclosures
* Credit Education
* Our niche is fixing credit for loan approval
A good FICO score is a huge part of your financial life and future. Keep it healthy. Use it wisely.
Get help when needed.
Use these tips and watch your score climb.