Why credit bureaus fail to fix errors

October 7, 2015 by · Leave a Comment 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6 More Credit Myths Debunked

October 6, 2015 by · Leave a Comment 


6 More Credit Myths Debunked

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

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

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

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

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

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

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

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

Credit 101 Part 6 – Filing a Complaint

October 5, 2015 by · Leave a Comment 

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

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

October 2, 2015 by · Leave a Comment 

New to the US? How can you build credit?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Janna Herron | Bankrate.com 

10 reasons you can’t get credit

October 1, 2015 by · Leave a Comment 

10 reasons you can’t get credit

When an application is turned down, you should know why. Here are some of the common reasons, and what you should do next.

If you’ve never been rejected for credit, count yourself fortunate. Somewhere between 25% and 35% of credit card applications are typically approved, “depending upon the pricing value proposition and other factors,” according to Robert Hammer, the president of R.K. Hammer and Associates, a consultant to the card industry.

With some issuers, the approval rate may be a mere 10% or so.

If you’re not turned down for credit, you may be told instead that you didn’t qualify for the best rate. Either way, if a credit score (or credit-based insurance score) was used in the decision, you must be told the main factors that contributed to your score.

Deciphering those reasons can be maddening, though. “What do you mean, I have no recent revolving balances?” Or, “So it says my account balances are too high. What does ‘too high’ mean anyway?”

Here’s a guide to some of the main reasons you may be turned down — and what you can do about them.

Keep in mind that these are just some of the factors that may be used to evaluate your credit. Not all of them will apply in all situations, and there may be variations on these as well.


‘Proportion of balances to credit limits is too high on bank revolving or other revolving accounts’

What it means: The score likely looks at your total available credit limits and compares them with your outstanding balances, individually and in the aggregate. The greater the percentage of your available credit that you are using, the greater the impact on your scores.

What you can do about it: Focus on paying down balances that are close to the credit limits as quickly as possible. What about transferring a balance from a maxed-out card to one with a smaller balance? While that might help, it’s not likely, since you still have just as much debt as before (another factor).

‘Amount owed on accounts is too high’

What it means: This factor may look at your debt in comparison with that of other consumers, and if your debt is higher than optimal, it could show up as a reason why you weren’t approved.

What you can do about it: This one is particularly frustrating because you probably have no idea how much debt is too much, nor do you know which balances to try to pay down first. Typically, though, you’ll get the most bang for your buck, credit-wise, by focusing first on paying down your credit cards with balances that are closest to the limits.

‘Too many recent inquiries in the past 12 months’

What it means: This reason appears when your credit report indicates a high number of credit applications (inquiries) within the past year. But not all are counted the same. Checking your own credit reports doesn’t count; nor do promotional inquiries, inquiries from employer and insurance companies, and account reviews by your current creditors. The impact of inquiries on your credit will vary, depending on your overall credit profile, but the typical inquiry can be expected to affect your score by about five points.

What you can do about it: This reason is more likely to appear when you have a limited credit history or strong credit, simply because there are fewer other significant negative factors affecting your scores. But it doesn’t hurt to lay low for a while. Avoid opening new retail cards. While inquiries resulting from shopping for a mortgage, student loan or auto loan aren’t as likely to hurt your score as the same number of inquiries for credit cards, limit your applications to a short period of time, such as 14 days.

‘Level of delinquency on accounts’

What it means: Delinquency refers to payments that were late. The general rule of thumb is that the further you fall behind, the greater the impact on your credit scores.

What you can do about it: If the information is inaccurate, you can dispute it. If it’s correct, you’re going to have to live with it for a while; usually up to seven years. Focus on making your current payments on time. If cash is tight, remember that all you have to do is make the minimum payment on time to avoid a delinquency on your report.

‘Time since delinquency is too recent or unknown’

What it means: Recent late payments will have a greater impact on your score than older late payments. Typically, delinquencies within a year or two will hurt your scores the most. If an account was delinquent a while ago but the credit report doesn’t indicate the date, this factor can pop up as well.

What you can do about it: The good news is that as time passes, these delinquencies will carry less weight, especially when you are paying current bills on time. But the date is important here. If an inaccurate date (or no date) is reported for a charge-off or collection account, for example, make sure you dispute that with the credit-reporting agency.|

‘Serious delinquency, derogatory public record or collection filed’

What it means: This can mean that your credit report includes a bankruptcy, judgment, tax lien or collection account. Bankruptcy remains on your report 10 years from the date you file (seven years for a completed Chapter 13). Paid judgments can be reported for seven years, but unpaid judgments can stay even longer. Paid tax liens are removed seven years after being paid, but unpaid tax liens can remain on your report indefinitely. Collection accounts may be reported for seven years and 180 days from the date you first fell behind with the original creditor, leading up to the account being turned over to collections.

What you can do about it: If the information is accurate, this is also a matter of biding your time and making sure you have as many positive credit references currently reporting as possible. (A secured card may be an option if you can’t qualify for a regular credit card.) And while paying a collection, judgment or tax lien won’t likely change this factor in the short run, it could result in the public-record item being removed from your report sooner and protect you from being sued for a debt, which could result in additional judgments or collections on your credit reports. If dates are incorrectly reported or payments are not being reported — not uncommon with collection accounts — dispute them.

‘No recent revolving balances (or no recent bank card balances)’

What it means: This reason may appear when your credit report doesn’t include any revolving accounts (usually credit cards), or when all your credit cards closed or are no longer being reported. If you have open credit cards, it may also appear when there are no balances on those accounts.


What you can do about it: Don’t worry. This doesn’t mean you have to have debt to have good credit. As long as you use your cards from time to time, this shouldn’t be a problem. But if you are avoiding credit cards altogether, you’ll have a tough time getting a top credit score. Get a credit card and use it occasionally — even a secured card — pay it in full and on time, and you should be fine.

‘Lack of recent installment loan information’

What it means: Your mortgage was paid off years ago. You pay cash for your cars. You don’t have any outstanding student loans. Guess what? The fact that you’re ultra-responsible here doesn’t help your credit scores.

What you can do about it: The strongest credit scores go to those with a mix of different types of accounts. Does that mean you have to rush out and take out a loan? No. But next time you go to buy a car, you may want to find out if you qualify for 0% financing or a low-rate loan. Or you may want to see if you can get a low-rate personal loan to consolidate some higher-rate credit card debt. On the other hand, don’t go overboard. You don’t want to pay a lot in extra interest charges.

‘Too few accounts currently paid as agreed’

What it means: This reason appears when your credit report does not show enough accounts paid on time relative to the number of accounts with late payments. But if you haven’t been late with payments, this reason most likely means that you need more accounts reported on your file as “paid as agreed.”

What you can do about it: You may want to think about adding a current credit reference, or even a couple of them over time. If you’re having trouble getting approved for a credit card or personal loan, consider a secured card.

‘Too many consumer finance company accounts’

What it means: Consumer finance companies make relatively small personal loans, usually limited to a several thousand dollars, and quite often at interest rates higher than those on most credit cards. Consumers who rely heavily on consumer finance company accounts tend to be riskier to lenders than consumers without such accounts.

What you can do about it: Paying off these types of accounts will not improve your credit immediately, but it’s still a good idea to pay them off as soon as you can, since the interest rates are probably high. Next time you need to borrow, try first to get a standard personal loan through a social-lending website, for example, or from your bank or credit union.


By Gerri Detweiler, Credit.com


Will a wage garnishment affect your credit score?

September 30, 2015 by · Leave a Comment 

Will a wage garnishment affect your credit score?

A wage garnishment, which results after a court order says a lender can obtain money a borrower owes by going through the borrower’s employer, won’t show up on your credit report and therefore, won’t impact your credit score.

“Garnishments do not have a direct impact on your credit scores because they are not picked up by the credit bureaus and placed on credit files,” John Ulzheimer, president of consumer education for SmartCredit.com, tells MainStreet.

An Experian spokesperson also confirmed with MainStreet that the credit bureau does not receive information about wage garnishments.

“Although garnishment proceedings are a matter of public court record, they are not reported on Equifax consumer credit files,” a spokesperson from Equifax also told MainStreet.

But that doesn’t mean it won’t send up a red flag to lenders that you can’t pay back your debts and shouldn’t qualify for a loan.

“Garnishments aren’t a secret to prospective lenders,” Ulzheimer says. “Applications for things like mortgages will usually ask for obligations and liabilities, and you’ll have to disclose the fact that your wages are being garnished.”


By Jeanine Skowronski

What determines your credit score?

September 29, 2015 by · 1 Comment 

FICO Scores are calculated from a wide variety of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages reflect how important each of the categories is in determining your score. These percentages are based on the importance of the five categories for the general population. The importance of these categories may vary for particular groups – for example, people who have not been using credit long might find less importance on amounts owed and greater importance on payment history. Paying your bills on time and paying down account balances are the top two factors that can help or hurt your credit score regardless of who you are and what your credit situation is! Here’s a breakdown of how your credit score is calculated:

• 10 % Types of Credit Used
• 10% New Credit
• 15% Length of Credit History
• 30% Amounts Owed
• 35% Payment History

Knowing and more importantly understanding these figures can help a great amount towards getting your credit score back on track. Follow us on Twitter and Facebook.

Divorce and Your Credit

September 28, 2015 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!

September 18, 2015 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 FindLaw.com 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 LowCards.com, “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

September 17, 2015 by · Leave a 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 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

Original Article @:sfgate.com