Based on a recent study just completed by the FTC…
Is your credit report accurate?
1 in 5 credit reports has an error
Online credit bureau websites designed to sell premium products
Reports for consumers are different from lenders
Dispute process fails to comply with the Fair credit Reporting Act
40 Million Mistakes from 60 minutes
Credit Life…After Death
By CHM for Elite Financial, LLC- California Credit Repair
The death of a loved one seems to linger on in more ways than one. As the passing of my father in October, we were filled with grief while rejoicing his life. In a continued effort of polishing his legacy, I have recently protected his credit identity by placing a security freeze or “Deceased Flag” on his credit profiles with the 3 major credit bureaus, Experian, Trans Union and Equifax.
Sorting through financial matters after the death of a spouse or loved one can be a challenging experience. When the heart is heavy with grief, the last thing you want to think about is protecting your loved one’s identity and forging a new credit life of your own. But, alas, this too shall pass…
By placing a freeze, I have secured his credit so as to prevent any would be thieves from stealing his identity and using it to create a new profile. Obituaries are the starting point for many identity thieves. You may have seen something like this being offered as a form of Credit Repair.
This is absolutely illegal and should never be done. In advertisements, you will see this marketed as “creating a new credit file overnight” and many times will include obtaining a new EIN # or CPN #. It is also offered as a shelf corporation or seasoned tradelines. Don’t fall for it. If it sounds too good to be true, it usually is.
Here is what I did to place the security freeze on his profile:
1) Type a letter containing all identifying information of the decease person. This includes
- Date of Birth
- Include your name and relationship
2) Attach copy of death certificate to the letter
3) Mail to 3 Major Credit Reporting Agencies
PO Box 9701 Allen, TX 75013
- Trans Union
PO Box 2000 Chester, PA 19022
PO Box 740256 Atlanta, GA 30374
4) Wait for response in mail (Should be within 45 days)
Now, getting into Joint Accounts, Authorized User accounts and handling other credit matters directly with banks can get a bit more extensive. I will write another article about this at a later date. If dealing with areas such as Probate, Estates, Trusts or Wills, I would suggest speaking with an attorney who specializes in this area. In addition to all this, community property states (such as California) can add a whole new layer of difficulty when sorting through this area and will require a whole new set of ideas that I will write about in the future.
If you think this article was helpful, sign up for our newsletter. It’s free and contains reliable content twice a month. Until next time, be smart with your credit and your loved ones.
How Credit Inquiries Impact Your FICO Score
It’s no secret that FICO scores and other credit risk scores consider credit inquiries when calculating your credit scores. A credit inquiry, if you are not familiar with it, is a record of who pulled your credit report and on what date.
If you want to bone up on inquiries you can do so here. I wrote that article for Mint a couple of years ago and the content is still accurate today.
When it comes to credit applications, many consumers are worried that by applying for credit they might lower their scores. That is certainly a possibility. Credit inquiries can lower your FICO scores. Notice I used the word “can” and not the word “will.”
The True Impact of an Inquiry
Before you choose to not apply for whatever it is you’re applying for, consider the fact that inquiries have a marginal, at best, impact on your credit scores.
Further, just because an inquiry causes your score to go down it may not cause it to go down enough to change any lender’s mind. Going from FICO 790 to FICO 786 because of new inquiries is likely going to be an irrelevant change when it comes to your credit application.
You’ll also want to keep in mind that the majority of credit applications result in one new inquiry on one of your three credit reports.
Applying for a new credit card doesn’t mean all three of your credit reports are being accessed. Only one is going to be pulled so the new inquiry will only appear on that particular credit report. That means your FICO scores at the other two credit bureaus are not impacted at all.
The only exception to this rule is a mortgage application where the lender or broker will likely pull all three of your credit reports.
The Grand Scheme
Something else to keep in mind…credit inquiries really aren’t terribly important in the grand scheme of things. Inquiries account for up to 10% of the points in your FICO scores. When it comes to pieces of the FICO score pie, it’s the smallest piece. The age of your credit report is more important than your inquiries.
FICO just released some data quantifying the true impact of inquiries to their scores. 57% of consumers are getting the maximum number of points from the inquiry category, which means inquiries are not lowering their scores at all. Inquiries are one of the top four reasons your FICO scores aren’t higher only 11% of the time.
And finally, only 4% of consumers lose more than 20 points in their FICO score because of inquiries. According to Frederic Huynh, one of FICO’s credit score scientists, “The bottom line is that I would not characterize inquiries as being a very important score factor relative to other predictors.”
Bigger Fish to Fry
If you’re concerned about your FICO scores then there are certainly bigger fish to fry than inquires. Negative information and paying your bills on time makes up a 35% piece of the pie. The various debt related measurements account for 30%. How long you’ve had credit is worth 15%. And, the diversity of account types accounts for 10% of the score points.
Keep in mind that when you pull your own credit report through sites like www.annualcreditreport.com, the inquiry has no impact on your scores. And, if you subscribe to a credit monitoring service or choose to purchase your credit reports through any of the retail websites, those inquiries also do not impact your scores.
By John Ulzheimer for Mint.Com
Read a Report
Once you’ve obtained a copy of your credit report, you’ll be able to see what your creditors are saying about you. There’s just one problem — credit reports can be a little confusing. Never fear! Elite Financial, LLC is here to help. In the following paragraphs you’ll find a step-by-step explanation of how to read and interpret each section of your credit report.
Here you’ll find identifying information like your:
- current address
- social security number
- date of birth
- spouse’s name (if applicable)
Easy, right? But don’t just skim over this section. Read all the entries to make sure everything is correct. One bad piece of information and the credit history listed on your report could be wrong.
Credit History Section
This is the meat of the report. It contains a list of your open and paid credit accounts and indicates any late payments reported by your creditors. Although it may seem a little tedious, it’s essential that you read through this section very thoroughly. If you find any information that is incorrect or accounts that don’t belong to you, you’ll need to submit a dispute letter to the credit-reporting agency.
The basic format for the credit history section is as follows:
- Company Name – identifies the company that is reporting the information.
- Account Number – lists your account number with the company.
- Whose Account- Indicates who is responsible for the account and the type of participation you have with the account. Abbreviations may vary depending on the reporting agency but here are some of the most common:
- I – Individual
- U – Undesignated
- J – Joint
- A – Authorized User
- M – Maker
- T – Terminated
- C – Co-maker/Co-signer
- S – Shared
- Date Opened – This is the month and year you opened the account with the credit grantor.
- Months Reviewed – Lists the number of months the account history has been reported.
- Last Activity – Indicates the date of the last activity on the account. This may be the date of your last payment or last charge.
- High Credit – Represents the highest amount charged or the credit limit. If the account is an installment loan, the original loan amount will be listed.
- Terms – For installment loans, the number of installments may be listed or the amount of the monthly payments. For revolving accounts, this column is often left blank.
- Balance – Indicates the amount owed on the account at the time it was reported.
- Past Due – This column lists any amount past due at the time the information was reported.
- Status- A combination of letters and numbers are used to indicate the type of account of the timeliness of payment.Abbreviations for the type of account are as follows:
- O – Open
- R – Revolving
- I – Installment
- Abbreviations for Timeliness of Payment varies among agencies. Numbers are used to represent how current you are in your payments. Current or paid as agreed is usually represented by 0 or 1. Larger numbers (up to 9) indicate that an account is past due.
- Date Reported – Indicates the last time information on this account was updated by your creditor.
Collection Accounts Section
If you’ve had any accounts referred to collection agencies in the last seven years, this is where they will be reported. The name of the collection agency will be listed along with the amount you owe and, in some cases, their contact information. If a collection is listed on your report that doesn’t look familiar to you, contact the credit bureau and submit a dispute letter.
For your own piece of mind, you may also want to contact the collection agency (Or have Elite do it for you) to determine the nature of the account. Here’s why.
- You may find out that the collection account is NOT yours. Perhaps it belongs to someone whose name or social security number is very similar to yours. If this is the case, ask the collection agency to acknowledge this fact in writing. They should send a copy of the letter to you AND the credit reporting agency so that the mistaken information can be cleared from your report.
- You may find out that the collection account IS yours. If so, it is in your best interest to determine the accuracy of the amount of the collection account and make arrangements to satisfy your obligation as quickly as possible. Once the collection account has been paid, you should request a letter from the collection agency to this effect. Again, make sure the credit reporting agency gets a copy of the letter so that they can list the account as paid.
Courthouse Records Section
This section may also be referred to as Public Records. Here you’ll find a listing of public record items (obtained from local, state and federal courts) that reflect your history of meeting financial obligations. These include:
- Bankruptcy records
- Tax liens
- Collection accounts
- Overdue child support (in some states)
Look closely at all the information listed here. If anything is mistaken, contact the credit bureau and submit a dispute letter.
This section consists primarily of former addresses and past employers as reported by your creditors.
Contains a list of the businesses that have received your credit report in the last 24 months. If you find the names of businesses that sound unfamiliar, you should find out who they are and why they’re looking at your credit! The credit-reporting agency may be able to help you with contact information. Remember, only companies that have received your written authorization should be able to check your credit history.
Time information is retained
The length of time that information remains in your file varies.
- Credit and collection accounts will be reported for 7 years from the date of the last activity with the original creditor.
- If you’ve filed a Chapter 7 or Chapter 11 bankruptcy, this information will be reported for 10 years from the date filed.
- All other courthouse records will be reported for 7 years from date filed.
As always, contact our office for more information. 909-570-9048
Imagine getting denied a credit card because someone else is on your credit report. I’m not talking about identity theft. I’m talking about a case of blended credit reports.
The Columbia Dispatch found that 1 in 17 consumer complaints (of 21,500) in 2009 to the Federal Trade Commission and 1 in 12 complaints (of 1,842) in 2009 and 2010 to state attorneys general involved the consumer’s credit report being mixed with another person’s.
The news report illustrated the mix-up by offering three tales of financial identity confusion.
One Ohio woman’s credit report contained the bad credit of a woman living in Utah. Another found her daughter’s poor credit history on her own report. And one lady named Brenda Campbell almost had her wages garnished because two other Brenda Campbells were on her credit report.
At this point, I’d normally say, pull your credit report and make sure everything on it is correct. (You’re entitled to a free credit report from each of the three credit reporting agencies every 12 months at AnnualCreditReport.com.)
The report you pull will be based off your name, date of birth, Social Security number and current address. However, lenders often use only one or two of those identifying features to pull a credit report.
That means if a creditor pulls your credit report using your name and date of birth, there’s a possibility someone else shares those features and their report will be combined with yours. In other cases, Social Security numbers or names just have to be similar for the mistake to occur.
This kind of botch typically happens to people who share the same or similar names and often are in the same family, says John Ulzheimer, president of consumer education at SmartCredit.com.
To help the credit bureaus keep records straight, make sure to fill in your credit application with complete information, he says. Don’t forget the Jr. or Sr. and/or an apartment number, for example.
If the blunder does happen, Ulzheimer recommends disputing the process manually. Talk to someone at each credit bureaus — TransUnion, Equifax and Experian — and have them contact the lender of the disputed item. (Each bureau has a dedicated department for mixed files, which is separate from departments that handle run-of-the-mill credit report errors.)
(Of course, this is easier said than done as the Columbia Dispatch article showed the difficulties the three ladies had correcting their reports. If you run into a brick wall, consider a consumer-law attorney.)
“The good news is once something is identified as not belonging to a consumer, there is a way to red flag it, so it won’t happen again,” Ulzheimer says. “It’s a permanent fix.”
What’s your worst/most unusual credit report problem? How did you resolve it?
By Janna Herron · Bankrate.com
Rep. Waters tackles mortgage woes created by medical debts
U.S. Rep. Maxine Waters, D-Calif., proposed legislation Friday that aims to improve Americans credit scores by ensuring any ‘paid medical debts’ are removed from a person’s credit report within 45 days.
While a delinquency tied to a medical bill may seem less serious than a mortgage default, lawmakers are upset with the practice of allowing late payments tied to medical debt to stick to a borrower’s credit report for an infinite period of time.
Waters believes the practice creates downward pressure on credit scores, freezing out access to mortgages and other lines of credit.
Waters’ bill – H.R. 1767 – is the sister legislation to Senate Bill 160 introduced by Sen. Jeff Merkley, D-Ore.
Waters and the bill’s co-sponsors also asked the Government Accountability office to review whether medical financing options provided to consumers are fair and transparent.
Source: Housing Wire
The NY Times posted a very interesting article on what the impacts, some very severe, can be for missing payments on mortgages and such. By taking a look at this article there will be fewer ways that you can get caught up in a mess of a poor credit score. Please follow the link below to the full article and as always, let us know what you think!
Fallout From a Poor Credit Score
By MARYANN HAGGERTY
IF you want to see how quickly you can ruin a great credit score, just skip a mortgage payment.
Lenders use credit scores to measure how you handle debt. The number you’ll see most often is your FICO score. It runs from 300 to 850. The major credit reporting bureaus developed a rival, VantageScore, with scores from 501 to 990.
Missed mortgage payments, serious loan delinquencies, loan modifications, short sales, foreclosures and bankruptcies all drag down credit scores. Because a mortgage is such a big slice of anyone’s credit profile, it carries more weight than other loans. Both FICO and VantageScore have studied and quantified those impacts.
They reached similar conclusions: for people with near-perfect records, a single mortgage payment that’s 30 days late reduces a credit score enough to hurt. For anyone, a short sale — selling a home for less than the amount owed — can be almost as destructive as a foreclosure.
In contrast, a loan modification — when the lender approves new loan terms — can have a “very, very minimal” effect, said Sarah Davies, the senior vice president for analytics at VantageScore. In some cases, the borrower’s score might drop 10 or 15 points.
With a loan modification, said Joanne Gaskin, the director of global scoring solutions at FICO, “the consumer does not have to go delinquent to get assistance.”
Modification horror stories abound; some borrowers have been told they can’t be helped unless they’ve already missed payments. That doesn’t have to be the case, said Josh Zinner, the co-director of the Neighborhood Economic Development Advocacy Project, a New York City nonprofit company active in foreclosure prevention.
The government-backed Home Affordable Modification Program, known as HAMP, specifically permits modifications for borrowers who can document hardship like a job loss, Mr. Zinner said. “What we advise people in New York to do” he said, “is reach out to a nonprofit loan counselor or to Legal Services in order to get a modification with a servicer.”
It’s not a perfect solution — HAMP has been criticized for not helping enough borrowers. There are plenty of paperwork hassles, and points in the process where credit scores are in peril.
Still, because of “some really profound consequences” to bad credit, modification is worth pursuing, he said. Employers increasingly check credit. Housing options may be limited. “Virtually all landlords look at credit,” he said, adding that getting a mortgage can be difficult. Car loan and credit card costs jump.
In a study last month, FICO looked at how choices would affect three hypothetical mortgage holders: One with a spotless 780 score; another with a good 720, who may have missed a couple of credit card payments three years ago; a third with a not-great, not-toxic 680, who has sometimes fallen seriously behind on credit cards or a car loan. (Most lenders consider poor credit about 650 and below, Ms. Gaskin said.)
¶30 days late: The gold-plated 780 drops to 670-690, the middling 720 becomes 630-650, and 680 is now 600-620. Effects are most significant for the strongest borrower. “A continued progression is going to have less and less impact on a score,” Ms. Gaskin said.
¶90 days late: This is seriously delinquent, and brings the onetime best borrower down to 650-670, the midlevel one to 610-630, and the weakest to 600-620.
¶Short sale, deed in lieu of foreclosure, or settlement, assuming the balance has been wiped out: The result is just a bit less serious. The 780 score deteriorates to 655-675; 720 to 605-625; 680 to 610-630.
¶Foreclosure, or short sale with a deficiency balance owed: For either, 780 is 620-640; 720 is 570-590; and 680 is 575-595.
At a certain point it might seem as if there was not much difference between bad and worse, but remember that the lower the score, the longer it takes to climb back.
Let’s say you’ve made some mistakes with your credit. With over 35% of the population scoring below 650 on the FICO scoring scale, you’re certainly not alone. But now that you’ve made the mistake, how long are you going to have to live with it?
Each and every negative item has a reportable statute of limitations. That means the credit bureaus can legally report it for some period of time before it must be removed. Let’s dive in…
This one has possibly the most confusing statute of limitations so let’s get it out of the way first. Chapter 7 bankruptcies can remain on your credit files for ten years from the date filed. Chapter 13 bankruptcies can remain on file for seven years FROM THE DISCHARGE DATE. This is important because most people believe 13s have to be removed seven years from the filing date, which is incorrect. It normally takes three to five years for a Chapter 13 to discharge due to the repayment process. That’s when the 7 years begins. The cap on all bankruptcies is ten years so most 13s remain on file for a full ten years, just like Chapter 7s.
This one has the longest statute of limitations and must be broken down into three categories; released, unpaid, withdrawn.
Released Tax Liens – Released liens can remain on file for seven years from the date released. This included liens that have been settled for less than you really owe.
Unpaid Tax Liens – Sit down. Unpaid tax liens can remain on your credit file indefinitely. That’s the bad news. Now the good news…
Paid and Withdrawn Tax Liens – Paid tax liens normally stay on file for seven years, but the IRS announced that they will withdraw the lien if paid in full AND the taxpayer requests a withdrawal. The credit bureaus do not report withdrawn tax liens so they will come off your files almost immediately if you get them withdrawn.
Defaulted Government Guaranteed Student Loans
The amount of time is actually governed by the Higher Education Act instead of the FCRA. Defaulted student loans can remain on your credit reports for 7 years from the date they are paid, 7 years from the date they were first reported or 7 years from the date the loan re-defaults. The point you should take away from this…pay your student loans!
The Seven Year Club
Delinquent Child Support Obligations
Judgments – Seven years from the filing date whether satisfied or not.
Collections – Seven years from date of default with the ORIGINAL creditor, not seven years from when the collection agency buys or is consigned the debt.
Charge Offs – Seven years from the date of the original terminal delinquency.
Settlements – Seven years from the date of the original terminal delinquency
Repossessions and Foreclosures – Seven years from the date of the original terminal delinquency.
Late Payments – Seven years from the date of occurrence.
You’ll notice “terminal delinquency” several times above. The seven year period actually begins 180 days AFTER the original delinquency that leads to a collection, charge off or similarly negative action. So, technically these items remain on your credit file for 7.5 years from the date of the last delinquency before the terminal delinquency.
If you’ve never heard of this term let’s hope you never do. Re-aging is the illegal process of changing the “purge from date” so the credit reporting extends past the allowable period of time. This is not common but when it’s done, it’s usually a collection agency or debt buyer who is breaking the law. It’s a clear violation of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act but the debtor has to know it has happened.
In my daily grind, I come across many real estate professionals trying to lend a helping hand to their clients in helping with credit issues. In some cases it can be considered as “minor” work. But for most, I find that they prefer using the online websites for generating a dispute to the credit bureaus. This is a Big NO-NO! For several reasons detailed below, this online dispute does very little to help you out. Not to mention most real estate professionals, unfortunately, are handling the dispute process incorrectly to begin with. But when they do go beyond their scope of expertise, the following usually happens;
1) Time – The credit reporting agencies do not have to process an online request. The online dispute gets tracked automatically and a request to verify is automatically forwarded to the data furnisher through e-oscar. The restrictive 30 day clock is accomplished easier if everything is automated.
2) Paper trail- with online disputes there is no paper trail to evidence the details of the dispute, and creating a paper trail during credit repair is essential.
3) Limited Dispute Reasons- With the limitations of dispute reasons, an accurate description of the dispute is difficult in most cases. It will all get broken down to its most simple form.
4) Expeditious Dispute Resolution- The Fair Credit Reporting Act section 611a(8) changes the standard requirements and protection afforded to the consumer by the FCRA.
When the Fair Credit Reporting Act was amended, they put in a section for “Expedited Dispute Resolution” Section 611a(8) the on-line dispute system. It reads as follows…
“…the agency shall not be required to comply with paragraphs 2, 6 and 7 with respect to that dispute if they delete the tradeline within 3 days.”
Paragraph 2 requires the CRA to forward your dispute and all related documentation you provide to the furnisher. They rarely forward the documentation.
Paragraph 6 requires the CRA to provide you with written results of the investigation.
Paragraph 7 requires the CRA to provide you with the method of verification on request from the consumer.
What they are doing is…
The Credit Reporting Agency (CRA) can delete a disputed trade line for 30 days, then, the trade line can reappear when the furnisher (creditor or collector) reports it again in the next cycle. That is because the CRA is not required to tell the furnisher you disputed it thanks to section 2 being omitted. This is sometimes called a “soft delete” and it is not permanent.
Furthermore, you lose your rights to request “Method of Verification” (MOV) so you lose this powerful tool in the dispute process thanks to Paragraph 7 being omitted.
Finally, another powerful tool we use often is the five-day written notice of re-insertion. Essentially, what that means is that if a credit bureau is going to re-insert a previously deleted item, they must inform you in writing five days prior to re-inserting it. I have rarely ever seen them give that notice.
That five-day notice is only required if the credit bureau takes longer then 45 days to complete. IF it is deleted via the expedited system, often completed in three days, the five-day written notice is no longer required.
So, let’s let the experts handle their own respective expertise and call a professional credit repair company when help is needed.
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.
By Cesar Marrufo
ELITE FINANCIAL, LLC
Cesar is an expert in the credit repair field, with over 10 years experience reading and analyzing credit reports. For more information or for help with your credit, visit www.elitefinancialllc.com or call (909) 570-9048