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
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.
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
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
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.