Many consumers go beyond getting their free annual credit report from the nationwide credit reporting agencies, Equifax, Experian and TransUnion. These consumers pay for monthly subscriptions to a credit monitoring service with the goal of knowing their credit score at any point in time and receiving alerts when someone uses their personal information or accesses their credit history. It takes many people by surprise when they purchase credit scores just before applying for credit only to find the lender’s credit score disclosure does not match. Why is that the case, and what can you do?
What Credit Scores Tell Consumers and Lenders
Credit monitoring services and nationwide credit reporting agencies make money by selling credit scores to consumers, lenders and other businesses that use credit scores for decision-making. You, as a buyer, borrower or consumer, can buy educational credit scores from a credit monitoring service. Educational credit scores help you prepare to apply for loans, manage your debts and eliminate fraud or identity theft. Mortgage lenders, auto loan companies, credit card providers, insurance companies, landlords and employers buy credit scores from credit reporting agencies. Credit scores help them determine if you will pay your bill on time, in full, every month; predict if and when you might fall delinquent on your accounts; or evaluate if and when you are likely to default on your credit obligations. Whatever they’re being used for, credit scores should be based on the same information for both lender and customer, so why are scores from different sources so different? Two reasons credit scores differ are discrepancies in reporting methods and different scoring models.
Issues with Reporting Methods
Common discrepancies in reporting methods include:
- Consistency – not all data furnishers give information to all credit reporting agencies.
- Timing – data furnishers may provide the same information to all agencies but at different time schedules.
- Accuracy – changing personal information, i.e. names or addresses, has to be matched to the correct credit file.
- Privacy – Credit reporting agencies do not cross-share details on inquiries and information with each other.
Lenders and other creditors can choose what information to report, when to report it and which agencies to report to. Some lenders report monthly to all three agencies. Other creditors, like collection agencies, may report quarterly or only when there is activity on your account. Some agencies only report to a single credit reporting agency. A one-week difference in reporting information to the agencies could make a difference in your score from each one. Since reporting agencies do not cross share information with each other, the report and score you buy may not contain the same information that the lender report and score contains.
Each credit reporting or monitoring agency uses a different method to calculate your score. They base these calculations on complex mathematics, statistical or algorithmic models. Scoring models are proprietary systems and are protected by trademarks, patents and copyrights.
There are three types of credit scores that credit providers purchase:
- Generic scores – predict general payment performance
- Industry scores – predict performance on specific type of credit
- Custom scores – predict performance by company’s customer base
Generic credit scores are used by credit monitoring services to educate you, the consumer. You can use a credit monitoring service to learn how to get your score from what it is today to where you need it to be in the future. You can also use this service find out how late payments, opening new accounts or paying off debts may change your scores over time. Again, these are educational items and there is no guarantee you will achieve a certain score at any time.
Industry credit scores tell, for example, car lenders how you have paid your car loan, but that score may be different from a mortgage or credit card score. If you have had an automobile repossession, your auto industry score may be low in comparison to your mortgage industry score if you have never had mortgage delinquencies. Lenders may have their own in-house system to calculate a custom score based on their specific credit products and customer base. These scores often rank you in comparison to other customers and may work more like a grading curve than a general purpose credit score.
Take an Active Role in Providing Your Own Credit Information
You cannot control what credit scores you or a lender will get at any time, but you can know what information is in your credit file and keep it up to date. Make sure your name, address, birth date, Social Security number and employment information are current and correct. If you have a common name make sure other people’s information is not in your credit report. If you have received collection agency notices, check for reporting with the original creditor. Duplicate items can affect your credit score. When you correct or dispute an item, make sure you do it with all three bureaus, Equifax, Experian and TransUnion.
The Bottom Line
Finally, educate yourself about the different types of credit scores, credit reporting agencies and credit monitoring services in the market. Visit their websites to learn about their scores and services. Here is a list of providers most often used by consumers and industry.
|CreditXpert Score||Affinion||www.privacyguard.com www.identitysecure.com|
|Experian PLUS Score||Experian||www.experian.com www.freecreditscore.com www.freecreditreport.com www.familysecure.com|
|Equifax Credit Score||Equifax||www.equifax.com|
|FICO Score||EquifaxFICO||www.equifax.com www.myfico.com|
|VantageScore||TransUnionVertrue||www.transunion.com www.truecredit.com www.privacymatters.com
Read more @:sfgatedotcom
Denied credit? Maybe you’re dead
Lots of people ‘die’ every year, at least on paper, and untangling the mistake can be a big headache. Here’s what to do if you learn you’ve ‘died.’
Rejected for a loan because your credit history was shut down? It might be because the credit bureaus think you’re dead.
About 1,000 people per month get mistakenly declared dead by the Social Security Administration, according to government estimates. Many more get falsely reported as deceased by their bank or credit card issuer, or by one of the big three credit bureaus — Experian, Equifax and TransUnion.
Often, when victims find out that they have been mistakenly declared dead, they assume that proving they’re alive and well will be easy. Instead, they find they will have to wait a month or more before lenders will acknowledge their living, breathing, bill-paying status.
Or, in more extreme cases, they’re told that they must be mistaken. They can’t possibly be alive right now because investigators have looked into their case — and records show they’ve passed away.
“There’s a sense of powerlessness, a sense that you are disenfranchised,” says James Willis, a California journalist and professor who was mistakenly declared dead by Capital One two years ago. Willis had started a new job and was getting ready to buy a house when he learned that, according to credit-reporting agency Experian, he had recently died.
“The news of my demise came in the form of a credit alert from Experian,” Willis recalls. “It said a potentially negative item had just been posted to my credit report.”Are debt protection policies worth it? FEATURED
When Willis followed up, he learned that one of his lenders, Capital One, had written off his charges as uncollectible because they believed that he was dead. Experian then froze his report, shutting out the mortgage company that Willis had enlisted to help him buy his house.
“When a credit card company declares you dead, then they send that notice on to the credit-reporting agencies, and then your credit history gets locked down,” explains Willis. “You cannot access it. Nobody can access it, because of the fact they assume you’re dead.”
At that point, being mistakenly declared dead shifts from minor annoyance to potential big, costly problem, says Jim Francis, a consumer lawyer in Philadelphia who has represented clients who have been declared dead on paper.
“The real problem with being marked as deceased on a credit account is you can’t get a credit score,” says Francis. “It’s impossible to get credit to the extent that most banks, mortgages (and) car dealerships require a credit score to assess risk. They have no possibility of getting that, and so there’s no way of getting credit.
“That’s the real problem and the real harm,” he adds.
Getting resurrected takes time
The amount of time it takes for “dead” consumers to be brought back to life can also hurt, say consumer advocates. Credit bureaus have 30 days under the Fair Credit Reporting Act to investigate a credit dispute and check on whether the information they have on file is correct.
However, that’s a long time to wait if a consumer is in the midst of applying for a time-sensitive loan, such as a mortgage, or is applying for a job and needs an immediate credit check, says Todd Mark, vice president for education at the Consumer Credit Counseling Service of Greater Dallas. “Those are situations where you don’t want to have to wait 30 days or longer for a dispute to be initiated,” says Mark.
In the meantime, customer-service representatives are rarely able to help speed up the process, which can be frustrating for a consumer who’s on a tight deadline, says Willis, the customer mistakenly declared dead by Capital One.
Short on time and anxious to erase Capital One’s mistake, Willis says he spent several hours on the phone, trying to get someone to help him in time to close on his home loan.
However, the workers at Capital One told him there was nothing they could do. Instead, Willis had to wait for the bank’s computers to process an investigation into the mistake and report back to the credit bureaus, he says.
“I don’t think you’re dead,” Willis says one customer-service representative told him over the phone. “I know you’re alive, but our computer is in control and our computer has 30 days to rectify the situation.”
“That’s when it took kind of a leap into the twilight zone for me,” says Willis. “Even though the individuals at Capital One believed I was alive, no one seemed to be able to do anything about the computer.”
Eventually, Capital One figured out that it had mixed up Willis with his deceased father, James Willis Sr., and restored his account. However, by that time, Willis had already spent countless hours trying to resurrect his credit.
“That’s what started weighing on me,” says Willis of the time spent trying to get the mistake corrected. “I was starting a new job at the time, and it was just a lot of time devoted to it — a lot of distraction that was caused by this.
“One of the frustrating things is to try to get them to understand that your time is valuable,” he adds.
It may take months — or years — to resolve
Willis was lucky. He was able to get his dispute resolved in less than a month and closed on his house just in time. However, other consumers have had to wait much longer to get their financial lives back on track.
Francis, the consumer lawyer in Philadelphia, says that many of his clients came to him in desperation after submitting their disputes through the credit-reporting agencies’ automated dispute process and getting nowhere.
“They tried sending detailed disputes, documentation (saying), ‘Here I am. This is my Social Security number. This is obviously not me.’ And surprisingly, in a bizarre fashion, the credit-reporting agency verified them as being deceased,” he says.
That’s when their lives turned upside down. Not only could they not get credit, but they had no idea how long it would take the credit bureaus to figure out the mistake.
If you, too, find that you are having trouble proving to lenders that you’re alive, don’t panic.
Prepare a detailed, notarized dispute for the credit-reporting agencies that includes documentation proving you’re alive, and send it by certified mail, say experts.
Also send a notarized copy of your dispute and copies of supporting evidence to any furnisher or creditor that you believe may be responsible for the mistake. If you believe the Social Security Administration is responsible for the mistake, contact your local Social Security office.
In addition, write down the name and number of every person you talk to over the phone, including what the person promised he would do for you, says Mark. “Create your own paper trail at home, and don’t be afraid to step up who you talk to,” he says.
If nothing works and your credit information is still shut down, seek legal help. Under the Fair Credit Reporting Act, you are entitled to seek legal action when legitimate errors — such as being mistakenly declared dead — aren’t corrected in a reasonable period of time.
Finally, remain calm, says Willis. If you believe you’ve located the source of the error, try calling repeatedly until you get a sympathetic voice on the line, he says. “I found one of those individuals with Capital One, and I found one with Equifax,” says Willis.
Explain your situation and understand that the person is at the low end of the totem pole and may not be able to do much to help you, he adds. “The natural tendency is just to boil up, but it doesn’t help anyone to do that. You just have to try to reason with them. Try to remain calm and reasoned, and try not to appear like a nut.”
Credit-reporting agencies are required by the Fair Credit Reporting Act to thoroughly investigate any item on a credit report that a consumer says is wrong. However, in many cases, Francis says, the original furnisher of the information got the record wrong, not the credit bureau, and the credit-reporting agencies don’t follow up.
“The credit-reporting agencies don’t conduct any type of independent investigation,” says Francis. Instead, they send a consumer’s dispute to the organization that supplied the information and rely on it to look into whether a consumer is really dead. “That’s how things are getting verified,” he says.
If a creditor looks at its records and sees that the consumer is listed in its files as deceased, it might not dig further, says Francis. “They’re not really that interested in conducting investigations,” he says. “It’s not really a profit center for them, so they are doing the bare minimum.” As a result, the creditor sometimes ends up repeating the same inaccurate information to the credit bureaus.
At that point, consumers have few options but to wait and try again.
Banks and other creditors are required by law to thoroughly investigate whether the information they have on file is correct, says Francis. “They have the same duty that the credit-reporting agency has,” he says. “Both the credit-reporting agency and the furnisher must conduct a reasonable investigation.” So consumers have the legal ammunition to fight back against credit-reporting agencies’ and furnishers’ claims that they are dead.
However, they have little power to speed up the process and get their credit reports unlocked when they need them.
“It takes a really persistent effort” to get a dispute resolved, says Nina Heck, the director of the Consumer Credit Counseling Service of Maryland and Delaware. “Sometimes (a dispute) has to be resubmitted and resubmitted.”
Heck has worked with multiple clients who have been mistakenly declared dead, and she says it often occurs because a client’s name was mixed up with someone else’s.
When that happens, proving you are who you say you are can be a challenge, she says. “First, you have to prove that you are you, and then you have to be able to validate that this (other) person is deceased,” says Heck.
Beware of the Death Master File
Consumers who have been accidentally declared dead by the Social Security Administration, rather than a creditor, have it even worse. The Social Security Administration keeps a master list called the Death Master File that lists everyone in the United States who has died. Sometimes, a person will get mixed up with someone else, or a typographical error will cause that person to be listed as deceased.
Once a consumer is listed as dead in the Death Master File, numerous stakeholders are notified, including the credit bureaus and other government agencies. Soon after, that individual’s credit reports are shut down, his or her benefits are cut off, and the person can’t get a new job (that requires a valid Social Security number for a living person).
Getting taken off the Death Master File, meanwhile, can sometimes take years, financially devastating those involved.
“As many news reports have accounted, incorrect death reports have created severe personal and financial hardship for those who are erroneously listed as deceased,” said U.S. Rep. Sam Johnson of Texas in February, announcing a congressional hearing on the Death Master File’s accuracy. “Those affected have experienced termination of benefits, rejected credit, declined mortgages and other devastating consequences, while their personal and private information is publicly exposed.”
By Kelly Dilworth for CreditCards.com
Found at money.msn.com/credit-rating/denied-credit-maybe-youre-dead
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
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
Section 604 of the Fair Credit Reporting Act says that the credit reporting agencies, Equifax (EFX), Experian (EXPN) and TransUnion, may furnish reports to any company that intends to use that information for the purpose of underwriting insurance. So, at the Federal level, the use of credit reports for underwriting insurance is perfectly legal and many of them do so. The real question is, why do they do it?
Insurance companies have the same issues lenders have: understanding the risk of doing business with certain consumers. It’s not necessarily the risk of being paid or not being paid for their services (premiums). It’s more so the risk of providing a policy for someone who is more likely to file claims and thus be a less profitable customer. It’s all about the money.
The primary difference between banking and insurance is that insurance policies are all secured, essentially. If you don’t pay your premiums they’ll cut you off, which could lead to you losing your home (it’s called a non-monetary default) or you getting arrested for driving without insurance. Determining whether or not you’ll pay your premiums is not the primary reason some of them pull your credit reports and credit scores.
The primary reason is to determine if they even want to do business with you and/or under what terms. Despite what many believe, how you manage your credit is very predictive of what kind of insurance customer you’ll be. It’s predictive not only of your likelihood of filing claims but also predictive of how profitable you’ll be. If it weren’t, insurance companies wouldn’t spend the money buying millions of credit reports and scores each year.
They’re Not The Same Credit Scores
Much like the financial services environment, the insurance environment relies heavily on credit scores. This isn’t anything new. However, the type of score they’re using is not the same type of score banks and other financial services companies use. In fact, they’re very different.
The scores used by insurance companies are called Insurance Credit Bureau Scores or Insurance Risk Credit Scores. They are developed by a variety of companies, including FICO and LexisNexis. LexisNexis develops the LexisNexis Attract Score, which is very commonly used by insurance companies.
Insurance scores consider credit information and/or previous insurance claim information. So, if you filed an auto claim or a homeowner’s claim it can be considered in your insurance score and it can result in a lower score. And if you’re assuming the presence of claims means that you’re a less profitable insurance customer, well, you’d be right. Yes, it’s all about the money.
But They’re The Same Credit Reports
While the scores used by insurance companies are different, the reports they use are the same as the reports used by financial services companies. The reason: all credit reports originate from the same three places; Equifax, Experian and TransUnion. Point being, there are no secret credit reports that insurance companies use to set your premiums.
Insurance Inquiries Don’t Hurt Your Credit Scores
Enough bad news. When you apply for insurance, the insurance company may or may not access your credit reports and scores. There is no guarantee that they will, in fact, pull your credit reports. But, it’s a safe bet.
If the insurance company does choose to access your credit report and score, there will an inquiry posted to the credit file. It will clearly be identified as being from your insurance company. And, more importantly, it will systemically be coded as coming from an insurance company. This is good news because insurance related inquiries are not counted in your credit scores.
You will be able to see them, but no other entity will be able to see them. And, credit-scoring systems don’t not consider insurance-related inquiries so they’ll never lower your credit scores.
I’ll end on that high note.
By John Ulzheimer here
Wonder how your credit report is created? Sometimes it’s best not to know how the sausage is made, but in this case some extra knowledge may be enlightening.
John Ulzheimer, a credit expert, worked with the Web site Credit Sesame to create a graphic map showing how various types of information make their way — or not — into your credit report.
In most cases, Mr. Ulzheimer said, the credit bureaus — like Equifax, Experian and Transunion — receive information from institutions where you have accounts, like credit card issuers or home loans or student loan lenders. In industry lingo, these are known as “trade” or “tradeline” accounts, he said.
Those accounts make up the bulk of the information in your credit report. Institutions provide the data under agreement with the bureaus, in exchange for access to credit files so they can evaluate the creditworthiness of applicants. Institutions aren’t legally required to report credit information — but if they don’t, they lose the benefit of having access to credit reports.
When credit bureaus get customer data, he said, they generally audit it before posting it to your credit file, to help avoid errors and disputes. A batch of data with an unusually high proportion of delinquencies, for instance, might be sent back for double-checking.
When lenders seek your credit report in response to an application for a credit card or a loan, it shows up as a “hard” inquiry. Too many such inquiries may cause your credit score, which is based on information in your credit report, to dip.
Some inquiries don’t affect your score, however. They include requests made as a result of applying for insurance or for service from a utility company, Mr. Ulzheimer said, and requests you make yourself for a copy of your credit report.
Some public records, like bankruptcy filings or federal tax liens, usually appear on your credit reports because the credit bureaus have electronic access to federal courts through the Pacer document system. But civil judgments filed with state and county courts may or may not show up on your report, since not all of those courts make such information available electronically. Credit bureaus may be able to find the information through database services, but its appearance in credit files is generally less consistent than legal information generated by federal courts. (In other words, you may get lucky.)
Have you ever had a legal judgment appear on your credit report? What impact did it have?
By ANN CARRNS
For Credit Sesame
Ask the Expert: Does Opting Out of Credit Card Offers Improve Credit Scores?
September 16, 2013 by John Ulzheimer
The world of consumer credit is loaded with myths, some more stubborn to debunk than others. Credit scores are used by employers, you build credit faster by carrying credit card balances, credit scores reward you for being in debt, opting out will improve your credit scores. None of these things are actually true and it’s the last myth that I’ll address today.
What is opting out?
Today when you get home from work or school and check your mail you’ll likely find one or more credit card offers from credit card issuers. Those offers are likely of the “preapproved” variety, which means the credit card issuer has actually determined that they are willing to offer you a credit card even though you never asked for one.
The credit card issuer purchased your name, along with many others, from one of the credit reporting agencies through a process called “prescreening.” Prescreening is the process whereby the card issuer gives the credit bureau a list of criteria and wants a list of consumer names and addresses that meet that criteria.
So, for example, I might ask one of the credit bureaus to provide me with list of 1,000,000 names and addresses belonging to consumers who live in the metro Atlanta area who have VantageScore credit scores above 725, don’t have any late payments in the past 24 months, and don’t have more than $10,000 of credit card debt. This is called “selection criteria.” Of course, the credit bureaus have to tap into their credit file database in order determine who meets this criteria.
If the credit card issuer acquires your name and address using this method then they have to make you what’s referred to as a “firm offer of credit or insurance.” This is normally done by sending you a credit card offer in the mail saying that you’ve been pre-approved for some amount of credit. All of this will result in a “promotional” inquiry being posted on your credit report.
The Fair Credit Reporting Act gives consumers the ability to prevent the credit bureaus from selling their names to lenders through a process called “Opting Out.” You can do this for free at www.optoutprescreen.com. You can opt out forever or for a shorter amount of time. After a few months you’ll stop getting preapproved credit card offers in the mail.
The opting out myth
Some people suggest that you will improve your credit scores by opting out. The problem is that it’s not true. Opting out has no impact, at all, on your credit scores.
The only direct influence opting out has on your credit reports is to prevent new promotional inquiries from being added. But, promotional inquiries are of the “soft” variety and they have no impact on your credit scores anyway so preventing them doesn’t do anything for your scores.
Advantages to opting out
That certainly doesn’t mean there’s no value to opting out. You’ll certainly reduce or fully eliminate credit card offers, which means less mail to throw away or shred. And, because those credit card offers can be used by credit card fraudsters to open new cards in your name opting out can help to minimize your risk of credit card identity theft. But, that’s where the value ends.
Original article here: http://www.creditsesame.com/blog/ask-the-expert-does-opting-out-of-credit-card-offers-improve-credit-scores/
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.
Do Gas Credit Cards Still Make Sense?
Gas credit cards have been around for decades and offer rewards, like regular credit cards. But do they still make sense for consumers? MarketWatch’s Jennifer Waters explores this issue on Lunch Break.
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
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.