Roadloans

As promised, here is the pre-approval link to RoadLoans.

Recently, they have been issuing some VERY STRONG approvals for our clients for new or used car auto loans.

After you fill out the application and get approved, they mail a "blank check" to you with instructions that you need to give to the Finance Manager at whichever car dealership you choose to buy your next car, truck or van. Basically - Give them the paperwork and go pick out your car.




Just do a small favor please - email a picture of your family standing next your new car to Robert@CreditRA.com. I can't wait to see it!!!


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Congratulations to Nancy

In addition to being a valuable asset at CRA, Nancy recently finished pursuing another passion - interior decorating.


She is a new graduate from University of Richmond Interior Decorating Program.


We are all very proud of her!!!


Now she wants to re-design most of the house. Why am I not surprised? - oh well... here's the checkbook.


What else can I do?



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What is a Credit Repair Company?

A good informative article by John Ulzheimer - President of Consumer Education of Credit.com

Switzerland; the land of great skiing, hush hush banking, Roger Federer, and international neutrality. It’s that neutrality I’m going to imitate while writing this article. Why?

The subject of credit repair is a powder keg, lightening rod, PR loser…chose your own metaphor.

Opinions on the subject seem to be polarized, meaning you either like credit repair companies or you hate credit repair companies.

First off, what is a credit repair company?

According to the Credit Repair Organizations Act (CROA), the Federal law that defines how credit repair companies must do business, a credit repair company is actually referred to as a credit repair organization (or CRO) - and a CRO is anyone who “sells, provides, or performs any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of improving any consumer’s credit record, credit history, or credit rating.”

There are some exceptions to that rule.

If you’re non-profit and perform those duties then you’re not a CRO.

If you’re a bank or a credit union then you’re also not a CRO.

But if you are for profit, aren’t a bank, and sell services promising to help a consumer’s credit then you’re a CRO, whether you want to be one or not.

There are people who believe all credit repair is illegal.

That’s not true. “Credit repair is anything but illegal if you do it the right way,” says Edward Jamison, a lawyer and the founder of CreditCRM, a developer of credit repair business software.

And, the “right way” means you fully comply with the requirements of CROA and any state equivalent. How exactly do you comply with CROA? According to credit repair experts, CROA states that a CRO must do the following things, and others, in order to be in compliance:

1. Provide mandatory disclosures letting consumers know, among other things, that they can dispute credit information directly with the credit bureaus.

2. Avoid making any misleading or untrue statements about any consumer’s credit worthiness. You can’t say, “We guarantee we can remove your negative credit items.”

READ THE REST OF THE ARTICLE HERE:

http://www.mint.com/blog/trends/credit-repair-10042010/



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What the Credit CARD Act (Credit Card Accountability, Responsibility and Disclosure Act of 2009) Means For You

Restrictions on rates and fees:

This new legislation will put restrictions on credit card companies from increasing rates and fees on existing balances.

If your credit card company raises your interest rates, the newly raised rate will not apply to your preexisting balance, just on new charges.

Avoid getting charged fees by always paying your credit card bills on time, even if you’re only paying the minimum monthly payment or balance.

Keeping the balance below your total credit limit will also help lenders view you more favorably (try to stay under 33% of your total limit).


No immediate changes:

The new law won’t go into effect for nine months.

Meanwhile, banks may still raise interest rates on your existing balances. A smart move now would be to start or continue monitoring your credit so you’re aware of balances and debt as well as fees, rates and interest charges.


Curbing of caps and fees:

The new legislation doesn’t completely cap credit card fees and interest rates.

For example, the regulation doesn’t set limits on the charges that may come with your monthly statement. It does, however, ban late fees if the issuers had delayed crediting the payment.

It also requires banks to give consumers at least 21 days notice when sending bills.

You’ll have more time between a bill’s receipt and its due date, but make sure you stay on top of your bills to avoid late charges.


No more rate raise surprises:

Credit card companies must now alert customers 45 days before interest rate increases.

They’re also required to give notice of significant changes to a card’s terms, so that companies can’t completely alter rewards programs without warning on customers who have been participating for years in a certain rewards program.

Be sure you understand a credit card’s terms before you agree to anything — read all the fine print.


Harder to get credit for some:

Credit card companies will be required, under the legislation, to consider a consumer's ability to pay when issuing credit cards, which could make it harder for some to get credit (but could also protect them from getting in over their heads). It also limits how issuers can offer credit to those under 21 without verification of their ability to pay or parents' permission.

It makes great financial sense to keep aware of how lenders view you as a borrower, so start or continue staying on top of your credit report!

Good stuff!


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Fast Credit Score Fixes - To Get The Best Mortgage Rates !!!

This article leans heavily on: Personal Finance 101: Know Your Credit Score

Free Credit Score - See yours at CreditReport.com!


With homes at near-bottom prices and mortgage rates at historic lows, a lot of consumers are jockeying to get into the homeowners market or to refinance their standing loan.

But there's one catch:

Getting approved for today's best mortgage products relies mostly on your credit score.

In addition, mortgage lenders are digging deeper than ever into homebuyers' credit reports, studying not only credit-card spending habits but ordinary bill-paying consistency and debt-to-income ratios.

Here is how to quickly and efficiently address the credit issues that mortgage lenders care about the most.

Typically, a credit score of 720 or above is the bar for qualifying for the best mortgage rates.

Many borrowers with lower scores may think there's nothing they can do to improve their situation, especially in the short-term, but that's a myth.

While there's no quick-fix magic to erase glaring blemishes, a borrower -- even with high levels of debt and a history of delinquent payments -- can start improving his or her score in immediate and dramatic ways.

First, it's important to understand that a credit report is a snapshot of your creditworthiness at the one particular moment mortgage lenders pull the report.

Scores can fluctuate a lot because most lenders update the credit bureaus on a monthly basis. But the amount the scores change is a little more complicated and depends on a series of factors, from your amount of available credit to paying your bills on time to the length of your credit history.

As when being photographed for a portrait, you want to look your best when lenders take a picture of your credit profile while still conveying an accurate record.


See your credit score: CLICK HERE


To help you see a bounce in your score and land a step closer to obtaining an affordable home mortgage, AOL Real Estate talked to some financial experts to find out some fast ways for consumers to address a less-than-desirable credit score and to start seeing results:


Tip No. 1: Pull your credit score

Before shopping for a home, you need to know your exact credit score and determine whether any wrong information has affected it.

According to Joel Ohman, a certified financial planner, around one-third of consumers have errors on their credit report and simply by pulling it, you can rectify those mistakes.

Ohman says depending on the flub, this could cause your score to spring 25 to 50 points.

You should see this adjustment reflected in your credit score before you apply for a home loan.

Cunningham advises allowing at least 3 months time to check your credit report before applying for a mortgage.

This allows for the time it takes to deal with the credit bureau, provide documentation, and then to see your score updated.

Consider subscribing to an online credit-score monitoring service for at least six months before you start applying for mortgages.

This will give you a crystal-clear sense of how different actions affect your score and how quickly your repair efforts register.

One big surprise: Large credit-card balances can hurt your credit score temporarily, even if you pay them off on time.


Tip No. 2: Pay down your debt

Before you take on a mortgage, you need to show lenders you can manage credit responsibly.

About 30 percent of your credit score is based on your available credit, which can be figured by taking the total of your credit card balances divided by your total credit card limits.

As you start paying down your debt and continue to do so over time, you are going to see your credit scores bounce.

But if you are saving up for a bigger down payment or to do a cash-in refinance, you may not have the spare dollars to completely wash away your liabilities.

If this is the case, then try to get as close as possible to the recommended level.

Typically experts suggest consumers use 20 percent or less of their available credit.


Tip No. 3: Target credit accounts that matter most to lenders.

Lenders are scrutinizing credit reports more carefully than ever, so it's important to target the accounts they'll be most concerned about.

Major credit cards are by far the most important.

But be sure not to forget about store credit cards, even those you rarely use.

It's easy to forget to pay a bill on a card you only use once in a while, but mortgage lenders will expect them to be up-to-date before moving forward.

Also, expect payments for doctor's fees, utility bills, and home equity lines of credit to be scrutinized, as well.


Tip No. 4: Piggy-back on good credit -- married couples can start anew when buying a home.

Another strategy to enhance your scores is to utilize the good credit of a significant other, a relative, or a very good friend, says Cunningham.

Get added to a credit card as a joint account holder, and as payments continue to be made on time, your credit scores will increase.

For example, if a husband with good credit adds his wife to his account, his history will be imported into her credit file and in effect, raise her score.

Cunningham says another way is to use a secure credit card, a credit line that requires a cash collateral deposit. This means you put a $1,000 in cash down for a credit card and then you can charge up to exactly that amount on the card.

The purpose is to have the issuing lender reward you for using the card and report back to the credit agencies. Just confirm before arranging for the secure card that your lender is going to report your payment history to the credit bureau.


Tip No. 5: Attempt to increase your existing credit limits, but don't open new accounts.

Most mortgage brokers say you should stay financially static during the application process and avoid starting an new credit lines.

But your score can actually benefit from increasing your credit limits, part of the equation that determines your percentage of available credit.

If you have been a responsible owner of a credit card, you may consider asking the issuer if they will raise your credit card limit.

However, this should not be confused with opening new credit cards and lines of credit, which could have an adverse effect on your credit.

"Someone opening five or six credit cards at one time may have a budget problem," says Ohman. "In the short term, it could be seen as a negative."

Opening up credit -- such as applying for multiple credit cards, a car lease, store cards-- around the time you apply for a home loan can compromise your position as a borrower.


Tip No. 6: DO NOT keep paying bills LATE -- especially your mortgage payment.

Forgo the defeatist mentality, because starting to pay your bills on time can start to correct your dismal credit score. About 35 percent of your credit score is based on whether you pay your bills on time. You just have to meet the minimum by the due date.

For those who are already homeowners, paying bills on time also includes your current mortgage payment. Scott Gamm, founder of a money management website, says that bankruptcies and foreclosures can cause your credit score to drop 150 to 200 points and that this discrepancy will be a fixture on your credit report for the next seven to ten years.


Robert's response: "I will NEVER agree that it will take 7 to 10 years for someone to learn to be responsible with their credit...

Think about it...

How long would it take YOU to learn any major lesson? one or two years... (maybe three...) ???

Why does the system require 7 to 10 years for an item to be removed from someone's credit report? People get out of jail after committing major crimes in less time than that.


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Four Myths About Your Credit History

From Equifax's own: Robin Holland


If you don’t learn how to understand your credit, it will be a lifelong problem.

You most likeley know that you should be checking your credit report at least once a year.

Do you understand what’s included in your credit report and how to read it?

Do you know what your credit score means?

When I work with consumers or lead workshops on financial literacy and credit, I’m always amazed at the misconceptions about credit histories, credit scores, and credit-reporting agencies.

Here are four myths about your credit history that I hear people proclaim frequently as truth:


Myth #1: The credit-reporting agency is responsible for my debt (or credit) rejection.

The credit report is an important part of the decision to grant you credit or not, but it’s not the only one.

Each lender or creditor has a set of criteria it uses to determine whether or not you qualify for that credit.

Think about it: It’s much easier to get a gas card than a credit card or a mortgage.

That’s because the requirements to qualify for a gas card are not as stringent as those for a mortgage.

It’s up to you to establish an on-time payment history and a good mix of credit.

Then when the creditor pulls your credit report, the creditor can look at your history, along with the other information you have provided, to make a decision about whether or not to give you credit.

A lot of the details you may provide, such as your gender, income, and employment history, aren’t on your credit report. But you can take responsibility for your financial identity and make sure the information reported about your credit history will present a positive picture of you to creditors.


Myth #2: The credit-reporting agency put the negative information on my credit file.

A lot of people don’t understand how credit reporting works.

Credit reporting agencies put information in your file when creditors send us details about your payment history.

Credit reporting agencies are not out to get you, and no one pays us to report negative information so they can avoid granting you credit.

We compile the data sent to us about your financial history and present it as a snapshot of your finances.

*** There may be inaccurate information on your credit report (and you should frequently check your file at all three nationwide credit reporting agencies for inaccuracies), and if you find any inaccuracies contact the credit reporting agencies to dispute them.


Myth #3: My credit score is a part of my credit report.

Your credit score is not included with your credit report.

You can access your credit report and credit score from Equifax or one of the other nationwide credit reporting agencies.

Your credit report is a history of how you pay your bills.

It includes your credit accounts—mortgages, student loans, credit cards, and auto loans—and shows if you’ve been late or on time with your payments, the balances on these accounts, and who else has been looking at your credit report.

Your credit score is calculated from a formula based on the components of your credit report.

While the score is a good reflection of you and your financial capabilities, there’s still room for interpretation.

A lender or creditor will look at your score as another element in determining the risk in lending to you or giving you credit.

So you can get your credit score from a credit-reporting agency, but it is not automatically included with your credit report unless you purchase a credit report and score product or subscribe to a credit monitoring service that includes it. (Because like all companies, we need to show a profit).


Myth #4: Credit-reporting agencies make the rules on how your credit history is reported and how long information stays on your credit report.

Nope.

The credit reporting agencies compile and report information about your credit history, but we’re not the decision makers.

A government agency, the Federal Trade Commission (FTC), governs the credit reporting agencies.

The Fair Credit Reporting Act (FCRA) outlines the rules on what credit reporting agencies can and cannot report and how long negative factors stay on your file.

It is helpful for people to understand what a credit reporting agency does and how information gets into their credit report. The more knowledge you have about this and your credit history the more control you will have over your finances.


Robert's comments: This is some good information. As much as I criticize the 3 big credit reporting agencies, we would not have the access to credit that our economy is based on without them.


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Secrets ot the Perfect Credit Score

Good Credit Scores Are the Key To Financial Health

Credit scores were developed as tools to help banks and businesses make objective decisions. To generate them, a mathematical formula pulls credit report data and transforms it into a numerical rating. Fico Scores range from a low of 300 to a high of 850, and, according to Fair Isaac, the creator of the scoring system, mortgage lenders consider anything above 760 as ideal.

Despite differences in each ranking system, they have one thing in common: A higher score indicates less risk. And having high credit scores makes you more appealing to lenders, employers and landlords.

Consequently, focusing on your credit scores is only natural. "People are drawn to this subject because it allows them to measure something that they equate to financial health," says Jose Rivas, the national education manager for Consumer Credit Counseling Service of San Francisco.

That focus, however, can turn into anxiety, and conflicting information is often to blame.

"One article states that consumers should close their unused accounts," says Rivas, and "another states that consumers should never close their accounts." For this reason, getting the facts from reliable sources is essential.


Keeping the Right Mix of Credit

"Every time someone runs my credit, they say, 'Wow, I almost never see someone with credit that high,'" says Carrie Rocha of Minneapolis, the founder of the “Pocket Your Dollars” blog. She keeps her credit first-rate to preserve her autonomy.

"As someone who got out of $50,000 in debt in less than three years, I take a lot of personal pride in my financial freedom" she says.

Though Rocha has no plans to borrow money again, "I have no barriers when it comes to employment, insurance or other areas of life where my credit score is used to assess the kind of risk I am."

Besides "the obvious things like pay my bills," Rocha says she increased her scores by talking to her credit union loan officer, who said an overabundance of idle retail accounts was driving it down.

She had opened the cards randomly during in-store promotions but never really charged on them, so there was no history to protect. After formally closing the accounts, her scores that were previously in the 720 to 740 mark rose to the 800s.


Does the Perfect Credit Score Exist?

Pursuit of excellence is often wise, but does "perfect" exist? Yes, says Craig Watts, the public affairs director for Fair Isaac. "Several thousand consumers do, in fact, have the highest possible FICO score."

Though most people won't reach the credit score apex, you can get close by consistently following three simple guidelines:

• Pay all bills on time.

• Keep credit card balances low.

• Take on new credit only when you really need it.

Don't obsess over small credit score variations. "Lenders decide what score they will accept for their best-interest-rate product," assures Watts.

"They genuinely don't care if your score is 50 or 100 points higher than that."

Clearly, A-plus credit has its advantages, but there is no reason to go overboard. Find a balance between attentiveness and fixation by understanding what those numbers can do for you and knowing how you can improve them.

And remember: Credit scores gauge your borrowing history, not your value as a person.


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Why Debt Settlement Is The Wrong Move

Debt settlement a 'nuclear option' that most people shouldn't even consider.

An excellent article by: Alysse Dalessandro


Complaints about debt settlement companies are on the rise - prompting warnings that dealing with those types of businesses might not the simple solution they might seem for consumers overwhelmed by debt.

Only an estimated one in 10 consumers who use these companies successfully emerge from the process, according to a recent government report.

The Better Business Bureau said it received more than 3,500 complaints from consumers on debt settlement companies since late 2007.

"The whole industry is getting a lot of attention right now because so many people are in so much financial trouble and unfortunately if they get tangled up in the wrong debt settlement company, they end up worse than they began," said Alison Southwick, BBB spokeswoman in an interview with Consumer Ally.

The Government Accountability Office recently released an investigation into debt settlement company practices and found that 17 out of 20 companies sampled impose fees on consumers before settling any of their debts - a practice that the Federal Trade Commission has proposed banning.


According to Southwick, how the process works:


1. consumers are told to stop paying their debt and instead pay into an account set up by the company.

2. The consumer pays into the account for years and then after saving a substantial amount, the debt settlement company will try to negotiate with the credit card company to accept the saved amount instead of the full debt owed.


The issue is that the credit card companies or other original creditors DO NOT have to comply with the negotiation and that is only one of the many potential problems Southwick warns.

"The problem is you haven't been paying your credit card for years, your debt is mounting, and your credit report is taking a hit and in the meantime, your credit card company can file a lawsuit with you and start garnishing your wages," Southwick said.

The BBB, a membership-based business ethics group, takes specific issue with companies making claims of debt settlement as a "simple" solution "guaranteed to work," according to Southwick.

GAO found the debt settlement companies provided information to consumers that was "fraudulent, deceptive, or questionable" including advertising success rates of the program as high as 100%, according to the investigation report.

"Debt settlement is not an easy fix and if you are going to do it, you really should only consider it before declaring bankruptcy," she said. "Its really one of those nuclear options that you do not want to enter into lightly."

Once entered into the lengthy debt settlement process, it may not be so easy to leave. Southwick cites a consumer who had paid $15,000 into a debt settlement account. When she dropped out of the process, the company refused to return the money.

According to the GAO, FTC and state investigations have shown that fewer than 10% of those entering into the process complete it.

U.S. Sen. Charles E. Schumer (D- NY) introduced the Debt Settlement Consumer Protection Act, which would require increased disclosure, limit fees charged by debt settlement firms and grant greater enforcement power to state and federal officials to go after companies that are taking advantage of consumers.


The FTC warns consumers should avoid companies that:

* promotes this as a "new government program".

* guarantee their success of making your debt vanish.

* advise you to stop all communication with your creditors.

* say that they can stop debt related collection calls or lawsuits against you.

* require you to pay a full upfront fee.


"You should always contact your credit card company and try to work something out first with them," Southwick suggested.

"For some people, who have a little bit of credit card debt, debt settlement is really not for them."


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Why the Credit Bureaus Can't Get It Right - Part 2

How Problems Go Global

So suppose there’s a whopper of an error on your credit report - Suppose it says you’re dead.

That’s what Ken Clark, a financial planner in Little Rock, Ark., was told when he tried to buy his wife a minivan. The auto dealer called Clark a con man because his report was marked “deceased.”

When Clark called the credit bureaus to report that he was still breathing, he learned that the real authority on the matter was a Utah bank that issued him a credit card and later reported him dead. To fix the error, Clark had to send a notarized letter and a copy of his utility bill to the bank, which in turn assured the bureaus that he was alive.


Clark’s story sheds light on how the dispute process works.

Credit bureaus say they usually need to check with the lender because 30 percent of disputes are filed by shady credit-repair companies that challenge all the negative information on a consumer’s report, regardless of its validity. Bureaus also have to deal with consumers who pull stunts like concocting official-looking statements on phony letterhead; one bureau says it recently got a letter from “Banke [ed.-this “typo” is intentional, replicating the original] of America.”

To sort the good from the bad, the industry sends almost everything through the automated system e-OSCAR (Electronic Online Solution for Complete and Accurate Reporting), which forwards consumer disputes to lenders for verification.


Here’s where the trouble begins.

Rather than call the lender or send it the consumer’s letter and supporting evidence, the bureaus zap the documents to a data processing center run by a third-party contractor. This system yields considerable savings.

Equifax reduced its per-dispute cost from $4.50 to 50 cents by outsourcing the work to Costa Rica and the Philippines, for example. But consumer advocates say these workers are under enormous pressure to process disputes and forward them to lenders as quickly as possible. While the bureaus say quality is the overriding factor, employees deposed in civil suits describe a harried pace.

One TransUnion manager testified that workers were expected to complete up to 22 cases an hour. An Equifax worker estimated she was allotted four minutes per dispute. To process the letters so rapidly, the workers summarize every complaint with a two-digit code selected from a menu of 26 options.

The code “A3,” for example, stands for “belongs to another individual with a similar name.” The worker can also add a single line of commentary. The two-digit code and short comment is the only information the lender receives about the dispute.

Consumer advocates say these summaries omit the background banks need to understand a complaint, and banks agree. “We’ve met with [the credit bureaus] and said, ‘Look, we need more information,’” says Nessa Feddis, vice president and senior counsel for the American Bankers Association.

But the bureaus say their codes provide accountability and accuracy. “People talking to people? That’s the last thing consumers want,” says Experian’s Maxine Sweet.

She suggests that consumers with complex cases resolve their disputes directly with their lenders. But that can put consumers in a catch-22. Currently, banks have no obligation to investigate a dispute unless it’s forwarded by a credit bureau.

What’s more, consumer attorneys say some lenders do little more than check the disputed information against their own records—even if those records were the source of the error. “It’s a closed loop,” says Michigan lawyer Ian Lyngklip. And some lenders rely on software rather than people to do some of the checking.

Not every dispute sent to a credit bureau gets the e-OSCAR treatment.

Some complaints get extra attention. Experian says it sends disputes to its “special assistance service” department when consumers have “unusual problems” or an elected official requests consideration for a constituent;

Equifax says it handles disputes relating to public figures and court cases with “additional processing procedures.” TransUnion declined to provide details on its VIP service, but its employee manual instructs workers to use “priority processing” if a letter comes from a “judge, senator, congressman, government official, attorney, paralegal, professional athlete, actor, director, member of the media or a celebrity.”

If your case is assigned this status, it may be given to a dedicated rep who will make phone calls on your behalf. But there’s no guarantee of a successful resolution. “I have a lot of cases that go to special services, and they still mess it up,” says Robert Sola, a Portland, Ore., attorney.


Better Times Ahead?

The Consumer Data Industry Association, the trade group, reports that 72 percent of disputes result in an update or correction, suggesting that the e-OSCAR system fixes plenty of errors. However, when the system fails, the consumer has few options.

If he files a second dispute without providing new information, the bureau can dismiss it as “frivolous.” The FTC is supposed to enforce laws requiring the credit bureaus to conduct a “reasonable investigation” into consumer disputes, but it hasn’t taken any action on that front since the start of the decade. (The agency says its recent reviews of consumer complaints yielded no reliable conclusions about report accuracy or the dispute process.)

That leaves the courts. But consumers can’t sue a bureau over an error until they can prove the error is already creating problems. “It’s a system designed to make sure the horse is out of the barn,” says Santa Fe, N.M., attorney Richard Rubin.

And even a successful lawsuit won’t necessarily fix a mistake. Just ask Chino, Calif., marriage counselor Jeff Christensen. In 2003 the cable company Charter apologized to him for reporting a collections account in error and directed the credit bureaus to delete the information.

Experian refused, so Christensen took the bureau to court. In 2005 a judge ruled that Experian was violating the law and fined the company $2,500. Experian paid the fine, but it didn’t correct the error until December 2008—when SmartMoney called—saying it never got the right paperwork.

Turns out, the courts can issue fines, but they can’t demand corrections.

“You have no right to an accurate credit report,” says Lyngklip, the attorney. Consumer advocates estimate that bureaus pay just $25 million a year in court fines—a minor expense for the $7 billion industry.

The credit bureaus say they have no immediate plans to change the dispute process.

They note that turnaround time is at an all-time low, and consumers have embraced a new online dispute-filing feature. “The possibility of errors is at its lowest point ever and continues to decline,” says Equifax’s Klein.

Consumer advocates have their own ideas. They want Congress to amend the Fair Credit Reporting Act so that judges can demand corrections. They’d like the bureaus to establish an appeals process and require proof from lenders who rereport disputed information.

And everyone seems to have their hopes pinned on regulations expected this year that will require lenders to address complaints received directly from consumers. Says Pratt, the trade group president, “That may allow consumers a better route to resolve a stickier dispute.”


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Why the Credit Bureaus Can't Get It Right - Part 1

A fantastic article submitted by SmartMoney.com


A mistake on your credit report can cost you literally thousands of dollars, especially in this economy. So what can you expect from a big credit bureau if you ask them to investigate and correct the error?

The answer, for many consumers: About 50 cents worth of effort, conducted by offshore workers at third-party firms. That’s just one of the findings from SmartMoney’s investigation into why credit-report errors continue to pop up so frequently—and why consumers often have so much trouble getting them fixed.

To follow what one consumer advocate calls an “electronic hot potato,” SmartMoney pieced together a depiction of the dispute process through information from trial depositions, internal company memos and the bureaus’ own employee manuals—much of which the bureaus and their trade group subsequently confirmed. The process may be efficient, but it remains a mystery to most consumers, and a source of bitterness for some.


The Wrong Kind of Thrills

For Brandon and Amanda Mendelson, it had all the elements of a paperback thriller:

The innocent newlyweds, the mysterious account held by an obscure bank in Boca Raton, the faceless corporation controlling everything behind the scenes.

But when the Mendelsons discovered the strange overdue loan mistakenly listed on Amanda’s credit report, they weren’t exactly thrilled.

The Glens Falls, N.Y., couple had never done business with that bank, and the error spoiled Amanda’s credit history. Making matters worse, their call to a national credit bureau yielded nothing more than a form letter stating that the accuracy of the entry had been “investigated” and “verified.”

Now they can’t help but wonder: investigated how? Verified by whom? Brandon studied organizational leadership in school, but even he can’t imagine how the bureau failed to fix such an obvious mistake. “Maybe it fell through the cracks,” he says.


Or maybe the process worked pretty much as it was designed to.

Although they generally decline to discuss specific cases, the three major credit bureaus—Experian, Equifax and TransUnion—each attest to their commitment to accuracy and accountability in their record keeping.

But while consumers might assume that each bureau employs an army of dedicated sleuths who carefully investigate and correct errors, all the bureaus actually process most disputes using a system that’s almost entirely automated—and where human beings are involved, they’re often working at a harried pace.

The bureaus say the system, dubbed with the Muppety acronym e-OSCAR, is the most efficient way to handle the more than 20,000 disputes a day they receive.

In practice, most complaints are electronically zapped straight to the lender, and according to consumer advocates, many lenders respond by simply rereporting the erroneous data.

Credit-report accuracy is profoundly important now, because an error can wreak more havoc than ever on your financial life.

Before the nation heard the words credit crisis, just about anyone with a pulse could get a loan. Now many banks are refusing credit to anyone who looks remotely risky. And as legions of anxious job hunters know, a growing number of employers routinely check credit reports before they make a hire. It’s no wonder, then, that the National Foundation for Credit Counseling says call volume is up 31 percent in the past 12 months.


“Credit is on consumers’ minds more than ever before,” says Curtis Arnold, CEO of CardRatings.com.

But according to a 2007 survey by pollster Zogby, 37 percent of consumers who obtain their credit reports find errors, and half of those said they could not easily correct the mistakes.

An earlier study by the U.S. Public Interest Research Group, a nonprofit consumer advocacy organization, found that one in four reports contained “serious errors.” For its part, the Consumer Data Industry Association, the industry’s trade group, says only 11 percent of consumers who get their credit report file a dispute and just 5 percent of those challenge the results.

“That’s an excellent satisfaction rate,” says the group’s president, Stuart Pratt. Still, even some industry insiders say there’s a problem. Testifying before Congress, one CEO of an independent Arizona credit bureau likened the dispute process to “having an IRS audit, brain surgery, getting a tooth pulled or going to your own funeral.”

And when the dispute process fails, consumers say they are left feeling powerless. Martha Soto, a 63-year-old Antioch, Calif., shipping manager, says she couldn’t get the mortgage she needed last fall because Experian listed her as the defendant in an unpaid court judgment.

She says she’s faxed records proving that she’s actually the plaintiff; Experian says they’re the wrong records, and the dispute is still unresolved, leaving Soto increasingly frustrated. “They’re defaming you, and you can’t do anything about it,” says Soto. “It’s scary to think an agency like that can control your life.”


Big Business, Little Service

Until the late 1980s, consumer credit records were scattered among thousands of low-profile local bureaus.

The industry gradually underwent a consolidation frenzy that left three companies controlling the data of 210 million Americans. The smallest, Chicago-based TransUnion, is owned by the Pritzker family of the Hyatt hotel fortune and boasts credit-reporting operations in 25 countries, including Nicaragua and Botswana.

Publicly traded Equifax, founded in 1898 by a Tennessee grocer who sold his customers’ payment records to fellow shopkeepers, calls itself a “global leader in information solutions” with businesses as diverse as risk detection and database management. (According to its income statements, its consumer data unit remains its most profitable, boasting a 40 percent pretax profit margin.)

Experian, the largest of the three and based in Ireland, is a $4 billion company that uses consumer data to help businesses send more than 20 billion pieces of junk mail every year.


Together, the three credit bureaus have amassed a spotty record on consumer care.

In 2000 they jointly paid a $2.5 million Federal Trade Commission fine for blocking millions of phone calls from consumers. Three years later Equifax paid a second fine because it still hadn’t hired enough people to answer the phone. In 2005, after new federal laws forced the bureaus to give away credit reports, Experian was hit with a $950,000 FTC fine for marketing those reports through a Web site that automatically charged consumers for an $80 credit-monitoring service. Last year TransUnion agreed to pay $75 million to settle a class-action lawsuit over sales of consumer data for marketing purposes.

The bureaus, which never admitted wrongdoing in these cases, say they realize the importance of providing reliable information to lenders and consumers alike. “If we don’t, we cannot survive, either as a company or as an economy,” says Equifax spokesperson Tim Klein.

But they also admit that credit-report errors can stem from glitches in their own systems. Some mistakes occur thanks to the algorithms used to match loans to individual credit reports. If the name or Social Security number on another person’s account partially matches the data on your file, the computer might attach it to your record.

The credit bureaus also employ contractors who gather tax lien and bankruptcy data from courthouses and government offices.

If these workers transpose a digit or misread a document, their error winds up on your report. But even if they never made mistakes of their own, the bureaus say they can’t possibly patrol the accuracy of the 3.5 billion pieces of account information they receive every month from lenders. “We’re the library,” says Maxine Sweet, Experian’s director of public education. “We don’t write the book.”

Continue to Part 2:

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New Credit Card Regulations Help Homebuyers Easier to Pay Down Debt and Qualify for Better Mortgage Rates

by Christina Crouch


When Brandon Hill, a 28-year-old marketing specialist based in Salt Lake City, went to buy a house, he got an unfortunate surprise. "I was under the requirement for an FHA loan at the time by about 15 or 20 points," Hill says. "We tried to get the mortgage under my wife's name, but the lender backed out. We needed to get my credit score fixed to buy a house."


Laden with $10,000 in credit card debt between Hill and his wife, Brandon doubled his credit card payments, but still had to enroll with a credit repair service in order to raise his score the 20 points necessary to land a loan. "It was a really long and rough process," says Hill. "[Before credit repair], we felt like our payments weren't going anywhere."


Future homebuyers may not have to go through the Hill's hassle. As of February 22, new provisions from the Credit Card Accountability, Responsibility, and Disclosure Act will go into effect, helping indebted consumers looking to land a mortgage pay off their debt and raise their credit score faster. Here's now the new laws will affect homebuyers.


Those looking to unload some debt before applying for a mortgage are about to get a much-needed helping hand, says Catherine Williams, vice president of financial literacy for Money Management International financial counseling firm in Houston.


"Credit cards that offer an introductory promotional rate have to make that rate last at least six months," explains Williams. "If someone is applying for a mortgage and needs to pay down debt, they'll be able to get a low- or no-interest card and spend the next six months paying off their balance. That could be substantial."


In addition to offering lengthier teaser rates on new cards, Williams adds that the Credit Card Act will also optimize payments for consumers with old balances. When consumers hold cards with multiple interest rates - for example, a five percent rate on the first $3,000 of debt, and 20 percent on anything higher - their monthly payments currently pay off the cheapest debt first, leaving the pricier debt to accrue. Under the new law, payments will eliminate the more expensive debt first, leaving consumers with lower balances, higher credit scores, and a better likelihood of landing sweet mortgage rates.


"It's just going to help everybody get rid of their debt faster," says Williams. "That's going to make their credit score go up."


"The major thing this act will do for mortgagees is help them be more aware of what their debt utilization ratio is and better understand how to lower it," says Curtis Arnold, CEO of the credit card information web site, Cardratings.com. "Now credit card companies are going to have to warn you about what happens if you keep making that minimum payment, and how long it's going to take you to pay off that card."


Arnold adds that to raise their credit score and qualify for the best mortgage rates, consumers need keep their debt to 10 percent or less of their credit limit.


While the new credit laws won't actually pay down your debt for you, they will help consumers keep track of how much they owe by forcing card companies to print the total amount of debt, how long it will take to pay the debt making only minimum payments and how high the payments will be if the consumers wants to pay off the debt with interest within three years on every credit card statement and to give card holders a full three weeks (21) to make their payments.


"As of late February, the only way they can increase your rates is if you're 60 days late on your payment," says Arnold. "That's going to help mortgage seekers financially plan a lot better."


While the card act may help those carrying credit balances destroy debt faster, it's going to block other consumers from getting credit at all, says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies in Fairfax, Virginia. For those planning to purchase a home in the future, this could have severe ramifications.


"People younger than 21 are going to have a lot of trouble establishing credit early on in their careers because they won't be able to get a credit card without a cosigner," Jones explains. "Because card companies won't be able to tack on new fees or target risky consumers, they might offset those costs by lowering credit limits or raising interest rates. That's going to create a tough situation for consumers who may be trying to get a mortgage."


The good news, Jones adds, is that those looking to clean up their credit before applying for a mortgage will be able to plan their finances much better. According to the new law, if a credit issuer does change your interest rate or card terms, cardholders will be given the right to opt out. Those who do opt out of a rate increase will lose the ability to use that card in the future, but will be given 45 days to find a new card, pay off their balance, and cancel their account. Changes in rates and fees will also only affect new balances, so future homeowners needn't worry about their old debts doubling or tripling days before submitting their mortgage application.


"The ability to say 'no' to new charges is going to give consumers who are looking for the best mortgage rates more control over their debt and their credit score," says Arnold. "It's going to help level the playing field. That 'Wild West' mentality that's been out in the credit card world until now is going away. There's a new sheriff in town."



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How The New Credit Score Will Affect You

Lenders now have a second formula for judging your past, backed by the three giant credit bureaus.

Your VantageScore could look very different from your FICO score.

By Liz Pulliam Weston


The three credit bureaus are touting their new credit-scoring system as a boon for borrowers, easier to understand and more "consistent" than other scoring methods.

Maybe. But VantageScore, which uses the same underlying data about your debts as the FICO score you already know, also poses some serious risks.

Let's be clear: This isn't about making credit easier for the little guy. This is business.

Big business.


Equifax, Experian and TransUnion are private companies that each track your accounts, balances and payment habits.

A credit "score" simply assigns a weight to those factors to produce an indicator of how much risk you show as a borrower.

Fair Isaac's formula (FICO) for scoring is the one lenders like best.

Fico Scores/Reports

Every time an appliance store or car dealership asks one of the credit bureaus for your credit score, the data the bureau has collected about you is sent through the proprietary FICO model.

The lender pays the credit bureau for the score, and the bureau pays FICO for using its formula.

This is quite a lucrative business for Fair Isaac. Credit scoring accounts for 20% of the company's revenues, according to Merrill Lynch analyst Edward Maguire, but 65% of its operating profits.

The bureaus, naturally, want to cut out the middleman.

"They don't like having to pay Fair Isaac for anything,"

said mortgage broker Ginny Ferguson, who teaches credit scoring to her colleagues in the National Association of Mortgage Brokers. "The (credit bureaus) are intent on finding the next area of revenue generation."

The bureaus have tried to break Fair Isaac's stranglehold before, with no success. The VantageScore may be a different story.

Investors certainly think so; they drove Fair Isaac's stock down 6.6% on the day the new scoring system was announced, even though the bureaus hadn't signed up a single lender.

Analyst Maguire rightly called VantageScore "a shot across the bow" of the bureaus and opined that even if the new system didn't replace FICOs, the bureaus could use it as leverage to get Fair Isaac to lower its prices.

We wouldn't have to care about these elephants' battles, except that consumers may be the grass trampled under their feet.


Here are just some of the concerns:


1. Credit score confusion

FICO and VantageScore use two different ranges. The classic FICO scale runs from 300 to 850, while the VantageScore starts at 501 and runs to 990.

The bureaus say the VantageScore range is more "intuitive," because it breaks down like an elementary-school report card:

901-990 equals "A" credit

801-900 equals "B" credit

701-800 equals "C" credit

601-700 equals "D" credit

501-600 equals "F" credit


There will probably be a lot of puzzled borrowers trying to figure out why a number that would qualify them for the best rates and terms under one system - say, a 780 credit score - makes them credit mediocrities under the other system.


2. Consistency

The information in the credit-bureau databases can be wildly different.

You may have accounts reported at one bureau that don't show up at the other two, or you may have successfully disputed an error at two of the bureaus only to have the third refuse to erase the bogus entry.

One of FICO's big selling points for lenders has been the model's consistency.

Even though the bureaus collect and report credit information differently, the same basic FICO model is used at all three to generate comparable scores.


We shouldn't fall for the idea that the new system is superior without more evidence -- so far, VantageScore hasn't been tested head-to-head with FICO.


3. The good, the bad and the ugly -- but mostly the bad

VantageScore is being marketed to lenders as being a better way to separate "good" from "bad" risks including, to quote its Web site, "the ability to classify more bad accounts into the worst-scoring ranges."

Lenders, you see, are often less worried about losing out on good customers than they are about getting stuck with bad ones.

So if a few potentially good risks get wrongly qualified as bad, lenders aren't that worried as long as they avoid the deadbeats.


*** If you happen to be one of those good eggs who's paying higher interest rates or having trouble getting loans, though, you should worry.


Again, the bureaus are quick to say that they haven't tested VantageScore against FICO, so it's unclear whether the upstart actually does sweep more folks into the worst-scoring range.


But the fact that it's one of the bureaus' goals should help you understand the point: this is not about making consumers happier.


4. "Thin" and "Young" credit profiles

One of lenders' beefs about the classic FICO model is that people whose credit histories are "thin" (they have few accounts) or "young" (their oldest account has been established for only a few months or years) can still get pretty high scores.

The lenders grump that these borrowers may pose a greater risk than the scores predict, and that people should have more robust credit files before they reach the top of the FICO pyramid.

Once again, without comparing VantageScore directly to FICO, the bureaus are touting it as a better way to grade people with limited credit histories.

If that means the young or others without "robust" histories get better access to credit to buy homes and build businesses, this could be a good thing. If it means making credit harder to get for those folks, not so much.


5. High switching costs

To say that FICO scores are entrenched in the financial world would be understating the case.

"FICO scores are used by 80% of the 50 largest banks. They're used in 75% of the mortgage loan origination decisions," said Ron Totaro, Fair Isaac's general manager for global scoring solutions. "We're a force because we've been at this for 50 years."

It's not just the lenders that rely on FICO. Most loans today are bundled up and sold to investors, who use the scores to gauge how much risk they're taking with these investments.

Wall Street is comfortable that FICO-scored loans will behave as forecast, Ferguson said, but could be more nervous about the "predictiveness" of a new scoring system.

If lenders begin adopting VantageScores, they might tighten up their underwriting guidelines -- in other words, make credit harder for consumers to get -- while they see how well the loans actually perform.


*** Consumers can stand to reap some benefits from the new score.


For one thing, competition has a way of bringing prices down and forcing companies to improve their products.

But more importantly, the bureaus promise to provide clear guidance about what goes into the scores and how consumers can better their numbers.

How specific that guidance will be remains to be seen, but Kerry Williams, group president of Experian's Credit Services, said that he wants consumers to know exactly how certain actions can affect their scores.

Currently, Fair Isaac offers a FICO "simulator" through the my FICO.com website that can show you how a handful of actions might affect your score.


At the moment we can't buy our own VantageScores, but Experian promises to make them available to consumers in the next few weeks, and the other bureaus say they'll follow suit by the end of the year.

Then we'll have some more information to gauge whether VantageScores really are a better mousetrap -- or just more of the same.



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