Friday, October 11, 2013

The Credit Bureaus "Rise to Power"


By Robert W Linkonis Sr.

The vast majority of Americans have to obtain a loan to purchase a new car or home. During this process, the lender will order a copy of one or all of your three credit reports to make either a lending or an adverse action decision to the request. The interest rate or fees that you will have to pay on these loans may be directly related to how you have handled your credit.   

Every one who has heard me speak over the years knows that I am big on handling credit "wisely". This means in part - maximizing your credit score by understanding the credit score. But - the credit score is computed based on data obtained by the three credit bureaus. How did the three credit bureaus rise to the level of power that they have to influence the lives of every one of us?


History of the Credit Bureaus

As far as back as the 1860s we can find traces of the origins of credit bureaus. Local merchants would share and maintain lists of individuals who were high credit risks. That allowed them to offer more credit to people who weren’t on the lists, whereas previously, most merchants only extended credit to people they knew personally.

Later on as populations became more mobile and a wider group of merchants across the country needed information to help determine the creditworthiness of individuals, credit bureaus as we know them today began to materialize. 

What Are the Three Credit Bureaus?

Over the years, as the number of people seeking credit grew, the ability to find consolidated credit reporting information took on added importance. Today, some 2 billion data points are entered every month into credit records in the U.S, and approximately 1 billion credit cards are actively being used in the U.S. That’s a lot of data!

There are literally thousands of small credit bureaus doing business today. Most are just resellers of data from the "Big Three": Equifax, Experian and Transunion Let’s take a brief look at their history.

 
History of Equifax

Equifax was founded way back in 1899 as the Retail Credit Company. They grew at a furious pace and had offices throughout North America by the 1920s. By the 1960s, they had credit information for millions of Americans on file, and weren’t afraid to share it with whoever wanted to pay them for it.

The passage of the Fair Credit Reporting Act of 1970 placed some limits on what information could be shared with who, as well as put laws in place to govern the credit industry and protect consumers. Retail Credit Company suffered a bit of an image problem, but by 1975 they had successfully re-branded as Equifax.


TransUnion

TransUnion was the second of the Big Three to come along. Founded in 1968 as the holding company of Union Tank Car, a rail transportation equipment company, TransUnion jumped into the credit sphere in 1969 when they began acquiring regional and major city credit bureaus. They’ve grown over the years to the point where they now have over 250 offices across the U.S., as well as in 24 other countries.


Experian

Experian is the latecomer to the Big Three. They were founded in 1980 in England as CCN Systems. They expanded to the United States in 1996 by acquiring a company called TRW Information Services. They’ve continued to grow their operations to 4 main geographic regions, employing 15,000 people working in 41 countries.



Credit from here and beyond...

With the dawn of the internet age, credit bureaus now offer the ability for consumers to view their credit reports online, as well as give them access to dispute incorrect items that may have shown up on their credit reports.

There are many ways, right and wrong, to dispute errors on your credit report. Always seek professional advice before blindly disputing errors on your credit reports. Did you know that disputing the incorrect way could sabotage your credit repair efforts??

Call a specialist today for a free credit consultation. 

There is never a charge for a consult and good advice. Call today: 800-648-5157.   Or visit us on the web: http://www.CreditRA.com




Tuesday, July 23, 2013

How Student Loan Debt Factors into Your FICO® Score

By Tom Quinn

This year’s summer break may be a bit more stressful if you are a college student who plans on taking out subsidized federal student loans to help pay for upcoming tuition.  Unless Congress takes action this summer to restore lower rates, new student loans will have interest rates twice what they were in the spring semester (3.4 percent to 6.8 percent).  You don’t need to be a math major to know this is not good news.

This difference in interest rates will increase the total amount of money you end up investing in your education.  And it will likely impact a lot of US consumers.

With education costs rapidly outpacing inflation, more students and their parents are taking out student loans to pay for education. Based on recent FICO research looking at a large data sample from one of the credit bureaus, we found that 6.2% of US consumers had two or more open student loans on their credit report in 2005. By 2012, that number grew to roughly 11.8%.

Consumers also have a greater amount of student loan debt today. In 2005, consumers with an open student loan on file had an average student loan debt of $17,233. In 2012, that number increased 54% to $26,530. This has outpaced growth for other types of debt, as the chart below shows.


So what does all this mean for your FICO Score? 

While this increase in interest rate has no direct effect on a FICO® Score (as interest rate information is not captured on the credit report and not considered by the score), it is important to understand that how you manage your student loan debt does have an effect on the score.

Let me set the record straight on exactly how student loan credit is factored into the FICO® Score:

  • A student loan receives no special treatment by the FICO® Score; it is treated like any other installment loan. The score doesn’t employ any variables that specifically evaluate student loan data.
  • It makes no difference to the score if the student loan is backed by the government or a private loan from a lender.
  • A student loan that is reported in deferred status does not receive any “special treatment” by the score.  These loans are considered by the algorithm and can have a positive, negative, or no impact on the score, depending on what other credit information is present.
  • Inquires identified as student loan related searches for credit are included in the FICO® Score’s special inquiry treatment logic.

It’s important to understand that while student loan debt can factor into the FICO® Score, revolving debt (like credit cards) has a larger influence. That’s because we’ve found that revolving type indebtedness has a stronger statistical correlation with future borrower performance than installment loan indebtedness.

While you have limited control over what happens “inside the Capital Beltway”, you do have control over how you manage your finances, and improve your knowledge of what drives your FICO® Score, which can influence your access to affordable credit options.  That’s a lesson we can all benefit from understanding!

Good luck to all students getting ready for the fall semester.

Tom Quinn is the Vice President of Business Development for myFICO, and has over 20 years of experience working with consumers, regulators and lenders and regarding credit related questions and initiatives.


Next Article:
How Employment Credit Checks Keep Applicants From Getting the Job


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Thursday, March 7, 2013

How Employment Credit Checks Keep Qualified Applicants From Getting the Job

by Amy Traub


Today, it is common for employers to look at job applicants’ personal credit history before making a hiring decision. According to a survey of human resources professionals, nearly half of employers check an employee’s credit history when hiring for some or all positions.1
 
The practice is hardly limited to high-level management positions: even a brief look at a popular job listing website reveals that employers require credit checks for jobs as diverse as doing maintenance work, offering telephone tech support, assisting in an office, working as a delivery driver, selling insurance, laboring as a home care aide, supervising a stockroom and serving frozen yogurt.2
 
Some employers also conduct credit checks on existing employees, often when they are considering a promotion.

Yet despite their prevalence, little is known about what credit checks actually reveal to employers, what the consequences are for job applicants, or employment credit checks’ overall impact on our society.

This paper, drawing on new data from Demos’ 2012 National Survey on Credit Card Debt in Low- and Middle- Income Households, a nationally-representative survey of 997 low and middle-income American house- holds who carry credit card debt,3 addresses these questions and finds substantial evidence that employment credit checks constitute an illegitimate barrier to employment.
   
Credit reports were not designed as an employment screening tool. Instead, they were developed as a means for lenders to evaluate whether a would-be borrower would be a good credit risk: by looking at someone’s history of paying their debts, lenders decide whether to make a loan and on what terms.
 
Accordingly, credit reports include not only an individual’s name, address, previous addresses, and social security number, but also information on mortgage debt; data on student loans; amounts of car payments; details on credit card accounts including balances, credit limits, and monthly payments; bankruptcy records; bills, including medical debts, that are in collection; and tax liens.
 
Credit reports may be purchased by employers through any number of companies that offer employment background checks (which also may include checks of criminal records or other public data) but the credit portion of the report is typically supplied by one of three large global corporations: Equifax, Experian, and Transunion, which are also known as consumer reporting agencies (CRAs). Credit scores —another product used by lenders which consists of a single number calculated on the basis of information in a credit report—are not typically provided to employers.
 
Employment credit checks are legal under federal law. The Fair Credit Reporting Act (FCRA) permits employers to request credit reports on job applicants and existing employees.4
 
Under the statute, employers must first obtain written permission from the individual whose credit report they seek to review. Employers are also required to notify individuals before they take “adverse action” (in this case, failing to hire, promote or retain an employee) based in whole or in part on any informa- tion in the credit report.
 
The employer is required to offer a copy of the credit report and a written summary of the consumer’s rights along with this notification. After providing job applicants with a short period of time (typically three to five business days) to identify and begin disputing any errors in their credit report, employers may then take action based on the report and must once again notify the job applicant.

Read the entire FANTASTIC paper by Amy Traub here

 

Next Article:  Debt Collection Complaints Rise


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Wednesday, December 26, 2012

Debt Collection Complaints Rise

 WASHINGTON, Dec, 20(UPI) — The U.S. Federal Trade Commission said complaints about aggressive debt collectors had jumped 73 percent since 2008, a symptom of a sluggish economy.

“We’ve seen a high level of complaints, and I think some of it is collectors realizing in hard times they may have to press that much harder to get someone to pay,” the agency’s chief debt collection lawyer Tom Pahl said.

“And a lot of them are pressing,” he said.

The agency handled 180,928 complaints about debt collection agencies in 2011, making it the No. 1 industry it terms of complaints filed, the Los Angeles Times reported Monday.

Roughly half of the complaints concern abusive phone calls. But complaints also involve legal tactics undertaken by debt collectors.

 Many of those complains involve debt collection agencies not checking facts on cases they pursue.
“These folks are very aggressive,” said California state Sen. Jose Luis Correa, D-Santa Ana, who found his wages garnisheed over a debt of $4,329 allegedly owed to Sears.

Correa contends that the debt collection agency had targeted the wrong man. Furthermore, he says he was never served court papers concerning any lawsuit filed against him. The court, however, ruled in favor of the debt collection company out of default, which it is allowed to do if a defendant does not show up for the trial.

“I always pay my bills on time. Then to have somebody garnish my wages, I thought was pretty astounding,” said Correa, who had the garnishment stopped and also found the debt belonged to a different Luis Correa.

In another incident, Katie Brown of Piqua, Ohio, got a phone call from a man who said he was from a legal aid service she had called to get help regarding harassing phone calls.

But after freely divulging personal information, the man said, “‘Now let me tell you who I am,’” she said. He then revealed that he was the debt collector holding her debt.

She is suing the International Asset Group Inc. of Amherst, N.Y., accusing them of false representation and debt collection harassment.


CRA's take on this: GOOD! If collection agencies violate the Fair Debt Collection Practices Act, then they deserve to get sued! In my opinion, debt collectors are no different from evil telemarketers. They are all on big commission pay plans and whose only goal is to extract money from the people that they are collecting from.

They will get judgements on people without "irrefutable" proof that the debt actually belongs to them, not someone with the same name.They will put accounts in the "unpaid collections" column on peoples credit reports with absolutely no proof of the legitimacy of the debt.

CRA is a total credit improvement company - Not just a credit repair company.

If the collection account is on a credit report legitimately, then we need to deal with it. A client in our program will have access to negotiators with years of experience in settling debts. Many times a debt is settled after obtaining leverage over the collection agency by their repeated violations of the FDCPA.

We also have access to a legal team who is paid when they win a case - not by the client.

If collection agencies are calling and leaving voice mail messages, than those messages might contain FDCPA violations. Sometimes, this is all we need to burn a DVD of the offending voice mail message and sue them.

Remember, there is never a charge for a consultation with a credit expert. Call us today! 800-648-5157 


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Good Article: The Credit Score That You See is NOT the Same as Lenders See

Sunday, October 21, 2012

Fair Credit Lawsuits WAY up in 2012. Why?

Headline and news outline by credit master and expert witness: John Ulzheimer

2012 continues to be a busy year for FCRA lawsuits, FCRA lawyers and FCRA expert witnesses says Ulzheimer.

According to WebRecon, a Michigan based Litigant Data tracking bureau, FCRA lawsuits are up 15% year to date in 2012 over the same time period (January through September) in 2011.

And while the pace of lawsuits has slowed considerably (at one time they were up over 90% year to date compared to 2011) 2012 is still shaping up to meet or exceed 2011′s record numbers.

Often these types of lawsuits involved a consumer plaintiff suing a credit industry player such as a bank, credit reporting agency (or some other form of consumer reporting agency), or a collection agency. The allegations can rage from reasonable procedures to permissible purpose violations (improper access) to re-investigation issues.

  • A big part of how ethical credit repair works, is demanding that our clients rights under federal laws are not violated. Collection agencies have no problem threatening to sue our clients for the money that they are trying to collect, so basically we demand for our clients that the collection agencies: 
1. irrefutably prove that the debt they are trying to collect belongs to the client. 
2. that they have proof of ownership or the proper legal assignment of the right to collect the debt. 

If the collection agencies just send a duplicate statement of what they had sent previously, or a "screen shot" from their computer showing that anyone can type information into their database, they did not comply with what the client requested by exercising their rights provided by the FDCPA. Refusal to comply gives the client the right to sue for damages.

If the credit bureaus and original creditors refuse to comply with the clients rights under the FCRA, it is the exact same result. If any entity violates our clients rights under federal law - they deserve to get litigated against.

At Credit Restoration Associates, we build the paper trail for our legal team for both FCRA and FDCPA violation lawsuits. 

Our legal team is available when the "hammer" needs to be pulled out to demand enforcement of the clients rights. We even have access to an expert witness with over 100 cases under his belt with victories in: credit report damage, credit score damage and credit reputation damages.

Call us today for an absolutely free credit consultation and credit report review and see if we might be able to help your situation: Toll Free: 800-648-5157.

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Sunday, October 7, 2012

The Credit Score That You See - NOT The Same As Lenders See

The credit score you receive may be much higher or lower than the one a lender uses when deciding whether to give you a mortgage, credit card or auto loan, a new government report finds.

One out of five consumers is likely to receive a score that is "meaningfully" different from the score used by a lender to make a credit decision, according to study from the Consumer Financial Protection Bureau that analyzed 200,000 credit files from the three major credit bureaus, TransUnion, Equifax and Experian.

As a result, many of these consumers receive either better or worse terms on mortgages, credit cards, auto loans and other credit products.

"This study highlights the complexities consumers face in the credit scoring market," said CFPB Director Richard Cordray in a statement. "When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision."

The credit score a lender sees often depends on the type of loan or credit product they are considering. Lenders that use FICO scores the most commonly used score, could be looking at one of 49 different scores to determine how risky you are -- including a FICO auto score, a FICO bankcard score and a FICO mortgage score.


YOU HAVE  49 FICO SCORES 


While you receive only one type of FICO score, lenders can choose from a variety of scores based on the kind of loan you're applying for. So if you want an auto loan, the lender can look up your FICO auto score. Apply for a credit card and there's a specific FICO bankcard score lenders can use.

There's also a FICO mortgage score, an installment loan score and a personal finance score that specifically focuses on your history of using financing companies -- for example, if you've signed up for store-branded credit cards. Then there's the generic FICO score, which is the most widely used score and is calculated based on your history with all forms of credit.

Even though newer versions of FICO's scoring software are being used, many credit reporting agencies continue to make older versions of the software available to lenders -- adding to the overall number of FICO scores for each consumer.

"The lender is going to choose the [scoring] model they think is most appropriate for what the consumer is applying for," said John Ulzheimer. "FICO is trying to further differentiate the risk of doing business with a consumer generically versus for a specific product. For example, I care how you pay your auto loans for any decision, but I really care about how you paid your auto loan if you're applying for an auto loan."

These scores are for lenders' eyes only, said Ulzheimer. When you request your FICO score, you receive the generic version. And the score you get may be about 15 or 20 points higher or lower than the score the lender is using to screen you, said Ulzheimer.


The discrepancy between the scores lenders and consumers receive was the subject of a report issued last year by the Consumer Financial Protection Bureau that showed that scores may differ for a variety of reasons, including the use of different scoring models by credit reporting agencies and that lenders and consumers don't always get scores from the same reporting agency.

To more closely compare the scores lenders and consumers receive, the CFPB said it would obtain data about credit scoring from FICO and from each of the three credit bureaus.

Rod Griffin, director of public education at Experian, said Experian provides different FICO scores to lenders depending on the kind of risk they are trying to assess. And he said consumers don't need to see every single score, because they are all based on the same information contained in a credit report -- some scores just weigh certain types of lending information differently.

So just because a consumer is seeing a different score doesn't mean that a lender is looking at different information. 

"There's a tremendous focus on these numbers, but what's really important is the credit report -- your credit report is what's used to calculate all of those scores, and you control what's on your credit report," said Griffin.


And though consumers are being kept in the dark about many of the scores lenders are using to evaluate them, in most cases that 15- to 20-point difference in the score is not going to hold much sway when it comes to being approved or denied for credit, said Ulzheimer.

"If someone is a high risk, they're going to be a high risk for any product, and if you have a great [generic] score, you're going to have a great score for any product," he said.

Aside from FICO scores, which are the most commonly-used scores, there are a plethora of other credit scores out there -- like proprietary scores developed by the credit bureaus and scores you can get from private companies like Quizzle.com, CreditSesame.com or CreditKarma.com.

"The grand total number of credit scores is truly countless -- so while 49 FICO scores seems like a large number, it's really a drop in the bucket," said Ulzheimer. "The good news is that proper credit management transcends all credit risk scores. If you do the right things, you'll have a good score across the board.


NEXT POST: "What Happens To My FICO Score While I Have Items In Dispute?"


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