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Credit Report Nuts and Bolts, Part 5 of 6: Credit repair scams and overreacting to threats about damaging your credit rating

The National Consumer Law Center warns heartily against “credit repair” scams.

The NCLC debunks the “credit repair” claims:

– “We can erase bad credit” – The truth is that no one can erase bad credit information from your report if it is truthful and accurate.

– “Only we can remove old or inaccurate information” – this is untrue because you can correct any old or inaccurate information yourself. There is no reason to pay a huckster to do it for you.

-“We will erase even accurate poor credit history information, even if it is accurate” – Lying to a credit report agency is illegal.

If you have been hoodwinked into a “credit repair” scam, here is a few things you should know.

First, you may have some protections. Federal laws and some state laws require credit repair companies to provide mandatory disclosures before you sign up.

Second, the credit repair company is not allowed to provide any services to you until three days after you sign a written and dated contract.

Third, the credit repair scam is not allowed to charge you in advance under certain laws.

Fourth, you have a right to cancel the credit repair scam contract without giving any reason (do it in writing!) within three days of signing the written contract.

A collection agency pressuring you to pay under threat of making a negative credit report entry is a hollow threat. Under arrangements that the collection agency likely has with the credit reporting agency (or agencies) they are required to make a report every month anyway. So do not give away your last dollar to a threatening collection agency in order to “save” your credit report from “damage”. The negative credit history is likely to be reported to the credit reporting company anyway under the reciprocity requirements between the credit report company and the collection agency.

Credit Report Nuts and Bolts: Part 4 of 6 – Credit Scoring myths and legends.

[categories: Washington Bankruptcy Attorney]

There is not just one credit score for you. Each credit bureau may have its own "credit score" calculated in an alternative manner. Thus, your "credit score" can vary over a considerable range from Equifax, Transunion or Experian. According to Fair Isaac Corporation (calculators of the FICO credit score) here is how Fair Isaac calculates your FICO score:

35% according to your payment history;

30% amounts owed on credit accounts compared to available credit – high balances relative to credit limits may indicate that you are over-extended

15% length of credit history

10% new credit – you supposedly receive a higher score if you have an established credit history and don’t have too many new accounts – opening several accounts in a short period of time can indicate greater risk

10% types of credit – Fair Isaac claims that it more favorably scores a mix of various types of credit

Shopping around for Credit – You may also have heard that a large number of credit inquiries will lower your credit score. This is not always true. Some companies and credit bureaus take inquiries into account and some do not. However, even those companies that do count a large number of inquiries against you claim taht this will have only a small impact on your score. Thus, it would seem that you should not be afraid to shop around for the best credit – if your only concern is lowering your credit score. Of course, moderation would seem to be the best recommendation here.

Getting your score – Under federal law, the credit bureaus are required to provide consumers with their credit scores upon request. The credit score IS NOT FREE, but the charge for the score will be set by the Federal Trade Commission. Mortgage lenders are also required to give you information about your credit score for free. You might check the Federal Trade Commission for the maximum allowable charge for your credit score before contacting the credit bureau(s) so that you go in prepared ahead of time.

NOTE: FACTORS FOR DENIAL OF CREDIT RULE

See Equal Credit Opportunity Act – Regulation B – Supplement I
(Official Staff Interpretations)

Sec. 202.9 Notifications

1. Use of the term adverse action. The regulation does not require that a creditor use the term adverse action in communicating to an applicant that a request for an extension of credit has not been approved. In notifying an applicant of adverse action as defined by § 202.2(c)(1), a creditor may use any words or phrases that describe the action taken on the application.

9(b) Form of ECOA notice and statement of specific reasons.
Paragraph 9(b)(1)
1. Substantially similar notice. The ECOA notice sent with a notification of a credit denial or other adverse action will comply with the regulation if it is “substantially similar” to the notice contained in § 202.9(b)(1). For example, a creditor may add a reference to the fact that the ECOA permits age to be considered in certain credit scoring systems, or add a reference to a similar state statute or regulation and to a state enforcement agency.

Paragraph 9(b)(2)
1. Number of specific reasons. A creditor must disclose the principal reasons for denying an application or taking other adverse action. The regulation does not mandate that a specific number of reasons be disclosed, but disclosure of more than four reasons is not likely to be helpful to the applicant.

2. Source of specific reasons. The specific reasons disclosed under §§ 202.9(a)(2) and (b)(2) must relate to and accurately describe the factors actually considered or scored by a creditor.

3. Description of reasons. A creditor need not describe how or why a factor adversely affected an applicant. For example, the notice may say “length of residence” rather than “too short a period of residence.”

4. Credit scoring system. If a creditor bases the denial or other adverse action on a credit scoring system, the reasons disclosed must relate only to those factors actually scored in the system. Moreover, no factor that was a principal reason for adverse action may be excluded from disclosure. The creditor must disclose the actual reasons for denial (for example, “age of automobile”) even if the relationship of that factor to predicting creditworthiness may not be clear to the applicant.

5. Credit scoring—method for selecting reasons. The regulation does not require that any one method be used for selecting reasons for a credit denial or other adverse action that is based on a credit scoring system. Various methods will meet the requirements of the regulation. One method is to identify the factors for which the applicant’s score fell furthest below the average score for each of those factors achieved by applicants whose total score was at or slightly above the minimum passing score. Another method is to identify the factors for which the applicant’s score fell furthest below the average score for each of those factors achieved by all applicants. These average scores could be calculated during the development or use of the system. Any other method that produces results substantially similar to either of these methods is also acceptable under the regulation.

6. Judgmental system. If a creditor uses a judgmental system, the reasons for the denial or other adverse action must relate to those factors in the applicant’s record actually reviewed by the person making the decision.

7. Combined credit scoring and judgmental system. If a creditor denies an application based on a credit evaluation system that employs both credit scoring and judgmental components, the reasons for the denial must come from the component of the system that the applicant failed. For example, if a creditor initially credit scores an application and denies the credit request as a result of that scoring, the reasons disclosed to the applicant must relate to the factors scored in the system. If the application passes the credit scoring stage but the creditor then denies the credit request based on a judgmental assessment of the applicant’s record, the reasons disclosed must relate to the factors reviewed judgmentally, even if the factors were also considered in the credit scoring component. If the application is not approved or denied as a result of the credit scoring, but falls into a gray band, and the creditor performs a judgmental assessment and denies the credit after that assessment, the reasons disclosed must come from both components of the system. The same result applies where a judgmental assessment is the first component of the combined system. As provided in comment 9(b)(2)-1, disclosure of more than a combined total of four reasons is not likely to be helpful to the applicant.

8. Automatic denial. Some credit decision methods contain features that call for automatic denial because of one or more negative factors in the applicant’s record (such as the applicant’s previous bad credit history with that creditor, the applicant’s declaration of bankruptcy, or the fact that the applicant is a minor). When a creditor denies the credit request because of an automatic-denial factor, the creditor must disclose that specific factor.

9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit. The Fair Credit Reporting Act (FCRA) requires a creditor to disclose when it has based its decision in whole or in part on information from a source other than the applicant or its own files. Disclosing that a credit report was obtained and used in the denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant’s credit history reveals delinquent credit obligations and the application is denied for that reason, to satisfy § 202.9(b)(2) the creditor must disclose that the application was denied because of the applicant’s delinquent credit obligations. To satisfy the FCRA requirement, the creditor must also disclose that a credit report was obtained and used in the denial of the application. Sample forms C-1 through C-5 of Appendix C of the regulation provide for the two disclosures.

http://www.bankersonline.com/regs/202/s202-9.html – source of Factors For Denial of Credit Rule – along with National Consumer Law Center’s "Guide to Surviving Debt", available for about $20.00 from www.consumerlaw.org.

Credit Report Nuts and Bolts Part 3 of 6 – Help! I already ordered my free credit report fewer than twelve months ago! What to do?

[categories: Washington Bankruptcy Attorney]

As you may know, you an obtain a free credit report every 12 months by contacting www.AnnualCreditReport.com.

This is because of the Fair and Accurate Credit Transaction Act (FACT Act).

Note that these free credit reports (and reports obtained directly for free from most credit bureaus like Equifax, Transunion and Experian will not contain your "credit score" – they try to get you to buy that from them as proprietary information. There is not just one credit score for you – the bureau may or may not use the FICO (Fair & Isaacs Company) organization’s calculation of your "credit score".

If you already obtained your credit report within the past 12 months here are four ways to proceed.

(1) First, you can just contact the three credit bureaus as follows and pay a $10.50 fee for each report from each creditor for the credit report:

Equifax, 800-685-111, www.equifax.com Equifax Information Services LLC
P.O. Box 740241
Atlanta, GA 30374

Experian 888-397-3742, www.experian.com Experian will not provide a written request credit report address. They insist that you call, as far as I can tell.

Trans Union 800-916-8800, www.transunion.com Purchase a TransUnion Credit Report

Online

Phone number: (800) 888-4213

Mail:
TransUnion
2 Baldwin Place
P.O. Box 1000
Chester, PA 19022

Obtain a free, annual TransUnion Credit Report

Online

Phone number: (800) 888-4213

Mail:Download mail order form

Note that you may be able to obtain a 3-in-1credit report from just one of the above – but be careful that you are not signing up for some sort of credit monitoring service or other consumer rip-off of dubious value – I noticed that Equifax was trying to sell you something called "debtwise" or "creditwise" or some other sort of nonsense. Last I checked, Experian had a $39.95 charge for obtaining all three agency credit reports AND your Experian calculated credit score. TransUnion had a similar sort of scam for trying to get you to sign up for an expensive subscription or some other sort of service.

Beware of Experian, though, they had a $1.00 offer for your credit score – but it was a "tricky Nixon" in that it signed you up for a $14.95 monthly subscription if you did not cancel within a very short period of time. Experian apparently has terminated some of its arrangements with FICO, in favor of trying to hawk its own credit scoring programs, as of February 1, 2009.

(2) Note that there are three "situational" exceptions and you can sometimes get two reports in a 12 month period, including:

-You are unemployed and will be aplying for a job within the next sixty days; or

-You are receiving public assistance; or

-You have reason to believe that the file at the credit bureau contains inaccurate inforamation due to fraud.

(3) You can obtain two reports in a two month period if you have made a fraud alert to the credit bureaus, and requested that a fraud alert be posted on your credit file.

(4) Denial of credit/insurance. Sometimes you can be denied credit or insurance — or initially be charged a higher premium — because of information in your credit report. In that case, the FCRA requires the creditor or insurance company to give you the name, address, and phone number of the credit reporting company that supplied the information. Contact the company to find out what your report said. This information is free if you ask for it within 60 days of being turned down for credit or insurance. The credit reporting company can tell you what’s in your report; only the creditor or insurance company can tell you why your application was denied. See the Federal Trade Commission’s website at: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm

Credit Reports Nuts & Bolts: Part 2 of 6 – How to avoid credit report “rip-offs”

[categories: Washington Bankruptcy Attorney]

The only true "free" credit reports are linked with www.annualcreditreport.com.

Beware of not-so-free credit reports says the National Consumer Law Center in their publication "Surviving Debt" available at www.consumerlaw.org, for about $20.00 – this is a great book, by the way and you should order it.

Some of these "free" credit report offers are not really free, but rather are introductory teasers that convert to an expensive subscription service. The new Credit CARD Act requires these businesses to now put a warning in their advertisments stating: "This is not the free credit report provided for by Federal law. To get your free report, visit www.AnnualCreditReport.com or call 877-322-8228.

Credit Reports Nuts and Bolts – Part 1 of 6 – Best way to ordering your report for free

[categories: Washington Bankruptcy Attorney]

Ordering your Credit Report – Tip-off: consider doing it in phone or by mail.

If you order by phone or mail, you will receive a paper credit report that is more information and is easier to read than the electronic version. I understand that if you order your credit report on-line, there may be a risk that you might waive your right to take the credit bureaus to court. (I am checking into this waiver – it is new info for me – so check into a later edition of this blog by using our Google Site-Search of our blog on www.washingtonbankruptcy.com to see if I have had a chance to follow up with an explanation).

You can get your free credit reprots from the centralized request service by:
(1) going to www.annualcreditreport.com;
(2) calling 877-322-8228; or
(3) completing the Annual Credit Report Request Form and mailing it to: Annnual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can download the form at www.ftc.gov/credit.

You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each credit bureau may ask you for some information that only you would know, like the amount of your monthly mortgage payment.

Source: National Consumer Law Center’s "Guide to Surviving Debt" pgs 39-41, Deanne Loonin, 2010 edition, Library of Congress Control #2010920702, ISBN 978-1-60248-065-0. www.consumerlaw.org

Trade imbalance: statistics in part misleadingly inaccurate – a study of the iPod and iPhone.

The Wall Street Journal (Andrew Batson) reported on Thursday, December 16, 2010 ("Marketplace" page B1) that the US does not receive trade credit for its high technology advancements when trade balances/imbalances with other countries are calculated.

Mr. Batson took the example of Apple Inc.’s iphone. The iphone added $1.9 billion to the U.S. trade deficit in 2009 because the traditional ways of measuring global trade fails to reflect the current realities and complexities of global commerce where the design, manufacturing and assembly of products often involve several countries. The current measurement standards result in distortion, according to Mr. Batson.

Of the I-Phone’s $178.96 estimated wholesale cost of the shipped phone which is shipped from China, the entire cost is of the phone is credited to China, even though the value of the work performed by Chinese workers is a mere $6.50 per phone and is limited almost exclusively to assembly only – with other parts of the phone components manufactured elsewhere e.g. 34% from Japan, 17% Germany, 13% South Korea 6% United States, 27% other countries. Only 3.6% should be attributed to China under a "value added" approach, instead of attributing the shipping country, China, with the entire $178.96 wholesale cost.

The Chinese have been quick to pick up and leverage upon this alleged mis-calculation to Chinese detriment. Mr. Batson reports as follows:

"…research also found that Chinese labor accounted for only a few dollars of the iPod’s value, even though trade statistics credited China with producing its full value. In a speech in September in New York, Chinese Premier Wen Jiabao cited that research to argue that trade tensions between the US and China are overblown."

Wall Street Journal, Thursday, December 16, 2010.