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How Tax Liens Affect Your Credit Score

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 24 Apr 2012 17:10:00 PDT

Tax day 2012 has come and gone. If you’ve already gotten your tax refund, then congratulations! And if you had to write a check, hopefully it wasn’t too painful. For those of you who blew off your taxes or decided to play games with your returns, I’d like to introduce you to the phrase: tax lien.

A tax lien protects the government’s (either state or Federal) right to claim your property if you don’t pay your tax obligations. A lien can be attached to your money or your property. When the IRS or your state’s tax authority files a lien against you they do so as a public record. This means anyone, including credit bureaus, can see the lien.

All three of the major credit reporting agencies (Equifax, Experian, and TransUnion) report tax liens on their consumer credit reports as a matter of common practice. Once a lien has found its way to your credit reports, it’s not easily removed. In fact, tax liens have the potential to remain on your credit reports indefinitely. That’s because the “seven year rule" that applies to most negative credit items does not apply to tax liens.

A tax lien is considered a serious derogatory item and can lower your FICO scores significantly. And even when the lien has been paid or settled, it still has a serious negative impact to your credit scores.

The reason…the incident of the lien occurring is what’s problematic, not the current balance.
If you do end up with a tax lien on your credit reports then you can address them one of several ways;

Settle it

This is often referred to as an offer in compromise. This is just like a settlement of your defaulted credit card debt. You make an offer to the IRS and if they deem it to be of a reasonable amount, they’ll likely accept it. Once they accept the offer in compromise they will file a release of your lien. This does not result in the lien being removed from your credit reports. It simply updates it to show as a “released” lien. At this point you can add seven years to the release date and that’s when the lien will be removed from your credit reports.

Pay it

If you don’t have any sort of financial hardship justifying the offer in compromise then the IRS is going to want you to pay your tax lien in full. Once it has been paid in full, they will file a release of lien. The above credit reporting scenario applies to these released liens.

Request a withdrawal

Last February the IRS announced a new set of policies and procedures designed to entice taxpayers to pay their liens in full rather than offer settlements. Here’s the deal, if you pay your lien IN FULL, or enter into an installment repayment program that will eventually lead to your lien being paid in full, you can petition the IRS to withdrawn your lien, rather than simply release it. You’d use IRS form 12277 to apply for the withdrawal.
If you are successful getting your lien withdrawn then it will come off of your credit reports immediately. This is because the credit reporting agencies do not report withdrawn tax liens. This option has caused confusion with taxpayers and has lead to the following questions;

Removing the lien from your credit report

The IRS didn’t put the lien on your credit reports in the first place. They just filed it as a public record, which is how the credit bureaus got it. The IRS won’t help you get the lien removed. Once the withdrawal has been approved and filed, contact the credit bureaus and let them know the lien has been withdrawn. They’ll confirm your dispute and then remove the lien.

Will this work for state tax liens?

This withdrawal policy is an Internal Revenue Service policy and does not apply to the various state tax authorities. And while I’m not versed on the tax policies of all 50 states, I have not seen an example of this working for a state tax lien.

Is the policy retroactive?

I’ve been asked if this new withdrawal option will work for liens that were filed and then paid in full before the IRS’s announced their new withdrawal policy last year. While I can’t get an answer from the IRS on that front, I have had numerous consumers contact me with examples of successfully getting old tax liens withdrawn and subsequently removed from their credit reports. So yes, it does appear the policy is retroactive at least according to the evidence I’ve seen.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.

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Can Your "Employment Credit Score" Hurt Your Chances At Getting A Job?

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 08 Mar 2012 18:53:00 PST

By Robert Linkonis Sr.

I’ve often defined and called out the "Myth of Credit score and Employment" as the Unicorn of the credit world—a lot of people have heard of this, but nobody has actually ever seen a case where a credit score caused an applicant to be denied employment on this factor alone ...

In trying to dispel this idea altogether, I have noted many cases - all exposed in this blog - but Suze Orman's recent campaign to promote her new Prepaid Debit Card – in which she eludes to the fact that not having a FICO score could cost consumers a job... Whaaaaaaaaaa ???

Suzi and I have never been friends, but -- what is she telling her prospective customers?

Here's the truth: Credit scores are never sold by credit reporting agencies for employment screening purposes.

Here's how you can be sure: The only three agencies authorized to distribute credit reports are – Equifax, Experian and Transunion. Because you can't get a credit score without first getting a report from those agencies, employers would have to go through those companies if they wanted your credit score.

And all three agencies all said the same thing. *** They do not sell credit scores to employers for screening purposes.

If affirmation from the national credit reporting agencies are not enough to convince you that credit scores ARE NOT used by employers, the Consumer Data Industry Association, the trade association of the credit reporting agencies, confirmed the same thing: There is NO credit score provided in a credit report pulled for employment screening.

Experian says that: "The employment credit report includes much of the information about your loans and credit cards that is listed in your credit report". BUT NOT YOUR CREDIT SCORE!!!

To pull your credit report and score, one must be a - "financial institution" and have a - "permissible purpose" to purchase a consumer credit report. AN EMPLOYER IS NOT A FINANCIAL INSTITUTION WITH PERMISSIBLE PURPOSE to pull a consumer credit report that includes your credit score.

Bottom line - a potential employer CAN pull your credit report and see all of your credit history - both positive and negative. They can use this information to make a decision on whether or not to hire you, but they can not see your credit score.

Please call anytime with all questions and ... Always feel free to "LIKE" Credit Restoration Associates on Facebook: http://www.facebook.com/Financed1

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Can Debt Collectors Contact You via Social Media?

noreply@blogger.com (Robert Linkonis Sr.) — Mon, 13 Feb 2012 18:08:00 PST

Fantastic strategies to preempt unwanted calls or other communication from collectors:

By Susan Johnston

The Fair Debt Collections Practices Act (FDCPA) was designed to protect consumers against abusive practices by the debt collections industry. But when FDCPA took effect in 1978, few people could have anticipated how Facebook and Twitter would infiltrate our daily lives. In recent years, a handful of lawsuits by consumers who were allegedly contacted by collectors through social media have brought the issue to light.

One strategy collections agencies use, according to Michelle Dunn, a 24-year veteran of the debt-collection industry and author of The Guide to Getting Paid, is to set up a fake profile and try to friend someone (however, a few states have laws against online impersonation). "If you look like a really good-looking girl, a lot of people would accept a friendship even if they don't really know the person," she explains.

Dunn says she discourages this practice in her webinars on social media and collections. "I just tell them to use common sense," she says. "Don't pretend you're someone you're not. There shouldn't be any interaction."

FDCPA doesn't explicitly forbid collectors from, say, posting on your Facebook wall or tweeting your relatives to ask about your whereabouts. But according to Craig Thor Kimmel, an Ambler, Penn.-based consumer attorney who handles collections issues, the act's intent is clear. "A debt collector that posts about your debt on social media would be violating this statute very clearly because that privacy is compromised," he says.

Despite this, collectors can use information found on a social network to contact you in other ways. "Right now, the normal pre-social media method would be to use the address off the loan documents and statements, but if the consumer is unwilling to respond to the contacts or is at a different location, they can certainly use social media as way of finding the consumer," says John Ulzheimer, president of Consumer Education at SmartCredit.com.

Experts suggest the following strategies to preempt unwanted calls or other communication from collectors:

1. Respond within 30 days of receiving a collections letter. For many people who receive a letter from a collections agency, the impulse is simply to bury their heads and ignore it. That's a mistake, according to Ulzheimer. "You can eliminate all communication," he says. "All you have to do is send them a letter within 30 days and tell them, 'Do not contact me anymore through any method.' They can still sue you for the debt, so the act of collecting doesn't necessarily stop, but they can't send you emails or call you anymore."

If you actually owe the debt, he suggests offering a settlement so that it doesn't continue to follow you. Third-party agencies who've purchased the debt "don't have the same skin in the game as the original creditor, so you could offer some sort of reasonable settlement and be done with it."

2. Use those privacy settings. Dunn said she's shocked by the number of consumers whose Facebook profiles are set to completely public. "Even though I'm not your friend, I can see all your pictures," she says. Setting your profile to private reduces the likelihood that a collector could be eying your wall or photos.

3. Be selective about what you post. Social networks like Facebook can create a false sense of intimacy because you're communicating with friends. Even with a private profile, your friends' accounts could still get hacked or someone could be peeking over their shoulder, so it's smart to err on the side of under-disclosing.

Dunn says collectors use social media profiles to "look for the address or employment information. A lot of people put what their occupation is, where they work, cell phone numbers." For instance, when someone gets a new cell phone number, they'll sometimes post it on Facebook so friends can reach them. "I have to say if I was somebody who owed money, I probably wouldn't put [my cell number] online and make it public information," adds Dunn.

Most people know not to post their Social Security or credit card numbers, but many list their birth date. "To me, that's comical," says Ulzheimer. "If someone walked up to you off the street and asked your birth date, would you give it on the street? But you're gladly doing it on Facebook."

4. Don't accept friend requests from strangers. For reasons described earlier, don't approve requests from people you don't know. It could be a friend of a friend, but it could also be a collector or a spammer.

5. Skip the "like" button. Liking your bank or credit card company on Facebook may open the door to them collecting information about you that you haven't given them. How many people actually like their bank? To the extent that you like your bank, that's fine, but I'm not sure that you have to memorialize that by clicking that you like it on Facebook.

If despite these steps, a collector contacts you via a social media site, Kimmel suggests printing out the message or saving a screenshot to your computer to create a paper trial. "Once you have that, report the sender as spam on Facebook and file a grievance with the Federal Trade Commission," he suggests. The consumer could be entitled to up to $1,000 plus attorney fees and actual damages "if a debt collector engages in unauthorized debt collection contact, through, for example, social media," says Kimmel, adding that a consumer attorney could help the person seek redress.

*** Always feel free to "LIKE" Credit Restoration Associates on Facebook: http://www.facebook.com/Financed1

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Reducing Debt in 2012

noreply@blogger.com (Robert Linkonis Sr.) — Sun, 08 Jan 2012 18:44:00 PST

Trimming the fat may be the most popular New Year’s resolution out there, but trimming your debt is not far behind for a lot of people.

“Getting out of debt is more strategic than simply writing a check to your creditors,” said John Ulzheimer , President of Consumer Education with SmartCredit.com and contributor at the National Foundation for Credit Counseling.

“You can save hundreds or thousands of dollars by prioritizing your debts,” he added. “You can also get the benefit of a higher credit score by being smart about what you pay first.”
Ulzheimer recommends these ground rules for those who are serious about reducing their debt in 2012:

REMEMBER THE BASICS
Make sure you make your minimum payments to ALL of your creditors… on time… each month. If you can pay more, you should. But skipping a payment or paying late is a big no-no.

RETAILER CARDS FIRST
Choose your retailer credit cards (i.e. Macy’s, Gap, Nordstrom, etc.) as the ones you pay off first. Be aggressive. On average, the interest rate on these cards is about 10-12-percentage points higher than general use credit cards like Visa, MasterCard, and Discover.
“You should be able to knock them out faster because the balances on these cards are generally lower than general use cards,” said Ulzheimer.
“And by paying off retail cards, you’ll also improve your credit score because you’ve lowered the number of cards with a balance and the infamous “debt utilization” percentage – both of which are very important in your FICO scores.”

SOCK LESS AWAY…FOR NOW
Ulzheimer said you may also want to stop contributing to your 401K and IRA until you’ve paid off your credit card debt. The amount you are earning in “gain” is probably not as much as you are paying in interest.
“That means you’re losing money each month you have credit card debt.” Said Ulzheimer.

INSTALLMENT DEBT VS. CREDIT CARD DEBT
Don’t put installment debt in front of credit card debt. Rates on cars, houses, student loans are much lower than those on plastic. And you are probably getting tax advantages on your mortgage and student loans.

KNOW WHEN TO SETTLE
If your debt is in default or being handled by a collection agency, then you need to offer what’s referred to as a “settlement.”

“I never advise this unless you’re dealing with collection agencies,” said Ulzheimer.
“They normally acquire the debt for pennies on the dollar so your former $1,000 debt isn’t really what you owe the collector, but that’s what they’re going to try to collect,” he explained. “Start your offer at 10% of what they say you owe and work with them until a satisfactory settlement has been reached.

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We Like NACA

noreply@blogger.com (Robert Linkonis Sr.) — Sat, 17 Dec 2011 10:15:00 PST

By: Robert W Linkonis Sr.

I tell all my clients all the time that I am the "Debt Collector Terrorist". This is because a large part of my credit improvement program is getting on the phone with collection agencies, banks, finance companies and debt collectors to make them violate the Fair Debt Collection Practices Act. This forces them to "cease debt collection activities" and work out a settlement or cancellation of the debt.

In the Richmond Times Dispatch last week, I heard about the NACA event coming to the Richmond Convention Center for four days. They were coming to Richmond to help homeowners who are in risk of losing their homes work with the banks to find a solution to help them to avoid foreclosure. I was intrigued with the concept. Especially because of how big the movement was and the size of the venue they were leasing. .

I immediately thought that this company could offer help to some of my clients at Credit Restoration Associates, so I started researching the company.

The first thing that got my attention was their CEO, Bruce Marks. He started the concept for NACA when he was a Union Activist. This evolved into his work as the Executive Director of the Union Neighborhood Assistance Corporation (UNAC) and was one of the first to expose predatory lending and it's devastating impact and the main reason we are in the housing mess to begin with.

What Bruce started doing was make the lives of bank executives a "living hell" unless they started helping the very consumers that they took advantage of. Yes - a percentage of those people should not have been given the loans, but due to predatory lending practices, they WERE given the loans. The banks made out like fat cats when the homeowner is stuck with no other option except foreclosure.

I read where Bruce Marks had been called an "urban terrorist" who went to a speech of the president of Fleet Bank, CEO Terrence Murray, at Harvard University, disrupted the speech and made this man's life miserable for four long years. Eventually, the bank caved and started modifying the loans and help the people stay in their homes.

Bruce's tactics sound like an extreme version of what I do to the debt collectors and collection agencies (the evil side of telemarketing). It actually inspired me to a large degree. Watch out debt collectors... so I had to go and see this event for myself. Here is a cell phone video clip of the event.

I wanted to meet Bruce Marks, but he was hosting the same event happening simultaneously in Charlotte, NC. Kindred souls will just have to meet another day.

The reason I wrote this post and am endorsing NACA is mainly because of the research done on the company and on Bruce Marks. Do some research yourself at: www. NACA.com.

Please feel free to call Credit Restoration Associates at (800) 648-5157 for all questions relating to NACA and home foreclosure. We will always guide you in the right direction. We are the only legal and bonded credit repair company in Richmond, so you know that we are the only legitimate company you will talk with. Our office is on southside in the Boulders Office Complex next to Chippenham Hospital. Call us today and schedule a FREE credit consultation!

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A Credit Score That Tracks You More Closely

noreply@blogger.com (Robert Linkonis Sr.) — Sun, 11 Dec 2011 07:38:00 PST

By: Tara Siegel Bernard
Anyone who has recently applied for a mortgage knows that lenders are already looking much more closely at your financial affairs. But soon, they’ll be able to easily delve into the deepest recesses of your financial life, accessing information that never before appeared on your credit report.

This week, a company called CoreLogic introduced a new type of credit file, which is based on the giant repository of consumer data it maintains on just about everything that most of the traditional credit bureaus do not: missed rental payments that have gone into collection, any evictions or child support judgments, as well as any applications for payday loans, along with your repayment history.
The new report also includes any property tax liens and whether you’ve fallen behind on your homeowner’s association dues. It may reflect that you now owe more than your house is worth or if you own any other real estate properties outright. It also is supposed to catch mortgages made by smaller lenders that the big credit bureaus may have missed.

The idea, CoreLogic says, is to provide lenders with more details about prospective borrowers, supplementing what they already know through the more traditional credit reports furnished by the big three credit bureaus, Equifax, Experian and TransUnion. Moreover, CoreLogic has formed a partnership with FICO — the provider of one of the most popular credit scores used by lenders — which will formulate a new consumer score based on the new data.

Perhaps it’s not surprising that a company decided to pull together this information, since much of it is already publicly available. But because it comes on top of all the other information that’s being collected about you — your exact location at every minute, where you’ve been on the Web — you can’t help but feel that some of these companies know more about your activities than your spouse.
While the CoreScore credit report became available to all types of lenders on Wednesday, the actual score, which will be ready in March, is being created specifically for mortgage and home equity lenders, though it could eventually be developed for other types of credit.

For many consumers, the files are likely to reveal black marks that previously went undetected, which may damage an otherwise clean record. But the companies contend that it works both ways: The added information could help consumers with thin credit files by illustrating positive behaviors elsewhere, say making timely rent payments.

So why now? Clearly, the two companies saw a business opportunity. Lenders, who just a few years back looked the other way, remain particularly skittish about mortgage lending and are looking for more information about prospective borrowers’ ability to pay their debts.

“Lending is very constrained and origination volumes need to grow to make for a profitable mortgage business,” said Joanne Gaskin, director of product management global scoring at FICO. “So lenders are looking for ways to expand, but to expand safely.”

An estimated 100 million American consumers will have a CoreScore credit report, while more than 200 million people have traditional reports from the big three bureaus. Though the new information can influence a lender’s decision, the new score isn’t replacing the classic scores used in the automated mortgage underwriting systems kept by Fannie Mae, Freddie Mac or the Federal Housing Administration, which buy or back the vast majority of mortgages (though CoreLogic said it has let the agencies know what it is doing). But the added information may sway a lender to charge you more (or less) in interest on a mortgage. Lenders of all stripes, including auto lenders, have access to the reports, and they will be marketed to employers and insurers, too.

Ms. Gaskin said that FICO was still tweaking the credit score’s formula. But the next step is to build something that will try to get even deeper inside your financial mind: The company plans to create a more sophisticated tool that will predict how you might behave under different loan terms.

Read the rest of the article HERE

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The Worthless Online Dispute System

noreply@blogger.com (Robert Linkonis Sr.) — Wed, 09 Nov 2011 08:15:00 PST

I do not recommend using the online dispute system that Equifax, Experian and Transunion offer because they are pretty much useless in regards to attaining true deletions of negative credit items.

The online dispute system, otherwise known as the "Expedited Dispute Resolution" is outlined in Section 611a(8) of the Fair Credit Reporting Act.

The key phrase to note is:

"the agency shall not be required to comply with paragraphs (2), (6), and (7) with respect to that dispute" if they delete the tradeline within 3 days."

• Paragraph 2 states that it is mandatory for the CRA to forward your dispute and all of the associated records you present to the creditor.

• Paragraph 6 states that the CRA must supply you with written proof and results of the dispute process.

• Paragraph 7 states that the CRA must supply you with the process of verification on demand from the person making the dispute.

The problem is that the law isn't detailed enough to say permanently delete or suppress the derogatory item.

The CRA can perform a "soft delete" for about a month and then the derogatory item can recur when the creditor reports it again in the subsequent 30 day cycle. This is because the CRA's aren't obliged to tell the creditor you disputed it at all!

This compounds their defense strategy of attrition and delay by allowing the consumer to think they are getting a permanent deletion, but it is only temporary solution. Since the creditor never knew it was removed, they will report it again and the CRA will put it right back on your report. Moreover, you have no proof the investigation or the supposed results ever took place that you would have received if the dispute was done by mail by a reputable credit repair company like Credit Restoration Associates.

See Below for the specific wording from the Fair Credit Reporting Act.

(8) Expedited dispute resolution. If a dispute regarding an item of information in a consumer's file at a consumer reporting agency is resolved in accordance with paragraph (5)(A) by the deletion of the disputed information by not later than 3 business days after the date on which the agency receives notice of the dispute from the consumer in accordance with paragraph (1)(A), then the agency shall not be required to comply with paragraphs (2), (6), and (7) with respect to that dispute if the agency

(A) provides prompt notice of the deletion to the consumer by telephone;

(B) includes in that notice, or in a written notice that accompanies a confirmation and consumer report provided in accordance with subparagraph (C), a statement of the consumer's right to request under subsection (d) that the agency furnish notifications under that subsection; and

(C) provides written confirmation of the deletion and a copy of a consumer report on the consumer that is based on the consumer's file after the deletion, not later than 5 business days after making the deletion.

(b) Statement of dispute. If the reinvestigation does not resolve the dispute, the consumer may file a brief statement setting forth the nature of the dispute. The consumer reporting agency may limit such statements to not more than one hundred words if it provides the consumer with assistance in writing a clear summary of the dispute.

(c) Notification of consumer dispute in subsequent consumer reports. Whenever a statement of a dispute is filed, unless there is reasonable grounds to believe that it is frivolous or irrelevant, the consumer reporting agency shall, in any subsequent report containing the information in question, clearly note that it is disputed by the consumer and provide either the consumer's statement or a clear and accurate codification or summary thereof.

(d) Notification of deletion of disputed information. Following any deletion of information which is found to be inaccurate or whose accuracy can no longer be verified or any notation as to disputed information, the consumer reporting agency shall, at the request of the consumer, furnish notification that the item has been deleted or the statement, codification or summary pursuant to subsection (b) or (c) of this section to any person specifically designated by the consumer who has within two years prior thereto received a consumer report for employment purposes, or within six months prior thereto received a consumer report for any other purpose, which contained the deleted or disputed information.

Call Credit Restoration Associates toll-free: 1(800) 648-5157 to have the professionals attain permanent deletion of inaccurate, obsolete or un-verifiable negative items from your credit reports.

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Girl Scouts Add New "Good Credit" And "Finance" Badges

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 20 Oct 2011 13:17:00 PDT

By Ben Popken on October 20, 2011 2:00 PM (Girl Scouts USA)

The Girl Scouts just finished their first redesign of their badges in 25 years, adding several new ones that will appeal to Consumerist readers.

There's now a "Good Credit," "Money Manager," "Budgeting," and a "Financing My Future" badge. But It's not just the consumer credit side that's getting represented, but also the other side of business. There's a new "Customer Loyalty" badge in the cookie sequence, as well as Meet My Customers and Business Plan badge.

For an Ambassador level scout in the 11th or 12th grade to earn the "Good Credit" badge, for instance, one of the tasks to accomplish is meeting a loan officer at a bank to discuss how one becomes a good candidate for a loan and what are the duties of a responsible borrower. After they've learned about credit reports and credit scores, the girls must make a pledge as to how they will use credit in their life.

A Girl Scouts USA spokesperson said that the badges add up to a program of financial literacy education that schools aren't providing.

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Six Ways to Beat Late Fees

noreply@blogger.com (Robert Linkonis Sr.) — Fri, 14 Oct 2011 10:18:00 PDT

By Naomi Mannino

Did you know late fees are assessed on just about all your monthly bills? These include bills related to your mortgage, cellphone, cable, utilities, insurances, credit cards, library books, traffic tickets and even kids' activities. And, of course, Uncle Sam assesses severe late fees and penalties if you're past due with your tax payment.

"Issuers claim they are a way to account for risk, but our research in the credit card industry shows that is not the case. They are trying to maximize revenue with late fees," says Josh Frank, senior researcher for the Center for Responsible Lending.

Financial experts agree that credit card late fees have been reined in somewhat by the Credit Card Act of 2009, which limited late fees to $25 for the first violation and $35 for subsequent violations. But these rules have substantial loopholes and do not apply to small-business credit cards or any other type of late fees, which can ring up at $39 each and more for past due payments -- on your mortgage, for example.

Late Fees Have Big Consequences

"While late fees (for many debts) are not reported to the credit bureaus, the late payments certainly are. That loads your credit report with delinquencies and can trigger a rate increase on your other cards for all future purchases," says John Ulzheimer, president of Consumer Education at SmartCredit.com. - Say you have one of those zero percent interest credit cards. Many of those have a clause that says one late payment will have the account default to an interest rate as high as 35%.

Another caveat:

"Credit card issuers can revoke your air miles, rebates and rewards for late payments. You may be able to reinstate them, but you'll be charged a reinstatement fee," says Frank.

Dave Ramsey, personal finance expert and radio talk show host, says, "When you pay your bills late and incur that extra charge, you're simply paying more and more every month. You're putting yourself deeper into debt and making it harder to pay in full on time next month."

Late Fees Are Not in Your Budget

The 2011 Financial Literacy Survey from the National Foundation for Credit Counseling found that more than half of adults don't keep a budget or track their expenses. In order to break the cycle of debt and late fees, Ramsey suggests you first figure out exactly where your money is going. "Make a written budget that gives each dollar a name -- including late fees," he says. You will be able to see just how much money you've been paying in late fees every month and what you can cut if you can pay each bill on time.

Says Ulzheimer: "You have to pay on time and be smart about taking on liability. If not, you are going to have a serious compounding problem unless you bring in more income or spend less."

Don't Make the Same Mistake Twice

Chronic procrastinators pay a higher price in the long run.

"The Fed approved a cap for late fees on credit cards, but the rule lets issuers charge a higher late fee of up to $35 if customers make more than one late payment," says Frank. "Credit card issuers can also change your annual percentage rate, or APR, to whatever they want on new charges and balances in the future. If you go 60 days late, they can change your APR on your total balance and you'll simply have to accept the consequences."

In addition, multiple late payments may prompt electric companies and cooperatives to demand additional substantial deposits and fees, without which they can disconnect your service.

Know the Rules, Grace Periods and Due Dates

Due dates for all your monthly expenses are clearly printed on your bills and statements, but they can change. Under the Credit Card Act, a credit card company must send you a notice 45 days before they can change fees, rates or other terms, but other bill issuers and monthly expenses are not bound by those rules. While the Credit Card Act extended the grace period to 21 full days (from 14 days), the grace periods for other companies and service providers vary. Knowing this information for each of your creditors can save you late fees.

"The consumer who is going to win against late fees is one who notes due dates on a calendar and works toward setting a shadow date to pay recurring bills a month early in advance," says Ulzheimer.

If you're desperate, making a phone payment, paying in person or paying online (note any lead times for posting) by the end of the grace period can help because the consequences of convenience fees (typically up to $15) are much less than the consequences of the late payment and late fees (typically $25-$39 and up).

Don't Be Afraid to Ask

If something unusual happens to you one month, it's a good idea to approach your creditor.

"If you happen to get in a bind and make one late payment for a good reason, ask your lender to give you a goodwill adjustment of your late fee. Obviously that doesn't work if you are habitually late," says Ulzheimer.

You can also avoid late fees by calling up before the due date to request an extension for many regular expenses such as the phone, electric and insurance payments.

If you find payment timing to be the problem, call to request a different monthly due date that better matches the timing of your paycheck to avoid late fees, says Frank.

Take Proactive Rather Than Reactive Steps

According to the 2011 Financial Literacy Survey from the NFCC, one in four adults admit to not paying all of their bills on time. "If you're paying late fees regularly but not defaulting, you are able to pay but are choosing not to pay on time and incur the late fee. The larger problem is fiscal irresponsibility," says Ulzheimer.

"If you're living paycheck to paycheck and paying late fees, you're a ticking time bomb. If an emergency happens or you get laid off, you will be tempted by pawn shops, car title and payday loans that are an extremely expensive start on your way to total default on all of your obligations."

If you find yourself juggling too many payments or too much debt, consider credit counseling or getting into a nonprofit debt management program.

"Go through the government-regulated National Foundation for Credit Counseling and stick to the program of paying back your debts and your monthly expenses on time with lower interest rates and no late fees," says Ulzheimer. "It takes hard work, commitment and typically three to five years to complete, but you'll get out with excellent credit and no debt."

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Navigating the Three Credit Score System

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 15 Sep 2011 09:25:00 PDT

From: Mint.com

Each of us has three credit reports housed by the three major credit reporting agencies; Experian, Equifax and TransUnion. And, for most of us those three credit files are scoreable.

Most lenders will make decisions using just one of our credit bureau risk scores.

That means when you apply for a credit card or an auto loan, the lender is going to buy one of your three credit reports and one of your three FICO scores (or, less frequently, one of your three VantageScores) to make their lending decision.

The only exception to the “one report for one loan” rule is in the mortgage environment. the mortgage lender will almost always pull all three of your credit reports, all three of your FICO scores, and then base their decision on your middle score.

How Widely Your Scores Can Range

Each of your credit scores is going to be different, primarily because the information in our credit files is never 100 percent identical.

Additionally, because of the common lending practice of only pulling one credit score, it’s almost a guarantee that lenders are going to see different numbers for us depending one which of our three credit reports they happen to purchase.

For example, my FICO scores vary by 24 points from my highest score to my lowest.

My highest score is based on my Equifax data and my lowest is based on my TransUnion data. This means if I applied for any loan outside of a mortgage and the lender pulled my TransUnion credit report they’d see my lowest FICO score. If that “lowest” score fell below the lender’s risk threshold, I could be denied the loan or approved but with less advantageous terms.

Read the rest of the article HERE

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Can I Transfer My Credit History From Another Country?

noreply@blogger.com (Robert Linkonis Sr.) — Fri, 12 Aug 2011 06:55:00 PDT

From: Smart Credit

Unfortunately you cannot transfer your credit information from one country to another. Not every country offers credit or has credit reporting companies. Some countries even have credit reporting companies owned by the government. The countries that have credit reports have different computer systems, currency, contributors and laws. The U.S, Canada and the U.K have the most sophisticated credit reporting systems. Here’s why transferring credit histories across boarders isn’t possible…

Computer Systems

The United States uses the Social Security Number as a unique identifier and other countries use other identifiers, such as name and address. Even though the three major credit reporting agencies, Equifax, Experian and TransUnion, have established credit bureaus in other countries, the systems aren’t compatible. Each county has different formats used for furnishing the credit data.

Currency

Each country has different currency except the European Union. The lenders contribute information to the credit bureaus in the currency of that country. If you still used your American Express, VISA or MasterCard in the country, your bills would not be in the same currency and would be subject to currency exchange fees. Point being, a $500 balance on an American Express card issued in the U.S is not the same as a $500 balance on a Visa card issued in the U.K.

Data Contributors

There are not many worldwide or “global” lenders. For the most part each country has their own unique banks, merchants, retailers, courts, etc. that would be contributing information. The exception would credit cards that are accepted worldwide. These companies report information based on the billing address. Inconsistency might be problematic for cross boarder credit reporting.

Laws

Some countries have laws that will not allow credit data leave the country. Each country has unique privacy and credit laws. For example, in the United States legislation is constantly changing regarding these laws; credit reporting agencies and lenders have to make changes to comply.

The Solution

You would have to establish credit in the country to which you are moving. A secured card may be a way to get started. A secured card is backed up with a savings account, which is used to set an equivalent credit limit. It would be best to consult with a banker to determine your options. If you plan to move back to your home country, you shouldn’t close your accounts. You want to still have a credit history when you return.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.

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Buyers Denied Loans will Get Free Credit Scores

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 21 Jul 2011 07:44:00 PDT

From: Bloomberg

U.S. consumers denied a credit card or auto loan will be entitled to free copies of their credit scores starting today.

The Dodd-Frank financial overhaul law passed last year expands credit-score disclosure rules and places the responsibility on financial companies to provide the numbers. It also forces lenders to give free scores to consumers who don’t get the best rates when borrowing, a practice known as risk- based lending.

“The purpose for the law was to provide consumers with greater access to and information about their credit scores,” Senator Mark Udall, the Colorado Democrat who proposed the provision, said in an e-mail. “By seeing the clearest picture possible of their personal finances, consumers can actively work to improve their scores,” Udall said in a statement earlier this month posted on his website.

The rule applies to financial-services companies that use scores to make loans. The most common scores are based on models established by Minneapolis-based FICO, formerly known as Fair Isaac Corp. (FICO), which are used to gauge a consumer’s financial health. The numbers, which range from 300 to 850, affect the ability to get mortgages, credit cards and insurance products, as well as the rates borrowers pay for them. Under current laws, all consumers are entitled to free annual credit reports, not their actual scores.

CFPB Report

“The law will affect credit-related transactions that occur tens of thousands of times every day,” said John Ulzheimer, president of consumer education at Costa Mesa, California-based SmartCredit.com, which offers consumers credit scores, monitoring and identity protection. It’s “something consumers have wanted and have not had the ability to execute for near 50 years now since credit scoring has been used.”

The rule also requires that a credit score be accompanied by the four main reasons why the number wasn’t higher, such as delinquent accounts, Ulzheimer said.

Get a Free Credit Score plus ongoing protection against credit fraud and identity theft with TrustedID

The Consumer Financial Protection Bureau, which begins formal operations today, is responsible for ensuring that lenders comply and give consumers who are denied credit or don’t get the best rates free scores. President Barack Obama nominated Richard Cordray earlier this week to head the bureau, which was created by the Dodd-Frank legislation. Jen Howard, a spokeswoman for the CFPB, declined to comment on the credit disclosure law and how it will be implemented and enforced.

Consumers may be unaware of the variety of credit scores available and may purchase a score thinking it’s their only “true” score, according to a report released July 19 by the CFPB. This could negatively impact them “if the credit scores the consumer buys give a substantially different impression of his or her credit risk than credit scores that a lender would use,” the report said.

Customer Notices

When Capital One Financial Corp. uses a credit score to determine an interest rate or decline an applicant, it will disclose the score in a notice to the consumer, said Pam Girardo, a spokeswoman for the McLean, Virginia-based bank.

Wells Fargo & Co. (WFC) said it had plenty of advance notice about the rule and was able to implement the necessary changes to provide scores, said Erin Downs, a spokeswoman for the San Francisco-based bank.

JPMorgan Chase & Co. (JPM), the second-largest U.S. bank by assets behind Bank of America Corp. (BAC), is “prepared to support new regulatory disclosure requirements,” said Steve O’Halloran, a spokesman for the New York-based bank.

American Express Co., the biggest credit-card issuer by purchases, will be disclosing credit scores and related information in notices when a score is used to decline an application for a credit or charge card, reduce the account limit or cancel the account, said Leah Gerstner, a spokeswoman for the New York-based company.

Custom Scores

Since 2004 mortgage lenders have had to provide credit scores to borrowers who are turned down, said SmartCredit.com’s Ulzheimer.

It’s unclear whether the rule also will apply to so-called custom credit scores used for non-lending, such as renting an apartment or purchasing insurance, according to Chi Chi Wu, an attorney at the National Consumer Law Center in Boston. Landlords and insurance providers may use custom scores derived from credit reports, which may not be covered by Udall’s provision.

Any lenders that use traditional FICO scores, such as student-loan companies or credit-card issuers, will have to supply scores to consumers, said Ulzheimer. The score is used by 90 of the 100 largest U.S. financial institutions, according to FICO’s website.

Wrong Assumption

A FICO score of 760 is considered an “elite credit score,” according to Ulzheimer, who said that any number at or above that figure would likely mean a borrower gets the best interest rate offer.

The average rate for borrowers with credit scores of 700 for a 5-year new car loan is 5.48 percent, yet those with scores of 700 or better can shop around and qualify for rates as low as 2.5 percent, said Greg McBride, senior financial analyst for Bankrate.com, the North Palm Beach, Florida-based website that tracks bank products.

Some consumers incorrectly expect that they’ll get their credit scores when obtaining their free annual credit reports at annualcreditreport.com, according to Liz Weston, author of “Your Credit Score.” Consumers can receive free copies from each of the nationwide credit bureaus, Equifax Inc., Experian Plc and TransUnion Corp., once every 12 months.

“People assume their credit scores are free because they get free annual access to their credit reports, and they don’t understand the difference between the two,” she said. A credit report contains information such as borrowers’ addresses, public records and payment history.

‘Right Step’

Consumers who aren’t entitled to free credit scores under the rule will have to pay $19.95 on myFICO.com for a FICO credit score and report.

Giving some consumers free credit scores is “a step in the right direction” toward transparency in consumer finance, said Udall, the Colorado senator.

“We already require that consumers be provided a free annual credit report,” he said. “I think we ought to go all the way and allow consumers to access their credit scores for free as well.

8 Secret Credit Scores (you might not have even heard about).

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New Credit Score Rules Pose New Complications

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 19 Jul 2011 09:04:00 PDT

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by: ANNAMARIA ANDRIOTIS from: SMARTMONEY

Starting this week, consumers who are denied credit or good terms entitled to see their credit scores!

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This week, consumers will finally be entitled to an explanation from lenders who offer them sky-high interest rates or deny them credit altogether. But critics say borrowers are still being left in the dark.

Part of the financial reform bill, the new rule kicks in on Thursday and says that any borrower who is denied credit or offered a higher-than-usual interest rate is entitled to see his credit score without even having to ask. The rule is supposed to wipe out much of the secrecy surrounding the lending process and give consumers the information they need to get a better deal in the future. And for the most part, this is the first time ever that consumers will have such access, says John Ulzheimer, president of consumer education at SmartCredit.com, a credit-monitoring site. Right now, consumers can't see their credit score for free except when they apply for a mortgage.

But critics say the rule has enough loopholes that the required information may leave consumers more confused than they are now. "We're concerned," says Chi Chi Wu, a staff attorney focused on consumer credit issues at the National Consumer Law Center. "What we would have liked to see is clear rules."

At its most basic, the information consumers receive could be confusing. Lenders are required to send applicants their scores if they are offered a rate that's higher than what the lender offers many of its customers, Ulzheimer says, but there's no way for consumers to know what the typical rate is. If a lender offers a high rate to everyone, an applicant isn't entitled to see his score.

And then there are several situations in which the rule gets bent. If a bank uses only its own scoring system with its own data to evaluate a borrower, it doesn't have to send that score to the consumer. If a bank uses its own scoring system in conjunction with a traditional credit score, the bank only needs to disclose the latter. The problem, experts say, is that if a bank is using a proprietary scoring system, a traditional credit score may not give consumers enough information about why they weren't given the best possible offer.

There are other industries that use credit scores to evaluate applicants but will mostly fall outside of the new rules. Car and home insurance companies routinely use an "insurance score," which takes into account an applicant's credit score and his insurance history those scores are exempt from the new rule. Utility companies also use their own scoring system, part of which includes a standard credit score, and they are likely to be exempt. But landlords may not be, if they use a consumer's credit score as a reason to deny them an apartment or to request a larger security deposit, says Ulzheimer.

For their part, the banks say that sharing their proprietary scores would be more confusing than helpful. Because banks' scoring systems are different, comparing among institutions is nearly impossible, says Nessa Feddis, senior counsel at the American Bankers Association. And the insurance industry says the credit score is only a small fraction of their evaluation process and that insurance scores are far more complicated than an applicant's credit history.

Despite the complications, consumer advocates do say having at least some idea of your credit score is better than none. "This is a learning opportunity," says Linda Sherry, director of national priorities at Consumer Action. "It will give people a practical example of how credit matters when they need to borrow money."

NEXT POST: Don't Worry, Employers Are NOT Going TO See Your Credit Scores !!!

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8 Secret Credit Scores (you might not have even heard about).

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Don't Worry - Employers Are NOT Going To See Your Credit Score

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 19 Jul 2011 08:16:00 PDT

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Finally!! An accurate piece about credit scores and employment by: Janet Aschkenasy

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Yes or No: Can banks look at your credit scores when making a decision on whether or not you would make a good employee in their organization?

If you thought "yes" you would be wrong.

“This is the number one myth with respect to credit scoring,” consumer education and credit expert John Ulzheimer, told eFinancialCareers.

“Employers in most states are able to look at credit reports as part of their pre-employment screening but they can’t see the credit scores.

Trouble is, many people confuse the terms credit "report" and credit "score" and believe they are the same thing. “It’s a prevalent myth because a lot of people use the terms interchangeably. Yet, all three credit bureaus have gone on record time and again saying that they do not provide credit scores on the credit reports sold to employment screening companies.”

So, what is the difference anyway? You might be surprised:

A credit report is basically a listing of your credit accounts and payment history, month by month. If you’ve been late with payments, it will show how late: 30 days or 60 days, for instance. If you’re being courted by collection agencies, that will be included. If you’ve filed for bankruptcy, or have bank judgments or liens against you, your credit report will show that as well.

Clean credit reports are easier.

The fact is, however, that many folks who’ve have just about tapped out their credit cards—and may have poor credit scores—will present clean-looking credit reports, so long as they’ve been getting their minimum payments in on time.

A consumer might conclude their credit report looks good or even great because of a lack of anything derogatory. “However if you've got too much credit card debt, too many inquiries, and a poor mix of different types of accounts,” that same person’s credit score could be average—or even worse.

Credit scores focus largely on your payment history and how much debt you’ve accrued.

And for scoring purposes, lenders like a borrower to diversify and have a portfolio of secured debt like home equity lines of credit and auto loans, together with unsecured forms of debt like credit cards, where there is nothing to show for the loan in question, and less incentive to pay it off. FICO scores range between 300 and 850, with under 620 considered risky. So, how come banks and other financial institutions that commonly dig into prospective employees’ credit reports can’t obtain credit scores, as well?

“Credit scores were never built to predict prospective employee quality. The tool is not designed to evaluate employees so all three credit agencies—Equifax, TransUnion and Experian—have chosen to not sell a credit score along with the credit reports they sell for employment screening,” says Ulzheimer, who has worked both at FICO and Equifax over the course of his career.

Prospective employers do make liberal use of credit reports, however, since federal law permits that. And employers are most apt to delve into prospective workers’ (or even current employees’) credit reports in an industry like banking or even human resources where employees have access to sensitive information.

“You are representing the company and the company is somewhat liable for your actions,” says Ultzheimer. “They have to be comfortable with you before they give you the keys to the kingdom.”

Since 2003, it’s been easy for consumers to access their credit reports once ever 12 months, and yet 96% of these reports go unclaimed, says the credit expert. The one legitimate source for free credit reports is annualcreditreport.com, says Ulzheimer.

Besides getting a peek at your report, what else can you do if you’re concerned about poor credit plaguing your employment search?

You might try debt counseling: “The National Foundation for Credit Counseling is probably the most recognized and legitimate of the credit counseling agencies, says Ulzheimer.

“It is truly non-profit, and for a fee of $25 to $50 a month they will work with creditors to facilitate a debt management programs for you that can forgive a portion of the interest and a portion of the fees you are paying.”

“That’s a lot less than some of these other vultures will charge you,” he adds.

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Credit Scores Will Be Easier for Consumers to get with New Rules from Federal Reserve, FTC www.Chicagotribune.com

noreply@blogger.com (Robert Linkonis Sr.) — Mon, 11 Jul 2011 18:33:00 PDT

Credit Scores Will Be Easier for Consumers to get with New Rules from Federal Reserve, FTC
www.chicagotribune.com

Consumers who are denied credit or whose existing loan terms become less favorable will soon be able to get free credit scores under new rules from the Federal Reserve Board and Federal Trade Commission.

Read the rest of the article here: http://www.chicagotribune.com/business/ct-biz-0708-credit-score-20110708,0,5422211.story

Next Post: The Medical Debt Responsibility Act May Aid Consumers.

Fantastic information. This is worth watching:

Medical Debt Responsibility Act May Aid Consumers: MyFoxATLANTA.com

Medical Collections Could Be Removed From Credit Reports!

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 28 Jun 2011 10:25:00 PDT

The Medical Debt Responsibility Act May Aid Consumers.

Fantastic information. This is worth watching:

Medical Debt Responsibility Act May Aid Consumers: MyFoxATLANTA.com

Free Credit Score at Credit Sesame

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 10 May 2011 16:05:00 PDT

I am posting this new beta site because I see value to Credit Restoration Associates clients here.

Check it out: Free Credit Score at Credit Sesame. It's the Experian National Equivalency Score - not the FICO score (which is what the mortgage lenders and automotive finance managers see), but it's still free.

There also seems to be a ton of useful tools here. The following are quotes from the Credit Sesame website:

"Thousands of Loans, Unbiased Advice"

We analyze thousands of loans from major banks, then evaluate them against your own personal financial situation. In minutes, we narrow them down to the three options that will save you the most money over time.

"Complete Analysis, For The Whole Picture"

We show you where you stand financially and keep track of the lay of the land. We analyze your loans, credit, mortgages, credit card debt – in minutes, and give you the facts: your free credit score, home value data, debt to income ratio and whether your debt is optimized. The more you know, the better financial decisions you can make. See your free credit score & financial stats

"Bank-Level Analytics Working For You"

We give you the same analytics that banks use to make lending decisions. These powerful tools track and evaluate your entire credit situation. Then our technology evaluates over 5,000 scenarios against loans from all major banks to give you advice that’s personal – and prequalified.

Identity theft protection: They claim that you are notified the instant your identity is compromised. ID Analytics?

Nice product but I'm still vetting it. My final take will be in a future post, but overall, I like this program.

Here's the link, let me know what you think: http://www.creditsesame.com

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Remodel Your Credit Before You Begin Renovating Your Home

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 19 Apr 2011 15:04:00 PDT

Improved resale value, more space or better use of the space you have, and a brand-new room to enjoy... It may be hard to imagine a downside to renovating a kitchen or bathroom. But you could discover a dark side to remodeling - deciding to finance the project by borrowing the money before checking your credit.

With the real estate market still limping along in many areas of the country, you may decide that it makes more sense to improve the home you have, rather than move into a new one. And you wouldn't be alone in thinking that way. Harvard's Joint Center for Housing Studies predicts Americans will spend nearly $141 billion on remodeling in the first half of 2011.

The economy may be driving the renovation trend another way, as well. Interest rates are low - for those who can qualify for them, with good credit.

So it makes sense to know what's on your credit report and what your credit score is before you make plans to renovate your kitchen, bath or any other room in the house.

If you plan to use credit to finance a renovation project (and few of us can afford to pay cash these days), be proactive and understand your credit with these simple steps:

1. Find out where you stand.

Although it's fairly easy to obtain a free credit report and score online, many Americans aren't confident about where they stand in terms of credit. Your first step toward making your renovation dreams a reality is to find out how potential lenders will perceive your credit worthiness.

Reviewing your credit score through Websites like Transunion's TrueCredit can help you get a clear picture of how potential creditors might perceive your use of credit. Membership in the site's credit monitoring membership can also help you keep on top of your credit by sending you e-mail alerts when something changes on your credit report.

* Take action - and keep at it.

If you find errors on your credit report, contact the major bureaus and dispute the errors. It's also a good idea to monitor your report regularly, throughout the year, as identity theft or instances of fraud could show up on it, alerting you quickly to a situation you otherwise might not have discovered for months.

Your credit score is a fluid number, and it can change throughout the year as you improve your payment records, miss or delay a payment, and open or close lines of credit. Many factors go into calculating your credit score, but generally bureaus take into account how reliably you pay bills on time, the total amount you owe in secured and unsecured debt, and how much unused credit you have available.

* Get an idea of the impact.

Knowing your credit score not only better empowers you to bargain for the optimum loan terms, it can also help you understand how that new renovation loan will affect your score and report.

Whether you're remodeling just one room in a house or the entire house, funding the project can affect your finances, including your credit score. If you make sure you understand - and have a handle on - your credit before undertaking a project, you'll be more likely to reap the rewards, and avoid the downside, of home renovation.

Reprinted by permission from the Richmond Times Dispatch - published print edition Sat April 16, 2011.

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8 Secret Scores That Lenders Keep Part 1

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 14 Apr 2011 13:01:00 PDT

By Liz Pulliam Weston from MSN Money

Lenders track every last detail of your spending habits, and then use the data to estimate not just how big a risk you are but how profitable a customer you might be.

Recently my husband and I received nearly identical balance-transfer offers from our respective Bank of America cards. The offers were identical, that is, except for the rates we'd be given. He was enticed with a 0% rate. Mine was 2.99%.

We live at the same address and share the same income. We both have high credit scores (although his are, annoyingly, a few points higher than mine).

So are these different offers evidence of rampant sexism on BofA's part? Hardly. The pitches were the result of complex and largely secret scoring systems that most financial institutions use to boost profits while limiting losses.

You've heard by now of credit scores, the three-digit numbers lenders use to gauge your creditworthiness. Credit scores predict how likely you are to default on a credit account or loan; they're used to help set interest rates and terms.

What you may not know is that credit scores are just the start of the way financial institutions evaluate you, and they're not even the most commonly used scores -- far from it.

While a credit card issuer might check your credit scores once a month as part of its regular account review process, the same company probably checks other kinds of scores every time you pull out your plastic.

"Every single transaction has some sort of score being generated," said credit scoring expert John Ulzheimer, president of Credit.com's education services and author of the book "You're Nothing But a Number." "Generally they're checking whether the transaction is likely to be fraudulent, but there are other reasons as well."

You're being judged by the type of transactions you make, how you pay your bills, how much profit you generate for your lenders and a host of other factors. The scoring formulas might be created by the credit bureaus, third parties or the lenders themselves. Banks and other financial institutions are tight-lipped about many of the details of these other scoring systems, but they're used to determine:

* The kind of credit card offers you get.

* Whether your credit limits are raised or suddenly lowered.

* Whether your over-limit credit or debit transactions are approved.

* Whether your card issuer calls you about a suspicious transaction, blocks it or shuts down your account.

* How cooperative your issuer is about waiving fees or lowering your interest rate.

* How quickly your issuer calls you if your payment is late.

* Whether a collection agency contacts you about an old debt and how hard it pushes.

Your credit scores are just the start.

Here are some of the ways you might be scored, roughly following the life cycle of a credit account. You're very familiar with credit-risk scores, but the other eight rarely see the light of day.

Credit-risk scores: These are the credit scores most of us know. The leading credit score, the FICO, was created by Fair Isaac and ranges from 300 to 850, with scores over 700 generally considered to be low risk.

Response score: This score predicts the likelihood a consumer will respond to an offer of credit, such as a new card or a balance transfer offer. Credit card issuers use response scores to decide whom to target and how to customize offers to appeal to particular consumers, said Chisoo Lyons, vice president for analytic research at Fair Isaac, which created the leading FICO credit score as well as many other scoring formulas.

Application score: This score scoops up data from your credit application that's not included in your credit scores, said Ulzheimer, who worked for Fair Isaac and for credit bureau Equifax before joining Credit.com. That data include how much you earn, how long you've lived at your current address and how long you've worked for your current employer. Application scores are typically used in combination with other scores, such as credit and bankruptcy scores, to determine whether to open the account, what rate to give and how much credit to extend.

Bankruptcy score: Credit scores typically predict the chance you'll miss a payment in the next two years. Bankruptcy scores predict the likelihood you'll throw in the towel on your debt entirely and file for Chapter 7 liquidation or a Chapter 13 repayment plan, said David Rubinger, spokesman for credit bureau Equifax, which produces the leading Bankruptcy Navigator Index or BNI. BNIs range from 1 to 300, with the higher the score, the lower the predicted risk. Most lenders use both credit scores and bankruptcy scores, Ulzheimer said, to help assess the risk that you won't pay.

Revenue score: Lenders want to maximize the profitability of each account, and one way they do that is to gauge how much money each account is likely to generate.

Continue to 8 Secret Scores That Lenders Keep Part 2

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8 Secret Scores That Lenders Keep Part 2

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 14 Apr 2011 13:00:00 PDT

Attrition-risk score: Attrition risk refers to the likelihood a user will stop using a card, and attrition-risk scores are typically used in combination with other scores to determine what to do next if you look ready to bolt. If your account generates a lot of revenue and is deemed at low risk for default or bankruptcy, for example, the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate and pelting you with convenience checks. If your account isn't that profitable or is deemed risky, on the other hand, the issuer might just let you go.

Behavior score: Credit scores provide a snapshot of how a consumer is handling all of his or her credit accounts. Behavior scores, by contrast, typically focus on a single account (the one you have with that particular creditor) but take in a broad view. Does the user pay off her bills every month, carry a balance occasionally or frequently pay only the minimums on her cards? That information typically isn't available on a credit report, but is contained in the issuer's databases, along with other data that helps the score describe how she handles her account. A behavior score might be used in conjunction with other scores, such as credit or bankruptcy scores, to decide whether an overdue payment is an aberration (maybe he's traveling?) or a sign of impending financial crisis (maybe we should call the consumer today and find out what's going on).

Transaction score: These are the scores run each time you use your plastic to determine whether the transaction should be approved. Issuers are typically looking for signs the transaction might be fraudulent, but transaction data can be used in other ways as well (more on that in a minute).

Collection score: You've failed to pay for long enough that your card has been turned over to a collection agency. These agencies use collection scores to assess the likelihood that you'll be able to pay them and sort their list of debtors accordingly. Collection agencies watch for all kinds of evidence that your financial situation may be improving, Ulzheimer said, from better credit scores to another collector's account suddenly being reset to 0, indicating it's been paid off.

If, on the other hand, your credit is in the dumps or the amount involved is small, the collection agency may make minimal effort.

"Why spend time and effort to track you down if you're not likely to pay?" Ulzheimer said. "Probably the most cost-effective (tactic) is to write you a letter, put it on your credit report and wait for you to call them."

Waiting, watching, hoping...

As several of the previous examples show, lenders and others often combine different types of scores to assess you. Sometimes the evaluations become pretty sophisticated.

One scoring model sold to lenders, the TRIAD Transaction Score created by Fair Isaac, takes into account credit risk, attrition, potential revenue and patterns in the user's charging behavior that might indicate higher or lower risk.

Let's say you typically spent $1,000 a month on your credit card, usually on toys, clothes and eating out at family restaurants. Then one month your spending changes -- you still spend $1,000, but now it's to get cash advances, buy groceries and gamble at the local racetrack.

The scoring formula may decide you've gone from Stable Family Guy to Desperate Unemployed Guy and flag the issuer that you've become a higher-risk customer.

Instead of a single three-digit number, TRIAD generates three numbers. Typically the scores will include a credit-risk score and an attrition score, both somewhere on a scale of 50 to 999 with higher numbers being riskier, plus a dollar figure to indicate the account's potential revenue generation.

If the issuer decides the risk of your default outweighs the profits you generate, it might reduce your credit limit. If you're a profitable customer, on the other hand, the card issuer might wait awhile to see if your situation improves.

Yes, it is rocket science...

How issuers decide what to do with the scores depends on their companies' policies, and even those are often changing targets. Credit card issuers constantly tweak their systems to maximize profits and minimize losses.

"Those guys at NASA have nothing on the Ph.D.s who work for credit card companies," Ulzheimer said. "They're Mensa-level smart, and they are very, very sophisticated in the ways they use credit data."

Which is not to say issuers, or the scoring systems they use, never make mistakes. Case in point: an issuer sending two different offers to the same household, as they did to ours. Most issuers use software to make sure that doesn't happen, Ulzheimer said; they don't want us comparing notes. (Bank of America didn't return my calls about the issue.)

In fact, financial institutions in general aren't eager to reveal how they make the decisions they do -- and that's not likely to change soon. While you have a federal right to see your credit scores, that's not true with other scores, which lenders often consider proprietary information.

Is that a crisis for consumers? I have mixed feelings about that. You clearly need to see your credit scores, since they influence so much of your financial life across the board. But given how many of these other scores are in use, how different they are and how many ways they're applied, I'm not sure I really want to see them all.

Back to 8 Secret Scores That Lenders Keep Part 1

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Experian Tool Adds Rental Info to Some Credit Reports

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 01 Mar 2011 08:17:00 PST

By Martha C. White - RSS Feed

Credit-reporting bureau Experian has begun adding rental payment histories to Americans' credit reports, following the company's acquisition of RentBureau last June.

For people with what are referred to as "thin" credit files, such as students, new college grads or recent immigrants, this is an important tool to help them build a credit history without the expense of an installment loan or the temptation of a credit card.

"The biggest effect of the data is on individuals who have 'thin' credit files," says an Experian spokesperson "What's more, during this year, they'll only be reporting positive payment information. Starting next year, however, if you don't pay your rent on time, you could find it tougher to land an apartment in the future, because negative activities will be recorded as well.

As of last month, rental information is incorporated into a person's VantageScore credit score; industry analysts say it's likely that details about rent-paying could be incorporated more broadly into credit reporting in the future.

With the addition of the RentBureau data, more than 45% of the individuals who either couldn't have a score calculated, or were in the 'F' category, are now moved up by at least one score bucket.

Given the new income restrictions and limitations on young people obtaining credit cards, this shift has the potential to be hugely beneficial to a population that would otherwise have to pay more for the privilege of obtaining credit.

If you rent, don't assume that Experian has your information; right now, only about 8 million renters' data is in RentBureau's files, which represents only a small slice of the estimated 96 million renters in the country. The rental details are considered for purposes of the scoring model to be an installment loan like a car payment because they have a fixed payment obligation each month.

One final note: If you've never rented, your score won't be negatively impacted. Although the credit scoring model faults people for not having both installment (such as a car loan) and revolving credit, it won't take you down a notch if you weren't a renter.

Link to original article: http://www.walletpop.com/2011/02/26/experian-tool-adds-rental-info-to-some-credit-reports/

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Rewriting the Rules of Credit

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 17 Feb 2011 14:53:00 PST

In his new book, A Call for Judgment: Sensible Finance for a Dynamic Economy, economist and Tufts University professor Amar Bhidé laments a banking system that bases decisions on complex algorithms rather than good old-fashioned loan reviews, a practice that has greatly choked off financing to small business.

Auto Finance Insider interview excerpts:

Lending used to be a subjective matter. Why did we wind up with a system of stringent rules?

First, there was an ethos that developed in academia that said that all risks can be quantified. What economists did was say the stuff that we cannot quantify is really on the margin. And what's essential to risk, we can pretend to reduce to one or two numbers. Once you do that, then you can create a machine. If you're required to think of risk in a broad, holistic kind of way, it's much more time-consuming.

Implicitly and explicitly, the government embraced this view of risk. Almost unwittingly, [Fannie Mae and Freddie Mac] created the largest mechanistic model of lending in the world simply by saying we will underwrite the risk of mortgages if they meet XYZ criteria. If you followed the model for a loan, the government would take it.

The interesting part is that not all lending can be equally mechanized and scaled up. And therein lies the rub. It means that if I'm a bank, and I want to expand, I'm going to favor the activity where I can put pedal to metal fastest.

And small-business lending does not fit into that mold.

Correct. It was and remains an activity that requires a banker to go and talk to the borrower. Analysts can pretend that all housing loans are the same, but with small business, the pretending completely defies belief. So small business gets the short end of the stick.

What about the bank bailout? Why did so little money reach small businesses?

The way to get more credit into the hands of the small-business owners has been long impaired, and for the money to reach the people who need it, you need more channels. Small-business lending requires a mechanism that frankly will take a long time to rebuild.

How can the U.S. revive small-business lending?

The government should demand that any depository institution whose liabilities are ultimately guaranteed by the taxpayer make its loans prudently—where a banker and an examiner understand the risks and where each loan is made with a case-by-case examination of the risk in the bank. Small-business lending will remain risky. But there's a difference between a risk taken after a bank has obtained a deep understanding of the situation and a risk taken based on algorithms or rules that do not in fact make a lending decision safer.

What role should regulation play?

I think one of the great strengths of America is people's willingness to borrow and consume in the expectation of a better tomorrow. That is one of the things that distinguishes America from Europe. I think it's fantastic that three million iPads have been sold even in a recession. But that primal urge needs to have a brake applied to it sometimes and the brakes used to be provided by the banking system. Something healthy and useful was taken to extremes. It becomes insane. It's like, protein is good for you so you go on an all protein diet.

For regulators, instead of continuously experimenting with things like quantitative easing, why not pay attention to the things we know are bad?

But there's no hard and fast rule that says more regulation is good or more regulation is bad. You have to look at the facts of the case. And the facts said with banks that self-policing did not work. We ought to examine the brakes.

I agree wholeheartedly!

You should buy this book - it is Awesome:

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Attorney's Advice - Print and Save for Reference!

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 13 Jan 2011 08:00:00 PST

In this time of fraud and identity theft, it's better to be prepared. Here is some useful info.

ATTORNEY'S ADVICE - NO CHARGE

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate attorney sent the following out to the employees in his company:

1. Do not sign the back of your credit cards. Instead, put 'PHOTO ID REQUIRED.'

2. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the 'For' line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary. But if you have It printed, anyone can get it.

4. Place the contents of your wallet on photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel.. Keep the photocopy in a safe place.

I also carry a photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a Name, address, Social Security number, credit cards..

Unfortunately, I, an attorney, have firsthand knowledge because my wallet was stolen last month. Within a week, the thieves ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.

But here's some critical information to limit the damage in case this happens to you or someone you know:

5. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

But here's what is perhaps most important of all: (I never even thought to do this.)

7. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number.. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name.

The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit..

By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend (someone turned it in). It seems to have stopped them dead in their tracks..

Now, here are the numbers you always need to contact about your wallet, if it has been stolen:

1.) Equifax: 1-800-525-6285 1-800-525-6285

2.) Experian (formerly TRW): 1-888-397-3742 1-888-397-3742

3.) Trans Union : 1-800-680 7289 1-800-680 7289

4.) Social Security Administration (fraud line):
1-800-269-0271 1-800-269-0271

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Roadloans

noreply@blogger.com (Robert Linkonis Sr.) — Thu, 09 Dec 2010 13:47:00 PST

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

noreply@blogger.com (Robert Linkonis Sr.) — Tue, 02 Nov 2010 21:14:00 PDT

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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