AG of NY Sues, Credit Bureaus make changes, but don’t hold your breathe

New York State Attorney General Eric Schneiderman started investigating the practices of the credit bureaus back in 2012 from the many complaints from his constituents about credit reporting errors and the what seemed to be a scam they encountered when trying to correct the errors.

The wall street journal published this article in March of 2015 at the following link:

http://www.wsj.com/articles/credit-reporting-giants-agree-to-overhaul-1425873884

What I am about to go over is the issues that may (or will) pop up as consumers most likely have the thought process that everything will be all grass and roses once completed.

BECAUSE….we all know how the credit bureaus want to do their utmost to help consumers, right???

Let’s first discuss what is to be done, we have been told “most changes” will be implemented nationally and will kick in over the next six to 39 months.

Not sure about you reading this but I somehow doubt the credit bureaus are racing against the clock to get this started so expect changes to occur in the latter of that time frame.

The next part which I find to be LITERALLY the most insulting is the credit bureaus will be required to use “trained employees” to review the documentation consumers submit when they encounter an error on their credit report & if the creditor says its correct the bureau employee must still look into it and resolve the dispute.

I don’t know about you reading this but does that last paragraph not have the bureaus saying to us as consumers between the lines that “we have never cared about what you told us before in the past or sent us and never looked at it but now that we were going to get sued and attacked by the State Attorney General of New York and know that several other Attorney Generals from other states would have jumped on the band wagon so now we will do it”.

While that statement of mine was long winded and if you haven’t seen it before, check out this link to when 60 minutes check out the credit bureaus and how they operate:

   60 Minutes Investigates the Credit Bureaus

In case you are wondering this is not just for the State of New York but a nationwide reform. Now I don’t know about you but if this helps us I would definitely consider voting for the guy who finally stepped up to put the credit bureaus in their place considering the credit bureau industry brought in approximately 11 billion according to a report I read last year.

In the next week I am going to publish a subcommittee hearing report from several years ago that will literally blow your mind away. Flat out, a creditor asking how they want to do the credit dispute investigation and I won’t tell you what their response was you will have to read it for yourself!

Getting back on track here now, the best aspect of this agreement is the way medical bills will be handled.

While I have my own thoughts on debt collection and the legalities of that let me tell you that when these changes take effect and of course this part would and should be the easiest but NO MEDICAL bills under 6 months old from date of service can be reported on a consumer credit report.

According to the CFPB about 52% of debt on credit reports are from medical expenses. The medical business (yes, I said business) is so poorly handled that I cannot tell you how many times I have had clients come to me telling me they had no clue there was an outstanding bill as when they went to hospital or had some emergency they ended up getting over a dozen bills and not have a clue where they came from.

My thought is give it a few years and see who goes after them to get their “billing” together.

The main issue of course is the insurance company taking their sweet time in paying out claims. Many stories are out there where they flat out deny paying certain bills as many majority of people have no clue what is covered and what isn’t and the less they pay the better off they are. So a huge lawsuit over denying obvious claims would be a great lawsuit to see.

The CDIA (Consumer Data Industry Association) a trade group that represents the bureaus and lender industry actually had the gall to state in 2013 they began sending paperwork to consumers that the could mail in with their disputes to lenders to address specific complaints.

As a credit professional, the ONLY thing I have seen is a 1 page paper pigeon holing the consumer into certain statements where they can convert it to the 2 digit code to send to the lenders (just a reminder to watch the 60 minute video).

While this is definitely a step in the right direction I am very interested to see how they plan to “forget” certain areas as the lower the consumer credit score the more places consumers try to become credit worthy as if you listen to TV, the radio and online “NO CREDIT NO PROBLEM”.

Which means the more money the credit bureaus make as consumers keep going to different lenders to see if they can get qualified. As money makes the world go around I am just waiting to see what is lurking over the horizon.

The Holidays and your Credit

The holidays are fast approaching and with it the media bombards us with constant commercials from cars to stores saying buy now and save 15% and pay later using our credit cards!

The United States is a credit driven society, it is the cornerstone of our economy. If you stop and pay attention to all the radio, TV and news advertisements credit is the one thing you do not have to worry about since the all the commercials say don’t worry about your credit just come on into our store!

The sales term for this is it’s a numbers game, get them in the door and throw them at the wall and see who sticks. Meaning of course let’s get everyone applying for our products and we will see who actually qualifies for it.

The problem is majority of consumers do not understand the damage it can do to the consumers credit score as most consumers have no clue of how credit works. If they do not qualify for something they listen to the next commercial that says don’t worry, just come on into the store. All of these inquiries can compound and damage the consumer’s credit score.

Now what about the store cards where you can save money? While the economy is still recovering everyone still needs to watch their dollars, especially around the holidays where a consumers spending is the highest of the entire year.

But if you stop and think about it, how much are you actually spending in that store? If you spend $150 then you really only saving approximately $22, it is of course a different story if you’re spending over a thousand dollars.

Then there is the discipline factor, most consumers if they have the credit will use that than the cash in their bank accounts and then before you know it, swiping the card here and there builds up to a point that the consumer is overwhelmed and over extended.

My advice to you (whether you want to take it or not) is do not apply for the cards if you can help it.

There was a chart that typically shows up on Facebook at the beginning of every year. It’s a savings plan designed to teach discipline. Every week of the new year you have the appropriate dollar for that week (ex: week # 1 save $1, week # 10 save $10).

The concept of this is to teach discipline techniques. At the end of the year you will have $1,378 saved, so my question to you is if you practiced that discipline and saved that much money would most of you reading this you really need to apply for a store credit card to buy holiday gifts?

Don’t let the banks and big business keep you under their thumb; now that you know it’s best to practice discipline (have I used that word enough?) then the banks will be coming to you offering credit that you can use to your benefit (free miles, cash back, etc) you just need to know how to use it.

Don’t fall into the trap of having 5, 10 even 15 credit cards and becoming a debt victim!

Want to learn more about how credit actually works and how lenders view you? Buy my book “The Real World of Credit” on my website www.waynethecreditguy or go to www.BN.com and get the electronic version on Barnes and Nobles website!

How do I have a Zero Credit Score?!?

There are many times I come across adults (40 years +) and they have a Zero Credit Score. Many people do not understand why they would have that as a score, so let’s explore that topic and identify the several ways you can have a zero credit score.

The 1st is simple! You just turn 18 years old and now you can obtain credit but you basically have a blank file/report. You can’t have any score if there is no data in the calculations, correct?

Part B of the 1st is you are older but have never actually ever utilized credit. I come across this in situation from a lot of ethnic cultures that are not originally from the United States. So you can be 40 years old and never utilize credit which would attribute to the reason why you have a zero credit score.

The 2nd is you have nothing on your credit report but negative information. This could be even if you never utilized credit in the past but have had medical bills or if you have cable or utilities and missed the last payment or had a cell phone contract. It does not have to be just a credit card, auto loan or mortgage.

The 3rd and final reason you can have a zero credit score is the negative information greatly outweighs the little positive credit you may have. This true especially if you have a “heavy” file that means you have a lot of negative accounts in your credit file.

NOTE: Majority of the time the dollar amount on the negative accounts are a non-factor it is the timeline of the negative account which is most prevalent to the amount of points its affecting the credit file.

A credit report that is considered a “light” file is when there are very few accounts within the credit report thus the accounts good or bad will greatly enhanced to the effect it has on the credit score.

So now you know there are actually 3 difference scenarios where a consumer can have a zero credit score. I hope you found this information helpful and check back for more!

Want to learn more about how credit actually works and how lenders view you? Buy my book “The Real World of Credit” on my website www.waynethecreditguy or go to www.BN.com and get the electronic version on Barnes and Nobles website!

New FICO score model helps with Medical… Or does it?

New FICO score model helps with Medical… Or does it?

FICO newest scoring model FICO 9.0 has changed its credit-scoring model by putting less focus on medical debts and will give consumers a break on their score IF they’ve settled with a collections agency.

It sounds like FINALLY, the newest credit scoring model helps the little guy, the American consumer. HOWEVER… it’s unlikely to change credit scores for most people anytime soon.

The new model touts paid medical bills are scored as neutral. Note the word PAID, which means if you are settling an account if the letter you get (IN ADVANCE) does not say the account will be marked PAID IN FULL then it will count against you.

For consumers reading this I write a lot of these blogs to help educate you when either thinking about fixing your credit on your own or assessing if you believe I am a reliable and solid company to work with to help achieve your financial goal.

It has recently come to my attention that some other credit repair companies have been reading these to help educate themselves on credit so after hearing this and deciding it is not my job to educate other companies who go around stating they are credit specialists I am going to explain several things on each topic and blog but not go into the major detail on certain aspects of the topics.

BUT BACK TO THE IMPORTANT INFORMATION!

The limits of these collections are $100 as mentioned by FICO. While many times there are medical bills on consumer credit numbering in the thousands many, many times there are what seems to be a ton of “little” bills ranging from $3 to 75. So paying these pesky little annoying bills seems like the perfect way to help your credit.

People cannot help getting sick and the medical business (yes I said business not industry) is littered with incompetency. Don’t believe me? If you have a few medical bills try going to the place where you had the services ( if the debt is a little old) and then ask for the manager and see what they can do to take the debt back from the collector so you can pay them directly (warning if you have long hair be prepared to pull it out).

So at face value this looks like a plus for consumers but here is the analogy that will make the reality of this stick. What good is the model if the banks/lenders/analysts do not use the model?

The financial industry is loath to change and while the previous scoring model came out a few years ago a majority of the lenders have not utilized it and only a few have recently started to.

PLUS… if the lender does not feel the new model represents the true picture of a consumer’s financial wellbeing and stability, why would they use it?

And if you are trying to buy a home then do not expect when the news articles hits that FICO 9 is now available and consumers are expecting to see an approximate 25 point increase in score, be prepared to be disappointed.

 

Want to learn more about how credit actually works and how lenders view you? Buy my book “The Real World of Credit” on my website www.waynethecreditguy or go to www.BN.com and get the electronic version on Barnes and Nobles website!