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Inquiries – Do They Hurt Scores?

Uncategorized Feb 05, 2014 Comments Off on Inquiries – Do They Hurt Scores?

When someone accesses your credit it establishes an inquiry which appears on your credit record. There are 2 types of inquiries, one will negatively affect scores and one will not.

The first form of inquiry is when a creditor accesses your file to determine if you meet their lending criteria. The key is that this inquiry is done WITHOUT any application being submitted by you. In fact, it is usually a means of finding consumers to which they will make credit offers. In other words, they will look at your credit prior to offering you credit. These are known as SOFT PULLS and do not affect your scores because it is not an application initiated by you.

The second form of inquiry is where you are applying for credit and the creditor accesses your report to see if you qualify. When YOU apply for credit and your credit report is pulled an inquiry appears on your credit report. This type of inquiry is called a HARD PULL and can have an adverse affect on your scores. Now this seems harmless but lets take a look at what this does to your credit profile.

A HARD PULL inquiry is reflected on your report for all creditors to see. This is important to understand because the common mistake people make is thinking that just because 1 lender turned you down doesn’t mean someone else won’t approve you. As a result of this damaged thinking you end up with multiple inquiries and NO APPROVAL. The reason is simple. Each creditor can see all the inquiries. They are made aware that you have RECENTLY applied for credit elsewhere and a new credit account may or may nor be opened. The more inquiries that exist, the more open applications exist and therefore the more likely it is that new accounts have been opened. Nobody will approve an application with multiple open inquiries. They can’t be certain that you haven’t extended yourself beyond their qualifying criteria. Regardless what scores and open obligations are reflected by your current report. Open inquiries suggest that your current credit limits, debt ratios etc may change. As a result, the more inquiries you initiate the faster you will get declined. If you have been declined STOP APPLYING! You will not find a lender who isn’t aware of your activity. As far as scores, multiple inquiries for the same item (car or mortgage) in a short period will count as 1 inquiry UNTIL IT IS DECLINED! Then they will count separately and negatively.

Once an application is opened and it DOES NOT result in a new account it will count against your scores. It reflects a declined application which again all lenders will be able to determine by seeing multiple inquiries with no resulting new accounts. It identifies an underlying problem. The more of these inquiries you have the worse your scores will be. I have seen 40 – 50 points commonly from reports that have excess inquiries.

How many are considered acceptable? The exact number is open for debate but it is fairly common knowledge that if you have more than 2 on any bureau in less than 12 months you will see inquiries listed as a negative factor on any credit report score explanation. ONLY 2-3!

There are also common lender violations that can cause consumers issues. For example, when applying for a car loan you would be better served to get a pre-approval from 1 lender before car shopping as most car lots will shop your credit profile with every lender they use. Each one pulls their own report and you end up with a list of inquiries for the 1 item. This is very common and while it is a clear violation it can be very difficult to get the bureaus to do anything about it. We have established methods to deal with this but many consumers just are not aware what the true affect an inquiry has on their credit and they continue to bury themselves. The moral of the story is if you have been turned down determine why and fix it. Applying again will only make matters worse.

The Trade Line Scam

Uncategorized Dec 04, 2013 Comments Off on The Trade Line Scam

As consumers try to boost their credit scores there are an abundance of people offering to add trade lines to your credit profile for an advance fee. We seem to receive calls daily from people who have gone this route only to have wasted money on an undelivered promise. You should NEVER purchase a trade line for many reasons. Lets start by reviewing “What are trade lines”?

A trade line is a “line of credit” account, usually revolving. There are 2 types of trade lines offered in this scam:

1) Authorized User: This is an account that has been opened by someone other than yourself and you are added to the account as an authorized user. You do not receive a card or any ability to use the credit line. You simply get the supposed benefit of its seasoned credit history and low balance – credit ratios. This is the most common form of trade line offered. It is borderline illegal and most certainly violates any credit card user agreement. No credit card issuer allows you to sell rights to access the account as an authorized user. Think about it. You are paying a 3rd party to act as an agent between you and a supposed person with good credit. Ask yourself, would a person with excellent credit and no financial troubles accept a few hundred dollars to add someone to his accounts? Yes, I know you are paying more than a few hundred dollars for them. These broker agents are pocketing the remainder. The answer is nobody who isn’t needing cash quickly would sell their credit this way. So, other than the obvious risk of upfront cash, you stand the risk of this persons credit going south and taking you with it. Even if these balances just shift upwards it will drive your score down as the balance – credit ratio worsens.

2) Primary User: This is an account that has been established with you as the primary user. This is fraud under any interpretation. The primary user MUST be approved by the credit provider! Again, its just common sense. What lender would blindly accept you without checking your credit? There is no legal way to add you as a primary user.

The bureaus and creditors have become wise to this whole game and we have had many clients claiming to have paid for these trade lines that never appeared on their report at all, or were there for a couple of months and then gone. Steer clear of this whole approach. It will cause you more grief than good.

The best way to add trade lines to your report is to have someone you know (family or friends) add you to their line. This is legal, ethical, and provides you at least some control of risk. You can select a stable individual with a strong credit standing.

In closing its probably best to remind you that there really is no free lunch, no fast fixes, no man behind the curtain. You get what you put into it. Want better scores? Have the derogatory accounts deleted, if any. You need open accounts on your report. Pay on-time each month, Keep your balances as low as possible. Over a reasonably short period it can make a huge difference and put you back on track. Lastly, never pay upfront for any credit repair services.

The Credit Sweep Scam

Uncategorized Nov 07, 2013 Comments Off on The Credit Sweep Scam

Once a person starts to recover financially from income struggles they start to research ways to fix the mess left behind on the credit report. The vast majority of people have no knowledge of their rights or the laws that govern them. As always, this has created a vulnerability that opportunists seem to be cashing in on. They are offering what is called a “Credit Sweep”. I will define this as it relates to consumer credit (corporate credit sweeps are completely unrelated).

By definition, a credit sweep is a complete deletion of all negative information from your credit report found with any or all of the 3 major credit reporting bureaus (Experian, Equifax, and Trans Union).

It is important to note that it is 100% illegal for anyone other than the original creditor to guarantee the removal of any valid information from your file!  There is no exception to this rule!

Your credit report is considered to be accurate until proven otherwise. The dispute must PROVE inaccuracy to cause it’s deletion. That process has rules of engagement that provide a 30 day window for the creditor to validate the information. It can’t be circumvented.

The best way for you to understand how far from legal this credit repair tactic is we should start with what the law says about items listed on your credit report and how they should be disputed if necessary.

The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. The key in this statement is “promotes”. There is little enforcement of the rules to ensure that consumer information is accurate. In fact, the vast majority of credit profiles have inaccuracies. This includes people with good credit. This created the need to establish rules that govern how a dispute needs to be addressed, what the time limitations and response requirements are, etc. It can be very confusing. To make matters worse, you really have 1 true opportunity to dispute any specific item on the report. The bureau only is required to validate information once. If it is done again you will receive “frivolous dispute” responses.

According to the FCRA summary:

You can dispute inaccurate information with the consumer reporting agency. If you tell a consumer reporting agency that your file has inaccurate information, the agency must take certain steps to investigate unless your dispute is frivolous. Inaccurate information must be corrected or deleted. A consumer reporting agency or furnisher must remove or correct information verified as inaccurate, usually within 30 days after you dispute it. However, a consumer reporting agency may continue to report negative data that it verifies as being accurate.

The rules of the dispute process according to the Federal Trade Commission (FTC):

Credit reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the credit reporting company, it must investigate, review the relevant information, and report the results back to the credit reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide credit reporting companies so they can correct the information in your file.

A credit sweep is not validating the information as incorrect and therefore subject to deletion. The sweep is actually erasing the negative accounts from the file, but temporarily.

The sweep is performed in 1 of 2 ways:

1) Inside contact at collection agency is paid under the table to delete items from the file. Many times this is offered as a 1 bureau sweep because that collection agency has the ability with only 1 bureau. All collection agencies have the right to remove as well as post negative information on files. The bureaus allow this to compensate for human error. The bureaus always catch up to this as the deletion of all items from a file can’t be considered human data entry error. All the items will re-appear once he gets caught.

2) An identity theft alert is filed with the bureaus. This is more common now and the bureaus are catching on. In this case the identity theft claim forces all accounts to stop reporting, but its only temporary. Once the accounts are proved to be valid by the creditor they re-appear.

In summary, anyone guaranteeing to completely delete all your negative information is committing fraud. More importantly, you are an accomplice. You an accessory to the crime and can be held liable. To top it off you will have wasted the $500-$3000 that these services charge upfront. Remember, there should be no NO UPFRONT FEES for any credit repair services.

How long do judgments stay on a credit report?

Uncategorized May 29, 2013 Comments Off on How long do judgments stay on a credit report?

Many creditors take their defaulting clients to court as a means of collecting a debt. A judgment is a debt imposed by a court of law. When a lawsuit is decided in favor of the plaintiff (the creditor) it results in a judgment against the defendant ( the person being sued ) and in favor of the plaintiff for the amount granted by the court. These are by far the most powerful means of enforcing the collection of a debt owed.

Unlike most credit reported items, most states do not have a 7 year statute of limitations for judgments. For example, A judgment in California is valid for 10 years and can be renewed for another 10! They accrue interest and penalties the entire period and can be multiple times the original debt.

Only a bankruptcy will stop a judgment from being enforced. Of course, enforcement can be a challenge for a creditor. However, the law is on the creditors side. If the defendant has a wage earning job, or owns any real estate, or has a bank account or investments he/she is subject to garnishment of wages, levying of assets or liens on real property. In this day of advanced technology it is fairly simple for a creditor to find what he needs to enforce the judgment.

Once he has found assets, bank accounts, property etc he can take the judgment to the local Marshall who will enforce it. There is nothing the defendant can do to stop it or reverse it at that point.

Obviously, it is imperative that people do whatever they can to avoid judgments by making successful arrangements with the creditor prior to it being taken to court. You will save yourself a lot of grief in the long run.

Of course, as with any debt, credit repair does not relieve you of the responsibility of the debt, even if the debt is removed from your credit report.