For years, LifeLock has aggressively advertized that they will protect your identity like no other. They even offer a $1,000,000 guarantee. What they don’t tell you is that they are simply putting fraud alerts on your credit files which have been shown to work 75% of the time. Now, anyone can put fraud alerts on their credit reports. They are designed to alert you if anyone is attempting to take out credit in your name. They are temporary in nature and have to be renewed. LifeLock would take it upon themselves to automatically add these to your credit reports and then renew them for you. However, what they are doing was never the intent of the Fair and Accurate Credit Transactions Law written by Congress.

Bold and high-light – if possible can you yellow highlight may be in the following paragraph?

The law states:

‘‘(2) FRAUD ALERT; ACTIVE DUTY ALERT.—The terms ‘fraud
alert’ and ‘active duty alert’ mean a statement in the file
of a consumer that—
‘‘(A) notifies all prospective users of a consumer report
relating to the consumer that the consumer may be a
victim of fraud, including identity theft.”

The law states that a consumer can add a fraud alert in the event that the consumer “MAY BE” a victim of fraud. It doesn’t say that you can add one just because you feel like it. Credit reporting agency Experian felt the same way. Back in 2008, they filed a lawsuit for deception and fraud. According to a MSNBC article, LifeLock CEO Todd Davis called the lawsuit baseless and said that Experian is simply upset that his firm is challenging its business model.

Actually, it has nothing to do with the model. It is the law that Congress wrote and expects people to follow. LifeLock recently sent this out to its customers:

“LifeLock is pleased to announce we are beginning implementation of a new and innovative identity protection system that provides you even better and broader protection. This new system, which replaces fraud alerts, is better because it offers you the benefit of real-time protection in some instances, and broader because it identifies identity risks beyond the scope of fraud alerts.

As you may know, as a result of litigation with the credit bureau, Experian, a Court has ruled that LifeLock must soon end the practice of setting fraud alerts on behalf of consumers. The placement of a fraud alert on a member’s profile is just one of the many tools LifeLock uses to protect our members from the growing threat of identity theft. We have been planning for the possibility of this ruling by developing even better ways to help protect you, and are excited about the broader protection we will roll out in the coming weeks.”

So now that they cannot do what they should not have been able to do in the first place, they have to come up with a real identity theft protection service. With all of the influence that this company has developed through their marketing (which I will have to admit is one of the most brilliant marketing campaigns -deceptive, but brilliant), it is my hope that they come up with a plan that can stand up to their aggressive marketing plan.

At the end of the LifeLock e-mail, he states that “At LifeLock, we never take your trust in us lightly, and consider it an honor to protect your good name.” Even if they come up with the greatest identity theft program available, can you really trust a company that has its business model built on doing something in a way that the law never intended on individuals to do in the first place?

Tags: Bob Brooks, Congress, credit reports, Experian, Fair and Accurate Credit Transactions Law, fraud alerts, identity, Identity Theft, Prudent Money

To get the best look at your credit, it has always been important to look at the FICO score of all three credit reporting agencies (TransUnion, Experian, and Equifax).  The FICO score was developed in 1956 by Bill Fair and Earl Isaac.  They built a company around this credit scoring formula called the Fair Issac and Company, which is where you get FICO from.  It is the accepted form of credit scoring by businesses.  The only one place you can get the original FICO credit score from the big 3 credit reporting agencies is through FICO’s website.  

Well that was the case until last week.  Experian has announced that they will no longer provide FICO with credit report information for the Experian-based FICO score.  You can still get your FICO score through TransUnion and Equifax.  Businesses will still be able to get the Experian FICO information to evaluate consumers.  However, consumers will now be in the dark concerning their Experian FICO score.

So why would Experian pull out?  There has been a big fight between FICO and the big 3 credit reporting agencies for years.  The credit reporting agencies are tired of paying FICO for their credit scoring system.  They would rather market their own credit scoring systems.  In fact, FICO filed a lawsuit against the credit reporting agencies for developing another credit scoring model.  Fair Isaac wants to remain the standard for credit scoring.  

So, you can still get your Experian score through their site and other sites.  It just will not be the FICO-based Experian score.  It will be based on a different scoring model.  

1) Will my credit score go up once I have paid a debt in collections off? What if I don’t pay it in full and just settle it?

It might go up a little. It all depends on everything else that is on your report. Keep in mind that the majority of the damage is done to your credit score at the point it goes into collections.

2) Why are the credit scores different at the 3 credit reporting agencies?

First, they all have their own tweak to the FICO score. Second, it is rare that all three reports have the same information. That can make a difference.

3) Is it smart to just not use credit at all?

This is a financed based society. You need to have a credit score. Using credit each month and paying it off each month is good for your credit score.

4) Can credit card companies legally change your interest rate?

Yes, they can change any detail to the credit contract that you signed. By signing on the dotted line, you are agreeing to the fine print which gives them the right to make changes.

5) Why does your credit balance increase so much when it gets to a collection agency?

Basically, it comes down to bogus fees. Collection agencies add a ton of fees and penalties.

6) Do these companies that advertise that they can repair my credit score really work?

There is no magic to improving your credit score. Thus, there is nothing that they can do for you that you cannot do for yourself. Then there are companies that guarantee they will get everything removed, but that is not possible. If a consumer lies to the credit reporting agency and tells them that an item shouldn’t be on the report and the consumer reporting agency cannot find anything to refute that claim, then the item gets removed. These companies basically advocate that you lie about everything in hopes that they get removed.

7) What is the quickest way to improve my credit score?

There is no quick way. It takes time and positive credit activity

If I want something correct on my credit report, do I need to contact all three credit reporting companies?

You only have to contact one. If they make changes, they are to contact the other two and have it corrected.

9) I have no debt and feel like I am on track for my financial goals. Do I really need a credit score?

Dave Ramsey says that the credit score is not important. In a financed based society, it is imperative to keep your credit score strong. Plus, you cannot ever say that in your lifetime you will not need to take out a loan. You need a credit score for insurance scoring and you might even need it for a job interview.

10) Can anyone just check my credit file?

Creditors don’t need your permission to check your credit file. They just need a permissible purpose and there are a lot of permissible purposes. A credit inquiry is just a statement of fact that someone inquired about your credit.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, Credit Score, creditors, Debt, Deceptive Money, FICO score, interest rates, Prudent Money

Ask Bob

Hi Bob,

Remember I talked with you over the radio about the mortgage lender suggesting that I contact their “credit repair” person, well the web for this particular one is “xxxxxxx” the lender guaranteed me a score of 640 within 35 days if I worked with her, their fee to start is $199. sounds really good for a guaranteed score improvement that high, I don’t know if I could do that on my own by submitting letters to the credit bureaus do you?

Thanks for giving me an opportunity to talk you through this one. First of all, it is impossible to guarantee that type of performance. Secondly, the web-site states that they don’t use meaningless guarantees. Once again, they are doing the same thing that you would be doing.

The credit reporting agencies don’t speed up the process just because it comes from a credit repair agency. They investigate it at the same rate as if you would have sent those letters in yourself. The site also says that it will take 30 to 60 calender days. The credit reporting agency has 30 to as much as 45 days (if new information is presented) to investigate.

The reality of credit reporting is this:

You have negative and inaccurate information on your credit report – if that is the case, you dispute it requesting it be corrected or removed.

You have negative and accurate information on your credit report – it will stay on your credit report for 7 1/2 years past the first missed payment – there are no exceptions regardless of what anyone says.

So, if you have anything on your credit report that is inaccurate, get it removed or corrected by following the instructions on my web-site. You can do that for free.

http://www.prudentmoney.com/adminnm/templates/abiz-conresources.asp?articleid=1124&zoneid=67

If you want to have some fun with the mortgage person, request that she put the guarantee in writing with her signature as well as the owner of her mortgage company. Then ask what you get in the event that the 640 is not reached. I will say that is the first credit repair type web-site that was actually legit.

Keep the Faith

Tags: Bob Brooks, credit bureaus, credit repair agencies, credit report, credit reporting agencies, Deceptive Money, mortgage, Mortgage consultant, Prudent Money

We all know that things like payment history and outstanding balances can end up hurting you in regards to interest rates and credit limits. What about your lifestyle? Well according to one lawsuit filed by the Federal Trade Commission in Atlanta, your lifestyle can have a big impact on your credit rating.

The Federal Trade Commission has filed suit against CompuCredit for not disclosing to the consumer who uses the sub-prime credit card, the Aspire Visa, that both payment history AND purchasing behavior are important. The FTC also goes into a full investigation that reveals all of the smoke and mirror marketing this company has practiced through the years and how it has misled the public.

According to the suit, “the company touted that cardholders could use their credit cards anywhere – what they didn’t say was that you could be punished for specific kinds of purchases.” Most of the behavior that was used to evaluate credit scoring was determined by morality based decisions and purchases. So you can imagine what comprises most of that list. However, the list also included types of business that you might not expect such as:

• Direct marketing merchants
• Marriage counselors
• Personal counselors
• Automobile tire retreading and repair shops
• Pawn shops

Now, most credit card companies will perform a risk assessment by taking a look at your overall credit history with all lenders. Based on that information, they can reduce your credit limit and increase your interest rates. If you are late or behind with other cards, then the credit card company where you are current considers you a risk and raises interest rates accordingly. This practice of changing the terms of your account is referred to as the universal default clause.

In addition to the normal practices of utilizing the universal default clause, CompuCredit was also looking at where the charges were created to see if the buying patterns of the individual were creating additional risk. If so, they would reduce the subscriber’s credit limits to levels below their existing balances and then charge over-limit fees.

This particular credit card (the Aspire Visa) is a sub-prime credit card. These are important for consumers that have low credit ratings and need to improve their credit score.

Sub-prime cards are important in the fact that they do help people build credit. However, you also need to be careful because there are a lot of companies waiting to take advantage of consumers who are in dire situations with their credit.

If you are using a sub-prime card or thinking about using one, make sure you do extensive research on that card and the corresponding company. It could end up saving you a lot of trouble down the road.

This is the great thing about the internet – if there is any negative news about a company, you can almost always find it on the internet.

This lawsuit does raise an important question. Are other credit card companies doing the same thing? Is CompuCredit just one of many credit card companies evaluating their cardholders on the basis of behavior?

For a lot of people, this wouldn’t be an issue because they don’t put themselves in situations that would put their character at risk. However, what about the person who is in counseling? What about the couple that is trying to save their marriage? Should that be used against them? This is another example of a credit industry out of control.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, CompuCredit, credit card, credit limits, Credit Score, Deceptive Money, Federal Trade Commission, interest rates, Prudent Money

The credit reporting agencies are working to change the way credit is scored. However, it might be a daunting task. First, they have to overtake the standard in credit scoring – FICO.

In 1956, Bill Fair and Earl Isaac founded a company called Fair Isaac. In 1958, they developed and introduced the credit scoring system. In 1989, the first FICO (F-Fair, I-Isaac, and CO – company) score was created called the Beacon score. This was developed through Equifax. The FICO score, as it is commonly referred to, was adopted as the standard for scoring credit.

Each credit reporting agency has their version of the FICO score.

Trans Union – Empirica Score (FICO score using information from Trans Union)
Experian – Experian/Fair Isaac Score (FICO score using information from Experian)
Equifax – Beacon Score (FICO score using information from Equifax)

Fair Isaac has kept the mathematical formula for the credit score a secret; however, we do have an idea concerning the make-up of the score.

Credit Scoring of the Future

The credit reporting agencies have had to rely on Fair Isaac for credit reporting. As a result, Fair Isaac shares in the revenues from each of the credit reporting agencies. As you might imagine, the credit reporting agencies would like for that to change.

In 2006, the three credit reporting agencies announced a new credit scoring called the Vantage Score. They developed this system to make credit scoring more accurate and consistent.

Credit scoring is based on the FICO model of 300 to 850. The Vantage Score is based on a range of 501 to 990. The Vantage Score would be utilized by all three credit reporting agencies and bring some uniformity. This scoring system apparently takes more factors into account than FICO. Where you fall on that scale would determine your grade of A to F.

A: 901–990
B: 801–900
C: 701–800
D: 601–700
F: 501–600

The scoring breakdown for the Vantage Score is as follows:

Payment history……………. 32%
Credit Utilization…………… 23%
Credit Balances…………….. 15%
Depth of Credit…………….. 13%
Recent Credit………………. 10%
Available Credit……………. 7%
(SOURCE: Wikipedia)

FICO is very entrenched in the business community as the preferred method of calculating credit scoring. At the same time, there are some flows in the system that I feel prevents an accurate representation of a consumers ability to be responsible with credit. The 3 credit reporting agencies feel the same way.

The bad news is that this new scoring system puts much more emphasis on total debt and the credit utilization ratio. That could be bad news for a lot of consumers.

There probably is not much to worry about at least for now. Although the 3 credit reporting agencies are working very hard to replace FICO with the new Vantage Scoring system, it is going to be an uphill fight. With FICO having a long-term hold on the credit reporting market, this should be quite a long drawn out battle within the industry to change from the FICO score to the Vantage Score.

Tags: Beacon score, Bill Fair, Bob Brooks, credit reporting agencies, credit scoring, credit scoring system, Deceptive Money, Earl Isaac, Equifax, Experian, FICO, Prudent Money, total debt, Trans Union, Vantage Score

Rent reporters market their service as a way to make your rental payment count. Credit scoring does not give consumers any positive credit scoring points for paying rent on time. This company says that they can change that. All you have to do is sign up for their service, and they will make sure that your timely rent payments are reported to the credit reporting agencies.

Let’s start off with the marketing –

1) Good or bad credit – this company will enhance your credit profile
2) Your rent will be reported directly to the major credit bureaus
3) Prove to banks and creditors that you deserve all types of loans
4) Your credit profile improves with every rent payment

Now when you go to the fine print, you start to see the “disconnect” between the marketing and the fine print or reality.

- The marketing says that it should take no longer than 60 days to show up. The fine print says that it could take as much as 160 days.
- The marketing says it will be reported to the credit reporting agencies and that it can benefit your credit score. The fine print says that the information might show up on one or many of the major bureau reports. There is a big difference between reporting and whether or not they can guarantee it will show up.
- In their marketing, they intermix the terms “improve your credit file” and “improve your credit score.” They lean more to the use of the phrase “improve your credit files.” Although anyone can add information to a credit file that is deemed positive, if it does not improve your credit score, it is for the most part worthless. Even deeper in their fine print appears “profile improvement does not guarantee a higher credit score.”
- You cancel at any time. Of course, if it is not within 5 days you will lose the $89.95 fee. In other words, you are paying this service a fee that is basically non-refundable to add information to your credit file that may or may not make it to your credit file.

So, what do the credit reporting agencies have to say?

Fair Isaac, who developed the credit scoring model, said this about rental payments in general. They “stated that it couldn’t find a reliable enough database of rental payments and, more importantly, there are questions about how ‘predictive’ rent payments are. In other words, your ability to handle a checking account and pay off a TV at a rent-to-own outfit might say more about your creditworthiness than whether you’ve managed to get the landlord a check each month.”

I also ran this by a senior executive at one of the credit reporting agencies – his reply:

“Bob,

I would agree with it in theory, but I’m not aware of many rental companies reporting payment histories to credit bureaus. Perhaps this company does, but not to us. The issue of “alternative payment types” is one which has been discussed in financial circles. There are a couple of companies I’ve heard of who are trying to build databases of alternative credit data, but I haven’t seen them in action yet. I believe it will take time to develop this type of alternative data, which will serve those consumers who are left out of the traditional credit marketplace. I don’t expect it to happen quickly, and if it does, the big issue will be if the “big three” reporting companies willhave this data, or will it only be available on a stand alone database. There’s a long way to go on this subject before anything effective hits the marketplace.”

Finally, their marketing slogan -

We have helped thousands feel like paying rent is finally paying off!!

The marketing certainly does make you feel like it is a good thing. The reality is another story.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, credit reporting agencies, credit scoring, Deceptive Money, Prudent Money, Rent

So, you might be thinking that this is a great topic but maybe for someone else. After all, I don’t have a debt collector problem. Even if you have perfect credit, there is a high probability that you will encounter a confrontation with a debt collector at some point. This is information that everyone needs to know.

Let’s review the various scenarios:

1) You get a call or receive a letter from a debt collector and the debt is yours.

- Get the address of the debt collector and send a request to verify the debt and the amount of the debt. Chances are you would receive all of that information with the debt notice. If not, go through the process of getting it verified. You first need to make sure that everything about the debt is legit.
- If there is something that you don’t agree with about the debt, your next step is to dispute the debt.
- If the debt has been verified and the debt dispute is unsuccessful, you now have a choice to make. You can either send a cease and desist letter or start dealing with the debt collector.

REMEMBER: If the debt is a valid debt and still in the statute of limitations period (period in which a debt collector and/or creditor can file a lawsuit), you are taking a chance sending a cease and desist letter. By law, the debt collector has to stop collecting. Thus they have a choice as to whether or not their next step is to pursue legal action.

2) You get a call or receive a letter from a debt collector and the debt is not yours.

- First, make sure that an identity theft has not occurred (if it has, see below).
- Second, check and make sure that this is item is not showing up on your credit score (if it is, see below).
- Send a dispute letter to the collection agency stating that they have the wrong person. It is important to include some proof. However, never send them any information that they can turn around and use in the debt collection process.
- If that still doesn’t work and you are positive the debt is not yours, send them a cease and desist letter. If something legal comes of it, you should be able to defend yourself.

(3) You get a call or receive a letter from a debt collector, the debt is not yours, and an identity theft has occurred.

- Immediately place a fraud alert on your credit reports.
- File a police report.
- Contact the company to let them know there has been an identity theft.
- Remember in an identity theft you are guilty until you prove your innocence. Thus, you want to make every effort to prove that debt is not your debt. You attempt to do this with the debt collector and/or original creditor.
- Start working to get the information removed from your credit report.

(4) You get a call or receive a letter from a debt collector, it is not your debt, and the debt is showing up on your credit report.

- Immediately go through the process of disputing that debt with the credit reporting agency, as outlined above.
- Keep an eye on your credit report because of the likelihood of this mistake reappearing.

Tips:

- Communicate through certified mail with debt collectors – phone calls typically end up being a dead-end.
- If a debt collector harasses you and breaks the law, seek the help of an attorney. For more information, go to www.deanmalone.com.
- Stay very organized and keep good notes.
- If you are served legal papers, make sure that you take them seriously. It is important to get an attorney.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, cease and desist letter, credit, Credit Score, creditor, Dean Malone, Debt, debt collection, debt collectors, Deceptive Money, fraud alert, Identity Theft, police report, Prudent Money, ststute of limitations, www.deanmalone.com

It is tough enough to keep your credit score accurate and in good standing. You could be doing all of the right things like making payments on time and paying more than the minimum. Of course, none of that matters when your lender reports inaccurate information to the credit reporting agency, causing your score to fall 80 to 100 points.

That is exactly what has happened to roughly 1,000,000 student loan borrowers that have loans with Sallie Mae. If you have a graduated payment loan with Sallie Mae, you could be one of those borrowers who either temporarily had or still might have a real problem with your credit score. A graduated payment loan is set-up to make the payment arrangements affordable on the front-end. As time goes on, the payment gradually gets higher.

In a May credit reporting to Equifax, Sallie Mae had a coding error that made these loans appear to be delinquent, causing credit scores to be greatly reduced. Since then, Sallie Mae has reported that they have fixed the problem. However, I wouldn’t just sit back and take that as reassurance that all is well.

If you do have a graduated payment student loan with Sallie Mae, it might be a good idea to just check your Equifax credit report and make sure that there isn’t a problem. Having a drastic drop in your scores could start a chain reaction of negative credit events. If any of your credit companies were to pull your Equifax credit score and that mistake was not corrected, they could deem you a risk and turn around and raise the interest rates on your credit cards.

If you check your credit score and this has happened and it has not been fixed, you want to immediately dispute the information with Equifax online as well as contact Sallie Mae to inquire on the status of getting that problem fixed. You can contact Sallie Mae at 1-888-2-SALLIE.

This is why it is important to really keep up with your credit scores and make sure that there is not any inaccurate reporting. Many surveys have come out concerning credit reporting errors. I have seen percentage range from 50 to 75% of credit reports have errors on them. One survey suggested that 30% of the credit reports that they examined had errors so harmful that the consumer would probably never be able to get a job.

I was talking about this yesterday. I don’t think that we stop and think about how important the credit score has become in this country. The bottom line is that the lower the credit score, the more expensive life is going to be. From interest rates on debt to the rates you pay on insurance to getting a job, they are all affected by the credit score.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, credit report, credit reporting agencies, Credit Score, Deceptive Money, Equifax, interest rates, Prudent Money, Sallie Mae, student loan borrowers

The credit score was developed in the 1960’s by a company called the Fair Isaac Corporation. The FICO score, as it is commonly referred to, was adopted as the standard for scoring credit. FICO stands for Fair Isaac Corporation. There are other credit scores developed by other companies, but this is the one that most people reference.

Fair Isaac has kept the mathematical formula for the credit score a secret. However, we do have an idea concerning the make-up of the score.

Payment History – Roughly 35% of the score

This is a very important part of your score. This shows your track record for making payments on time, how long you have had credit, and if you have completed your obligations.

Total Debt – Roughly 30% of the score

This looks at your total debt versus the total available debt. This is referred to as credit utilization and is viewed in terms of a ratio. For example, your credit score is going to be significantly lower in the event that all of your credit accounts are borrowed to their maximum limit. For a lender, that represents a higher risk. Preferably you want the ratio of debt to your total credit limit less than 50%.

Credit History – Roughly 15% of the score

This factors into your score the length of time that you have held credit. It is important to keep the oldest accounts open. This shows your “credit experience.” An older, positive credit history is favorable to your credit score.

Recently Added Credit – Roughly 10% of the score

This part of your score represents the number of new accounts opened as well as inquiries for your credit score. A great deal of activity showing multiple accounts opened as well as inquiries will lower your credit score. It is referred to as a “hard” inquiry when a creditor makes an inquiry. When you make an inquiry, it is referred to as a “soft” inquiry. Hard inquiries affect your credit score, whereas soft inquiries do not.

Types of Credit – Roughly 10% of the score

The credit score is calculated based upon the various types of accounts that you have opened. This gets into the area of secured accounts versus unsecured accounts. A car loan is secured by a car. A home loan is secured by the house. If you default on the car, they will repossess the car. If you default on a home note, they will foreclose. As a result, the lender reduces their risk by having access to the car or the house in the event of a default.

An unsecured note would be any debt where the creditor cannot seize an asset upon default of the loan. A credit card account is a good example. Credit cards are issued on the basis of a credit score and good faith. For lenders, this is higher risk. So a higher number of unsecured accounts on your credit report has more of a negative impact. It demonstrates higher risk.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, credit, credit history, Credit Score, Debt, Deceptive Money, Fair Isaac Corporation, FICO, new accounts, payment history, Prudent Money, recent credit, risk, total debt, unsecured note

(1) If a spouse is responsible for a debt due to a divorce decree, the other spouse is completely released of all liability – True or False.

False – If at the time of divorce both spouses are signed on the credit account, they are both liable for the debt after the divorce regardless of the divorce decree. The credit card companies only release liability when the debt is refinanced into the responsible spouse’s name.

(2) If you co-sign for another individual, your credit could be affected – True or False.

True – If you co-sign on a credit application, you are as responsible for the loan as the individual you co-signed for. If that individual misses a payment, that negative mark goes on your credit report. If that individual defaults on the debt, the co-signer is now responsible.

(3) If a creditor settles a debt, the consumer has no other further obligations – True or False.

False – If the creditor forgives debt, the creditor reports that to the IRS and the consumer has to pay taxes on the amount that has been forgiven.

(4) If a debt collector harasses a consumer, the consumer has no means of protecting their rights – True or False.

False – Consumers are protected under the Fair Debt Practices Act. If a consumer’s rights have been violated, a consumer can hire an attorney and file suit against the debt collector for the means of protecting their rights. The law also allows for attorneys that practice this special type of law to take cases for free. The attorney can force the debt collector to pay fees in the event the case wins.

(5) If your debt has been charged off and is with a debt collector, the consumer can always go back to the original creditor and negotiate the terms of the debt – True of False.

False – Once the debt has been charged off and is in the hands of the debt collector, the original creditor has no interest in talking to you about the debt. You talk with the creditor as long as they are holding the debt and collecting the debt through their in-house debt collection department.

(6) It is a good idea to try and negotiate a current debt – True or False

False – If you are on time with your payments and everything is current, you never want to call a creditor and ask for the balance to be reduced. It is like asking your credit card company to close your account and place you in collections. They will automatically deem you as a risk and probabilities are high that they will close your account and raise your interest rates to penalty rates. It happens all the time. You can attempt to get your interest rate lowered. However, it stops there.

(7) There is a way to legally remove bankruptcies before the credit reporting period has ended – True or False

False – Every negative item on your credit report has to serve its allotted reporting time on your credit report. For most, that is 7 ½ years past the first missed payment.

(8) A credit reporting agency has to inform me of the results of my dispute – True or False.

True – They do have to inform you by letter of their findings.

(9) After 7 ½ years and the debt has been removed from your credit report you no longer owe it – True or False.

False – You always owe the debt.

(10) Debt Collectors can always take legal action against you to collect a debt – True of False.

True and False – They can only successfully file suit against you during the statute of limitations period which is determined individually by each state. In Texas, it is 4 (some attorneys argue 4 ½) years past the first missed payment. They can still file suit after that period. However, it is up to the consumer to use the statute of limitation defense and get the lawsuit thrown out. If the consumer does not take action, the debt collector will probably successfully win that suit.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, co-signer, credit report, Debt, debt collector, Deceptive Money, Fair Debt Practices Act, liability, Prudent Money

There is a lot of information floating around out there about debt. Today, we are going to take a look at some of this information and determine if it is fact or fiction.

(1) If I close my credit cards, I will remove all of my credit history – True or False.

False – your credit history stays on your credit report if you close a credit card.

(2) Your credit score is your FICO score – True or False.

True and False – Fair Issac Corporation developed the original credit scoring formula. However, each credit reporting agency has its own version of the scoring model. Trans Union’s score is called the Empirica score. Equifax calls their score the Beacon score. Experian does call its credit score the FICO score.

(3) Every time you check your credit report, you get an inquiry posted and could lose points on your credit score – True or False.

False – When an individual checks their credit score, it is called a soft inquiry and there are no deductions or records of the inquiry. When a company checks a consumer’s credit score for the purpose of credit information, this is a hard inquiry and there is a deduction of points.

(4) Every time you close a credit account your score lowers – True of False.

More True than False – Approximately 30% of your credit score is determined by how much overall credit that you have available to you versus how much of that credit you are using. This creates your utilization ratio. It is the ratio of total available credit to debt. If you have a lot of available credit and low amount of debt your ratio is low. That is a good thing. If it is the other way around, your utilization ratio is high. If you close accounts that have free credit limit, you remove the available credit limit from your ratio, which in turn could increase your utilization ratio and lower your score.

(5) If someone illegally uses your credit card without your authorization, you are on the hook for the full amount charged on the credit card – True or False

False – The law states that you are only on the hook for no more than $50. The credit card company is on the hook for the unauthorized charge. Credit card companies market that you have zero liability for unauthorized charges. They are just marketing something that you have anyway due to the law. In fact, most companies waive the $50.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, Credit Card Companies, credit cards, credit history, credit report, Credit Score, Debt, FICO, Prudent Money

Credit scores are extremely important in our society. A good credit score saves you money in the long-run. One of the items that can lower the credit score is an inquiry. Of course, this occurs when a creditor or employer runs a credit check.

There are two types of credit inquiries. There is the soft inquiry. This occurs when you check your own credit file and score. Soft inquiries do not affect your credit score. There are no deductions for points.

What about a hard inquiry? When a company runs a credit check, points will be deducted from the credit score. The amount really depends on how many inquiries have been made and in what time-frame. For instance, consumers can run many inquiries within a 14-day time period and it only counts as 1 inquiry. The credit reporting agencies understand that a person might need to shop rates when buying a house or car. So, the credit reporting agencies allow for that over that 14 day period.

Who can arbitrarily check your credit scores and for what reason? Well the law reads that a company or individual must have a permissible purpose. They have to have a valid business reason for checking your scores. Unfortunately, if you don’t agree with a credit check and want to dispute it to have it removed, the credit reporting agencies typically side with the creditor. Most inquiries have legitimate permissible purposes when it comes to checking credit.

Only in cases of fraud could you have it removed.

Some examples of permissible purpose would be:

- To obtain credit
- Employment purposes – must have consumer permission
- To assess credit risk by a creditor
- Underwriting of insurance
- In connection with a business transaction
- Eligibility for a state license

Here is one that you probably would never think of. If you are renting an automobile with a debit card, the rental car company most often will check your credit to make sure that you are not a credit risk. With a credit card, they know that their risk is covered if you damage the car or keep it an extra day. With a debit card, there is a risk that they will not get their money.

This offers them a way to collect. So, if renting a car, always use a credit card. If you are going to use a debit card, present a credit card in order to prevent them from checking your credit report.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, credit card, credit report, credit scores, debit card, fraud, hard inquiry, Prudent Money, soft inquiry

Making your credit score the best that it can be isn’t rocket science. Fortunately, you really don’t need to pay those services big dollars to do something that you can easily do yourself. However, you do need to know how to go about the process the right way.

Remember, that on your credit report (and you have 3 of them – TransUnion, Equifax, and Experian.), all items should be classified in one of three ways.

1) Correct
2) Inaccurate – information is correct; however parts of it need to be corrected
3) Mistaken – the information is not yours and needs to be removed

There really is nothing that you can do if it is correct. If you have a bankruptcy or a collection item on your credit report, then it stays until it serves its time. Each negative item has to stay on that credit report for 7 ½ years past the first missed payment.

The information is inaccurate (balance or date is incorrect, etc.) then it is important to dispute the information and request that it is corrected.

Mistaken information definitely needs to be disputed and requested to be removed on the basis of mistaken identity.

As you would guess, the three credit reporting agencies all have their own ways that they want you to go about the process.

TransUnion – They have three different ways to dispute. If you mail it in, they have a form that needs to be filled out. For complete information including forms and addresses, click here.

Equifax – They also have 3 different ways to dispute information. They are the easiest to deal with because they don’t require any additional forms. For complete information including forms and addresses, click here.

Experian –They have one way to dispute. In order to dispute an item, you must buy a credit report from them so that you have a credit report number. They are running a racket. Then you dispute everything online. What a rip-off!! For more information, grab your credit card and go here.

So, here are a couple of tips:

1) If it is a minor item, dispute online or over the phone. If it is a big item, always dispute through the mail using certified mail with a request to send you a receipt. This is the most effective way.
2) When disputing something, include as much evidence to support your claim as possible.
3) If you want to get around the Experian credit report fee, you can always dispute the same item with another credit reporting agency. Most of the time, an item will be reported on at least two of the three credit reporting agencies. If you dispute the item with one agency and they rule in your favor, they then communicate with the other agencies and have them correct or remove the information.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: bankruptcy, Bob Brooks, collection, credit report, Credit Score, Deceptive Money, Equifax, Experian, Prudent Money, transunion

I had a question come up regarding the new Truecredit (http://www.truecredit.com/) credit file lock. I have commented in the past on how Lifelock (http://www.lifelock.com/) works. Lifelock is simply putting fraud alerts on your credit reports every 90 days in order to help you fight identity theft.

As a review, the law states that you may only issue a fraud alert in the event that you are a victim of identity theft or you think that you might be a victim of identity theft. It doesn’t say that consumers should just apply a fraud alert because of general identity theft concern. So, this is a company taking advantage of a gray area in the law. If you don’t have an ethical issue with it ( I do by the way) then you can do it for free for yourself.

I have always stated that Truecredit is an outstanding company. So, I don’t want you to get these two programs mixed up. Truecredit are just stating that the company will put a lock on your TransUnion credit reporting agency credit report and not all three. They are not issuing fraud alerts.

TransUnion owns Truecredit. They can easily offer this program due to the ownership. Thus, TransUnion can elect to lock a consumer’s credit file outside of whatever the law says. Is it a benefit? Truecredit doesn’t charge for it. Locking up 1 of the 3 in a sense is a false sense of security. An identity thieve can still access the other two credit reporting files. In a business of aggressive marketing, it is probably Truecredit’s way to stay up with the competition without taking the low road like Lifelock.

Tags: Bob Brooks, Credit lock, fraud alerts, Identity Theft, LifeLock, Prudent Money, Truecredit