Viewing entries tagged
credit-scores

Why Do the Credit Scores I Pull Look Different Than the Ones My Lender Pulls?

Comment

Why Do the Credit Scores I Pull Look Different Than the Ones My Lender Pulls?

“Help! I’m really confused! I got all 3 of my credit scores online last week and they looked really good. Today I applied for a mortgage and the scores the lender pulled look totally different. All 3 scores are about 50 points lower than the scores I saw online. Thankfully, my scores were still high enough to get a mortgage loan, but why are the scores so much lower today?”

In the credit world there are few things which frustrate and upset consumers more than discovering the sometimes vast difference between consumer credit scores and the credit scores used by lenders. Popular TV commercials for credit monitoring websites often confuse consumers and lead them to believe that they have only one credit score. However, the truth is that there are actually hundreds of different types of credit scores. The idea that you have one "official" credit scores is a complete myth.

Consumer Scores Vs. Lender Scores

While there are hundreds of credit scores available, most of these scores can be boiled down into one of 2 categories - consumer scores or lender scores. (Insurance companies often use credit based insurance risk scores as well, but for the purpose of this article those scores will fall into the "lender" category as well.) Consumer scores are scores that are accessible to you individually. You can purchase these scores from the credit bureaus directly, from FICO directly, or from a host of consumer credit monitoring websites. Some websites will offer you free credit scores in exchange for signing up for a trial offer of their credit monitoring services. Other websites will offer you a free score from 1 of the 3 major credit bureaus (not all 3) in exchange for your email address and the right to advertise financial services to you. CLICK HERE if you would like to compare websites where you can access your 3 consumer credit scores.

Lender scores are almost always some version of a FICO score. There are some lenders which have begun using VantageScore credit scores (a score created by the credit bureaus themselves) in recent years, but FICO is still the most popular lender score in use today by a landslide. Both FICO and VantageScore have released multiple generations of their credit scoring software. Additionally, FICO scores come in many varieties (FICO Mortgage Score, FICO Auto Score, FICO Personal Finance Score, FICO Installment Loan Score, etc.) and each different FICO score variety typically has different versions in use as well. If today you were to pull a copy of your consumer credit scores, have a mortgage loan officer pull your credit scores, and have an auto lender pull your credit score then you have almost a 100% chance of getting a different set of numbers every time. Credit scores can vary pretty wildly depending upon which credit scoring model is being used to calculate them.

Focus On Healthy Credit

If you are feeling frustrated or overwhelmed as you try to keep track with all of the different possible credit scores, you are not alone. Remember the statement above revealing that you have hundreds of credit scores? It would be practically impossible for a consumer to keep track of each one of these scores individually. Instead of spending time and energy focusing on the numbers, it is much better to focus on the health of your credit as a whole.

The fact of the matter is that all credit scores are based upon the same data. Your credit scores are calculated from the information which is contained in your credit reports. (Don't forget, you can get a copy of all 3 of your credit reports, without scores, completely free once a year at www.annualcreditreport.com.) If your credit reports show that you routinely make late payments on your accounts, your scores will suffer regardless of who pulls them or which credit scoring model is used to calculate them. If you have clean credit reports with no collections, no late payments, and low credit card balances then all of your many scores will likely be in great shape. You may have hundreds of scores, but you only have 3 credit reports. You may not be able to control your credit scores, but you can absolutely control your credit management habits.  


michelle-black-credit-expert

Michelle Black is an author and a credit expert with nearly 2 decades of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft.




Expert Credit Advice:



Comment

Consumer Financial Protection Bureau Sues Navient

Comment

Consumer Financial Protection Bureau Sues Navient

In one of its final moves under the former presidential administration, the Consumer Financial Protection Bureau (CFPB) filed three separate lawsuits against the student loan servicing giant Navient. Navient currently services the student loans of over 12 million borrowers in the United States, loans which amount to over $300 billion in both federal and private student loan debt.

The student loans in question are not actually issued by Navient itself. Instead the company collects the payments on some 12 million loans on behalf of the US Department of Education, numerous private banks, and other lenders as well. There are 9 total student loan services currently under contract with the US Department of Education, but Navient is the largest servicer. In fact, nearly 25% (1 in 4) of student loan borrowers currently have Navient as their loan servicer.

The Allegations

According to the CFPB Navient failed student loan borrowers and repeatedly cheated many of them out of their rights to lower payments. Richard Cordray, director of the federal watchdog agency, alleged in the CFPB's statement that "For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today's action seeks to hold them accountable."

Additionally, the CFPB took issue with Navient's alleged tendency to direct borrowers toward forbearance when financial troubles arose instead of reviewing income-based repayment options. When a borrower takes out a forbearance of their student loan the interest charges on the debt continue to accrue even while payments are not actively being made. The result? An additional $4 billion in interest charges were added on top of the principal loan balances of the Navient-serviced borrowers who enrolled in multiple and concurrent forbearances between January 2010 - March 2015.

Navient's Version of the Story

Navient, of course, has a very different side of the story to tell. The company vehemently denies any wrongdoing whatsoever and plans to fight the CFPB's allegations.

According to Navient the CFPB actually issued an ultimatum to the company to settle by Inauguration Day or be faced with multiple lawsuits. In a press release the company stated that "Navient rejects CFPB ultimatum to settle by Inauguration Day or be sued. The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit—midnight action filed on the eve of a new administration—reflects their political motivations."

In addition to allegations of the CFPB suing as a result of political motivations, Navient also maintained that the federal agency was trying to apply newly updated student loan servicing standards to Navient's past dealings with borrowers. In the aforementioned press release Navient stated that the company  "welcomes clear and well-designed guidelines that all parties can follow, and [they] had hoped [their] extensive engagement with the regulators would achieve this objective. Instead, the suit improperly seeks to impose penalties on Navient based on new servicing standards applied retroactively and applied only against one servicer. The regulator-asserted standards are inconsistent with Department of Education regulations, and will harm student-loan borrowers, including through higher defaults."

Finally, in response to the allegations that Navient pushed borrowers toward forbearance options in lieu of income-based repayment options, the company pointed out that nearly half (49% to be exact) "of loan balances serviced by Navient for the federal government are enrolled in income-driven repayment plans," and that "assertions that we do not educate borrowers about IDR plans ignore the facts."





michelle-black-credit-expert

Michelle Black is an author and leading credit expert with a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.


Comment

My Debt Has Been “Charged Off.” What Now?

Comment

My Debt Has Been “Charged Off.” What Now?

“Michelle, last year I lost my job and was unable to keep up with my credit card payments. The credit card accounts have been closed and the accounts are being reported as “charge offs” on my credit reports. I don’t know why, but the accounts are still showing outstanding balances. Since the accounts have been charged off that means that I don’t owe the debt anymore and the balances should be zero, right? What gives?!”

A somewhat common misconception which consumers may have is the idea that if a bill is charged-off then the debt is no longer owed. Unfortunately for the consumer, that is a myth. A charge off does not equal forgiveness of a debt.  Charge off is simply a classification or a category that creditors give to debt which they will be writing off as a loss for tax purposes. When a charge off notation appears on a credit report, it does not mean that the consumer no longer owes the balance. The balance may still be very much owed to the creditor or collection agency.

When a debt is charged off by the original creditor (typically once the account has become around 6 months past due), it is often sold or turned over to a collection agency. If you can afford to pay the debt before it is reported to the credit reporting agencies, you should do so. You can save yourself a big headache in the future by paying the account now.

It is also important to be aware of your rights concerning charged off debt. Take a look at the list below to protect yourself from “credit bullies” who are employing abusive or illegal collection tactics.

Know Your Rights

1. FDCPA (Fair Debt Collection Practices Act) -

Collection agencies are not allowed to harass you. They cannot call you excessively, threaten you, or call you at all hours of the night. Collection agencies cannot call your friends and family members in an attempt to embarrass you. There are a lot of other protections afforded to you under the FDCPA. If you have been called or harassed by a collection agency, it might even be in your best interest to speak with an attorney who specializes in FDCPA cases. In fact, feel free to contact us if you would like a referral to a reputable attorney in your area. If you have been harassed then there is a chance your attorney will even represent you on contingency with no upfront funds coming out of your pocket for attorney fees.

2. FCRA (Fair Credit Reporting Act) –

A. Re-aging is illegal.
Derogatory accounts are allowed to remain on your credit reports for 7 years from the date of default (when the original account became 6 months past due). If a collection agency changes the date of default on the original debt in an attempt to manipulate the date when an item is purged from your credit reports, that is known as re-aging and it’s illegal.

B. You have the right to dispute inaccurate, questionable, unverifiable, and outdated accounts.
If you believe that a collection account on your credit reports has been re-aged, you have the right to dispute the account with the credit reporting agencies. You can file disputes on your own, or with the help of a professional like HOPE4USA. You also have the right to dispute any accounts which you believe to be inaccurate or unverifiable. 

The best thing that you can do for your credit scores is, of course, to keep all of your payments on time. However, anyone using a little common sense can realize that most people never set out not to pay their bills. It’s not like consumers with credit problems just wake up one morning and say, “I think I’ll stop paying my bills today.” No, most people who get into credit and financial trouble do so due to unfortunate circumstances like job loss, illness, family emergencies, etc. Bad credit happens to good people every single day.

If you have made credit management mistakes in the past, there is good news. Bad credit does not have to last forever. CLICK HERE to download our free HOPE4USA Credit Report Toolkit for some expert advice on how to get started on your road to recovery today!




michelle-black-credit-expert

Michelle Black is an author and leading credit expert with over a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.


Comment

The Dangers of Co-Signing.

Comment

The Dangers of Co-Signing.

The Dangers of Co-Signing
By Michelle Black

We've all been there before.  A friend or family member asks you to co-sign for a car loan, a home loan, or some other type of financing and you feel obligated to help your loved one out.  You might think that being a co-signer is not really that big of a deal since you are not the primary borrower on the account.  However, the truth is that co-signing for someone else really is a big deal and not only is it a big deal, it can be detrimental to your credit as well.

When you co-sign for someone else's loan you are legally responsible for the account just like you would be if you received the loan for yourself.  Co-signing makes you a joint account holder. Plus, although you are not in control of making the monthly payments, the credit history for the account will affect your credit scores every single month.  If your loved one makes even 1 late payment on the account, your credit score could drop - in some cases up to 100 points or more.

The HOPE4USA team strongly recommends that our clients never, ever, ever co-sign for a friend or family member, not even for a child.  Spouses are the only people you should ever consider co-signing for and then ONLY IF one of you cannot qualify for the loan based upon your income alone (i.e. a mortgage loan).  We know that can be very hard to say "no" to a loved one, but if you make up your mind ahead of time that you will never co-sign it can help to make the situation a little easier when and if it presents itself.

Remember, you can refer your friends or family members to the HOPE Program if they are facing credit issues.  Our caring staff will be happy to help the people you care about establish the healthy credit they need to qualify for future financing on their own. Call 704-499-9696 for more information on the amazing services offered by the HOPE Program.



michelle-black-credit-expert

Michelle Black is an author and leading credit expert with nearly a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 


Comment

Why Consumers Don't Care about Credit

Comment

Why Consumers Don't Care about Credit

As I was checking Google for credit related news this week, something that I do quite often as the admitted credit geek that I am, I came across an article about a new study that really bothered me. The study I am referring to was recently conducted by Bankrate and, among other things, it estimates that around 35% of US consumers have never reviewed their credit reports and over 26% of consumers have never even checked one of their credit scores.

As a credit expert I am constantly approached by consumers who are extremely concerned about their credit and want to learn more about how to improve their credit reports and scores to the highest level possible. So, I found it pretty disturbing that over 1/4 of consumers simply seem not to care about their credit at all.

Although disturbed by the study, I was not surprised by the fact that a large portion of US consumers are unconcerned about their credit reports and scores. After all, thanks to the Fair and Accurate Transactions Act (FACTA) passed in 2003, consumers have had the right to pull copies of all 3 of their credit reports for free annually via AnnualCreditReport.com. Yet only a mere 4% of these free reports are claimed on an annual basis.

There are many different reasons why consumers ignore their credit reports and scores. However, regardless of the reason ignoring your credit is a recipe for disaster - especially with the modern prevalence of data breaches. Here are 3 of the top reasons why consumers do not care about their credit as much as they should.

1. Failure to Understand the Responsibility

Of course you have the right to expect accurate and error-free credit reports. It is a right that is afforded to you under the Fair Credit Reporting Act (FCRA). Yet even though you have the right to expect accurate credit reports the fact of the matter is that errors and fraud occur on credit reports every single day. Mistakes on credit reports are quite common. In fact, the Federal Trade Commission released a study in 2013 which estimated there to be around 40 million mistakes on consumer credit reports. This means 1 in 5 consumers are victims of credit report errors.

While you do have the right to expect accurate credit, it is 100% up to YOU to monitor your credit reports for mistakes. When and if a mistake does arise then you have the right to dispute the mistake with the credit reporting agencies or even with the creditor or collection agency directly. However, if you are not in the habit of checking your credit reports routinely then you will never know when an problem occurs.

2. Bad Advice

The cash-and-carry crowd has many consumers convinced, especially young consumers, that living a life free from the shackles of credit is the only logical choice to make. However, the belief that credit scores, credit cards, loans, and mortgages are all part of an evil system designed to ensnare the unsuspecting masses is completely false.

Even if you decide to avoid credit cards, rent your home, and pay cash for vehicles it is still impossible to live a life which is unaffected by your credit reports and scores (unless you plan on going completely off the grid and living in a shack in the woods). Like it or not, your credit reports and scores impact many areas of your life including your insurance premiums, utility deposits, your ability to rent an apartment, your ability to rent a car, and even your ability to land a job. The sooner you admit to yourself how much your credit really matters the better off you will be. CLICK HERE to read "Why Credit Avoidance Is a Bad Strategy."

3. Mistaken Beliefs

Many people mistakenly believe the their credit only matters when they apply for a loan. However, only checking your credit reports and scores during a loan application is a giant mistake. First, if credit issues do arise during a loan application it is important to understand that it can often take months of hard work to resolve credit problems on your own or even with professional assistance. Second, only viewing your credit reports during a loan application is dangerous because it increases the probability of fraudulent accounts appearing on your credit reports without your knowledge.

How to Monitor Your Credit

Thankfully, monitoring your credit is not very difficult. You have the right to access a free credit report from each of the 3 credit bureaus individually annually via the website AnnualCreditReport.com. There are also many websites where you can access completely free credit scores (generally from one credit bureau at a time). CLICK HERE for a list of free credit score websites. Finally, you can sign up for an inexpensive, 3-bureau credit monitoring service to make the process of keeping tabs on your credit reports and scores consistently a breeze. CLICK HERE for a list of reputable, 3-bureau credit monitoring services.







michelle-lambright-black-credit-expert

Michelle Black is leading credit expert with over 13 years of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 


Comment