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ethical-credit-repair

Tackling Your Holiday Credit Card Debt

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Tackling Your Holiday Credit Card Debt

You may have began the holiday season with a firm conviction: I will not overspend this year. I will only spend what I can afford. I will not go into debt. Yet the truth is that despite the best intentions, we Americans are notorious for digging ourselves into big financial holes during the holidays.

If you find yourself wanting to run away and hide from your impending credit card statements, this article was written specifically with you in mind. It is too late to undo the damage your holiday spending sprees may have caused, yet that is no excuse for wallowing in self pity for the next few months and allowing the damage to fester.

Excessive credit card debt can place a burden upon you financially and can damage your credit scores as well. As a result, it is important for you to take action immediately so that your credit and your finances can start to recover.

Make a List, and Check It Twice

The first component in your post-holiday recovery plan needs to be a detailed list of the damage which has already been done: aka a list of your outstanding credit card balances. You should begin the list by writing the smallest balance at the bottom and working your way upward. Here is an example to help you get started.

·        ABC Bank Card: $2,000 Balance

·        XYZ Bank Card: $1,500 Balance

·        QRS Bank Card: $800 Balance

Start at the Ground Floor

Credit card debt harms your credit scores even when you make all of your monthly payments on time. The reason why credit card debt can cause so much credit score damage is because 30% of your FICO credit scores are largely based upon your revolving utilization ratio (aka your credit utilization). Your credit utilization is basically the relationship between your credit card limits and your credit card balances. The closer your balances climb to your limits the worse the impact will be upon your credit scores.

Credit scoring models like FICO and VantageScore pay attention to the credit utilization ratio on all of your credit cards combined and also to each of your credit card accounts individually. This means that each time you pay a credit card account off you will probably see at least some credit score increase. In fact, when you pay a credit card balance down by even a mere 10% you might begin to see some positive credit score movement.

By paying off your lowest credit card balances first you may be able to bring about a positive increase in your credit scores more quickly. For example, paying off the $800 on the card with the smallest balance in the example above (QRS Bank) would probably help your credit scores more than if you paid the same $800 on either of the cards with the higher balances (ABC Bank or XYZ Bank). Starting at the ground floor and working your way up as you pay off your credit card debt will give you a lot more bang for your buck.

A Commitment to Change

The most important step you can take as you work toward eliminating your holiday credit card debt is to resolve to break the bad habit of overspending once and for all. In fact, if you will cut your spending in other areas you could free up additional funds to help you wipe out your credit card debt much more quickly. Paying off your credit card debt may not be easy and no one ever said that cutting spending is fun, but making a positive financial change is worth the sacrifice. Take control of your finances so that your finances won't control you.

 





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.


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Credit Scams You Should Avoid

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Credit Scams You Should Avoid

Poor credit can lead to a lot of painful and embarrassing moments. If you are currently struggling with credit problems then you already know just how miserable bad credit can be. Credit problems can make it difficult to secure a place to live, to finance a vehicle, to qualify for a credit card or loan, and even to do something as simple as opening a new utility account without a sizable deposit.

Unfortunately, scammers are very aware that bad credit makes life hard too. They know that many consumers are absolutely desperate to change their credit situations and they eagerly try to prey upon this desperation. Thankfully, you can help to protect yourself from these con artists by learning a little more about some of the most common credit scams you need to avoid.

The New Credit Identity Scam

One of the most popular credit scams involves the practice of paying someone to create a "new" credit identity for you. On the surface, it is understandable why the idea of a fresh start might sound attractive to you. Unfortunately, what a scammer will not tell you is that by using a "new" identity you could actually be guilty of committing a number of different crimes.

The new credit identity scam, also known as file segregation, typically involves a few steps. First a fraudulent company, likely pretending to be a credit repair outfit, will offer to sell you a new credit identity number (typically an EIN number or a CPN number) which you can use in place of your social security number on future credit applications. By using this alternative number you will be creating a separate or segregated credit file with each of the credit bureaus which will supposedly replace your old, damaged credit files. Yet not only is this file segregation scheme typically illegal, it can also be expensive and ineffective.

Fees for new credit identity services often run into the thousands of dollars, although the scammer will probably try to argue that the fee is a small price to pay for an instant fix to all of your credit woes. Be careful not to be fooled by such tactics.

Additionally, when you use an EIN or CPN number in place of your social security number on a credit application you are likely guilty of bank fraud. If you submitted a fraudulent application over the phone, online, or via mail then you might be guilty of wire fraud or mail fraud as well. Furthermore, that EIN or CPN number you thought you were purchasing could actually be a real social security number which has been stolen from someone else. (Are you really surprised that your friendly neighborhood scammer might be an identity thief as well?) If you use someone else's social security number on a credit application then you might just be guilty of committing identity theft yourself.

The Tradeline Rental Scam

Piggybacking is a term which refers to the process of being added to someone else's existing credit card account as an authorized user. Becoming an authorized user on someone else's credit card account can sometimes be a wise part of your overall credit improvement strategy. If you are added onto an older, well managed credit card account it certainly has the potential to help improve your credit scores when (and if) that positive account shows up on your credit reports. However, the authorized user strategy is only really safe and effective when done with someone whom you know personally.

Tradeline renting describes the process of paying to piggyback on a stranger's credit card account in an attempt to trick the credit scoring system. Typically you pay a middle man (most likely a sizable fee) who will then act as an agent to connect you with someone who is willing to add you onto their account as an authorized user. The bad news if you fall for the tradeline renting scam is that you could be guilty of bank fraud and a number of other associated crimes as well. To add insult to injury, newer versions of FICO's credit scoring models have been designed with logic that helps to detect fraudulent tradeline renting. So, not only can tradeline renting be expensive and illegal, there is a chance that it might not even work. 

Legitimate Credit Help

Although you should be careful not to fall for credit scams, the good news is that there are legitimate credit repair professionals who may be able to help you with your credit problems. Remember, a trustworthy credit repair company will never ask you to change your identity, rent a tradeline from a stranger, or to pay upfront fees for services.

CLICK HERE or call 704-499-9696 to schedule a no-obligation credit analysis with a HOPE4USA credit expert today.






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.


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The Newest Credit Scoring Model: VantageScore 4.0

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The Newest Credit Scoring Model: VantageScore 4.0

To many people, FICO is king when it comes to credit scoring models. The majority of lenders, most notably those in the mortgage industry, rely either exclusively or at least heavily upon FICO scores as they evaluate the credit worthiness of new applicants for financing. However, with the introduction of VantageScore 4.0 in the fall of 2017 many lenders are starting to pay a bit more attention to this newest arrival to the world of credit scoring.

In truth, VantageScore Solutions (the company which creates and sells VantageScore credit scores) is not so new. It is only new when compared with the Fair Isaac Corporation (FICO). VantageScore Solutions, founded by the 3 major credit reporting agencies themselves in 2006, is actually over a decade old. 

Yet most lenders still prefer FICO scores. FICO was initially founded in 1956 and created its first credit scoring system in 1958. The credit bureaus themselves began to adopt FICO credit bureau risk scores between 1981 (Equifax) and 1991. According to FICO its scores are currently used by 95% of the largest financial institutions in the country.

VantageScore 4.0

Though the company is already dominate in direct-to-consumer credit score sales, VantageScore Solutions has been fighting for over a decade to dip further and further into FICO's lender-purchased credit score market share. This goal is achieved by convincing more and more lenders to purchase VantageScore's credit scores to use for risk analysis in prospecting, account management, and application reviews. The roll out of the 4th generation of its scoring model in the fall of 2017 will be just one more step toward this goal, but might be better described as a giant leap instead of a step.

The reason the release of VantageScore 4.0 is such big news is because it will be the first credit scoring model to consider trended data in the calculation of consumer credit scores.  Trended data, added to credit reports several years ago, allows credit card issuers to report a 24 month history of historical balances and payment amounts made by their customers. This historical data can show future lenders whether you are truly someone who pays off your credit card balances in full each month (aka a transactor) or whether you are in the habit of revolving an outstanding balance from one month to the next (aka a revolver).

Revolvers, especially minimum payers (consumers who only pay the minimum payment due on their credit card bills) represent a higher level of risk to lenders. In fact, according to a study conducted by Experian, minimum payers are 6 times more likely to have a future delinquency than transactors. TransUnion's study on trended data found that revolvers represent between 3 to 5 times more risk than transactors.

Including trended data in VantageScore 4.0 gives this new scoring model increased predictive power over previous generations of VantageScore and, arguably, FICO scoring models as well. In other words, this new scoring model is being touted as a more reliable way to predict credit risk. Predicting risk, after all, is why lenders purchase credit scores in the first place.

Advice for Consumers

Because of recent changes in credit reporting, especially the upcoming removal of many tax liens and judgments from credit reports and the removal of many medical collections as well, lenders and credit score developers are going to begin paying more attention to alternative credit data which is also predictive. It has always been important to pay off your credit card balances in full each month both from a credit scoring perspective and also from a financial perspective as well. However, with the consideration of trended data now in the works the importance of paying off your credit card balances has multiplied exponentially.

Of course implementing a new credit scoring model is very expensive for lenders. Due to the high cost it will likely be years before a majority of lenders begin using VantageScore 4.0. The same can be assumed for any yet unannounced but potentially forthcoming new releases from FICO which consider trended data for that matter.

As a result consumers do not necessarily have to worry about trended data impacting their credit scores for a while. Still, remember that when credit scoring models which consider trended data are finally adopted by lenders those models will be looking back at a 24 month history of your credit card payments. This means that the time to develop the habit of paying off your credit card balances monthly is now.

 





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.


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Coming Soon: A New Credit Score Boost for Millions of Americans

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Coming Soon: A New Credit Score Boost for Millions of Americans

Arguably the biggest change to impact credit reporting (and by extension credit scoring) in decades will be going into effect within just a few months. In July of 2017 the 3 major credit reporting agencies (CRAs) - Equifax, TransUnion, and Experian - have announced that they will remove a significant number of the tax liens and judgments which are currently appearing on consumer credit reports. The pending removal of these derogatory public records could potentially boost credit scores for millions of Americans.

Reasons Behind the Change

There is nothing illegal about a credit reporting agency placing a judgment or a tax lien on your credit reports as long as they comply with the law. Of course if incorrect information is reported (i.e. wrong balance, incorrect dates, a public record which is not yours) that is another story all together.

It is important to understand that the Fair Credit Reporting Act (FCRA) absolutely allows for certain types of accurate public record information to appear on credit reports. Judgments have an FCRA requirement to be removed after 7 years and paid tax liens fall under the same 7 year removal requirement. According to the FCRA unpaid tax liens never have to be removed from credit reports, making them currently one of the most difficult credit problems for a consumer to overcome. However, in July this previously massive credit reporting problem is going to simply vanish from the credit reports of many American consumers.

As already mentioned, there is no FCRA requirement to remove public records such as tax liens or judgments from credit reports unless they have been reporting longer than is legally allowed. What then would prompt such a massive change in credit reporting procedure by Equifax, TransUnion, and Experian? The answer is regulatory concerns.

According to a statement released by the Consumer Data Industry Association (the trade organization of the credit reporting agencies), interim president Eric Ellman attributes the changes in credit reporting procedures as being part of the National Consumer Assistance Plan (NCAP). The NCAP was created after the 2016 settlement between the CRAs and 31 different state attorneys general. (Initially the settlement was reached between the CRAs and the New York Attorney General. You can read more about that first settlement here.)

Per Ellman, as a result of the NCAP the credit reporting agencies " have developed enhanced public record data standards for the collection and timely updating of civil judgments and tax liens." These new standards include a requirement for "a minimum of consumer personal identifying information (PII)" such as a consumer's name, address, social security number and/or date of birth to be verified in order to include public record information on a consumer's credit reports. Additionally, a minimum frequency of courthouse visits (specifically at least every 90 days) to update public record information is required under the NCAP. Most of the tax liens and judgments currently appearing on consumer credit reports do not meet these standards set forth in the NCAP and, as a result, will be removed from credit reports altogether in a few short months.  

What the Change Means for Consumers and Lenders

FICO credit scores, the chief credit score brand currently used by most lenders, are designed to consider public records such as tax liens and judgments whenever a consumer's credit scores are calculated. When the aforementioned public records are present a consumer's credit scores are normally impacted negatively. As a result, when the CRAs remove a public record (or multiple public records) from a consumer's credit reports the consumer's credit scores are almost certain to move upward, perhaps significantly. Translation: up to 12 million Americans could potentially see an immediate increase in their credit scores this summer when the majority of tax liens and judgments are removed from credit reports.


up to 12 million Americans could potentially see an immediate increase in their credit scores this summer when the majority of tax liens and judgments are removed from credit reports.

Lenders are understandably troubled regarding the pending change in credit reporting procedures when it comes to public records. After all, lenders rely heavily upon both credit reports and credit scores to predict the risk of doing business with new applicants. Removing tax liens and judgments from credit reports will lead to credit score increases for many consumers, making it more difficult for lenders to accurately evaluate the credit risk of new prospective customers.

Many consumers, on the other hand, are thrilled by the prospect of the upcoming change which could lead to higher credit scores. Of course it is important for these consumers to remember that the removal of a tax lien or judgment from a consumer's credit reports does not make the issue simply go away.

Consumers applying for a mortgage, for example, will probably not be off the hook when it comes to unresolved tax liens and judgments. Although a tax lien or judgment may no longer be appearing on the applicant's credit reports that does not mean that the items will not show up when the lender performs a public records search of its own. Lender requirements to pay outstanding judgments or tax liens (or at least enter into an acceptable payment plan) are not going to change because the public records may be removed from the credit reports. The removal of these items from credit reports could certainly help to bring about a credit score improvement, but that does not mean a legitimate judgment or tax lien would no longer be owed.







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.


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Consumer Financial Protection Bureau Sues Navient

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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.


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