Kudos to Suzanne Woolley for authoring an article which accurately portrays how one can improve their credit.
JUNE 09, 2016
Equifax, Experian and TransUnion today launched a new website, http://NationalConsumerAssistancePlan.com, to inform and update consumers about implementation of the National Consumer Assistance Plan, an initiative launched by the three companies in March, 2015 to enhance their ability to make credit reports more accurate and make it easier for consumers to correct any errors on their credit reports.
“Providing both consumers and businesses with accurate, transparent credit reports is our first priority,” said Stuart Pratt, President and CEO of the Consumer Data Industry Association, the trade association representing the consumer data industry, including the three national credit reporting agencies. “The nationwide consumer credit reporting companies are making important changes to their procedures that will improve their ability to collect accurate information, and we want to make sure consumers know about the new options available to them.”
The National Consumer Assistance Plan is being implemented over three years, and the new website will serve as a vehicle for updating consumers about changes to their ability to interact with the nationwide consumer credit reporting companies.
Changes included in the National Consumer Assistance Plan include:
- Consumer experience:
- Consumers visiting www.annualcreditreport.com, the website that allows consumers to obtain a free credit report once a year will see expanded educational material.
- Consumers who obtain their free annual credit report and dispute information resulting in modification of the disputed item will be able to obtain another free annual report without waiting a year.
- Consumers who dispute items on their credit reports will receive additional information from the credit reporting agencies along with the results of their dispute, including a description of what they can do if they are not satisfied with the outcome of their dispute.
- The credit reporting agencies (CRAs) are focusing on an enhanced dispute resolution process for victims of identity theft and fraud, as well as those who may have credit information belonging to another consumer on their file, commonly called a “mixed file.”
- Data accuracy and quality:
- Medical debts won’t be reported until after a 180-day “waiting period” to allow insurance payments to be applied. The CRAs will also remove from credit reports previously reported medical collections that have been or are being paid by insurance.
- Consistent standards will be reinforced by the credit bureaus to lenders and others that submit data for inclusion in a credit report (data furnishers).
- Data furnishers will be prohibited from reporting authorized users without a date of birth and the CRAs will reject data that does not comply with this requirement.
- The CRAs will eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as traffic tickets or fines.
- A multi-company working group of the nationwide consumer credit reporting companies has been formed to regularly review and help ensure consistency and uniformity in the data submitted by data furnishers for inclusion in a consumer’s credit report.
The National Consumer Assistance Plan builds on other steps the credit bureaus have made in recent years to improve consumer’s ability to resolve issues related to credit reports. In 2013, the companies launched a process under which consumers can upload documents digitally to dispute how their lenders have reported their accounts to the credit bureaus.
The plan was launched after cooperative discussions and an agreement with New York Attorney General Eric Schneiderman and a group of other State Attorneys General.
Source: News Release
Personal bankruptcy is surprisingly common in the United States. Almost 15 percent of the U.S. population has filed for bankruptcy sometime over the past twenty-five years, based on my calculations using the New York Fed Consumer Credit Panel/Equifax (CCP). In 2015, roughly 800,000 debtors filed for bankruptcy, according to court records, representing 0.64 percent of U.S. households. One of the consequences for filers is a mark on their credit report—a bankruptcy “flag”—which indicates that the consumer has filed for bankruptcy.
This bankruptcy flag is visible to creditors and, according to the credit bureaus, hurts filers’ credit scores. To limit these effects, the Fair Credit Reporting Act restricts the length of time that credit bureaus can fly these flags on reports for each (personal) bankruptcy chapter: the flag for Chapter 7—in which debtors get a full discharge of (unsecured) debts after unprotected (non-exempt) assets are liquidated—must be removed after ten years, while the flag for Chapter 13—a partial debt repayment bankruptcy designed to help people keep their homes—is typically removed after seven years. For economists, the fixed timing of the flag removal (and the difference across bankruptcy chapters) gives us a laboratory to explore how the lifting of bankruptcy flags affects borrowers’ credit scores and credit outcomes, by comparing these outcomes directly before and after flag removal…
As discussed in Credit: Use It To Build It -Part 1, it is essential to qualify for and properly use credit in order to have credit. A thin credit file does little good to help one build or rebuild credit. Thin credit is described as a file lacking in length and depth of credit history. Thin is not a good thing in the credit sense.
The length of a credit history is a matter of time. A short credit history may have accounts that have been open for a matter of months or one or two years. A long credit history may span decades because open, active accounts remain indefinitely.
The depth of a credit report is an issue of the number and types of accounts you have. A credit history with only one or two accounts will likely be considered thin, even if it spans many years. A “thick” file would have several accounts of different types. For example a credit history could include credit cards, installment loans and a mortgage.
Let’s start with the basics, understand the mechanics of the FICO Pie Chart as well as the art and science of Rebuilding Your Scores. Credit scores are not a big mystery; they are simply a measure of the information reported to the credit reporting agencies by your creditors. Learn about your credit reports control that which you can as to what is reported and your credit scores will follow.
Credit Score Facts
On credit scores, how do they work? What you can do to raise your scores is discussed in this blog. It is necessary to understand there is a difference in the credit scores one may obtain for free via the Internet. These are not the scores used by lenders. They may not even be close to those used by lenders. In this blog we discuss the difference between what we call FICO or FAKO Scores?
Join a Credit Union
Not just any credit union will do. Some credit unions are so large they act more like a bank than a credit union. To learn a little more about credit unions and to find one you can join, read our blog titled: Credit Union Power. This is a key step to reestablishing your credit. Once you’ve become a member, ask for help to set up a $500 secured installment loan. Next, utilizing some of your savings, as much as possible, set up a secured credit card account and use it properly.
Beginning Anew or New?
Whether beginning from scratch as a young person with no credit or whether starting again, the tasks are quite similar. Read through both Part 1 and Part 2 of these blogs to learn more of what to do and not do as you begin this new journey. If you have a family member with excellent credit, read and share this blog on this which we call inherited credit. You have the opportunity to learn about how it works and how it doesn’t work.
Anyone who uses credit cards could have high utilization, particularly those which pay off their balances in full each month. This is because balances are often reported to the credit bureaus mid-billing cycle. So if you have a $5,000 limit and you charge $4,000 in a month, you could be reportedly utilizing 80% of your available credit. The result is most often dramatically reduced FICO™ Scores.
We wish you success!Financially Speaking™ James Spray, MLO, CNE, FICO Pro CO LMO 100008715 | NMLS 257365 | September 21, 2014 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.
Embarrassed: Believes No One Will Grant Credit
My very good friend, we’ll call him Ramsey (not David), does not use credit. Mind you, he’s not just a simple follower of some nameless cult leader advocating that no one should ever use credit. Ramsey’s a regular fellow, professional, married with children and a grandchild, too. Ramsey simply does not use credit and has not used credit in the past 6-8 years. The only credit he’s had in the past several years is bad credit due to medical bills. These are the type of medical bills CFPB studied and recently discussed. These are the medical bills which have ruined credit for so many for so long. This is compounded if one is not offsetting the bad credit with good credit. And he wonders why he has such poor credit scores. One must use credit to get credit for using credit.
Fear of Credit
Tips for overcoming credit phobia – Although you intellectually understand that using a credit card is beneficial, you might still have emotional concerns. Perhaps you misused or didn’t understand how to use and not use credit when you were younger. Perhaps you had a bad experience. Start over and don’t make the same mistakes, you’ve learned what not to do.
The good news is that you can take steps to get more confident about the proper use of credit.
Check your attitude and thinking – One reason people overspend with credit cards is they are thinking incorrectly. Internalize the idea that credit cards provide short-term loans. When you swipe your card, you’re borrowing money – and you’ll have to pay it back. Plastic isn’t free money or additional income. And it does not replace income.
Confront your fear – Ignorance breeds fear, so the best way to overcome a fear of credit cards is to become more educated about them. The Board of Governors of the Federal Reserve System put together this wonderful guide to help you learn more about credit cards.
Make a budget – The best way to keep your spending under control is to make a plan for how you’ll use your funds. Be realistic about your budget and stick to it. You can use this budget form from Google for free. TIP: The most restrictive budgets usually fail.
Track spending by keeping receipts – After setting up a budget, keep tabs on how you’re doing by tracking your spending. You can use online banking or any other method you’re comfortable with, just do it.
Sign up for alerts – Most credit card issuers give you the option to set up text or email alerts to be reminded of billing due dates, your current balance, etc. Even though you’re keeping track on your own, setting up an alert adds an extra layer of protection against overspending or not timely paying.
Learn the facts –. Do not let your in-use credit be more than 20% of the available credit, ever. Better is to have no more than 10% of your credit limit in use as you are building or rebuilding your credit reputation. To learn more click and read this and then this.
Next, we suggest you read: Credit: Use It to Build It – Part 2Financially Speaking™ James Spray, MLO, CNE, FICO Pro CO LMO 100008715 | NMLS 257365 | September 19, 2014
Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.
In neither of the below situations had either credit user been reckless or irresponsible. Neither had run up large balances and there were no late payments. The problem with each was that they simply hadn’t been using credit and had allowed open accounts to age-out from lack of use and be closed by the credit provider.
She Quit Using Credit
In December, my mortgage client’s co-signer’s FICO Scores were all over 830 and given that 850 is the ceiling, we call these great scores! In February, when my client was ready to set a closing, her co-signer had no reported FICO Scores. This means they had fallen below the floor of 350.
His Credit Cards Expired
Summer before last, my son-in-law began shopping for a home in their new town. His scores were all in the early 800s. By the time it came to schedule a closing, his scores had all dropped into the 740 range. What happened? His unused credit lines were closed. The result was that his usage of available credit increased such that his scores dropped. Rather than having less than 10% of his available credit in use, he now had more than 45% of his available credit in use. He had not increased the amount of credit he was using. He lost open unused credit, which had a negative impact on his overall score, as it appeared he was overusing credit.
What to Do?
The card issuers have models which track your usage or lack thereof. The credit provider also incurs ongoing costs such as credit reporting, accounting and audit controls. Be Aware: If you are not using the credit card at least once a year, the provider is likely to close the account. If nothing else, charge something you need to purchase regularly, perhaps a pair of socks.Financially Speaking™ James Spray, MLO, CNE, FICO Pro CO LMO 100008715 | NMLS 257365 | August 22, 2014 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.