Credit Bureaus are Failing American Consumers

A Resident of Virginia was left with a major error on one of her credit reports from TransUnion after her husband of 40 years died of a heart attack last August. While she was pushing through grief, she had to focus on finances. She had to downsize and sell her family home. She thought everything was settled, and had applied for a car loan. 

Upon applying she did not qualify for a low interest rate from the car dealership. The 12% interest rate she received would have cost her more than $100 extra a month. She is on a fixed income, so every dollar counts. 

TransUnion mistakenly showed that she had a PayPal credit card with a balance due of $1,200 — an error that really hurt her credit score. This account was paid off. Equifax and Experian correctly reported the account as paid off and closed. 

She filed multiple disputes with TransUnion, but like many others, the mistake was not fixed. This story comes from Consumer Reports - who reached out to the credit bureau about her situation and successfully got it corrected. 

Many Americans are unsure of what to do when they find a mistake in their credit report, especially after making multiple disputes to no avail. Consumer Reports created a recent analysis where they asked over 5,000 volunteers to get a copy of their credit report and check for errors. This study was not nationally representative, but it did find errors within these few volunteers that are alarming. Just over 1/3 of volunteers found at least one error. 

As in such case, mistakes can be serious and can dramatically lower a person’s credit score. In turn, this can make loans more expensive. Inaccurate information in your report can also affect decisions from insurers and employers. 

Consumers are often faced with roadblocks when trying to correct errors or even just obtaining access to their reports. The post-pandemic economy is coming back to life and consumers are having their life opportunities stripped from them. 

The large number of errors from this small study is an indication that the credit reporting system is failing American consumers. Credit reporting is a part of our public infrastructure which is a necessity for consumers to participate economically. The Big Three — TransUnion, Equifax, and Experian have all the power over our financial destinies. 

For about 1 in 10 people in Consumer Reports study, errors were related to their financial data: unrecognized payments, payments wrongly reported as late, or debt in collections that were mistakenly in their name. All of these could easily lower a person’s credit score. When a debt is reported as in collections or payments are reported as late, your score could drop as many as 100 points. 

More common were mistakes in personal information. One man stated that his bank account was hacked several years ago and an address that he never lived at wound up on his credit report. It took him several years to get the address removed from all three of his reports. 

A new rise are errors in reporting among people who had sought financial help during the COVID-19 pandemic. In the early days of the crisis, legislation offered forbearance to people with certain student loans and mortgages, meaning they could put off payment for several months with no penalty. But 15% of people who had an account in forbearance noticed that their accounts were reporting as “not current”. 

Trouble Accessing Reports 

Some people have found that obtaining their credit report was confusing or almost impossible. A few of them said that they were locked out for failing to answer the credit bureau’s security questions that were outdated. One lady failed an online security quiz and had to make copies of her drivers license and Social Security card and send a request for her report via mail. This caused her a lot of stress that her sensitive information could be stolen in transit. She stated that it took several weeks to get all of her reports back.  

Credit bureaus have turned to requiring more detailed information for security questions, but many people do not remember how much their mortgage payment was, or which bank may have serviced their mortgage 10 years ago. 

To make matters worse, some of the security information you are asked about is based on inaccurate data in your report. One woman reported that she answered the questions correctly but because the answer didn’t match the wrong information they had on file, they wouldn’t allow her access to her reports. 

Unexpected Charges 

The credit bureaus are allowing consumers to get a free copy of their credit report every week through April 20, 2022 and not just annually, as they did in the past. Some people reported that when they tried to access the free reports, they had to provide a credit card and pay anywhere from $1 to $30 to get their report.  A woman from Virginia was trying to sort out a credit card issue and accidentally signed up for a monitoring subscription for $30. The credit reporting websites and be sneaky at getting consumers to buy a product. 

How to Find, Dispute, and Fix Problems 

It is important to check your credit report often, and with the free weekly access this year, it makes it easier from www.annualcreditreport.com.

You should first look at your basic information. Make sure your name, address, SSN are all correct and spelled correctly. You should immediately dispute anything that you see in error. 

Next, you should make sure that your credit information is yours and that it is accurate. 

It is best to send a complaint/dispute through certified mail so that you know an actual person is looking into the information. The online disputes are convenient but are coded and may not get you the results you need. 

By law, the credit bureaus have 30 days to respond to your dispute. 

f you still encounter errors, or they are not fixing the errors, you can contact us for help and we can look into your situation. 

What is a Charge-Off?

Put simply, a charge-off is put in place when you miss too many payments and your account goes unpaid, a creditor may prevent you from making additional charges. Even if a creditor stops trying to collect on your account, you could still be responsible for the debt. 

A charge-off is the last resort that creditors take and decide that the debt is a loss for the company. You could potentially end up with an unpaid charge if your account becomes delinquent. This can happen with credit card debts and installment loans like an auto loan, personal loan or student loan.

This does not mean you’re off the hook. Even if your account is listed as a charge-off and the creditor is taking the loss, you’re still responsible for paying back the debt. A charge-off can remain on your credit history and show up on your credit reports for up to seven years from the date your missed payment was reported. 

How does a charge-off end up on your credit reports?

Once a creditor writes off your account, it may be reported as a charge-off to the credit bureaus, which translates to a derogatory mark on your reports. The derogatory mark can stay on your reports up to seven years. The creditor may sell your account to a third-party collections agency if the debt was unsecured. If this is the case, your account could appear as an “account in collections” on your reports. When this happens, your credit score may lower and it will become more difficult to qualify for credit or get competitive interest rates. 

The Difference Between a Charge-Off, a Write-Off, and a Transfer

A charge-off and a write-off are the same thing: A creditor decides that you are not likely to pay back the debt and prevents you from making additional charges on the account after the account becomes severely delinquent. This may have a negative effect on your credit. However, a transfer can be neutral. This means the original creditor has sold your account or moved it to a different creditor. The account may be transferred in good standing or listed as a charge-off. 

How does a charge-off affect your credit? 

Before your account was officially a charge-off — you probably missed a number of payments. These missed payments can significantly damage your credit because payment history is a major determining factor on your credit scores. Your scores will most likely suffer further if the account is listed as a charge-off because of the derogatory mark. 

If your account is in collections, it may also lower your credit scores. Not paying the collections agency can further damage your credit, because the agency can report missed payments to the credit bureaus. 

In positive news: if you show that you use credit responsibly from here forward — such as making on-time payments and being proactive about your debt — then the effects of the derogatory marks on your credit reports can begin to diminish after about 2 years. And, thanks to the Fair Credit Reporting Act, you have the right to have negative information like a charge-off removed from your credit reports after seven years. 

Should you pay a charged-off account?

You should first verify that the charge-off account is accurate. If there is a charge-off account on your credit reports, you should verify all of the information. 

Make sure to look at these things:

• Your account may be sold a few times through third-party collections agencies. Make sure each sold account is marked “closed” and has a zero balance. Only the most current collections account should be listed as open.

• Check the outstanding balance. If it’s more than you think it should be, ask the creditor to explain any additional costs or make the correction.

• Verify the charge-off date on the original account as well as any offspring accounts in collections. The charge-off date should be the date of your first delinquent payment on the original account.

Is the charge-off is legitimate

If you find that the charge-off is legitimate, it is important that you take action to pay it off. It may be tempting to to not pay the charge-off, since the lender has likely stopped trying to collect on the account. But as long as the debt is yours, you’re legally responsible for it until it is paid, settled, or discharged in a bankruptcy filing. Plus, the charge-off can ruin your chances of getting a loan. Some lenders require that you pay all outstanding debt before you take out a mortgage or other types of loans. 

If the charge-off is an error

Don’t pay the charge-off if you find that it was made in an error. If it was an error or if it isn’t removed from your reports after 7 years, you can file a dispute. TransUnion, Equifax, and Experian have a dispute option and are required to review them within 30 days. However, it is best to write a letter and send the dispute by certified mail. This method removes the computer generated checking and lets you know that a real person has investigated your information. 

How to pay charged-off accounts

• Communicate with the original lender.

If the debt hasn’t been sold to a collection agency, you can work with the original lender to make payment arrangements. Once it is paid off, the lender will change the status of the account to “paid charge-off” and update the balance to 0. Lenders usually see a paid charge-off as more favorable than an unpaid debt. 

• Settle the Debt 

If you decide to negotiate a settlement and either the original lender or collection agency accepts less money than originally agreed, keep this in mind: It should appear on your credit reports as a “settled” charge-off. This could negatively impact your credit scores, but the account won’t be sent to collections. 

• Pay the collections agency

If the creditor sold the account to a collections agency, the you would pay the agency. Before you do, write to the agency and ask for proof that it owns the account. After you have paid off the debt, the account will appear on your reports as “paid collection”, which is more favorably viewed by lenders than an unpaid account.  

Once you have paid off the debt, through the original creditor or the collections agency, or via a settlement, make sure you ask for a final payment letter. You should also keep tabs on your credit reports. If the account isn’t shown as paid, you will have the letter as proof that you can use to help get your credit reports corrected. 

Removing a Charge-Off 

If the charge-off listed on your credit reports is legitimate, there is not much you can do to remove it. You can try negotiating with the original lender. If the account hasn’t been sold, you can offer to pay the debt in full exchange for the charge-off note to be removed from your reports .

Some debt collectors may offer to remove the charge-off note from your credit reports — this is sometimes knows as a “pay for delete” offer. It is important to note that lenders are required to report accurate and complete information, so any “pay for delete” service is unlikely to be successful. Otherwise, a charge-off should be removed automatically from your credit report after 7 years. 

Final Steps

Once you have taken care of the charge-off, you should take healthy credit steps to improve your credit. There are credit counseling services that help you make a budget and avoid delinquent payments in the future. 

If you have found an error on your credit report and investigations have failed. Contact us for help. 

Real Example of Mixed Credit File

Siblings, especially twins are more likely to have their credit files mixed than most people. One man had realized that his credit file continued to be mixed with his twin sisters file. The US credit rating agencies can’t seem to tell them apart. Sometimes they associate his social security number with her name and vice versa.  

When he applied for a job, his background check listed his name as hers; and his actual name was listed as an alias. They have both been consistently rejected for credit cards, despite both of them having good credit. Mitchell was denied a car loan by a bank that he had used for years. However, they did have luck obtaining housing. 

This is a problem that they have to worry about anytime they apply for credit. They never know what information is coming up when their file is pulled. 

The problem doesn’t lie within the banks or lenders, but the credit system. In the United States, the Big Three: Equifax, TransUnion, and Experian have the most control over our information. These companies obtain hundreds of data sources to predict your credit score. In this mass of data, mistakes happen. 

When a credit system messes up, consumers are supposed to have a recourse in fixing the problem. Each agency has a dispute process. When a consumer disputes an error, the credit bureaus are required to do an investigation. When that fails, consumers are oftentimes unsure of what to do. The next step is to file a complaint with the Consumer Financial Protection Bureau (CFPB), which will forward your complaint to the appropriate ratings agency. 

Unfortunately, these situations go in circles. The furnishes will verify your information with the creditors and the creditors will verify your information with the furnishes. In the twins situation, the male pulled his files and mailed in physical proof of his identity, such as his social security card and drivers license. After investigation, his reports still listed his sister as an alias or a former name. 

These situations are rarely heard of, but happen often. In this situation, it is likely due to their social security numbers “matching” in the system. Since they are twins, they were likely given social security numbers that are one digit off. The credit bureaus consider this a match, since they only verify 8 out of 9 digits. They also have the same last name, and likely lived in the same household growing up, giving the bureaus verification that they are the same person. 

We recommend that you check your credit reports a few times a year. This is especially important if you may have a relative with a similar name. Many people do not realize their credit has been compromised until they are denied credit. You can check your credit reports for free once a week until April of 2022 at www.annualcreditreport.com 

If you have investigations that keep failing, contact us for help. You may be entitled to a settlement. 

The e-OSCAR System

When delving into the credit reporting world, it is easy to get lost in the terminology. You see a lot of acronyms in credit reporting such as: CRA, DF, FICO, and FCRA, but this blog will discuss e-OSCAR. 

What is e-OSCAR?

OSCAR stands for “Online Solution for Complete and Accurate Reporting”. The “big three”: Experian, Equifax, and TransUnion owns and created this software in 1993. 

Put simply, e-OSCAR is an automated credit dispute system. This system was created due to the mass amount of manpower needed to process consumers’ claims of mistakes on their credit reports.  According to the Federal Trade Commission, at least 1 in 5 consumers has an error on one of their three credit reports and 1 in 4 of these errors have a negative impact on the consumers’ overall credit scores. It is recommend that you check your credit report at least once a year and report anything that seems incorrect. As of now, consumers are able to obtain their credit reports for free once a week until April 2022 due to the pandemic. 

Consumers can submit a complaint to the credit reporting agency by phone, online, or by mail. It is best to submit your dispute by mail, using certified mail, so that you have verification that they received it and that a real person will look into it. 

The bureaus receive letters topping the thousands each day. The bureaus created e-OSCAR to streamline the dispute process. 

Credit Disputes and e-OSCAR

Credit disputes involve a 3-step process: 

1. The credit bureau receives a credit dispute letter.

2. An employee reads the letter and assigns one of e-OSCAR’s 29 three-digit codes to classify the type of error.

3. The employee enters this code along with basic information about the consumer and creditor. They may also enter one or two lines of explanation.

e-Oscar Coding

When the credit reporting agency receives a dispute they enter it into the e-OSCAR system. Next, an e-OSCAR representatives categorize the complaint in one of 29 three-digit dispute codes. These codes include:

• 001 — not his/hers.

• 002 — belongs to another individual with same/similar name.

• 008 — late due to change of address or never received statement.

• 010 — settlement or partial payments accepted.

• 019 — included in the bankruptcy of another person.

• 038 — claims account closed by consumer.

In addition to the code that best fits the dispute, the agency may enter a few lines of explanation. Once e-OSCAR receives this data, the system creates and records a formal dispute. It then distributes the information to the other credit reporting agencies and to the appropriate data furnishers.

Issues with e-OSCAR 

Credit disputes are unique and complicated. Critics of the e-OSCAR system believe that neither a 3-digit code nor 2 lines of explanation are sufficient. Attorneys encourage consumers to send as much evidence as possible to support their claim. This makes it harder to credit bureaus to later claim that the error is your fault because you didn’t send enough informational evidence. Critics also question whether e-OSCAR staff fully review additional documents that provide support to the consumers complaint. 

What to Know About Disputes

Under the Fair Credit Reporting Act (FCRA), the Consumer Reporting Agency (CRA) has up to 45 days to resolve a dispute. If the error involves an account with your organization, the credit bureau will usually reach out to investigate the item you reported. CRA’s resolve only 15% of complaints without involving the data furnisher. After you provide a response to the dispute, the CRA will notify you of the verdict. The error will either be validated and will be corrected, or they have determined there was no error and the item is reported as accurate. 

Credit Repair Myths

Credit repair companies are everywhere lately, but there are some myths to be aware of. Credit repair is difficult, but there are many things you can do yourself! 

Bad Accounts are Removed From Your Report

This myth is oftentimes promoted by credit repair companies. They are not able to remove negative accounts just because you paid them to do so. These companies are only allowed to remove accounts that are inaccurate. They can help you locate incorrect items on your report and will contact your creditors for you. If the company makes a promise to raise your credit score by a certain amount of points, you should be skeptical because this is a nearly impossible to fulfill or to predict. Most inaccuracies are easy to find yourself, because only you know your accurate basic information and accounts you may have. You can check your credit reports for free every week from www.annualcreditreport.com 

Closing old accounts boosts your credit score

Your credit score is influenced by the amount of time you have lines of credit reporting. Older accounts that are positive will generally give you a better credit score. The average age of all of your accounts also matter. So, if you close an old credit card that you no longer use, it can actually lower your credit score. The length of your credit history makes up 15% of your score based on the FICO Score. 

Paying off Collections Improves your Credit Score Immediately 

Even if you pay off your collection accounts, those accounts can still continue to hurt your credit history for up to 7 years. Paying it off will only stop the collection action from creditors and debt collectors, and it can increase your credit score a little, but because it was in collections it can still impact your credit score for 7 years. If you want a collection account removed, it needs to be proven as inaccurate. To do this, you must file a dispute to the credit bureau reporting it and provide them with proof of the inaccuracy. If you have an inaccurate collections on your account and they keep verifying it as correct, you should contact an attorney to take action, especially if you have been denied credit due to this inaccurate reporting. 

All your credit reports have the same information

here are three major credit reporting agencies: TransUnion, Equifax, and Experian. All three have their own credit report, and may all contain different information.  This is one important reason to review all three of your credit reports to make sure that they are consistent and accurate. 

Checking your own credit score or reports lowers your credit score

Checking your own credit reports and credit score does not harm your credit score. You are entitled to review your information without consequence. Your credit score is also not harmed when you receive an unsolicited preapproval from a lender, such as a letter notifying you that you’re prequalified for a credit card that you did not apply for. These are considered “soft inquiries” on your credit. 

Multiple credit pulls can harm your credit score

This is partially true, but it depends on how you are applying for new credit. When you apply for new credit, the lender will request your your credit reports and this is what is considered a “Hard Inquiry”.  This can harm your credit score by around 5 to 20 points for up to 12 months. If you apply for multiple credit lines over a span of just a few months, it can harm your credit score and cause points to drop. There is a way to minimize this impact and its called rate shopping. 

If you apply for the same type of credit within two weeks the credit-scoring models understand that you’re shopping for a good deal. When done correctly, only one hard inquiry impacts your credit score - all are reported but only one carries influence on your score.

Your employment status impacts your credit score

Whether you are employed, collect Social Security, or have never had a job in your life, it has no affect on your credit score. It is true that sometimes your employment history is listed on your credit reports, but it doesn’t have influence on your credit score. The credit scoring models care about how you’re handling repaying your loans - not where you work. On the other hand, lenders do care about your employment history because they want to have confidence in your ability to repay the credit that you’re taking on. 

Your and your spouse’s credit scores merge

When you get married, it is true that many things between you and your spouse become shared. However, your scores are still separate. Your marital status has no bearing on your credit score. 

If you apply for new credit with your spouse, such as a joint auto loan, your credit scores are also considered separately. Oftentimes, the spouse with the lowest credit score is the one that is used to meet credit score requirements. 

Having no debt is good for your credit score

If you don’t have anything currently being reported on your credit reports, then you likely have what is called a thin file. A thin file can create a lower credit score. The majority of your credit score is based on your payment history. If you don’t any loans or credit that you are actively paying on, you are not building a good credit score. 

However, having too much debt can also hurt your credit score. For example if you have credit cards that are over 30% of their borrowing limit, it will likely lead to a poor credit score. There is no real baseline for how much debt you should have. What is most important is that you are not overextending yourself and that you’re paying loans back on time. It all depends on your situation and what you can comfortable handle. 

Most lenders prefer that borrowers have active accounts because it proves that you are able to handle credit. Borrowers that have never taken on any credit can also be called no credit borrowers. It can be tough for new borrowers to get their feet wet in the credit world because they have not yet proven they can handle relying credit.

What is an ACDV?

The largest search we find on our page concerns ACDV’s. So, what is an ACDV? 

An ACDV is an Automated Credit Dispute Verification form that  is used by the credit reporting agencies to communicate consumer disputes to lenders and collection agencies. 

ACDVs are transmitted to furnishers via an electronic system known as the "E-OSCAR" system, which is an automated system that enables furnishers and credit reporting agencies (CRA’s) to create and respond to consumer credit history disputes.

The ACDV process tracks and manages an ACDV initiated by a credit reporting agency on behalf of a consumer and routes it to the appropriate furnisher.

The furnisher then, returns the ACDV to the initiating CRA with the updated information (if any) relating to the consumer's credit history.

In responding to an ACDV, a furnisher informs the CRA’s if the disputed information is "Verified" or if the disputed information should be "Changed" or if the disputed item of information should be "Deleted".  To do this the furnisher literally checks a box. 

Once checked, this will instruct the CRA that all information about the disputed tradeline is, in fact, accurate and that no changes should be made. If a furnisher chooses to change information, it will check a box called "Change Data As Shown" and then will input changes into the various fields of information that need to be changed. Whenever a furnisher directs a CRA to change information on a consumer’s credit file, that furnisher affirms to the CRA that it has made the same changes to its own systems.  This affirmation is made by the furnisher on the form used to process the dispute. 

What is a Credit Score?

Credit scores indicate your level of risk as a borrower. There are different credit scores that use unique formulas but they each will typically include factors such as: payment history and amounts owed. 

What Is a Credit Score?

A credit score is a number that measures how risky you are as a borrower aka your credit worthiness. Financial institutions use this score to measure how much they can trust you. Credit scores are calculated by your past behavior with loans, credit cards, and other financial products. The higher your credit score, the lower risk you pose to lenders. Higher scores usually mean that you can expect better terms and lower rates when you borrow money. 

You might not realize that you have hundreds of of credit scores, not just one. The FICO brand of credit scores used to be the only scoring system3. Established by Fair Isaac Corporation, FICO, remains the main type of credit score used by lenders to evaluate the credit ratings of applicants. When you hear about credit scores, it usually means the FICO Score. However, under the FICO brand there are different types of FICO Scores for different purposes. For example, when applying for a student loan or buying a house, the bank may use a different type of score than if you are applying for a credit card. 

Most recently, the three major credit bureaus (TransUnion, Equifax, and Experian) have banded together to create another scoring system called VantageScore. This score relies on a slightly different set of weighted criteria than FICO Scores. If you receive a free credit score on your credit card statement, you may read the fine print to find out what scoring model and credit bureau data they are using. 

Range of Credit Score

VantageScore 3.0, 4.0, and most FICO Scores range from 300-850. Older versions of VantageScore and some other types of FICO Scores have different numerical values. 

What isn’t In Your Credit Score

Your FICO and VantageScore credit scores only consider your account information on your credit reports. They do not consider things like:

• Your income (credit card companies will ask for this when you apply for new credit, though)

• Your specific place of residence

• Your age, race, gender, religion, marital status, or national origin

• Child support/family support obligations

• Whether or not you’re using credit counseling services

Criteria Used by FICO and VantageScore

FICO and VantageScore determine credit scores by evaluating similar factors that essentially boil down to the following:

• Your payment history

• Amounts owed, particularly versus your overall available credit

• The age of your credit history

• The types of credit accounts opened in your name (loans, credit cards, etc.)

• New/recent applications for credit

It is generally safe to assume that the biggest factor that impacts your credit score is your payment history followed by amounts owed and utilization of credit. 

Exactly how these factors impact a given score can vary, but it’s generally safe to assume that your payment history is the biggest consideration, and that’s nearly always followed by your amounts owed/utilization.

Here is an outline of a few of the more commonly used scoring formulas:

FICO Scoring Criteria

(Scores range from 300 to 850)

• 35% Payment history

• 30% Amounts owed

• 15% Length of credit history

• 10% New credit

• 10% Types of credit

VantageScore 3.0 Scoring Criteria

(Scores range from 300 to 850)

• 40% Payment history

• 20% Credit Utilization

• 11% Balances (total amount owed)

• 21% Depth of credit (length of credit history, types of credit)

• 5% Recent credit

• 3% Available credit

VantageScore 4.0 Scoring Criteria

(Scores range from 300 to 850)

• 41% Payment history

• 20% Credit Utilization

• 20% Age/Mix of Credit

• 11% New Credit

• 6% Balances

• 2% Available credit

Look for our next blog for the break down of these elements included in FICO Scores. 

You Can Repair Your Credit Without a Credit Repair Service

Credit repair companies can remove information on your credit report that is lowering your credit score but they cannot remove negative marks if the information is accurate, timely, and verifiable. Credit repair services can cost you around $100 a month, but everything the service does, you can also do on your own. 

Your credit score is calculated from information in your credit reports. A study from the Federal Trade Commission found that 5% of consumers had errors on their credit reports that could significantly lower their scores. 

Legitimate credit repair services check your reports for information that shouldn’t be there and dispute it on your behalf. They may also check to make sure the information does not reappear. Sometimes information that is accurate but cannot be substantiated is removed, but it could be reinstated if it is verified later. 

Errors that can be addressed: 

• Accounts that do not belong to you.
  

• Bankruptcy or other legal actions that were not yours.
  

• Misspellings, which may mix in negative entries that belong to someone with a similar name — or may mean positive entries aren't showing up when they should.
  

• Negative marks that are too old to be included.
  

• Debts that can't be validated and verified.

Using a credit repair service can cost between $79-$129, and the process could take several months to a year. You may also be required to setup a fee to begin. Credit repair services argue that you will save money because of lowered interest rates. It is true that lower interest rates go to borrowers with higher scores but it is also true that you can handle credit repair yourself. 

You can opt to fix your credit report on your own. Here is how: 

• Obtain your credit report: As of now you can retrieve your credit reports for free once a week at www.annualcreditreport.com until April 2022. Check all of your information and verify that it is accurate.

• Dispute errors: As a consumer, you can dispute errors directly with the three major credit bureaus. All three bureaus have an online dispute process, but it is more efficient to send in a complaint by certified mail. This provides proof of service and a real person will have to look at your information.

• Work on your payment history: The biggest factor affecting your credit score is your record of paying bills on time. If you have late or missed payments, that can drag your score down. It is important to bring your late accounts to current as soon as possible and consider writing a goodwill letter asking your creditor to remove the make from your credit reports.

• Use less of your available credit: How much of your available credit card limit you are using is known as your credit utilization ratio. The lower, the better for your score. If you can afford to do so, consider making multiple small payments in the billing cycle to help keep this ratio down.
  

Before deciding to use a credit repair service, know that you can do all of this on your own. It is as simple as looking through your reports and verifying the information without the cost. If you have inaccurate information on your credit report, you may be entitled to a settlement. 

If you find inaccurate information, be sure to dispute the information. If you need help, reach out to us for help in the process. We may also be able to obtain a settlement for you. 

Navient's Deceptive Practices

Navient is one of the most well know student loan services in the United States. Millions of borrowers use this company to repay their federal and private student loans. They have lawsuits that allege harmful and deceptive practices that could impact your student loans. 

Below we will go deeper into Navient lawsuits that have began since 2017. 

Borrowers Being Mislead

The Consumer Financial Protection Bureau (CFPB) stated that Navient “illegally failed borrowers at every stage of repayment.” The CFBP alleged in a lawsuit that Navient damaged borrowers by providing negative and sometimes false information such as: not processing payments correctly and not taking the appropriate steps to rectify situations when borrowers submitted complaints to company.

The lawsuit had alleged that Navient purposely caused many borrowers to pay more on their loans than they were expected to. The CFBP is suing Navient for borrowers to get financial relief from their mishandling. 

The suit alleged that Navient directed borrowers into forbearance over other preferred options such as income-driven repayment plans. A forbearance temporarily pauses student loan payments without hurting the borrowers repayment standing, but the interest builds up while the borrower is not making payments. This means that borrowers end up paying more in interest rather than being able to save money while choosing the IDR plan. 

Navient Advises Pricey Options 

A lawsuit filed in October 2020 in New Jersey alleges that Navient pressured borrowers into taking out private student loans with co-signers, even though it wasn’t in the best interest of the borrower. New Jersey states that Navient told borrowers they could have family members guarantee their private loans as co-signers, but set in place almost impossible hurdles to let borrowers release their co-signers from the loan. This makes it so that Navient gets paid if the borrower defaults on the loan since Navient is able to collect by charging the co-signer on the loan. 

Lies and Collections

New Jersey states that Navient would tell borrowers that they owed more on the loan than they really did if they were behind on their loans. Navient did this by collecting the amount that was past due and also the next months amount. This has caused borrowers to overpay hundreds of dollars oftentimes when they could not afford it. The CFPB alleged that Navient would not allow some borrowers to discharge their loans even though they qualified. The CFPB stated that “severely and permanently disabled borrowers with federal student loans, including veterans whose disability is connected to their military service, have a right to seek loan forgiveness under the federal Total and Permanent Disability discharge program—Navient misreported to the credit reporting companies that borrowers who had their loans discharged under this program had defaulted on their loans when they had not.” 

How This Affects Your Student Loans 

Many lawsuits are still on-going, so as of right now you won’t see an impact. If you are experiencing any issues with your student loan servicer, you can take these steps to ensure that it is working in your best interest: 

• Review all of the details in your loan. Whether you have been on autopay or have not been able to make payments in awhile, you might not know what is happening with your loans or even the types of loans you have. Since Navient services private and federal loan lenders, you should check what you have before exploring your options.

• Look for alternatives on your own. You can explore different repayment options such as: income-driven repayment plans, forgiveness, or student loan refinancing. It is vital to know what options you have before speaking to your loan servicer so that you are informed about different offers.

• Ask the servicer for options. After researching on your own, contacting your servicer is next. Ask them what you qualify for and how each option will impact your repayment and what you will eventually repay over the lifetime of your loan. If the lender mentions that you do not qualify for specific programs or if they direct you to more expensive programs and payment options — it may be a red flag.

• File a complaint if necessary. If you believe that your loan servicer is causing you to pay more money than you think you owe or you’re being mislead, consider filing a formal complain. You can do this directly with your lender, your states attorney general or at the federal lever with the U.S. Department of Education, Federal Trade Commission, or the CFPB. If you do this, you will need documentation proving your case. Keep a detailed record of notes, every phone calls, and correspondence with your lender.

Does Navient Service Your Loan? 

Navient services millions of borrowers but it does not service ever borrower. You can check your servicer with the Department of Education if you have federal loans. The best way to find out who services your private loans is to check your latest correspondence. If you have not made payments in awhile, you should check your credit report. You can do this for free through www.AnnualCreditReport.com. Due to the pandemic you can check your reports weekly for free until April 2022. This will allow you to see all of your debt, including delinquencies, in default, and paid off loans. 

Will Navient Forgive Student Loan Payments? 

A lawsuit against Navient that was settled July 2020 gave no monetary damages to the borrowers affected. Instead, Navient implemented improved training for employees regarding PSLF. It is a possibility that future lawsuits could proved the affected borrowers a monetary compensation, but it is unlikely that Navient will forgive student loan payments. 

Many lawsuits are still ongoing. If you feel that you have been negatively and wrongfully affected by Navient, consider reaching out for help and guidance. 

Identity Theft By Family or Friends

Identity theft isn’t always committed by a stranger or a mystery hacker. Oftentimes, when your identity is stolen, it is taken by someone who know. In 2014, there were approximately 550,000 identity theft and fraud victims reported that was committed by someone they knew and the numbers have likely raised.

It is hard enough to deal with a stolen identity, let alone when it is perpetrated by someone you know.You may feel betrayed, violated, and your trust may be broke. It might be difficult to trust anyone again. These are valid feelings to have.

When the theft is by a family member or friend, you may have a hard time turning that person in or filing a police report because of the ramifications it will have for that person and the judgement by your other family members. They may even pressure you to let the matter go. It is even trickier when your spouse is the one who stole your identity. 

What is Identity Theft 

Identity theft happens when someone uses your identity for their own financial gain. It could be for making purchases, qualifying for a loan, or getting approved for a credit car, among other things. 

Parents may be under the impression that using their child’s information for financial gain is okay, but that is a form of identity theft. Some other examples include:

• A family member uses your name and SSN to qualify for a credit card or loan.

• A parent uses their child’s name and SSN to sign up for utilities or cable.

• A family member uses another family members name and SSN to qualify and sign for a lease.

• A spouse uses your name and income without your permission to open an account without you knowing.

Often, you may not know that it has happened until you have a delinquency on an account, an outstanding debt under your name, or an unfamiliar account on your credit report. It is still considered a crime that needs to be corrected even if it hasn’t gone into collections. 

What To Do

Once you realize that your information has been stolen you need to contact the creditor and business and explain that you are not responsible for the debt. You should also file a police report. This is the only way that you will be able to fix your credit report. You need to also place a fraud alert with the credit bureaus and report the theft to the Federal Trade Commission (FTC). It is difficult to file a police report on someone that you know, but it is a must if they have jeopardized your financial future. 

What if Friends or Family Do Not want you to File a Report?

If you are being pressured to let the situation go by friends or family members, you have to realize what is at stake if you do not report the theft. Your credit history is on the line, and you will ultimately be the one responsible for repaying the money owed unless you take the necessary steps to dispute the charges. If the person gets away with the theft, you might be putting others at risk as well. They may feel that they can get away with stealing someone else’s identity if they see it as an easy task. 

Other Ways to Protect Yourself

You will possibly need to change your bank account number as well as close all the accounts that you currently have open. You should take the time to set up alerts on your credit report. This will help protect you from identity theft in the future. 

If your credit card(s) are stolen, you are at an even greater risk of having your identity stolen. You will want to carefully monitor your statements. You should be requesting your credit report every few months to check over your information. Right now, credit reports are free weekly from www.annualcreditreport.com until April 2022. Many banks are now offering free credit report tracking as well. 

Dealing With Your Family After

You need to remind yourself that identity theft is not your fault, and you did not do anything wrong. You will likely be dealing with feelings of betrayal regarding the person who did this. You should take the time to seek advice on how to communicate with them, what boundaries you need to set up, and if it is possible to maintain the relationship.   You should always be cautious about how you share your information with friend and family members. 

Let us know if you have questions on dealing with this type of situation. 

Free Report Weekly Until April 2022

On March 2, 2021 the three major credit bureaus, TransUnion, Equifax, and Experian in a joint statement said that they will continue to offer consumers free weekly credit reports until April 20, 2022 due to the ongoing COVID-19 pandemic. 

Prior to the pandemic, credit bureaus were required by law to provide a single free report just once a year and consumers were charged about $20 each additional time they needed one. 

Frances Creighton, president and CEO of the Consumer Data Industry Association, which represents the three credit bureaus told Consumer Reports Inc.: “None of us could have foreseen that the pandemic situation would last longer than a year.” This time is especially important for consumers to have the key to their financial information. 

Credit reports are used by lenders to determine whether you’re a good credit risk. Your credit report shows whether you made mortgage, credit card, auto loans, and/or student loan payments on-time. Employers, potential landlords, cellular service providers, and employers are able to review your report with your permission. 

Your credit score is calculated by the information in your credit report. This is the three-digit number that is meant to determine your creditworthiness. Getting a credit report on a regular basis can help consumers monitor their information because changes in the report can happen daily. 

You can obtain your credit reports at AnnualCreditReport.com. The credit reporting industry has seen an unprecedented amount of consumer complaints made to the Consumer Financial Protection Bureau over errors discovered in credit reports. Credit report errors accounted for nearly 2/3 of the total complaints in 2020, which is a rise of 23% from 2019 according to the CFPB’s complaint database. 

It was found that up to 1/4 of credit reports contain at least one mistake according to a 2012 Federal Trade Commission Report. Consumer Reports Inc. conducted a nationally representative survey of 2,223 U.S. adults in January 2021 and found that 12% of Americans who checked their credit report found an error. 

Errors include anything from incorrect address information to more serious problems, such as loans that are listed multiple times, paid-off loans that appear as still open, and/or information about someone else’s account that appear on your account. 

Last year, in another survey, participating consumers noted a range of mistakes on their reports. One man found that his mortgage was listed twice. His bank had promised to fix the error but it still remained on his report months later. Another consumer’s report had his sons information mixed with his own. One other found that an unpaid bill had went into collections in a state he had never lived in. 

These errors can negatively affect a consumers credit score and could be a particular problem for people who deferred loan payments with lenders or credit card companies. 

Last May, the Coronavirus Aid, Relief, and Economic Security Act was passed and required companies providing federally backed mortgages and student loans to offer deferrals while still reporting to the credit bureaus that the loan is current. Some credit card companies and auto lenders also offered deferrals. For some, those deferred loan payments were still being reported as late. This is another good reason to check your report often. 

There are consumers who are advocating that credit reports should be free permanently. They feel that consumers should not be charged to access their own data. Chi Chi Wu, an attorney at the National Consumer Law center, who has a focus on credit issues, said: “There’s nothing I can think of that would legally or logistically prevent the Big Three credit bureaus from making free weekly reports permanent”. 

Credit bureaus are suppose to look at all supporting documentation when a consumer files a dispute, but they very often do not. Agencies should ensure that any supporting documents a consumer submits in the automated dispute filing is considered in the bureau’s review of their case. Oftentimes the task of reviewing disputes is outsourced and the bureaus will usually accept the results of the outsourced investigation without questioning the accuracy of the findings. 

Currently, credit bureaus will only match 7 of the nine digits of a social security number in the consumes report. To avoid errors, advocates are pushing for the bureaus to require the matching of all nine digits. 

If you find an error in your report you should file a dispute with the three credit bureaus. TransUnion, Equifax, and Experian are separate companies so the disputes must be filed to each. It is best to send a letter by certified mail and keep copies for yourself. The paper trail will make it easier to confirm that the credit bureaus are following the lawful time lines. You should avoid filing disputes online because often credit bureaus have standardized forms that might force you to oversimplify your situation and never have an actual representative look at the dispute. 

Along with the letter, you should include any evidence. This could be account statements or information on payments made that will protect you from a credit bureau dismissing your claim because of lack of sufficient backup information. Avoid resubmitting a evidence later on because it could be denied if the claim is considered similar to previous ones. 

Dispute Still Denied

If your disputes get denied consider hiring an experienced lawyer to file a case. We specialize in FCRA law, your consultation is free, and your legal fees will be covered so there is no out of pocket expense. 

Personal Statement 

You are able to add a personal statement to your report to help explain your situation. Banks and other institutions will typically read and consider this note when making a decision about your creditworthiness, especially if you lost a dispute and have a negative item on your report. 

Ask to send updated report

If you won a dispute you should ask the bureaus to send out an updated report. This new report will go to anyone who has checked your report within the past six months. 

Plaintiff Alleges Obtaining Credit Report for Marketing Purposes is Not Permissible.

Last month, on February 16, 2021, the United States District Court Middle District of Florida Tampa Division denied a motion to dismiss by Defendant when Plaintiff claimed that Defendant allegedly violated the federal Fair Credit Reporting Act (FCRA). Plaintiff claims that Defendant requested their credit report from two Consumer Credit Reporting Agencies without a “permissible purpose” under the FCRA. 

Plaintiff alleged the Defendant had obtained their credit report without their consent for “marketing purposes” which is not a permissible purpose under the FCRA. The FCRA prohibits a person from using or obtaining a consumer report for any purpose unless “the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished” under the FCRA and “the purpose is certified in accordance” with the FCRA.

Plaintiff alleged that Defendant engages in consumer lending of high-interest bearing loans and had obtained Plaintiff’s credit report two times without her consent to assess whether she would be a good loan prospect for Defendant’s marking efforts.

The United States District Judge Kathryn Kimball Mizelle stated in the order that the court must accept the conduct is not a permissible purpose as true at this point under the FCRA. She also stated that “Defendant fails to make any argument that it obtained Plaintiff’s credit report for a permissible purpose or under a reasonable interpretation of the statute. Accepting Plaintiff’s allegations as true and viewing them in the light most favorable to her, the Court concludes that Plaintiff has adequately pleaded enough facts to proceed past the motion-to-dismiss stage.”

In 1970, Congress enacted the FCRA to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRA’s), protect consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports, and regulate the collection, dissemination, and use of consumer information, including consumer credit information. 

In background screening, lawsuits for alleged violations of the FCRA have become very common and can result in monetary awards in thousands or even millions of dollars. In 2020, FCRA lawsuit settlement proposals reached up to an $18 million. According to the provider Employment Screening Resources® (ESR), FCRA lawsuits will continue to serve as a legal compliance signposts for employers conducting background checks on job applicants. 

What to Know About the 3 Major Credit Bureaus

Credit reports affect your life more than most people realize. When you are leasing or buying a new home, applying for loans or credit cards, getting insurance coverage, or applying for a new job, there is likely someone using one of your credit reports to evaluate you. 

Because your credit reports carry so much of your information, the companies in charge of putting together and selling them have a major influence over your financial life. These companies are known as credit bureaus. In this blog we will look closer at what the credit bureaus do and the rules they must follow. 

The three main credit bureaus in the U.S. are Equifax, TransUnion, and Experian. They are the three largest nationwide providers of consumer credit reports to lenders, insurance providers, employers and other companies who use credit information to help predict risk. 

Credit reporting has been around for over 100 years, but it has evolved over time. Credit bureaus use to be small and localized, but overtime the “Big Three”, as the major credit bureaus are known, attained may of these smaller credit agencies and consolidated their data into larger databases. 

Presently, each of the three major credit bureaus maintains a database with information of approximately 220 million U.S. consumers. When you apply for a loan and/or credit card, it is a given that the lender will access at least one of your credit reports provided by these three companies during the application review process. 

Big data, as the credit reporting industry is often called, brings in big money. The three main credit bureaus earn billions of dollars every year selling credit information to other companies. They collect information about you and sell it to others who are willing to pay for the data.  

How They Get Your Information

You may not recall giving credit bureaus permission to create a credit file about you, and you shouldn’t. This is because that is not how the bureaus work. Many companies that you and others owe money, are willingly sharing details about their customers with the bureaus. These companies include lenders, banks, credit card issuers, collection agencies, and others. These businesses are called data furnishes. Data furnishers opt to share information with the credit bureaus for many reasons. The biggest motivator is that credit reporting give a company’s customers extra motivation to pay their debts and to pay on time. 

Most of the data in credit reports comes from data furnishers, but the credit bureaus collect information in other ways too. When it comes to public records such as bankruptcies, the credit bureaus seek out purchase information from data aggregation companies like PACER, AKA Public Access to Court Electronic Records, and LexisNexis. 

Information the Credit Bureaus Collect

The credit bureaus collect a great deal of data to include in your credit report but ignores some details about your life also. For example, your credit reports do not include criminal records, income, or bank account balances. The information that they do collect for credit reporting purposes can generally fit into one of the five categories.

Categories:

1.Personal Information

• Name (current and previous)

• Addresses (current and previous)

• Date of Birth

• Employer

• SSN

2. Collections

• Accounts sold to, or managed by third-party debt collectors

3. Public Records

• Bankruptcies

• Previously included judgements and tax liens as well

4. Credit Inquires

• Details about when your credit was accessed during the last two years.

5. Accounts 

• Credit obligations (current and previous)

• Account numbers

• Payment History

• Current Balance

• Status (current, closed, past due, charged-off, etc.)

• Credit Limit

• Date of account opening

Credit bureaus collect this information for the reason that it is profitable. Other companies are willing to pay for your credit reports. Credit reports are helpful to lenders and other companies to predict the risk of doing business with you. Scoring models, like FICO and VantageScore, can also use these details to calculate your credit score. 

Credit Bureaus Must Follow Federal and State Laws

It I can be aggravating that the credit bureaus are allowed to collect sensitive financial information without your permission. Even though these companies are allowed to gather your information and sell it to others, there are rules in place to help protect you. 

At the federal level, the credit bureaus are obligated to follow the Fair Credit Reporting Act, also known as the FCRA. The FCRA is in existence to protect consumers and regulates what consumer reporting agencies are required to do when it comes to your information. The full text of the FCRA is over 100 pages, but here are some of the key provisions of the act:

• Credit Report Accuracy: The bureaus must impose “reasonable procedures” to assure “maximum possible accuracy” of the information concerning the individual. They should only be including accurate information on your credit reports. Should you discover credit reporting errors or fraud, the FCRA allows you to dispute the information. When you submit a credit dispute, the bureau must investigate your claim. They have 30 days to respond to the dispute and to delete information that isn’t verified as accurate. 

• Free Annual Credit Reports: It is a good idea to review your credit reports frequently. An amendment from 2003 to the FCRA, known as the Fair and Accurate Credit Transactions Act or FACTA, provides free access to each of your credit reports once every year. AnnualCreditReport.com is the website you should visit to access these free reports. The three major credit bureaus are offering a free weekly credit report access at this website until April 2021 in response to the Coronavirus pandemic.

• Permissible Purpose: The credit bureaus are only allowed to sell your credit reports to certain entities such as Lenders, insurance companies, landlords, and employers (with written permission). They may have “permissible purpose” to buy a copy of your report. In good news, someone such as your ex-partner or random creepers would be out of luck.

• Freezing Your Credit Report: You have the right to freeze your credit reports as a protective measure. When a credit freeze or security freeze is in place, companies you don’t have a current relationship with cannot access your credit information. In order to grant them access to your data, you must first unfreeze your report. An amendment established in 2018 to the FCRA, known as the Economic Growth, Regulatory Relief, and Consumer Protection Act, lets your freeze and unfreeze your reports for free.

• Opting Out: The credit bureaus are able to sell your information to certain companies for marketing purposes, even if you are not applying for financing. Your credit data may have been sold without your knowledge if you have ever received a prescreened offer of credit or insurance in the mail. Use the link OptOutPrescreen.com or call 888-5-OPTOUT (888-567-8688) if you wish to stop sharing your credit information for marketing purposes

Along with the FCRA, the credit bureaus must comply with state laws as well. For example, on top of the free annual credit reports provided by the FCRA, state law might require the credit bureaus to give you more free reports. In some states, employers aren’t allowed to review your credit information as a part of the background check. 

Different Credit Bureaus Contain Different Information

When reviewing your credit reports from all three bureaus, you will likely find similar information on each report. But, there are probably some differences as well. For example, your Experian credit report might show a collection account, while that account may be missing from Equifax and TransUnion. 

There are many reasons why your credit reports could contain slightly differing information. Here are a few examples:

• The credit bureaus are competitors and they do not share data with one another.

• Credit reporting is voluntary. Just because a data furnisher opts to share information with one bureaus does not mean it has to report information to all of them. The most major lenders will report to all three credit bureaus.

• The consumer doesn’t always understand the dispute process. Someone might dispute an incorrect item with one credit bureau, but not the other two. This could results in an incorrect account being deleted form one credit report while it remains on the others.

• Dispute results can be inconsistent. Even if you dispute an inaccurate account with all three credit bureaus, the results may vary. Each bureau will conduct its own investigation. So, while a data furnisher might verify the account as accurate with one credit bureau, it could also fill to respond to the others. This might lead to a disputed account remaining on one or more of your reports, but not all of them.

• Your credit file could be mixed. Credit bureaus can make mistakes. One major mistake is combining your credit file with someone else’s file. This often occurs when people have similar names. Generally, mixed files occur with just one credit bureau at a time.

It is critical to understand how the credit bureaus work, whether you’re building credit for the first time, rebuilding damaged credit, or trying to maintain your already good credit rating. The credit bureaus are important but they do not control every aspect of your financial life. 

The credit bureaus don’t assign your credit scores. They don’t approve or deny loan applications. They don’t decide which accounts you will open or how you will manage your credit obligations. Knowing what the three credit bureaus are allowed to do and which behaviors are wrongful can protect you and help you keep your credit intact. 

Statutory Violations for All Class Members

In a previous blog, I wrote about Plaintiff Sergio Ramirez, who was trying to buy a car in 2011 and found out that he was incorrectly put on a “terrorist list” by TransUnion LLC (“TransUnion”), one of the three major credit bureaus. Ramirez had sued on behalf of himself and 8,184 other TransUnion users who were also wrongfully designated. Ramirez alleged that TransUnion violated the Fair Credit Reporting Act (FCRA) “by placing the false alerts on their credit reports and later sending misleading and incomplete disclosures about the alerts.” A jury found in favor of the case and each class member was awarded $984.20 in statutory damages and $6,353.08 in punitive damages.

TransUnion appealed, in part because the class members (not including Ramirez) lacked standing. The Ninth Circuit held that “each member of a class certified under Rule 32 must satisfy the bare minimum of Article III standing at the final judgement stage of a class action in order to recover monetary damages in federal court.” The Ninth Circuit also held that each class member had requisite standing to obtain damages, even though about 3/4 of the class members did not have their reports disclosed to third parties. The court had found standing in that TransUnion violated the class members’ statutory rights under the FCRA.

On December 16, 2020, TransUnion filed a writ of certiorari, meaning that all Justices have an opportunity to state their views on the case and raise any questions or concerns they may have. The court granted this petition. 

On March 30, 2021, the Supreme Court will hear the arguments on whether a damages class action is permitted by Article III of the Constitution or Rule 23 of the Federal Rules of Civil Procedure where the majority of the class has suffered no actual injury. This will be the first time the Supreme Court will apply the rulings of Spokeo, which held that plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation,” to an entire class. 

The Supreme Court’s ruling would make it difficult for larger companies subject to a variety of laws and regulations to defend against class actions. Other companies such as Google, eBay, and several others, have filed a brief in support of TransUnion. They argue that the services provided “are often target for claims under the federal and state laws that confer private rights of action and contain statutory damages provisions similar to the provisions in the FCRA including the Wiretap Act, the Stored Communications Act, the Video Privacy Protection Act, and the Telephone Consumer Protection Act.” If the ruling is in TransUnion’s favor, this could aid those companies in defending against damages claims based only on statutory violations. 

The Supreme Court’s decision could also affect the settlement process inherent in the litigation of class actions. The U.S. Chamber of Commerce and the National Federation of Independent Businesses filed an amicus brief arguing that affirming the Ninth Circuit’s holding “would embolden [enterprising] lawyers to seek out atypical clients in order to leverage their uniquely sympathetic experiences into a multi-million-dollar damages award or settlement – all based on technical statutory violations.” In their view, upholding the lower court’s ruling would encourage settlements even more so than class actions already do.

The Supreme Court’s forthcoming decision will have significant implications on defenses to class actions, and could possibly expand liability for companies most often entangled in class actions with plaintiffs that have tenuous claims based only on statutorily created rights of action.

Twitter Shredded by Credit Karma's Comically Inaccurate Scoring

Last week, Twitter was bombarded with consumers expressing their (hilarious) frustrations concerning their credit scores provided by Credit Karma, the personal finance company owned by Intuit. 

The frustration comes from users realizing that Credit Karma is providing them with lower credit scores than what is found on their credit reports. 

Consumers were tweeting about applying for credit cards, loans, and attempting to purchase vehicles thinking that they had good or excellent credit, only to find out that the credit score that the issuer pulled was lower than what they had found on Credit Karma. The tweet that started the meme trend can be found here.  

Twitter users were quick to share and create memes about how their credit score was inflated on Credit Karma. @RiotGrlErin had even tweeted “checking your credit score on credit karma is like checking your symptoms on WebMd.”

But, users were on to something important when it comes to checking your credit score. There are many reasons why your credit scores differ between what a personal finance website tells you and what lenders or credit card companies find. There are mainly two reasons: For one, a lender may pull your credit from different credit bureaus, either Equifax, Experian, or TransUnion. Your score can differ depending on which bureau your report is pulled from, since they do not all receive the same information about your credit accounts. Secondly, there are different credit score models and versions that exist across the board. 

Credit Karma’s website states that they use the VantageScore® 3.0 model. VantageScore may look at the same facts that the other popular FICO scoring models does, such as your payment history, amounts owed, length of credit history, new credit and your credit mix but each scoring model weighs these factors differently. Because of this, VantageScore and FICO Scores tend to vary from one another. The VantageScore® 3.0 on Credit Karma will likely be different from your FICO Score that lenders use most often. If you are planning on applying for credit, make sure to check your FICO score since there is a good chance that lenders will use this to determine your creditworthiness. FICO Scores are used in over 90% of U.S. lending decisions. It is important to note that there are also industry-specific FICO Scores to look at when you are planning a specific purchase. For example FICO® Auto Scores are ideal if you are wanting to finance a car with an auto loan. If you are planning to buy a house you should look at FICO® Scores 2, 5 and 4. 

The best way to look at your scores is to visit www.annualcreditreport.com where you can access and download your reports from Equifax, Experian, and Trans Union. Due to Covid, your report is free to access once a week until April 2021. 

Feel free to shoot us a message for any questions!

COVID-19 Identity Crimes on the Rise

The number of COVID-19 identity crimes are expected to rise in 2021. The Identity Theft Resource Center (ITRC) has new data that shows an increase in identity crime victims being targeted multiple times. The rate was 21% in 2018 and increased to 28% in 2019 before the pandemic. 

With the stress of COVID, identity theft is not the top focus of people right now and victim resources are getting harder to research. The U.S. Department of Justice funds allocated for crime victim services has dropped from $3.7 billion to $1.9 billion since 2018. New fraud cases and identity crime victims are likely to increase with the pandemic-related benefits and stimulus payments due early this year. 

2020 was a difficult time for many people and it continues to affect them today. Some have lost their jobs and others had to close their businesses. There have been millions of state unemployment benefit-related identity theft cases that have been detected across the U.S. since March 2020. The ITRC receives less than 20 inquires regarding unemployment benefits in a year on average but in 2020 they received more than 700 unemployment benefits fraud victims inquiring for help. A sharp increases in scams was seen also. This has given criminals countless opportunities to trick people with phishing scams, charity scams, healthcare scams and work-from-home scams. 

What Will 2021 Bring?

Identity crimes are expected to impact victims well into 2021. Many victims may not even realize that their identity information was misused until they received their IRS Form 1099 for non-wage income. The research by the ITRC shows a significant increase in identity crime victims being victimized a second time, even before the rise of fraud, scams, and identity crimes in 2020. An analysis of the post-pandemic shows an even greater spike. 

The ITRC and other private-sector researchers show that cybercriminals looking for profit are using consumer’s and employee’s bad security habits, as well as the changing work environment, to attack businesses more often. Resources for cybersecurity training and education along with identity-related crime victim assistants are lessening. 

The U.S. Department of Justice (DOJ) funds allocated for all crime victim services has dropped from $3.7 billion in 2018 to $1.9 billion. Discredtionary DOJ grants awarded to victim services organizations has dropped from $311 million in 2019 to $144 million in 2020. Funding for programs that support victims of identity crimes, compromises, cybercrime, scams, and fraud have been reduce to $0. According to the cybersecurity firm Coveware, ransomware payments have grown on average from less than $10,000 per incident in 2018 to $233,000 as of the third quarter of 2020. Some large enterprises are reportedly paying ransoms over $1 million. The most common cause of ransomware attacks is stolen credentials to access a business system or network remotely. 

Research by the ITRC that will be published in May 2021 shows that there is an increase in identity crime victims being targeted multiple times. It could be even worse after the rise in crimes committed during COVID. 

Data shows that the COVID identity crimes will continue in 2021. More victims will suffer from trauma of a second, or even third crime. Getting the fraud resolved can be a daunting process and some victims will have trouble meeting their basic needs or find a job because they will not pass a background check until the fraud is resolved. Winning the battle to protect ourselves from cybercriminals will require us to devote more resources toward assisting victims and devote more time and attention to educating consumers and employees of their need to be cyber-aware and vigilant. 

If you believe that your information maybe have been compromised, contact us on our page for resources and help. We can direct you on how to solve this issue and guide you through a potential lawsuit. 

FTC is Launching Identity Theft Awareness Week

The FTC is launching an Identity Theft Awareness week. We will be doing the same. Follow us on social media to gain more insight.

Below is from the FTC website with helpful links and information.

FTC Marks Identity Theft Awareness Week with Events to Help Consumers Identify Risks of Identity Theft During the COVID-19 Pandemic

The Federal Trade Commission is launching Identity Theft Awareness Week, February 1-5, 2021, with a series of events to highlight steps consumers can take to help reduce their risk of identity theft and recover if identity theft occurs.

Identity theft happens when someone steals personal information about you such as your Social Security number or credit card information, and uses it to commit fraud. Reports about any type of identity theft topped the list of consumer complaints submitted to the FTC through the third quarter of 2020.

As part of Identity Theft Awareness Week, the FTC will participate in webinars and other events to highlight what you can do to protect your personal information, red-flag warning signs of possible identity theft, and steps to take if identity theft happens to you. Events include a webinar on Monday, February 1, with Identity Theft Resource Center and FTC experts discussing identity theft during the pandemic, and a Facebook Live discussion on Thursday, February 4, hosted by the AARP Fraud Watch Network, focused on COVID-19-related identity theft, current trends, and ways to protect yourself.

You can find the full list of events at ftc.gov/IDtheftweek, along with details on how to participate and tips on how to reduce the risk of identity theft.

The Federal Trade Commission works to promote competition and to protect and educate consumers. You can learn more about consumer topics and report scams, fraud, and bad business practices online at ReportFraud.ftc.gov. Like the FTC on Facebook, follow us on Twitter, get consumer alerts, read our blogs, and subscribe to press releases for the latest FTC news and resources.

For Consumers

Identity Theft Awareness Week Calendar of Events

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Home Security Company Violated FCRA and Must Pay a $600,000 Civil Penalty

On December 11th, 2020 a home security company in Utah  had an alleged violation of the Fair Credit Reporting Act (FCRA). The Consumer Financial Protection Bureau (CFPR) announced that the Arkansas Attorney Generally reached a settlement with Alder Holdings, LLC. Alder charged higher activation fees to consumers with lower credit scores without providing a notice. 

The settlement terms include a $600,000 civil penalty that Alder will pay and they will have be required to provide proper notices to their customers in the future. Alder sells home security alarm systems by door-to-door selling. They have sold products and services to over 115,000 customers. When a salesperson sells an alarm system, the customer is entered into a long-term contract that contains monthly monitoring fees and an initial activation fee. Through monthly installments, the activation fee may be deferred. 

The alarm and monitoring material is sold to the customer at a much lower price than the retail value. Alder then recoups their costs and makes a profit through the deferred activation fee, monitoring fee, and the arrangement of the long-term contract. 

Alder grants that their customers have the right to defer payment of the activation fee and this arrangement qualifies as an extension of credit for FCRA purposes, according to the complaint. Not all customers of Alder are charged the same activation fee. Each customer is evaluated by Alder, and is evaluated by their credit score. The score determines the amount that the customer has to pay for the activation fee. The FCRA’s Risk-Based Pricing Rule regulates the practice of providing a less than favorable credit terms based on a review of a consumers credit report. This requires that that a company utilizing this practice must provide a Risk-Based Pricing Notice to the affected customers. This notice has to contain information about the consumers report, the identity of the provider of the report, and the customers rights under the federal law to obtain a copy of the report and include an option to dispute its accuracy, among other things. 

Alder failed to provide these notices to their customers, and has violated the FCRA and regulation V according to the complaint. 

Alder is also currently involved in a related litigation with the State of Arkansas in Arkansas state court. According to the terms of the settlement, if Alder will agree to pay $100,000 to settle the related state-court litigation, that amount will be offset from the $600,000 civil penalty in this case. 

Only One-Third of Americans Checked Their Credit This Year

CompareCards have conducted a survey for the third year in a row in August 2020 following the massive data breach from Equifax four years ago. Only thirty-three percent of Americans have checked their credit reports in the past year. This is a concern since there have been an increase in credit card fraud attempts during the Covid-19 pandemic. In 2019 39% checked their reports and in 2018, just 37%. It is most crucial to be checking your reports at this time because it has never been easier. For the past four months until April 2021, consumers are able to check their credit reports for free once week, instead of just once a year through AnnualCreditReport.com.

Consumers aged 75 and older are at most risk for credit card fraud and only 20% of this age group has reviewed their credit report in the last year. Cardholders are taking less action to prevent identity theft. Here are some steps to take to prevent identity theft:

• Review online banking and credit cards often

• Check your credit score

• Activate alerts via text, email, etc to inform you when changes are made

• Review your credit report

• Change passwords to your banking and credit card sites

• Change the PIN on your ATM card

From a group of the surveyed consumers, 41% of cardholders were unaware that they had the option to check their credit report for free weekly due to the pandemic. Twenty-eight percent of those surveyed admitted that they did not plan to take advantage of this free allowance. Checking your credit report every week isn’t necessary but checking it once a month will put your mind at ease and keep you up to date and it won’t do any harm. Once you take a look at the reports one or two times, it will give you a good idea of what it looks like and you will have an easier time finding mistakes and errors, if they were to occur. Consumers who don’t have a credit card or a loan are more likely to feel that they do not need to review their reports as often. There is too much fraud out there to not keep tabs on your file. 

Only half of credit or debit cardholders check their credit score each month and a third of those admit that they do not always review their card or bank statements to ensure accuracy. Women are dropping the ball on checking their reports with only 41% doing so monthly as opposed to men at 59%. Breaking down to different generations, Gen Xer’s are best about checking their scores followed by Millenials. 

The fatigue of the pandemic may be distracting from the focus of identity theft. There has been an economic downturn and rampant job loss which is understandable why some consumers may be more focused on other areas of their personal and professional lives than they are of identity theft. More people are at home more often, so instead of binging out on Netflix during downtimes, we could be keeping up to date on identity theft. 

Most people are hesitant about providing their personal information online but nearly 47% of people with a credit or debit card provided their entire social security number in an online form in the past month according to the survey. In 2019 it was 40%. This increase may have occurred due fluctuations in the job market and people applying for unemployment and onboarding at new jobs online. Even providing a partial SSN causes concern. This puts consumers more at risk for identity theft, which makes checking your reports and statements a priority. 

Seventy percent of cardholders have reported using the “sign in with “Facebook” feature to sign up or log in to various websites. While this is a convenience, using your Facebook account to log into other multiply accounts can be problematic. There has been security concerns about Facebook’s ability to protect personal data. The information you are giving has an increased risk of being exposed which is a major target for hackers. Facebook is a signal site that contains information about you that are useful to hackers. Facebook has a past for not keeping data safe so it is important to proceed with caution when you login to other accounts or webpages. 

Nearly half of cardholders (47%) were victims of a data breach within the last year and 14% of them experienced this harm more than once. Consumers may want to take stronger steps to protect their identity such as:

• Freezing your credit- With a credit freeze, or security freeze, you can restrict access to your credit reports and prevent others from opening new credit-related accounts with your information. You will still have access to your credit reports during the freeze and your credit score will not be affected.

• Sign up for alerts - Many companies are on the market to provide services that monitor for identity theft as well as keeping an eye out for Social Security number scanning. 

• Create safer digital habits - You can set calendar reminders to change important passwords often and learn to recognize the signs of phishing emails and other online scams. It is important to remain cautious when providing personal and financial information online and you may even want to invest in security software for electronic devices. 

Most of all it is important to realize that you, as a consumer, have your financial health and security in your own hands. Nobody cares as much about your credit and money as much as you do. It is vital that you protect your personal information and finances because no one else can do it for you. 

Drastically Dropping Credit Score

Many people are are wondering why their credit scores are dropping at a drastic rate. You may be doing things such as paying off auto loans, credit cards, and even making credit card payments well above the minimum due. So, this drop seems really unfair, doesn’t it?

You first want to retrieve your credit reports from the three main bureaus: Equifax, TransUnion, and Experian. You can obtain and download these reports from: AnnualCreditReport.com  These reports are now available weekly, for free until April 2021! Every month millions of data are retrieved by credit bureaus to be posted. The items in your report should be accurate but sometimes errors can be found. You should check for things such as: a misspelled name, a mixed-up account in the lenders’ records, a suffix such as “junior” that should be “senior” and other items that could be a mix up with someone else’s data on your report. By getting all three reports you will be able to see the discrepancies faster.

The bureaus do not have all the same information. They compete for business both into and out of their files. Some lenders may only be reporting to one of the lenders and you may find that you have very different credit scores from each reporting agency. Make sure to dispute anything that you do not recognize as yours, that is more than seven years old, or if something is missing. The best way to dispute is by sending them a letter through certified mail, so that you know an actual person is reading your dispute and you can verify that they received your letter. Since they are in competition with each other, if that data is incorrect, that is not a good competitive business for you. 

High Balances

If you are making the above minimum payment on a number of cards which you are carrying balances, the interest being charged is making your balance go up which is causing you to lose points.  You should be keeping your credit card balances below 30% of your credit limit. If you have multiple cards, don’t focus on just paying off one. The card with a high balance will still effect your credit score regardless if they other(s) are paid off. 

Accounts not appearing on report

Some lenders don’t report to every bureau every month. It costs the lender money to report to the bureaus that you have paid a bill. Auto lenders are quick to repossess a vehicle if you miss a payment but might find little advantage in reporting the paid-off loan instantly. It may take a three-month period for that good news to get published! It’s unfair! 

Closed Credit Card Accounts 

If you have paid off credit cards and then closed the accounts, the utilization points in your score will have gone down because you have lost the available credit from those cards. This is a reason why it is important to not close accounts if you can prevent from doing so. Your credit limits are tied directly to your credit utilization ratio, which counts for 30% of your overall FICO score. You should try to keep credit cards open, whether you are using them or not, unless you are being charged a large fee for their use. One tip I can suggest: If you have two cards from the same bank issuer, you should ask to have the closed account credit limit added to your remaining opening account. This will keep the utilization factor low while saving you an annual fee. 

Your credit history has gotten shorter

If you have recently closed any other accounts, it could have impacted your credit history. Your credit history is how long you have had credit being reported in your name. In credit reporting, the older the better. This makes it more difficult for young people to build up their scores. It is useful to know that some scoring models only count your open accounts in this calculation. 

What affects your credit score?

Here is a brief FICO score primer:

The five basic components in order of importance:

• Payment history (35 percent)

• Credit utilization (30 percent)

• Length of credit history (15 percent)

• Credit mix (10 percent)

• New credit (10 percent)

Credit mix

While the car payments aren’t a factor in utilization, they have a direct impact on the credit mix portion of your score. Lenders like to see that borrowers can handle both revolving credit (credit cards, etc.) and installment debt (car notes, mortgages, etc.) on a monthly basis. Once your car notes were paid off, you lost those points. You still have your good payment history on those notes and that history will stay on your credit reports for 10 years. But credit cards alone will not do much for you in the credit mix department.

New credit

Having hard inquiries over the past couple of years could negatively impact your credit score but only in short term. If you have applied for credit that you did not receive that will hurt you since you would not have the new available credit credit to balance out the impact of that inquiry. It is important to have a fairly good idea that you will be accepted for credit before you apply. 

If you have questions or concerns about your credit report use our online form to contact us. We can answer your questions and see if you might have a case.