Transcript Name of presentation - Score l Credit Repair Solution l

Demystifying Credit Repair
Ten Greatest Myths About Your
Credit
Let’s go WAY back to…
1998
-How were home insurance premiums calculated?
-How were auto insurance premiums calculated?
-How were job applicants screened and qualified?
-What’s next? Health Care? Utility rates?
A WORLD OF CHANGE
Who is FICO?
Who are Experian, Equifax and Trans Union?
Who are their customers? (what do they say?)
The Big 3
• Equifax – Beacon, EFX, S&P 500
component, Atlanta, Georgia
• Trans Union – Empirica, Private company,
H Group Holdings, Pritzker (ie. Penny
Pritzker – Obama appointee) family of
Chicago, IL Global Hyatt, Royal Carib.
• Experian – Fair Isaac, EXPN, London
Stock Exchange, Dublin, Ireland
FICO, A Brief Chronology
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1956 – Engineer Bill Fair and mathematician Earl Isaac found FICO
on the principle that statistical data can improve business decisions
1963 – Montgomery Ward begins using the credit scoring system
1970 – Delivery of first credit card scoring system to Connecticut
Bank & Trust
1987 – FICO goes public, moved listing to NYSE as “FIC” in 1996
1991 – FICO made available to Equifax, Trans Union and Experian
1993 – First insurance bureau score introduced
1995 – Fannie Mae and Freddie Mac recommend use of FICO
1997 – American Bankers Assoc. honors Bill Fair and Earl Isaac
2000 – 2003 Multiple mergers and world-wide implementations
2004 – Launch of Global FICO
2007 – 100 Billionth FICO score sold
Current headquarters in Minneapolis, MN
Latest Statistics
• WSJ reported in July of 2010 that 43
Million Americans have a FICO score
of 599 or lower (25.5% of adults)
• Feeder population of the unbanked
will find it tougher to obtain a FICO
• The train wreck is still happening
Why Credit Scoring?
• Credit scoring is a “lazy man’s”
method to evaluate your risk of
defaulting - nondiscriminatory
• Credit scoring has become a
thermometer of your financial health
• FICO scores range from 300 to 850
• Assets and income not considered
Payment
History
Late Pays
Collections
Charge-Offs
Repossessions
Foreclosures
Tax Liens
Bankruptcies
Judgments
Short-Sales
Amounts Owed
Credit Cards
Mortgage Loans
Auto Loans
HELOC’s
Installment
Loans
Length of History
New Credit
Soft Inquiries
Hard Inquiries
Types of Credit Used
A Mortgage Loan
An Auto Loan
2-3 Major Credit
Cards
• Paying a collection that is more than 2 years old
can hurt a score.
• Derogatory accounts do NOT always fall off of a
credit report automatically after 7 years. They
must be disputed.
• A divorce decree does NOT take precedence
over the creditor agreement.
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New debt temporarily decreases a score.
Balances should be kept below 20%(?) of the limit at all
times to maintain a score.
Debt should NOT be consolidated, it should be distributed
evenly over all credit card accounts.
Going over the limit on a credit card, even by $1 can cost
as much as 100 points
HELOCs can be considered revolving debt, not
mortgages.
Credit card accounts should NOT be closed except in
special circumstances.
Unused credit card accounts will become unrated in 3
months.
• Borrowers should hold onto old
credit cards, even if the rate is not
great.
• Mixture is the best.
• The type of credit card DOES
matter.
• 2 to 3 revolving credit cards with
established history is optimal.
• Hard vs. soft Inquiries.
• Inquires affect a score for one year.
• Inquiries can cost between 2 and 30
points, depending on the current
score.
• Pre-approved card offers are NOT
really pre-approved.
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Average 1st Mortgage Balance
Home Equity Line of Credit
Credit Cards With High Balances
2 new “Reason Codes”
Could see credit scores drop by as
much as 100 points
Demystifying Credit Repair
• Myth #1.
• Credit Agencies are empowered with some
kind of governmental authority.
• Credit agencies have no legal authority at
all, they are simply billion-dollar
corporations who are in the business of
gathering and selling YOUR information
Demystifying Credit Repair
Myth #2.
• The credit agencies are required by law to
keep derogatory items on your credit
report for 7 to 10 years.
• There is no law that the credit agencies
report anything. Just the opposite is true!
Credit Agencies are required by law to
automatically remove all derogatory items
older than 7 years, or in the case of a
bankruptcy, 10 years.
Demystifying Credit Repair
Myth #3.
• It is impossible to remove an item of public
record.
• Bankruptcies, tax liens, etc. come off just
like any other item that is incorrectly
reported, obsolete, erroneous, misleading,
incomplete, or that cannot be verified.
Remember, the nature of the item has
nothing to do with its removal under the
Fair Credit Reporting Act.
Demystifying Credit Repair
Myth # 4.
• The burden of proof rests with the
consumer to validate information
contained on your credit report.
• The opposite is true under the Fair
Credit Reporting Act; both federal
and various state laws REQUIRE that
the credit agencies bear the burden.
Privacy vs. Piracy
Myth #5.
• It is illegal or immoral to have the
information on your credit report altered or
removed.
• Not only is it not illegal or immoral, but it is
what the Fair Credit Reporting Act is all
about. It was enacted by congress for the
very purpose of protecting consumers from
the intrusion of the credit agencies into our
lives.
Demystifying Credit Repair
Myth #6.
• Paying a past due debt removes it
from your credit report.
• Just because you pay an old debt
does not change or erase the fact
that at one time you were not paying
on it as you agreed. Can this record
be changed? Absolutely!
Demystifying Credit Repair
Myth #7.
• Credit reporting and credit scoring were
developed to educate and inform
consumers. (visit their websites)
• False. The big 3 and FICO serve the
banking and insurance industries who
need a 3rd party to “rate” their services.
• Evidence: Blockbuster and Hollywood
video article
Demystifying Credit Repair
Myth #8.
• If you get a derogatory item removed, it will
just come back.
• Not if it is removed legally. When it is
removed with cause under the Fair Credit
reporting Act it cannot legally be placed
back on your credit report. Consumer must
receive a reinsertion letter 5 days prior.
Demystifying Credit Repair
Myth #9.
• The past equals the future.
• This is the biggest myth of all. The concept
that once bad, always bad, or at least for 7
years is totally false. The scoring model,
like Google’s search engine parameters,
has been in constant change. The simple
truth is, no credit report or scoring model
can predict the future
First the Facts
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The Fair Credit Reporting Act: 1971
Congress passed the Fair Credit Reporting Act (FCRA). The FCRA
was passed by congress with the intention to regulate creditreporting agencies. The Act spelled out all the rules and
regulations that the credit-reporting agencies had to follow before
they put anything on someone’s credit report. All information
reported must be 1) Verifiable, 2) Complete and 3) Accurate. For
the past three decades, those agencies have ignored most of the
law. If “reasonable procedures” have not been correctly followed,
then any verified inaccuracies, etc. must be removed from your
credit reports as defined in the FCRA. The three credit reporting
agencies (CRA) ARE Experian (formerly TRW), Equifax and
Transunion. There are various agencies that purchase information
from these three major agencies, but they get their information
from the “Big-3”, so if you can repair your credit with the Big-3, you
basically repair it with everyone. www.yale.edu report
Fair Credit Reporting Act
How to read your results
Deleted - This item was removed from your credit report
Remains - This item has been verified as accurate
Updated – A change was made to this item; review this report to view the change. If ownership of
the item was disputed, then it was verified as belonging to you.
Reviewed - This item was either updated or deleted; review this report to learn its outcome
Items We investigated
We completed investigating the items you disputed with the sources of the information. Here are the results: Credit
items
outcome
CAP ONE
Remains
ZALES/CBSD
Updated
STATE OF ALABAMA HR
Deleted
CBSI
Deleted
CBSI
Deleted
SECURITY CHECK LLC
Deleted
HSBC BANK
Deleted
CAVALRY PORTFOLIO SERV Deleted
LISTER-HILL CREDIT UN
Remains
Visit experian.com/status to check the status of your pending disputes at any time
Additional related Acts
Google Search; consumer rights +
• FCRA
• FCBA
• FDCPA
• FACTA
• CROA
Fair & Accurate Credit Transactions Act
ALERT
ADDRESS DISCREPANCY: THERE IS A SUBSTANTIAL DIFFERENCE BETWEEN THE ADDRESS SUBMITTED IN THE INQUIRY AND
THE ADDRESS(ES) ON FILE
TRANSUNION ID MISMATCH ALERT: PREVIOUS ADDRESS MISMATCH. INPUT DOES NOT MATCH FILE.
ADDRESS DISCREPANCY: THERE IS A SUBSTANTIAL DIFFERENCE BETWEEN THE ADDRESS SUBMITTED IN THE INQUIRY AND
THE ADDRESS(ES) ON FILE
SCORE MODELS
EQUIFAX/BEACON 5.0 - SOME PPERSON – XXX-XX-XXXX
SCORE: 588
00038 - SERIOUS DELINQUENCY, AND DEROGATORY PUBLIC RECORD OR COLLECTION FILED
00018 - NUMBER OF ACCOUNTS WITH DELINQUENCY
00020 - LENGTH OF TIME SINCE DEROGATORY PUBLIC RECORD OR COLLECTION IS TOO SHORT
00014 - LENGTH OF TIME ACCOUNTS HAVE BEEN ESTABLISHED
_________________________________________________________________________________________
TRANSUNION/FICO CLASSIC (04) – SOME PERSON – XXX-XX-XXXX
SCORE: N!A
SC3 - FILE NOT SCORED BECAUSE SUBJECT DOES NOT HAVE SUFFICIENT CREDIT
_________________________________________________________________________________________
EXPERIAN/FAIR, ISAAC (VER- 2) – SOME PERSON – XXX-XX-XXXX
SCORE: 524
38 - SERIOUS DELINQUENCY AND PUBLIC RECORD OR COLLECTION FILED
13 - TIME SINCE DELINQUENCY IS TOO RECENT OR UNKNOWN
02 - LEVEL OF DELINQUENCY ON ACCOUNTS
18 - NUMBER OF ACCOUNTS WITH DELINQUENCY
08 - TOO MANY INQUIRIES LAST 12 MONTHS
F.A.C.T.A.
SCOREMODELS
5 MAIN BORROWER
EQUIFAX/BEACON 5.0
810
00011 - AMOUNT OWED ON REVOLVING ACCOUNTS IS TOO HIGH
00032 - LACK OF RECENT INSTALLMENT LOAN INFORMATION
_________________________________________________________________________________
3 MAIN BORROWER
TRANSUNION/FICO CLASSIC (04)
808
004 - LACK OF RECENT INSTALLMENT LOAN INFORMATION
014 - LENGTH OF TIME ACCOUNTS HAVE BEEN ESTABLISHED
012 - LENGTH OF TIME REVOLVING ACCOUNTS HAVE BEEN ESTABLISHED
_________________________________________________________________________________
1 MAIN BORROWER
EXPERIAN/FAIR, ISAAC (VER. 2)
822
12 - LENGTH OF TIME REVOLVING ACCOUNTS HAVE BEEN ESTABLISHED
01 - AMOUNT OWED ON ACCOUNTS IS TOO HIGH
Credit Considered in Credit Scores
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Trade lines
Inquiries
Collections
Public Records
NOT Considered in Credit Scores
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Age
Address
Employment
Income
Sex
Research and Repercussions
• In June of 2004, the Public Interest
Research Group found (79% or more)
have significant errors in their credit
profiles. These errors affected credit
scores by 50+ points.
• lyonslawfirm.com/pdfs/creditlawsuits.pdf
• bankruptcydischargesettlement.com
• 10th Circuit Appeals Court ruled that EOscar is not a reasonable validation
method (2010)
Demystifying Credit Repair
Myth # 10.
• I cannot restore my credit on my own.
• Yes, you can! You can try to do it yourself
(just like you can represent yourself as an
attorney in a court of law). But you can
also allow experienced professionals to
educate you and assist you in restoring
your credit profile.
CROA & who can charge
Credit Repair Organizations Act
2007 Amended to FCRA
1. Prohibited practices
2. Disclosures
3. Certain Federal Exemptions
Industry Leader Established in 1997
• Federally-chartered CUSO
• “A+” Rating with the BBB
• 160,000+ Customers
• Fantastic money-back policy
www.United-Credit.org