Protect Yourself From Credit Repair Scams


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With an improved economy and real estate prices on the rise, your good name and reputation are more important than ever when applying for new credit cards, an automobile, rental property or home mortgage. Many creditors have tightened their lending guidelines, effectively barring millions of Americans from borrowing money.

Long gone are the days of obtaining credit, goods, benefits, services and/or employment with a 620 FICO score. In most instances, a borrower will be denied if they maintain a credit score lower than 740. Even those with high credit scores have experienced reduced credit lines or closed credit card accounts and equity lines. When an account has not been closed, credit limits have been reduced to the existing balance due.

Mortgage lenders, auto finance companies, credit card issuers, credit unions and traditional banks have all raised the bar. Borrowers with low FICO scores can expect to be denied credit or to pay significantly higher interest rates than those with excellent repayment histories.

With about 52 percent of credit profiles at the Equifax, Experian or TransUnion consumer reporting agencies containing some sort of error or omission materially impacting credit worthiness, some turn to credit repair to remedy low credit scores and issues that prevent them from borrowing money. Absent self-help and the “do-it-yourself” approach, they hire a credit service organization in the restoration of their good name and reputation.

The terms credit repair, credit restoration or credit rehabilitation are somewhat synonymous. Those with bad repayment histories cannot afford to ignore the potential benefits of credit repair. In today’s economy, a strong FICO score is more important than ever.

Beware, though, when hiring a credit repair company.

Most — but not all — credit service organizations specialize in the restoration of consumer credit worthiness as well as issues related to identity. Assuming that the credit repair company is performing within established guidelines, they utilize laws enacted by Congress to dispute negative, erroneous, obsolete and/or fraudulent information contained within your consumer credit profile.

Utilizing the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Fair Credit Billing Act and the Fair and Accurate Credit Transactions Act, a reputable credit service organization will assist in the submission of disputes electronically, verbally and in writing to the Equifax, Experian and TransUnion consumer reporting agencies. Disputes are also submitted to creditors, collection agencies, and third-party record providers, in addition to state, federal, and local regulatory authorities.

Unlike most credit repair clinics that submit the same written complaint letters monthly, a reputable credit repair company will have devised a strategy whereby disputes are submitted electronically, verbally and in writing over a long period of time to the credit reporting agencies, creditors, collection agencies and third-party record providers reporting negative, inaccurate, obsolete and erroneous information.

Keep in mind that anything a credit repair company can do, you can do yourself for little to no cost. With that said, a reputable credit service organization should have an edge over consumer driven disputes as they will possess the education, knowledge and a source proven method that is generally unknown to the average consumer.

A reputable credit service organization should have a provable track record of results in the modification or removal of erroneous and inaccurate judgments, liens, mortgage foreclosures, bankruptcies, short-sales, student loans, credit inquiries, derogatory accounts and collection agency entries, personal identifiers and other transient data from a consumer’s credit report. Although the credit restoration process can take many months, most individuals should see some results within the first 45 to 60 days.

Credit repair, credit restoration and credit rehabilitation is as legal as pleading “not guilty” in a court of law. One must understand, though, that most credit service organizations are not law firms and that their employees may not be licensed to practice law. As such, even a reputable credit repair company cannot provide legal advice, nor may they represent a consumer before any court or in any legal proceeding. In the event that legal representation is required, the credit repair company should provide an appropriate attorney referral for consultation.

When self-help or the “do-it-yourself” approach is not feasible and you decide to hire a credit repair company to restore your credit, be sure to check them out. While the majority of credit repair clinics are scams, a few good ones do exist. Consumers can check out a credit service organization through their state Attorney General, the Federal Trade Commission at http://www.ftc.gov or through the Better Business Bureau at http://www.BBB.org.

Mortgage delinquency rates to remain high while credit card rates to drop


Credit Cards and Mortgages
Credit Cards and Mortgages

On Wednesday, TransUnion released its annual forecast on two primary consumer credit variables – mortgage and credit card delinquency rates.

The national mortgage loan delinquency rate – or the ratio of borrowers that are 60 or more days past due – is projected to decline to 5.06 percent by the end of 2013 from an estimated 5.32 percent this year.  TransUnion forecasts mortgage delinquencies, a statistic generally considered to be a precursor to foreclosure, will decline in 34 states and the District of Columbia with only 13 states experiencing increases.

“As house prices and unemployment slowly improve, TransUnion’s forecast indicates that the national mortgage delinquency rate will gradually drop throughout 2013,” said Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit, in a prepared release. “While we are encouraged by the direction of the forecast, we would have hoped for a projection that called for a more substantive drop in delinquencies.  If the pace of improvement does not pick up, it will take a very long time to get back to ‘normal’ delinquency rates.”

The mortgage delinquency rate peaked to 6.89 percent in Q4 2009 after rising 12 consecutive quarters from its 1.94 percent mark in Q4 2006. The 255 percent increase was unprecedented in American history.

Based upon the most recent data, the peak in mortgage delinquency rates has dropped 21 percent to 5.41 percent in Q3 2012.

Should TransUnion’s forecast hold true in 2013, the rate would only have dropped about 27 percent over a four year period.  This is still well above the “normal” delinquency rate range of 1.5 to 2 percent.

“The slow improvement pace we are experiencing right now seems to be less about new borrowers not being able to make their payments and more about existing borrowers who have been delinquent for a very long time,” stated Martin. “For example, our analysis shows the delinquency rate would fall to around 2.5 percent, or pretty much normal, if we simply took borrowers who haven’t made a mortgage payment in over a year out of the calculation.  By comparison, pre-recession, it was unusual for a borrower to go more than 6 months without either being able to cure their situation or go through the foreclosure process.”

Credit Cards

Credit card delinquency rates – or the ratio of bankcard borrowers that are 90 or more days delinquent on one or more of their credit cards – are expected to remain relatively low throughout 2013, increasing slightly from 0.83% in Q4 2012 to 0.87% in Q4 2013.

From 2000 until 2011, the credit card delinquency rate has averaged 1.24% during the fourth quarter.  In the 51 quarters since Q1 2000, the credit card delinquency rate has only been below the 0.90% threshold 10 times.

“The credit card delinquency rate continued to remain low in 2012 after reaching its lowest level since 1994 in the second quarter of 2011,” stated Steve Chaouki, group vice president in TransUnion’s financial services business unit, in a prepared release. “We expect much of the same in 2013 as consumers have come to rely on their credit cards for liquidity with continued high unemployment rates and a stagnant economy.

“It should be noted that we have seen credit card delinquencies drift somewhat higher in the last year.  Some of this can be attributed to the fact that credit card delinquencies were so low, that at some point they were bound to increase.  A more significant factor may be that credit card originations have been increasing in the last few years, and with that increase we have seen non-prime borrowers receive not only more credit cards, but also comprise a larger share of new credit cards.”

The latest credit card origination data from TransUnion points to an increase in non-prime credit card borrowers.  The share of non-prime, higher-risk originations – with a VantageScore® credit score lower than 700 – was 29.55 percent in Q2 2012. This was slightly higher than last year with 29.28 percent in Q2 2011and much higher than the 23.86 percent observed in Q2 2010.

Credit card debt per borrower – which has been relatively low since 2010 – is expected to increase from its current $4,996 level (as of Q3 2012) to $5,050 in Q4 2012 and $5,446 at the end of 2013.  This would be the highest credit card debt level since 2009. In Q1 2009, the average credit card debt per borrower peaked at $5,776.

In 2013, thirty-nine states and the District of Columbia are projected to see credit card delinquency increases in with only six states experiencing declines.  

States expected to experience the largest credit card delinquency increases next year include Ohio (11.84%), Missouri (8.33%) and North Dakota 7.50%). However, all of these states still remain below their historic averages. The largest declines in 2013 are expected in Rhode Island (-7.59%), Montana (-5.88%) and Georgia (-5.21%).

TransUnion’s forecasts are based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values. The forecasts would change if there are unanticipated shocks to the global economy affecting recovery in the housing market, or if home prices unexpectedly continue to fall.

The most recent mortgage and credit card delinquency data for the nation can be found at www.transunion.com/trenddata