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www.moneymattersboston.com Listen in tomorrow at 2pm. Chris Devin, top mortgage pro in New England and Nikitas Tsoukalis, owner of Key Credit Repair discuss credit scores and their role in the real estate process. 1120AM Money Matters Radio
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10/5/11 |
43 Million People below 600 credit |
43 million people below 600 credit...and climbing. 10% more since 2008.
abcnews.go.com uly 12, 2010
Many Americans' have seen their all-important credit scores fall victim to the recession, new numbers show.
Data released by FICO Inc. indicates that more than a quarter of Americans -- some 43 million people -- now have credit scores of 599 or lower, a threshold that will make it tough to get credit cards, mortgages and other loans. Bad credit scores can even make it difficult to find a job.
The number of Americans struggling with their credit has increased dramatically since the start of the recession. Historically, 15 percent of Americans have had credit scores below 599, and with millions of Americans still out of work and others facing foreclosure, analysts expect the number of people struggling with credit to rise even further.
Our question to you today: Are you concerned about your credit score?
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10/5/11 |
$50 Collection...60 point drop? |
$50 collection|60 point drop|really?
myemail.constantcontact.com
Take a look at the scenario below. This consumer lost 60 points because of a single, erroneous $52 collection that hasn't reported since 2005 on credit. This was a quick fix that we expedited and completed before our client closed on her mortgage. This gave her an additional $125/month in savings on...
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10/5/11 |
Experian misleading consumers? |
Experian misleading consumers?
MSNBC Reports
Lawsuit: Credit score sites mislead consumers
By Bob Sullivan
Confused about your credit score and where to get it? That's intentional, according to a new lawsuit filed in a California federal court.
Many consumers who think they are buying a peek at their credit scores are being defrauded, according to a lawsuit against credit bureau giant Experian. The case, which seeks class action status, claims that Experian is intentionally confusing customers, engaging in false advertising and not giving consumers what they pay for when they sign up for services at the firm's popular FreeCreditReport.com and FreeCreditScore.com Web sites.
"It's a classic consumer fraud case," said David Woodward, one of the lawyers who filed the case. "The law is designed to prohibit exactly this kind of egregious advertising practice. ... The defendant is profiting from deception."
Experian, through its ConsumerInfo brand, aggressively markets access to credit scores as a benefit of subscribing to its credit monitoring service. Knowing your credit score, ads suggest, is essential before borrowing money and could save consumers thousands of dollars.
The vast majority of lenders use a three-digit number called a FICO score to make lending decisions. Developed by Fair Isaac and Co., the FICO score takes data from credit reports maintained by the nation's three credit bureaus -- Equifax, Trans Union and Experian -- and boils it down into one three-digit number for each bureau report to provide a quick assessment of a consumer's creditworthiness. All consumers in the system have an Equifax FICO score, an Experian FICO score and a Trans Union FICO score.
The credit scores that Experian sells to consumers, however, are not the Experian FICO scores, the lawsuit contends. Instead, subscribers who sign up for a $14.95 per month service at FreeCreditReport.com get access to a similar three-digit number developed by Experian using its so-called PLUS Score model. While the value is meant to give consumers a sense of their creditworthiness, Plus Score ratings are not sold to lenders, and are not used in lending decisions, the lawsuit alleges.
It's unclear how much the Experian FICO score and the PLUS score can vary. But that is immaterial to Woodward, who says Experian intentionally blurs this distinction in its advertisements.
"It's simple. ConsumerInfo doesn't sell PLUS Scores to lenders," he said. "Fraud is inherent in the advertising."
Experian currently has 3.1 million credit monitoring subscribers through its ConsumerInfo group, which has also doled out 20 million credit reports, the company says.
An Experian spokeswoman said the firm would not comment on the accusations because they stem from ongoing litigation.
The plaintiff in the case is David Waring, a California consumer who signed up at FreeCreditReport.com and now says he was duped.
In one advertisement cited by the lawsuit, a notice on Experian site FreeCreditScore.com says, "Only One Number Matters! Your CREDIT SCORE." Later in the text, the site says that membership includes "credit score alerts," which allow consumers to "find out when your score changes. This could help you qualify for better interest rates."
Text on FreeCreditReport.com uses similar language: "Lenders use credit scores to help them determine the 'credit worthiness' of consumers applying for credit cards, lines of credit, or loans."
In each case, the sites suggest that consumers will receive access to the score lenders use when making credit decisions, and that's misleading, said attorney Woodward.
"The defendants represent that they are selling a credit score, a number to determine credit worthiness. But it's not that. It's a score based on an in-house model that lenders do not use," he said.
Experian sites do indicate in various places that the score they are selling is not a FICO score. Accessed this week, FreeCreditReport.com indicates towards the bottom of its home page that the "Experian Credit Score indicates your relative credit risk level for educational purposes and is not the score used by lenders."
But Woodward says Experian's disclosures are not "clear and conspicuous," and many consumers who view the marketing materials are left with the impression that they are buying a score used by lenders.
Experian's FreeCreditReport.com has been the target of many legal actions and accusations of deception, including several run-ins with the Federal Trade Commission. Accusing the firm of tricking consumers into paying for credit reports that they could obtain for free, the FTC last year forced Experian to add a link atop FreeCreditReport.com that sent consumers to AnnualCreditReport.com, the congressionally-mandated website where consumers can obtain their credit reports for free. In turn, Experian changed its business model for the site and began focusing on selling credit scores and credit monitoring services.
For years, credit experts have warned consumers that not all credit scores are created equal, and that many outlets selling credit scores aren't selling the real thing. In 2006, Fair Isaac sued the nation's three credit bureaus over the creation and sale of such alternative scores. In 2009, a jury ruled against Fair Isaac, in what became essentially a trademark violation case.
Still, consumers could buy their three FICO scores using a Fair Isaac Web site named MyFico.com -- until February 2009, when Experian stopped letting Fair Isaac sell Experian FICO scores at the site. That means today, there is no way for consumers to obtain this number, unless they receive it as part of a mandatory disclosure from a lender following a negative credit action.
Purchase of Experian's PLUS Score is a poor substitute, Woodward said. More important, the resulting marketing blitz for Experian's score has led to great consumer confusion, he said.
"Accurate credit scores are critically important to consumers, especially now, in a down economy," he said. "Consumers have a right to receive truthful advertising about them."
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Vip List at the credit agencies? |
THE NEW YORK TIMES
May 14, 2011
Credit Error? It Pays to Be on V.I.P. List
By TARA SIEGEL BERNARD
The credit rating bureaus, whose reports influence everything from credit cards to mortgages to job offers, have a two-tiered system for resolving errors — one for the rich, the well-connected, the well-known and the powerful, and the other for everyone else.
The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people. Those on the list — and they may not even realize they are on it — get special help from workers in the United States in fixing mistakes on their credit reports. Any errors are usually corrected immediately, one lawyer said.
For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — "account not his/hers," for example — and sending a dispute form to the creditor to investigate. Many times, consumer advocates say, the investigation translates to a perfunctory check of its records.
"The legal responsibility of the credit reporting agencies and of the creditors is well established," said Leonard Bennett, a consumer lawyer in Newport News, Va. "There is a requirement that they do meaningful research and analysis, and it is almost never done."
Consumers who have trouble fixing errors through the dispute process can quickly find themselves trapped in a Kafkaesque no man’s land, where the only escape is through the court system.
"You are guilty before you are proven innocent in a situation like this," said Catherine Taylor, 45, of Benton, Ark., who said she had been denied employment and credit because her filing was mixed up with a felon who had the same name and birthday.
Judy Johnson of Bossier City, La., was confused with a less creditworthy Judith Johnson, with a similar address and Social Security number. For nearly seven years, Judy Johnson, a 63-year-old credit manager for a building supply company, said she tried to remove the black marks from her credit report. But when she was denied a credit card, she knew the problem had returned — a third time. "This time, I was livid," she said.
She ultimately brought a suit against one of the bureaus, and recently settled for an amount she cannot disclose. But the problems still linger. A deputy sheriff recently came to her door to serve her papers for a debt she says she does not owe.
The credit rating bureaus, private-sector companies that each attempt to track all American consumers’ credit use, have grown much more powerful over the last couple of decades as credit has become a crucial cog in the nation’s
financial system. Their reports are used to formulate the all-powerful credit score, which lenders use to determine creditworthiness.
But as the bureaus’ work has become more important, consumer advocates say, regulation has not kept up, in large part because their overseer, the Federal Trade Commission, lacks broad authority. That could change once responsibility for the credit bureaus shifts to the new Consumer Financial Protection Bureau, which will be able to write rules and examine the credit agencies’ policies.
The bureaus, meanwhile, do not have an economic incentive to improve the system, consumer advocates say, because their main customers are the creditors, not consumers.
"There is no neutrality in the credit reporting agencies," said John Ulzheimer, who has been an expert witness in more than 80 credit-related cases and is president of consumer education at SmartCredit.com. "They work for the lenders who buy credit reports from them, and anyone who suggests otherwise is not being intellectually honest."
When asked about the V.I.P. category, TransUnion said all consumers "have the ability to speak to a live representative." Equifax said consumers who received a free copy of their credit report were provided with a number for customer service.
Experian denied that it had V.I.P. lists. But a spokeswoman did say that prominent people deemed high risk — like politicians in an election year — might have their credit files taken offline so that creditors or other companies making inquiries could not get access without the bureau’s permission. Experian said those people did not receive any other special handling.
David Szwak, a consumer lawyer in Shreveport, La., who has handled dozens of credit cases, said that the V.I.P. designation and preferential treatment did exist at Experian, and he provided sworn testimony from former Experian employees that the category existed.
Estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. A recent study, paid for by the Consumer Data Industry Association, the trade group for the bureaus, found potential errors in 19.2 percent of reports, but said that less than 1 percent of them had disputes that, when settled, resulted in a meaningful increase in scores. Even 1 percent translates into millions of consumers, since there are at least 200 million files at each of the bureaus.
The F.T.C. is expected to deliver a nationwide study on credit report accuracy next year that could provide more clarity. It could also include recommendations for legislative action.
The volume of disputes has been rising as consumers borrow more and gain greater access to credit reports. The automated system was a response to that. A spokesman for the trade group said most consumers received an answer within 14 days.
Experian is the only bureau that still processes disputes in the United States, experts said, though most complaints wind their way through the same online system — unless the dispute involves a V.I.P.
"They get a lot more high-end treatment," said Mr. Szwak, the lawyer, who has read the bureaus’ internal procedure manuals and deposed or cross-examined employees. The biggest difference at TransUnion and Equifax, lawyers said, is that V.I.P.’s disputes are specially handled domestically. Regular consumers’ files, meanwhile, may get priority treatment if they involve a time-sensitive issue, like a mortgage pending, or if the consumer is represented by a lawyer or dealing with fraud.
Last year, new rules went into effect to strengthen existing regulations on the accuracy of reports. The rules also allow consumers to dispute errors directly with the creditor. But critics say the rule lacks any teeth because consumers don’t have the right to sue the companies. (Individuals can, however, sue the bureaus and creditors after lodging a dispute through their system.)
But the problem, advocates say, is that consumers cannot vote with their feet. "They cannot remove their information from the bureaus," said Chi Chi Wu, a staff lawyer at the National Consumer Law Center, who wrote a report on the automated dispute process in 2009, "or take their business elsewhere."
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10/5/11 |
The Truth about credit inquiries |
The truth about credit inquiries and how they DO NOT impact your FICO scores....
What to know about "rate shopping"
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.-Fair Isaac Corporation 2011
Best regards,
Nikitas Tsoukalis, President
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Great article on Bankruptcy and Tax Debts that our attorney recently forwarded |
Bankruptcy and Tax Debts
Five Rules for Discharging Tax Debts in Bankruptcy
By William Perez, About.com Guide
- Income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code. Filing for bankruptcy is one of five ways to get out of tax debt, but you should consider bankruptcy only if you meet the requirements for discharging your taxes.
Chapter 7 provides for full discharge of allowable debts. Chapter 13 provides a payment plan to repay some debts, with the remainder of debts discharged. Under the new bankruptcy laws, tax debts are treated the same way in both Chapter 7 and Chapter 13 petitions. Not all tax debts are capable of being discharged in bankruptcy. The bankruptcy petitioner must have tax debts that meet five criteria for discharge.
Tax debts are associated with a particular tax return and tax year. The bankruptcy law lays out specific criteria for how old a tax debt should be.
Five Rules to Discharge Tax Debts
If the income tax debt meets all five of these rules, then the tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions.
- The due date for filing a tax return is at least three years ago.
- The tax return was filed at least two years ago.
- The tax assessment is at least 240 days old.
- The tax return was not fraudulent.
- The taxpayer is not guilty of tax evasion.
Return Due At Least Three Years Ago
The tax debt must be related to a tax return that was due at least three years before the taxpayer files for bankruptcy. The due date includes any extensions.
Return Filed At Least Two Years Ago
The tax debt must be related to a tax return that was filed at least two years before the taxpayer files for bankruptcy. The time is measured from the date the taxpayer actually filed the return.
Tax Assessment At Least 240 Days Old
The IRS must assess the tax at least 240 days before the taxpayer files for bankruptcy. The IRS assessment may arise from a self-reported balance due, an IRS final determination in an audit, or an IRS proposed assessment which has become final.
Tax Return was Not Fraudulent
The tax return cannot be fraudulent or frivolous.
Taxpayer Not Guilty of Tax Evasion
The taxpayer cannot be guilty of any intentional act of evading the tax laws.
Some Tax Debts Not Dischargeable
Tax debts that arise from unfiled tax returns are not dischargeable. The IRS routinely assesses tax on unfiled returns. These tax liabilities cannot be discharged unless the taxpayer files a tax return for the year in question.
Other Tax Issues in Bankruptcy
Before a Chapter 7 or Chapter 13 bankruptcy can be granted, the bankruptcy petitioner is required to prove that the four previous tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors' meeting in a bankruptcy case.
Additionally, bankruptcy petitioners are required to provide a copy of their most recent tax return to the bankruptcy court. Creditors can also request a copy of the tax return, and petitioners must provide a copy to them.
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10/17/11 |
The State of the Massachusetts Economy. A surprisingly optimistic outlook from JP Morgage Chase. |
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10/18/11 |
The End of Loan Modifications? -
Attorney John Papantonakis, Esq writes in....
www.proandpaplaw.com 781.246.2000
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The End of Loan Modifications?
The US Government began the current loan modification era by introducing HAMP (Home Affordable Modification Program) in March of 2009. At the time of its unveiling, the program was put in place because we were told the US economy was in great peril, many banks were facing economic catastrophe and there were talks of great finance giants even folding. When HAMP was initially introduced very few really knew how it would work. Luckily today we know a bit more about how HAMP works.
At the time however, the public was just told the US Government would work with banks and servicers to figure out the implementing HAMP evaluation. We were also told the program would remain in place until December 31, 2012 and that it was expected to help 3-4 million people modify their mortgages.
Since HAMP’s inception over 100 banks have enrolled in the program, evaluating what we have been told is millions for eligibility. Many other banks have even introduced their own HAMP like loan modification programs. The result has been an estimated 1.4 million people have been placed in temporary loan modifications thus far and about 500,000-600,000 of those having received permanent modifications. According to the US Treasury however, only 3% of the funds put aside for the HAMP program have been used thus far.
Bank of America recently announced a 41% spike in Notices of Intent to Foreclose being sent out nationwide. Further, anyone dealing in loan modifications can tell you it is still extremely difficult to achieve one. The most common reason for denial being “..missing documentation...” (despite one having sent in all the documentation repeatedly). Though I must admit I have even seen lack of affordability as a reason for denial when the income used to qualify an individual is exactly the same as that which was used to qualify them for the mortgage in the first place. In short, loan modifications have been difficult to achieve even for those that know and can interpret the complex qualification process. Thus, generally speaking loan modifications have been hard to come by, as also evidenced by the number of permanent modifications in place a year and a half into the program.
Now, our government, as evidenced by the last six months, instead of trying to figure out a way to further streamline loan modifications to achieve the 3-4 million modifications, is fighting over whether or not to cut off further funding to HAMP, and maybe even the program entirely prior to December 31, 2012.. The elimination of HAMP can only mean any pressure banks currently feel to offer loan modifications would end and folks facing foreclosure would lose yet another option.
I am not an Economist but I fail to see how ending loan modifications now while unemployment is still close to 10% nationwide will help distressed homeowners or the housing sector. Further, if homeowners truly are on the cusp of going into foreclosure in greater numbers now as evidenced by Bank of America’s recent report, what options do homeowners have?
Here at P&P Law our office tackles these tough issues for home owners everyday and while we can not make the ultimate decision for clients in terms of what is best for them, we certainly have enough experience with loan modification, short sale and even bankruptcies to help educate homeowners about their options. The only remaining advice I can give homeowners is act now because the time left to modify your loan is ticking away in more ways than one.
Resources:
1. http://en.wikipedia.org/wiki/Home_Affordable_Modification_Program
2. http://www.bls.gov/news.release/empsit.nr0.htm
3. https://www.efanniemae.com/sf/mha/mhamod/npvtest/
- https://www.hmpadmin.com/portal/index.jsp
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10/18/11 |
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Bankruptcy or Foreclosure-Which is Worse?
Many folks today face the unfortunate predicament of having to decide whether to let their mortgage company foreclose on their home, or whether to declare bankruptcy to try and save it. The average homeowner may not know whether bankruptcy or foreclosure is more detrimental to their future. This article may help some with making a more informed decision but as always one should consult an attorney prior to making such an important decision because one’s particular facts may require a drastically different choice over one another.
The credit bureaus do not make the decision any easier because they do not publicize their formulas for determining credit scores. If they did, then perhaps by analyzing the mathematical algorithms, homeowners could determine whether bankruptcy or foreclosure had the longer term effect, and choose the one with the least effect. What we do know from the credit bureaus is they report foreclosures for 7 years and bankruptcies for 10 generally speaking. Does this then mean one should always allow their home to be foreclosed as opposed to declaring bankruptcy as this action will result in a shorter negative reporting period on credit? Well, if that were the case then why do lenders consider individuals for mortgages 2 years after discharge of their bankruptcy? This latter fact would seem to indicate lenders view bankruptcy as less detrimental to one’s credit.
Many people also do not know that if a lender forecloses on your home, not only is that lender entitled to foreclose and take the home, but they are also legally able to add attorneys fees, late fees and interest and pursue what is called a deficiency judgment against the foreclosed owner (the difference between what the house sells for at foreclosure and the sum of the mortgage, attorneys fees, late fees and interest). This difference can often be thousands if not hundreds of thousands. Then, per Massachusetts Law the lender can sit on that judgment for up to 20 years prior to having to enforce it. This means the Lender has a span of twenty years to decide when to attach foreclosed owners wages, repossess their car for payment, attach their future bank accounts as well as use any other collection methods the Lender wishes to collect on their deficiency judgment.
For a foreclosed homeowner facing such a situation there is only one solution to eliminating the 20 year uncertainty, and that is bankruptcy. Now whether it is a chapter 7, 13 or 11 will be determined by the foreclosed owner’s particular circumstances. Nevertheless, the homeowner caught in this situation will have both a foreclosure and a bankruptcy on their credit and depending on how quickly they file bankruptcy, the combination cannot be good for their future credit score reporting.
If the distressed homeowner had consulted an attorney earlier on in their financial predicament, then perhaps a short sale could have been discussed where the attorney could have worked to get the Lender to forgive the deficiency, the homeowner letting go of the home and the lender not pursuing a deficiency judgment. In the alternative and depending on the distressed homeowner’s financial situation, maybe a chapter 13 bankruptcy could have been feasible in catching up on arrearages and saving the home from foreclosure for altogether. Either way, if the distressed homeowner had consulted legal advice earlier on in the process, it is clear the homeowner could have been informed of less credit damaging scenarios than foreclosure or forced bankruptcy (to avoid 20 years of collections).
It is this author’s opinion, distressed homeowners should consult legal advice as soon as possible to determine their options. Waiting or burying one’s head and letting the chips fall where they may will often lead to more financial and credit damage than may have been necessary.
REFERENCES:
- http://www.msnbc.msn.com/id/21478416/ns/business-answer_desk/t/which-worse-foreclosure-or-bankruptcy
- http://www.fha-home-loans.com/
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11/6/11 |
USA TODAY REPORTS: Credit Reports Stacked Against Consumers
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