How to start a good credit history

via How to start a good credit history, clarionledger.com

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Credit card debt among Americans is sky-high right now. Back in May, the Federal Reserve noted that we’d reached a dubious milestone: Americans’ credit-card debt had reached the $1 trillion mark, the highest since 2008. The average household carries a little more than $16,000 in credit-card debt; some lower and some much, much higher.

Debt can be crippling. Many families, for whom the cost of living has risen out of proportion to their income over the past several years, find themselves living paycheck-to-paycheck, with little in the bank and often having more “month than money.” Credit cards often provide a deceptively convenient way to take care of the immediate problem, while passing the bill to the uncertain future. But as balances rise, so do finance charges. It’s a little like digging a deep hole around yourself, and finding the sides getting higher as you try to climb out.

Of course, if you could pay for everything with the cash you have, you wouldn’t need credit. While that approach works great for those of us who can make that happen, many Americans don’t have the knowledge, circumstances or discipline required.

So, what are the options? Other than carrying out a cash-only existence, you can be a victim of credit or make it work for you. While many young adults appear to be avoiding credit cards (perhaps after seeing the previous generation struggle with them), many financial experts say that using credit responsibly is a learned habit, and it’s best to learn it while you’re young.

My own experience with credit started at a tire shop in McComb. When I got my first paycheck from a part-time job, one of the first things I did was to go to the tire shop and get new tires for my old car. The tires cost more than my meager paycheck, and the owner of the shop suggested I buy the tires on credit at zero interest. Despite my lack of credit history, he extended the credit because he knew my family. I was a little reluctant at first, but it didn’t take me long to pay off those tires, and I showed up like clockwork to make the payments. I still remember the feeling of accomplishment I had when I plunked down the final payment.

Establishing credit is different today. The complicated credit-scoring system looks at whether credit has been offered and used and whether you’ve met your obligations. The resulting credit score isn’t sympathetic to your life events, nor does it care about how great a person you are, or consider your feelings. It boils everybody down to a number.

But, it is possible to make the system work for you. The “Cashlorette” (Sarah Berger) wrote recently on her blog about how to establish a good credit history for millennials. Berger notes that it’s crucial to show you can use credit in the first place.

  • First, she advises, establish a habit of paying your balances in full, every time.This will show future creditors that you are serious about your responsibilities. “Link a small, fixed expense to your credit card; one you know you can pay off every time, like your Netflix subscription,” Berger advises. “This is a simple way to slowly build credit, without having to stress over accidentally overspending.”
  • Pay attention to your utilization ratio. While this sounds complicated, it’s really not; it’s just the percentage of available credit you’re actually using. Keeping this number around 30 percent gets you the best score. For example, if you have a credit line of $1,000, keeping your credit balances below $300 is considered acceptable utilization of credit. (Be sure to include all your credit cards in this equation, not just one.)
  • Apply for the right card. There’s a plethora of cards out there, offering all kinds of “rewards” and “incentives”. But keep in mind these things are there to encourage you to use the card, so choose wisely.
  • Avoid store credit cards. While it’s tempting — and a little bit of a status symbol — to pull out a credit card from your favorite clothing store, such cards often have the highest interest rates in the industry.
  • Don’t look at your available credit as a license to spend. For most purchases, use cash or a debit card. If you want to make a purchase, delaying the instant gratification and saving up for it puts the power in your hands, and you’re far more likely to appreciate it as well.

Check out Berger’s full blog post here: http://bit.ly/2w3nZ7h.

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Credit scores may be on the rise

 

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Chicago Tribune

via Your credit score may have gone up July 1, clarionledger.com

 

PDF: Credit scores going up for millions

This month, up to 20 million Americans who keep a close watch on their credit scores will get a pleasant surprise as all existing civil judgments and many tax liens will disappear from credit reports. The result will be an immediate bump — as much as 20 points — in the credit scores from the “Big 3” credit reporting agencies. Many expected the changes to take effect July 1, so it may have already happened.

Because of new policies requiring more documentation, Experian, Equifax and TransUnion announced recently they’ll be removing these items from their credit reporting. The action comes after many regulators and advocates have expressed concerns over the reliability and accuracy of the information contained in many credit reports. In particular, the Consumer Financial Protection Bureau called out the credit reporting industry in a March report, citing lax standards for researching the information contained in credit reports and leading to inaccuracies.

You may recall that, last October, Attorney General Jim Hood announced a settlement with the Big 3 over a variety of supervisory practices that led to large numbers of errors affecting thousands of consumers. The companies agreed to pay more than $7.1 million to settle the charges, gave Mississippi residents free credit reports (see below), promised to remove certain liens and judgments and said they’d make substantial changes in their practices.

The credit report — and the scores generated from them — are extremely powerful in determining whether you get credit, a job or even a place to live. But with the increase in their usage, it’s more important than ever that the information is accurate. Errors can unfairly ding your credit and limit your options when it comes to credit.

Credit scoring — typically called “FICO” or “Vantage”— uses a computer algorithm to look at your credit history, including how much debt you have and how long you’ve had it, how much of your credit you’re using, whether you’ve been responsible with credit in the past and several other factors. It all comes down to a number between 300 and 850. (Wallethub reports that the average FICO score in the U.S. is 699). People on the high end generally get better credit, while those stuck in the low end of the range are often out of luck.

The credit report is divided into several sections, one of which is Public Records. In this section, you’ll find whether you’ve been the subject of negative actions by the government or courts including tax liens and civil judgments. For example, if you’ve lost a lawsuit and the court has ordered you to pay, it might appear on your credit report as a civil judgment. If you’ve gotten behind on your taxes, the government can claim some of your assets until the debt is paid. That would be considered a tax lien. These are simple examples, but both civil judgments and tax liens can be quite complicated.

The latest action by the credit bureaus wipes the slate clean on civil judgments and many tax liens in credit reports, removing civil judgments entirely and removing at least half of tax liens. (It doesn’t mean new ones won’t be reported; just that the old ones will be eliminated.) In the future, civil judgments and tax liens must contain your name, address, Social Security number or birthdate, and must be updated at least every 90 days.

Eliminating these items from credit reports, Wallethub notes, will mean 6 to 9 percent of Americans (in other words, 12 million to 20 million people) will see their scores improve. The average person will see their scores rise by 10 points, up to a maximum of about 20 points. Most of those seeing an increase, Wallethub adds, are people whose current scores are between 351 to 500; those with scores above 600 are less likely to see a bump. Some credit-industry watchers have expressed concerns the changes might be good for some consumers, but could increase lending to high-risk borrowers. However, most believe the effect on the industry will be minimal.

If you read this column on a regular basis, you know that you’re allowed by law to review your credit report once every 12 months from annualcreditreport.com. And Mississippians, as I noted above, can review their credit reports as often as they want by getting an activation code. (But don’t delay; you have until July 24 to get your code at http://www.mississippicreditreportsettlement.com/.)

“While any credit-score increase associated with these changes is unlikely to exceed 20 points, every piece of negative information that falls off your credit reports is good for your credit score,” advises Wallethub in its article. “So we definitely recommend reviewing your credit reports on a regular basis, both to confirm the removal of problematic public records and to make sure no other mistakes wind up costing you money.”

Millennials shooting for financial independence

via Millennials shooting for financial independence, clarionledger.com

PDF: Millennial Financial 1Millennial Financial 2

Perhaps more than any generation in history, millennials have been the subject of intense scrutiny. The millennial generation (loosely defined as people born between the 1980s and early 2000s) has been studied endlessly, stereotyped mercilessly and subjected to low expectations. While some of the common beliefs about millennials are probably true, many are likely not.

In an article in Forbes magazine in September, writer Caroline Beaton identified six prevailing myths about millennials that should be retired. Among them, Beaton suggested, are that they can’t live without their parents; that they’re chronically unemployed; that they’re lazy; that they’re sex-crazed marriage-phobes; that they’re born entrepreneurs; and that they shun the traditional workplace and just want to work from home.

Statistics, however, don’t seem to bear out all those preconceptions. In fact, most millennials are a lot more like previous generations than we previously thought. For example, research has indicated that, while millennials are living at home much longer, a lot of those are in college and many are living in college dorms (which are counted as “home” by the U.S. Census Bureau). Another example: While you wouldn’t have to look far to support a belief that millennials are lazy, look closer and you’ll find millennials putting their noses to the proverbial grindstone as they start their careers, some working longer hours than even their parents.

 

And in one area, many millennials are holding themselves to standards of financial independence that exceed their parents’ expectations. Bankrate.com commissioned a study of millennial attitudes about when they should be expected to become financially independent. When asked the age someone should be able to pay their cellphone bill, buy a car and cover their housing costs, millennials were more likely to give a much lower age than their parents.

For example, a majority of millennials think they should be expected to pay for their own housing at age 22, pay for their own car at 20 ½ and pay their own cell phone bill at 18 ½. In all three cases, millennials’ average response is about a year and a half earlier than what their parents feel is appropriate, noted the study’s authors.

“Millennials are often stereotyped as being entitled,” said financial columnist Sarah Berger, the “cashlorette” (cash+bachelorette, get it?) at Bankrate.com. “It’s refreshing to see that millennials really do have high expectations of gaining financial independence and getting off their parents’ payroll.”

There were a few regional and political differences. Republicans, on average, believe someone should be able to afford their own car a few months prior to their 20th birthday. That’s almost three years earlier than the average Democrat’s response. As for when they should be responsible for their own cellphone bills, the average answer from millennials was 18, while their parents felt their kids should pay their own cellphone bills around age 20.

Midwestern parents in general favored closing the “bank of Mom and Dad” for housing costs at 22 ½, two years earlier than for Northeastern parents (24 ½). Southern parents were at the lower end of the scale, saying they planned to help with housing until the age of 23.

But these are really just statistics. Individual results may vary, as each child is different and unique. I know parents whose kids left the financial “nest” just after high school, while others are still paying most of their kids’ bills well after they’ve left college. Some of that is probably due to the parents’ unwillingness to cut the apron strings, but the situation is often more complicated than it would appear at first glance. Most parents I know are generous to a fault with their kids (even to the point of enabling their continued dependence).

This seems clear: We parents are likely to bear the fruit of what we sowed when our kids were growing up, plus a generous helping of whatever unique traits God gave them. They learn our habits — good and bad — from watching us, but what they do with that knowledge is as unique as they are. As with any generation, this one will have its share of successes, its share of failures, times they’ll make us proud and times they’ll disappoint us. Chances are, they’ll one day have similar concerns about their own kids’ generation, and maybe they’ll realize we gave them our best.

Partner’s finances can be dating dilemma

via Partner’s finances can be dating dilemma, clarionledger.com

PDF: Dating Finances 1

PDF: Dating Finances 2

If you were dating someone and found out they had a lot of debt or were not very good at managing their money, would that affect how you felt about continuing your relationship with them? While many romantic-minded people would doubtless say they’d follow their heart and not their head in making such judgments, it’s evident growing numbers of people are giving it some thought.

In a recent study by Bankrate.com, 42 percent of Americans surveyed said that knowing someone’s credit score could have an impact on whether they wanted to date that person. While that’s well-short of a majority, the numbers are growing; it’s up a few percentage points from last year’s study that asked the same question. It appears that financial security is growing as a concern for people seeking long-term relationships, and especially marriage.

In general, about 13 percent of people surveyed said knowing the credit score would have a major impact, with about 20 percent of women and 7 percent of men saying it was a crucial factor. Said another way, the credit score was nearly three times as important to women as it was to men. On the other side of the coin, about one in five respondents said they’d never consider it to be an important factor in choosing a partner.

Deciding when to ask for such information (or when to reveal it) can be tricky. Money is a delicate subject for most people, and discussing finances is especially difficult for those with a complicated financial history or those with a lot of money. Most people would consider it “tacky” (as my mom would put it) to ask your date to produce a credit report on the first date or before even agreeing to go out, but if such knowledge is important to you, it’s a good idea to get the issue behind you in the first few months.

“It’s probably not a great idea to ask for someone’s financial history on the first date,” said Mike Cetera, credit card analyst at Bankrate.com. “However, it’s better to know if a potential partner has a history of bad financial decisions before the relationship goes too far, especially if you plan on making large purchases together or sharing bank accounts.”

And, romantic hearts beware; while a credit score might tell you how much debt a person has and their payment history, it’s rarely a reliable indicator of character or integrity. Many people’s low credit scores are the result of uncontrollable life events such as health issues or unemployment, past behavior that’s now changed, or even mistakes made by credit reporting agencies. Without going deeper, most people would consider it shallow to dump an otherwise-delightful partner because they’d been late a few times with their credit card payment years ago.

Of course, when it comes to marriage, financial habits become a lot more important. Deciding to spend the rest of your life together means you’re going to be making a lot of decisions together, and it also means (in most cases) your own history will be forever linked with your spouse’s. (Bankrate’s study noted that 77 percent of married or partnered couples say they use joint bank accounts.) If you’ve carefully tended your own financial garden as a single person, getting married to a financial slob could mean that both of you are going to have to get used to a lot of changes.

Ultimately, honesty is the best policy when it comes to finances in a relationship. Many relationships have been destroyed because of disputes about money, so it’s important to make sure both parties are open and honest about their financial habits, resources and attitudes about spending and saving. Choosing when to ask about (or reveal) crucial financial information depends on the relationship and the people involved but should never be purposefully concealed or distorted. As Shakespeare put it in “All’s Well that Ends Well”: “No legacy is so rich as honesty.”

Senior Surprise: Student loans dragging down retirement

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credit.com

via Senior Surprise: student loans dragging down retirement

Most people like to think of their senior years as when they’ll finally be able to take a break after decades of hard work, maybe do some of the things they’d always dreamed about, unfettered by the daily demands of the workplace. Many seniors have worked hard and sacrificed to build a nest egg so they can achieve these dreams.

But increasingly, older Americans are finding themselves worrying about something they might not have factored into the carefully laid plans they made decades ago: student loans. In a report released recently by the Consumer Financial Protection Bureau, the agency announced some startling numbers regarding the number of seniors (defined as those 60 or older) who are trying to pay off student loans. In the decade from 2005 to 2015, the number of seniors carrying student loans more than quadrupled (from 700,000 to 2.8 million), with a combined debt load of $60 billion. On average, this works out to about $23,500 per senior carrying student loan debt. And it’s having a profound impact on their ability to handle their finances.

What’s going on here? The most obvious answer would be that it’s the result of people going back to college in middle age, or paying off their own old college loans. While both of those things are true, most of that debt is actually from parents shouldering the debt for their children and grandchildren. In some cases, those kids and grandkids have defaulted, placing the burden on the shoulders of the previous generation (who had co-signed). In other cases, parents or grandparents have offered or agreed to take on the responsibility of paying for their descendants’ college educations.

Most seniors live on fixed incomes and finance their lifestyles through a combination of Social Security, pension plans, annuities, cash they stashed away for the future and, in some cases, employment. But the added pressure of student loans is, in some cases, making seniors work longer, stress about handling the debt and facing an uncertain financial future.

“It is alarming that older Americans are the fastest-growing segment of student loan borrowers,” said Richard Cordray, director of the Consumer Financial Protection Bureau. “Many of these older Americans are helping to finance their children’s or grandchildren’s education while living on a fixed income. We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”

 Let’s face it: Most of us would do just about anything for our kids. We want to see them succeed, and many parents wouldn’t hesitate to co-sign or authorize a loan if it were the only option for getting a child or grandchild through college. But seniors with limited means may find this added burden comes at a time when their income has decreased, and when they may face challenging issues related to their declining health. What’s making the situation worse for some is they may also be carrying debt of their own, forcing them in some cases to curtail necessary expenses, such as medications.
In its report, the the bureau focused on the increasing problems caused by companies responsible for servicing those debts. The agency charged that some companies aren’t doing a good job of informing borrowers of their obligations, making critical mistakes in handling the accounts, and in some cases, even engaging in illegal practices.
It’s a big problem, and one that’s growing. Investopedia’s Mark Cussen reported this week that the student-loan default rates are more than 50 percent for borrowers age 75 and above. And, like many, he warns it’s imperiling a generation’s financial stability. “Student loan debt is turning into a runaway financial train in America,” Cussen noted. “… it is also seriously damaging the ability of many taxpayers to save for retirement.”
If you’re holding a student loan but are unable to make the payments, Investopedia’s Ashley Eneriz has some good advice at  http://bit.ly/2jvIRk9.

Debt collection complaints top list

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USA Today

via Some debt collection is downright nasty, clarionledger.com

I’ve often wondered if telemarketers have some kind of device that lets them know when it’s the most inopportune time to call. Most of us have experienced the interruption caused by having the phone ring during dinner, in the most critical scene of your favorite movie or during family activities.

Of course, while most American households use their caller ID to screen calls from unfamiliar numbers or have their numbers placed on Do-Not-Call lists, some calls still get through. Many of those are from companies looking to collect on debts.

Of course, few would argue debt collection — at least as a general principle — is unnecessary. An astounding number of people are behind on their debts (Creditcards.com reported in 2015 that Mississippians topped that list). According to the Urban Institute, about 77 million Americans have at least one collection event in their files (about 35 percent of the population).

People have lots of reasons for being in debt and for being delinquent. Some are just overextended, while others are behind because of unfortunate circumstances or life-changing events. Some just don’t care, or lack the resources to manage it. But companies loaning money have a right to expect payment according to the terms of the lending agreement, and consumers have to uphold their side of the contract.

Companies vary in when they report the debt as delinquent, but it usually starts when you’re 30 days past the due date. If they’re unsuccessful in collecting the debt, many companies sell it to private debt collection companies.

But in the past few years, a lot of consumers have gotten fed up with illegal, inaccurate, unethical and downright nasty debt collection activities. Unscrupulous debt collectors have been reported as harassing and threatening consumers — even when the person doesn’t actually owe the debt; using illegal tactics such as calling after allowed hours or calling people at their workplaces; even threatening people with lawsuits or ruined reputations.

 Last week, the Consumer Financial Protection Bureau released its monthly report breaking down the complaints it receives each month. The agency noted that, of the more than 1 million complaints it had received since it began accepting them five years ago, the largest chunk of those complaints (about 27 percent) is about debt collection practices. Three debt-collection companies — Portfolio Recovery Associates Inc., Encore Capital Group and ERC — were singled out as generating the most complaints.
Specifically, these practices raised consumers’ ire the most:
  • Calls about debts not owed. Nearly four in 10 consumers filing debt-collection complaints reported being contacted repeatedly about debts they either had paid off — or never owed in the first place. “Many consumers complained they were never provided documentation to verify the debt, even after submitting requests for verification,” the bureau noted in its report.
  • Accounts forwarded to third-party collectors without notice. Many companies routinely work with private debt-collection companies to recover the debts, but the original creditor should contact the debtor before doing so. In some cases, consumers reported their accounts were not even delinquent before they were contacted by the third-party debt collectors.
  • Harassment. Many complainants reported getting repeated calls from collectors, including getting calls at work when they previously told the collector it was prohibited by the employer.

“Today’s report shows that consumers continue to report being harassed about debts they already repaid or debts they do not owe,” said Richard Cordray, director of Consumer Financial Protection Bureau. “The Bureau will continue to work to ensure that consumers are not being wrongly pursued by debt collectors.”

If you find yourself on the unpleasant end of a debt collection call, here are a few things to remember:

  • Think. Collectors know that many people are ashamed of their delinquent debt and will use that to their advantage. While you should be expected to pay all your debts, no one should pressure you into paying. Calmly ask for information on exactly what you owe, when you incurred the debt and to whom, then say you will call back later to discuss it. Many experts suggest you ask the caller for a debt validation letter, which should contain details about the debt. In any case, if you feel pressured, don’t give in at that moment; by paying even a small amount, you are validating its legitimacy and it may even “restart” debts that had reached their statutes of limitations.
  • Make sure it’s yours. Since debt can linger for many years after going delinquent, it’s possible you may not even remember it. Of course, that doesn’t mean you don’t owe it, but you should be sure that it’s yours before you pay. Debt collection isn’t an exact science, and errors can occur. Often, uncollected debts are sold multiple times, increasing the possibility of errors. Consumers frequently complain about getting calls about people with similar names or addresses as theirs.
  • Know your rights. The Fair Debt Collection Practices Act is a federal law that prohibits debt collectors from using abusive, unfair, or deceptive practices. It’s a good idea to know those rights. Visit http://bit.ly/1njIbLP for more information.
  • Face the music. If you legitimately owe money to a company, you’re obligated to pay unless you discharge the debt through bankruptcy or through some program. Ignoring debt will not make it go away; it can make your life difficult for years to come and affect your ability to buy things you need, get a job or stay healthy. According to Webmd.com, paying off a debt can boost your self-esteem, leading to a wide range of benefits in your life and relationships. So, once you’ve had a chance to gather your thoughts and information, contact the collection agency to work out a payment plan that works for you, and stick with it.

Black Friday can leave behind a lot of red ink

via Black Friday can leave behind a lot of red ink

Although it may not have felt much like November, the holiday shopping season is here. While really wise shoppers may have already finished checking off their Christmas lists (feel free to gloat; it’s really awesome), the rest of us are going to dive headlong into the fray soon enough. It doesn’t help that the whole thing has blurred into one long spending spree, in which what was once just “Black Friday” has overflowed into Thanksgiving Day itself, spurring legions of turkey-sated celebrants to pile into their SUVs to seek early deals at the mall.

But while retailers may beckon bargain-hunters with their hypnotic promises of 40 percent off and two-for-one deals, wise shoppers know you can easily get too greedy with the deals, only to have to pay the piper when January’s credit-card statement rolls around. So, to help stop the madness before it begins, the American Bankers Association Foundation this week cautioned Americans to formulate a plan before diving in.

“It’s incredibly easy to go overboard buying gifts for loved ones during the holidays, but spending within your means will help keep your holidays merry and your finances bright,” said Corey Carlisle, executive director of the foundation. “There are simple things you can do to avoid a holiday spending hangover, like setting a budget in advance and avoiding impulse buys.”

Doing so may even help relieve some of the stress many of us feel during the holidays. Here are some tips from the foundation (list may be found here):

  • First, plan ahead. Before you start shopping, develop a realistic budget for holiday expenses. Figure out your bottom-line number and set aside holiday cash in increments throughout the year. If you need to use your credit card, think about what you can afford to pay back in January.
  • Keep track of other costs. Don’t forget costs beyond gifts, like postage, gift wrap, decorations, greeting cards, food, travel and charitable contributions. Keep in mind the end of the year is a time when large annual or semi-annual costs like car insurance, life insurance and property taxes arise.
  • Make a list and check it twice. Keep your gift list limited to family and close friends, noting how much you want to spend on each. If you’re donating to charities, factor in the total amount you plan to donate and how much each charity will receive.
  • Shop early and space out purchases. Avoid shopping while rushed or under pressure, which can lead to overspending.  Make sure to comparison shop online first, or download an app that lets you compare prices before you buy anything in a store. Before you head to the cashier (or online checkout), make sure your purchase is within the budget you set.
  • Avoid impulsive spending decisions. Finding a spectacular sale on something you’ve been wanting can easily throw you off course. Stay strong and stick to your budget. Don’t be blinded by limited-time incentives geared toward getting you to spend more.
  • Use credit wisely. Limit the use of credit for holiday spending. If you must use credit, use only one card — preferably the one with the lowest interest rate — and leave the rest at home. Pick a date when you can pay off your holiday credit card bills and commit to paying off the balance by that time. Be sure to check statements for unauthorized charges and report them immediately.
  • Save your receipts. Not only will you need them for possible returns, you’ll need them to keep track of what you’ve spent and to compare with your credit card statement. Knowing how much you spent will help you plan for next year, too.  Keeping receipts for charitable donations will help you receive tax deductions in the spring.

To this list, I’d only add one suggestion: Don’t be a target for thieves. Police departments around the country will be on the lookout for crooks looking to make off with your freshly acquired purchases, but they’ll have a lot of activity to monitor. Thieves have been known to follow shoppers, waiting for them to set down their bags for easy snatching, or even following shoppers to the parking lot. There are lots of people in crowded stores, so opportunities for purse snatching and pickpocketing will abound. Be aware of your surroundings, and don’t shop alone if you can help it.

Curbing credit scores would give consumers power

Credit Report written in search bar on virtual screenvia Moak: Curbing credit scores would give consumers power, clarionledger.com

PDF: The_Clarion-Ledger_State_20160528_A002_0

Credit bureaus have long memories. As any consumer who’s tried to get a home loan with a less-than-stellar credit record knows, mistakes you made in the past can hang around like a ghost that never seems to go away. If you missed a credit card payment, racked up too much in debt compared to your income, or had garnishments, divorce, bankruptcies, liens or just made some questionable financial decisions, they can affect you for a decade or more. The credit score, used just about everywhere, takes all this into account and reduces you to a simple number.

For those deciding whether to grant someone credit, that number indicates just how good (or bad) a customer you’re likely to be, and they make decisions — unfairly or not — based on this simple, computer-generated number. And making it worse is the fact the credit rating is now used in a variety of situations far-removed from lending. Your credit score can keep you from getting a job, an apartment or good rates on insurance.

And, even though credit-scoring models take into account the passage of time, many consumer advocates say they are looking back too far. Credit bureaus have come under fire in the last couple of years for failing to correct erroneous information, making it difficult for people to remove negative information and even trying to upsell them with costly new products and services when they’re trying to dispute those errors.

MOAK: Survey ranks Miss. credit scores

The problem is that things change; the person you are today is usually very different than the person who let his or her payments lapse way back before you knew better.

Recently, U.S. Rep. Maxine Waters, D-Calif., (a ranking member of the U.S. House Committee on Financial Services), announced she’s about to introduce a bill that would attempt to tame some of the power wielded by credit bureaus. Among them would be a reduction in the amount of time negative information can hurt you.

“I recognize that credit information is necessary for lending decisions,” Waters said in a press call announcing the bill last week. “But the growing reliance on credit information for noncredit decisions means that credit reporting and credit scoring have a significant impact on many aspects of consumers’ lives.”

Waters’ bill would, if enacted, constitute the biggest overhaul to the credit-reporting system since the Fair Credit Reporting Act was enacted 46 years ago. Among her proposals:

Taking three years off the clock. Waters’ bill would shorten by three years the amount of time consumers could be affected by negative information. For example, an item that would normally stay on your report for seven years would now roll off in four.

Medical debt grace period. A 180-day grace period would allow you to clear up your medical-bill delinquencies before they could appear on the report.

Predatory lender provisions. If you were victimized by a predatory mortgage lender, negative information about you resulting from that loan would have to be removed.

Cutting back credit report use in hiring. It would be illegal for employers to use credit history in hiring decisions except under a narrow set of exemptions, such as obtaining national security clearances.

Student loan protection. Those who used private student loans to finance their educations could have delinquent or default information removed after making nine monthly payments in a row. (This protection is already in place for federal student loan borrowers.)

More notice. Companies that send negative information about you to a credit bureau would have to alert you within five business days.

Many consumer advocates have expressed their doubts about whether such sweeping reforms can make it through Congress and into law; however, the proposal (and others like it) could help get the ball rolling on fixing a system that most agree is overdue for an overhaul.

Mississippians say debt collection is top gripe

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consumerreports.org

via Moak: Mississippians put debt collection as top gripe, clarionledger.com, 3/8/2016

PDF: Collection leads complaint lists

In 2015, many Americans got fed up with being harassed by debt collectors, having their identities stolen by identity thieves and being impersonated by crooks. Those three topics formed the bulk of complaints made last year to a host of federal, state and local law enforcement and regulatory agencies and private groups.

Each year around this time, the Federal Trade Commission issues its annual Data Book using data collected by Consumer Sentinel, which serves as a clearinghouse and database of complaint activity nationwide. The 2015 report listed a record 3.08 million complaints, of which nearly a third were filed about various debt collection issues. It’s worth noting that a large number of identity theft cases concerned the fraudulent filing of tax returns, in which many consumers found their taxes had already been filed (and refunds collected) by the time they went to file their tax paperwork.

Here in the Magnolia State, our consumers filed more than 18,400 complaints during 2015, with about a quarter of those dealing with debt collection practices. Second place was imposter scams, followed by prize/sweepstakes/lottery scams, telephone and mobile services issues and banks and lenders. Rounding out the top 10 Mississippi complaint categories were complaints about phone and mobile services; banks and lenders; shop-at-home and catalog sales; auto-related issues; TV and electronic media; credit bureaus, information furnishers and report users; and investment-related issues. (These numbers don’t count complaints collected by the Mississippi attorney general’s office, which handles a large number of consumer complaints filed each year by Mississippians.)

While debt collection complaints rose to the top spot among complaint categories, the report notes that this was attributable in large part to a surge in complaints “contributed by a data contributor who collects complaints via a mobile app,” but didn’t immediately disclose which one. This change caused a spike in complaints related to debt collection via mobile phones, and marked the first time debt collection overtook identity theft as the top complaint generator in 15 years.

“We recognize that identity theft and unlawful debt collection practices continue to cause significant harm to many consumers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Steps like the recent upgrade to IdentityTheft.gov and our leadership of a nationwide initiative to combat unlawful debt collection practices are critical to our ongoing work to protect consumers from these harms.”

Debt collection looms large on the radar of the FTC and other regulatory agencies, and the agency noted “ramped-up” enforcement of illegal debt collection practices during 2015. A massive sweep called Operation Collection Protection resulted in more than 130 actions being brought against companies engaging in illegal collection practices.

Consumer Sentinel pulls complaint data together to use as a resource for law enforcement, using a host of partners from government regulatory agencies, law enforcement agencies and private organizations. Agencies use the data to “research cases, identify victims and track possible targets.” The data book lists a lot of statistics of the complaints reported, but more specific information is only made available to law enforcement.

To access the data book, visit http://1.usa.gov/1TOY61g.

Survey ranks Miss. credit scores

 

Credit report with score

blog.mint.com

via Moak:Survey ranks Miss. credit scores, clarionledger.com, 1/12/2016

In 1978, Bob Seger’s everyman anthem “Feel Like a Number” complained about how our lives are reduced to numbers. “To workers, I’m just another drone; to Ma Bell I’m just another phone; I’m just another statistic on a sheet,” he sang.

Thirty-eight years later, that claim has only become more accurate. Today’s consumers (at least in the eyes of potential lenders) are reduced to a three-digit number called a credit score.

Your score gives lenders a picture of how big of a credit risk you might be. This little number has a lot of power, and can either help or hurt you borrow money, buy a house, or even rent an apartment or get affordable insurance.

Most businesses that use credit scores use the FICO (Fair Isaac & Company) score, which looks at many different data points and assigns the consumer a number ranging from 300 to 850. The idea is the higher the number, the less likely you are to be a credit risk. Someone with a score of 300 is unlikely to get any credit from reputable lenders; someone with 850 can pretty much get whatever they want.

The personal finance site Wallethub.com keeps an eye on the American credit landscape. Recently, they released an interesting survey in which they analyzed data from TransUnion (one of the “Big 3” credit bureaus) for 2,570 cities across the U.S. In general, higher scores track with high personal income, although they’re heavily influenced by the amount of debt measured against household income and other factors. Ultimately, financial experts believe that the higher the score, the better your and my financial habits.

According to Wallethub, the best credit scores in the nation were in The Villages, a planned retirement community in Central Florida, with an average credit score of 779.51 on the 300-850 scale.  The worst was Camden, New Jersey, with an average score of 565.62.

Included were 32 Mississippi cities. The only Magnolia State city included in the top 500 was Madison, which ranked at No. 447 nationally, with an average FICO score of 705.65. A distant second was Brandon (1,069th), with an average score of 680.33. Rounding out the top 10 Mississippi cities were Hernando (1,182nd); Oxford (1,495th); Olive Branch (1,515th); Ocean Springs (1,574th); Clinton (1,652nd); Starkville (1,814th); Ridgeland (1,897th); and Corinth (2,014th).

At the bottom of the list were Horn Lake (2,493rd); McComb (2,494th); Greenwood (2,527th); Greenville (2,534th); and Jackson, which ranked just 31 slots from the bottom.

“With this report we wanted to find out consumers’ financial habits and how well they manage their debts based on their credit score,” noted Wallethub Analyst Jill Gonzalez. “The cities with excellent average credit scores are places where people are taking their finances seriously and successfully managing their debts. Cities with low credit scores are still struggling from an economic point of view, thus the residents have a hard time keeping up with their debt and making payments on time.”

Wallethub pointed out that the term “city” was applied to only to the boundaries of the actual city, not metro areas or surrounding rural areas. Not all Mississippi cities appeared on the list, and some smaller-population cities (such as Lucedale) appeared, while larger cities (such as Clarksdale and Cleveland) did not. Wallethub’s rep Diana Popa told me, “Some cities were not included due to data limitations.”

It’s not surprising the higher scores are generally in communities with higher personal income; however, many financial experts allege the credit scoring system is flawed because it represents a “snapshot” in time (which might reflect temporary conditions), and is prone to errors made during data entry. In some cases, the credit bureaus responsible for the data have been challenged in court, such as when Mississippi Attorney General Jim Hood sued “Big-3” credit bureau Experian in 2014 because of alleged mistakes and inclusion of erroneous information in credit reports, and failing to adequately investigate and address challenges by consumers of erroneous information.

And, of course, these are just averages, and from one source. If you happen to live in a city with a low average score, you could have top-drawer credit; and if you happen to live in a city higher on the list, your score could be scraping the bottom of the credit-score barrel. After all, credit scores cannot reveal the “true” you, and are certainly not an indicator of the worth of a person — or even whether it would be a good choice to lend you money. They are just one of several indicators to be considered in making a decision.

To see how your city fared, visit https://wallethub.com/free-credit-score/#methodology.