Basics of Consumer Credit

What is Consumer Credit?

Consumer credit is the borrowing of money for goods and services. This could be in the form of credit cards, personal loans, and other lines of credit. Total consumer credit comprises of two major types: revolving and non-revolving. The borrower agrees to pay back the borrowed amount plus interest over a set period of time, usually in monthly installments. Consumer credit is commonly used for big purchases such as cars, homes, and education.

Revolving credit

Revolving credit lets you borrow up to the pre-approved credit limit. The borrower is required to make monthly payments either on the full amount or regular payments. Interest is charged on the outstanding balance. Examples include credit cards, home equity lines of credit (HELOCs), and personal and business lines of credit.

Non-revolving Credit

Non-revolving credit is a type of credit a borrower repays in fixed payments over a set period. Unlike revolving credit, a non-revolving credit is a one time arrangement. Once the credit line is paid off, the lender closes the account. Examples include: home mortgage loans, student loans and business loans.

What is a Credit Report?

A credit report is a record of an individuals credit activity and current credit situation. The report is created by the credit reporting agencies also known as credit bureaus or credit reporting companies, that collect information about an individual’s credit accounts, payment history, and other financial transactions that is submitted to them by creditors, such as lenders, credit card companies, and other financial companies. Creditors are not required to report to every credit reporting company.

What’s in My Credit Report?

Your credit report will include:

Personal information

• Your name and any name you may have used in the past in connection with a credit account, including nicknames

• Current and former addresses

• Birth date

• Social Security number

• Phone numbers

Credit accounts

• Current and historical credit accounts, including the type of account (mortgage, installment, revolving, etc.)

• The credit limit or amount

• Account balance

• Account payment history

• The date the account was opened and closed

• The name of the creditor

Collection items

Public records

• Liens

• Foreclosures

• Bankruptcies

• Civil suits and judgments

• A credit report may include information on overdue child support provided by a state or local child support agency or verified by any local, state, or federal government agency.

Inquiries 

Companies that have accessed your credit report.

What are Inquiries?

An inquiry is a record of when a lender, a creditor, or other authorized entity requests to see your credit report. There are two types: hard inquiries and soft inquires.

Hard Inquiry: Occurs when a lender or creditor requests to see and individual’s credit report as part of a credit application for a loan or credit card. Hard inquires can impact a credit score and remain on a credit report for up to 2 years. Multiple hard inquiries within a short period of time can signal to lenders that an individual is seeking a lot of credit, which could be interpreted as a sign of financial distress.

Soft Inquiry: Does not impact credit scores and are not visible to lenders. Soft inquiries can be initiated by the individual when checking their own credit report or by organizations like employers or credit monitoring services.

How Do I Check My Credit Score?

As of April 2023, Annual Credit Report is still allowing access to free credit reports once a week. Go to this link: https://www.annualcreditreport.com/index.action to get your reports from Equifax, Experian, and TransUnion.

What if I See Errors?

If you see errors on your credit report, dispute the information with the credit reporting company in writing. Explain what you think is wrong, why, and included documents that support your dispute.

Disputes Ignored: Credit Repair Companies to Blame?

There have been a record breaking amount of complaints from 2020 through 2021, with more than 619,000 in 2021 alone and Rep. James Clyburn, the chairman of the House Select Subcommittee on the Coronavirus Crisis wants credit reporting agencies TransUnion, Experian, and Equifax to be investigated.

The agencies have allegedly failed to respond to consumer complaints during the pandemic and continue to have longstanding problems with consumers raising complaints about credit reporting errors.

In May, the CFPB reported that  4.1% of complaints were resolved in 2021 compared to 25% in 2019 before the pandemic.

It appears that the majority of credit report disputes have not resulted in correction or removal of errors in consumers credit reports. The subcommittee found that between 2019-2012:

• Equifax corrected 43% - 47% of disputed items.

• Experian corrected about 52% of late payment disputes or other inaccurate data.

• TransUnion corrected approximately 49% - 53% of disputed credit reports during this time.

The CARES act, paused loan payments and were supposed to report them as current, though some lenders may have incorrectly categorized them as late.

Consumers have been reporting errors on a larger scale. The CFPB estimated the combined number of dispute submissions among Equifax, Experian and TransUnion to be 8 million in 2011. The subcommittee found that in 2021 Equifax received nearly 14 million complaints alone.

The record breaking amount of complaints consist of nearly 336 million items, including names, addresses and credit accounts on their credit reports. Yet evidence by the subcommittee found that credit raters discard millions of disputes a year without investigation. At least 13.8 million were thrown out between 2018 and 2021.

Discarding disputes violates the Fair Credit Reporting Act (FCRA) if they are submitted directly by consumers to authorized representatives.

The companies defense is that disputes are discarded without investigation when they suspect a credit repair service is making the complaint. Which highlights the importance of why you should make complaints yourself, as they may also be disputing information on your report that is accurate.

The agencies have a criteria that determine which disputes may be submitted by an unauthorized third party. For instance, Equifax, tosses out mail that tends to similar language and formatting and also comes from the same zip code.

Experian takes into account for envelope and letter characteristics, this includes same/similar ink color, same/similar formatting when choosing what disputes to discard.

It was found that credit rating companies referred more than half of the disputes to data furnishers for investigations between 2019 and 2021. TransUnion referred the most.

The prevalence of credit reporting errors have been especially concerning at a time when consumers needed access to their credit to handle difficult economic circumstances brought on by the pandemic. Errors in credit reports have the potential to lower credit scores that could deny access to loans, housing, and possibly employment, among other serious consequences.

Recent reports have noted increased activity among credit repair companies which can inflate the complaint numbers. This seems to be the biggest cause of consumer complaints being thrown out. It highlights the importance of making complaints about credit reporting errors yourself rather than relying on a third party, since many credit repair companies may make illegitimate complaints or dispute information on your reports that are accurate.

The credit reporting industry is continuing to to collaborate with the CFBB and policymakers to better serve consumers and will continue to make better economic opportunity solutions.

Negative Credit Information

Your credit score is likely to be hurt when negative information shows up on your credit report. There is a varying degree of impact from late payments, collection accounts, charge-offs and bankruptcies.

Negative information on your credit report tends to stick around for awhile, and could make it harder to qualify for new financing (such as loans and credit cards). The good news is: they don’t stay on your report forever.

It can be difficult to understand how credit scores work. One puzzling factor is that specific items on your credit report (credit score factors) are not worth a preset number of points.

For example, you won’t automatically lose 20 points, or any set number of points for a 30-day late payment that is newly showing up on your report. You could just be earning fewer points, which would result in a lower score the next time your credit score is calculated.

The credit scoring models like FICO and VantageScore consider all of your credit report information at once. Someone with a clean credit report who receives a new collection account might have a larger decrease in their score than someone who already has blemishes on their credit. However, the person with the cleaner credit report would still have a higher score overall.

Two other factors have a role in how negative information impacts your credit score: age and severity. As for age, a more recent late payment is likely going to damage your score more than a late payment that is several years old.  As for severity, a 90-day late payment tends to be more damaging than one that is 30 days late.

Negative information does the most damage to your credit score when it first appears on your credit report. The derogatory information will hurt your score as long as it is reporting, but becomes less pronounced over time, especially if you have avoided adding more derogatory items.

Any item that is reporting on your credit report is likely to affect your credit score for good or bad. The Fair Credit Reporting Act (FCRA) is a federal law that regulates the three major credit bureaus, as well as others. The maximum shelf life of derogatory information is seven to ten years. There are some exceptions to this rule.

Examples:

7 Years

• Late Payments

• Collection Accounts

• Medical Collections

• Charge- Offs

• Chapter 13 Bankruptcy

10 Years

• Chapter 7 Bankruptcy

• Accounts closed in good standing

2 Years

• Credit inquiries

Indefinite

• Defaulted federal student loans

Incorrect & Outdated Information

There isn’t much you can do about an accurate but negative item on your credit report. You can however, talk to the creditor about a goodwill removal (which is not always granted). Most negative items will keep showing on your credit report as long as the law allows.

If you have an item on your credit report that is inaccurate or it has been reporting for longer than the FCRA permits, there are a few actions you can take.

• Dispute: You have the right to dispute any incorrect or outdated information on your credit report. You can send disputes online or by mail, but the Federal Trade Commission (FTC) recommends using certified mail for dispute letters. This method allows you to verify that your letter was received and that a real person is reviewing your dispute. Online disputes are computerized.

• Complain: Along with disputing the incorrect information on your credit report, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

• Legal Action: If disputes and complaints aren’t fixing your issues, you might consider talking to an attorney specialized in the FCRA. An attorney can help you discover if your rights have been violated. They will advise you on steps you may not have taken and will initiate legal action when necessary.

Negative information on your credit report has the potential to damage your credit score and make it harder to qualify for financing and applying for any type of credit. It is best to avoid issues like late payments charge-offs, and collection accounts. If you do happen to make a mistake or have an error in your credit report, all hope isn’t lost. You can still bounce back and improve your credit for the future.

Hyundai Hurting Credit Reports

On July 26th on the Consumer Financial Protection Bureau (CFPB) penalized Hyundai Capital America (Hyundai) for providing inaccurate information to nationwide credit reporting companies and did not take the proper measures to address or correct this information when it was identified between 2016 and 2020.

Hyundai Capital America serves approximately 1.7 million drivers of Hyundai, Kia and Genesis vehicles and has agreed to pay a $6 million civil fine and $13.2 million in restitution to current and former customers, making this the CFPB’s largest Fair Credit Reporting Act case against an auto servicer.

The CFPB found that Hyundai used manual and outdated systems, processes, and procedures to furnish credit reporting information. This resulted in Hyundai providing negative inaccurate information over 8.7 million times across 2.2 million accounts from January 2016 to March 2020, damaging customers’ credit reports and often resulting in lowered credit scores.

In a statement Hyundai Capital America stated that it launched an “end-to-end review” of it’s credit reporting, and was committed to giving customers “timely, accurate, high-quality service and care.” In the investigation the CFPB received many consumer complaints that Hyundai was inaccurately reporting their accounts. Hyundai identified many of the issues causing these inaccuracies in its internal audit books but it still took years to address the problems.

The CFPB concluded that between January 2016 and March 2020 Hyundai violated the Fair Credit Reporting Act (FCRA) and it’s implementing regulation, Regulation V, by:

• Failing to report complete and accurate loan and lease account information: Hyundai repeatedly did not take steps to promptly update and correct information it furnished to credit reporting companies that it determined was not complete or accurate, and continued to furnish this inaccurate and incomplete information.

• Failing to provide date of first delinquency information when required: FCRA requires data furnishers to provide credit reporting companies the date of delinquency for when a delinquent account is being charged off or placed for collections. Hyundai failed to report a date of delinquency for many consumers who were more than 90 days delinquent.

• Failing to modify or delete information when required: Hyundai’s furnishing system often overrode manual corrections made by employees in responding to consumer disputes. The furnishing system would provide monthly updates to credit reporting companies that reintroduced the data error after it had been disputed and corrected.

• Failing to have reasonable identity theft procedures: FCRA requires furnishers to respond to any notifications from credit reporting companies about furnished information that is the result of identity theft. Hyundai failed to establish reasonable identity theft and related blocking procedures to respond to identity theft notifications, and continued to report such information that should have been blocked on a consumer’s report.

• Failing to have reasonable accuracy and integrity policies and procedures: Regulation V requires furnishers to maintain written policies and procedures regarding the accuracy and integrity of the information furnished. Hyundai failed to review and update its credit reporting furnishing policies and procedures from 2010 to 2017. It was not until 2021 that the company finally updated some of its credit reporting policies and procedures.

Enforcement Action

The CFPB was created by the Consumer Financial Protection Act, and has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices and violating FCRA, which protects consumers from the transmission of inaccurate information about them. Today’s order requires Hyundai to:

• Pay $13.2 million in compensation to current and former customers: As identified by the CFPB, consumers about whom Hyundai, after determining the information was inaccurate, furnished to credit reporting companies inaccurate information that the consumers were 30 or more days past due on an automobile retail installment contract or lease will receive compensation for the harm incurred.

• Pay a $6 million fine: Hyundai will pay a civil money penalty to the CFPB, which will be paid towards the victims relief fund. This fund provides compensation to consumers harmed by violations of federal consumer financial protection law.

• Take steps to correct all inaccurate account information: Hyundai will review all account files that it currently furnishes to credit reporting companies and correct all inaccuracies and errors described in the order and send updated information to the credit reporting companies. Hyundai will also examine its monthly furnishing data processes for the errors described in the order, take reasonable steps to identify such errors, and resolve identified errors before providing the data to any credit reporting company.

• Address procedures identifying and correcting inaccurate information: Hyundai will establish and implement written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a credit reporting company. Hyundai must specifically include processes for identifying and promptly correcting systemic errors in Hyundai’s credit report furnishing system. Hyundai will also examine current policies and procedures and implement changes to the practices of its employees to ensure that its employees properly route, categorize, investigate, and respond to all direct and indirect credit reporting disputes.

Credit Bureaus Still Failing Consumers

Recently on November 10, 2021, U.S. Senators Senators Brian Schatz (D-HI), Sherrod Brown (D-OH), Ron Wyden (D-OR), Elizabeth Warren (D-MA), Jack Reed (D-RI), Chris Van Hollen (D-MD), and Ben Ray Luján (D-NM), urged the Consumer Financial Protection Bureau (CFPB), to take action to reform the credit reporting industry. 

They want the consumer reporting agencies (CRAs) to improve the accuracy of credit reports, minimize the hassle, and hold the CRAs accountable for errors. 

The smallest of errors could affect millions of people. This could prevent them from getting a job or housing at no fault of their own. These mistakes, consumers may pay more for credit and be denied loans, getting mortgage, or renting an apartment. 

A study that took pace in 2012 found that one in five consumers had an error on their credit reports and five percent had errors that were economically damaging. A followup in 2015 found that nearly 70% of the impacted consumers surveyed three years earlier continued to dispute information. 

If you need information on the disputing process or to seek legal action, contact us for help at anytime. 

What is an Inaccuracy in a Credit Report?

What is an Inaccuracy in a Credit Report? 

Many consumers misunderstand what an inaccuracy is considered on a credit report. 

Here are some examples of Inaccuracies you may find in a Credit Report: 

• Accounts that don’t belong to you

• Addresses that don’t belong to you

• Social security number that doesn’t belong to you

• A name that is not yours

• Current or previous employers you didn’t work for

• Old Records that should have been removed

Examples: 

• Bankruptcies can be reported for ten (10) years

• Civil suits, judgments, and records of arrest can be reported for seven (7) years

• Paid tax liens can be reported for seven (7) years from the date of payment

• Accounts placed in collections can be reported for seven (7) years

Here are some examples that consumers commonly confuse for inaccuracies:

• Accounts that belong to the consumer but claim they didn’t get the bill or didn’t get the chance to pay. 
  

• Being charged with a “Collateral Attack” *example* - an apartment complex charges a tenant  for various things written in the contract but tenant believes they do not owe the charges and refuses to pay - then charges show on credit report. 

• Filing for bankruptcy but still still having negative marks on credit accounts. 
  

• Having a loan extended but still having a late or non payment show up up. 

There are more examples that could effect your credit score. Don’t be afraid to reach out for questions. Many consumers are confused about how credit reports work. It’s a frustrating process.

What is a Charge-Off?

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

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

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

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

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

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

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

How does a charge-off affect your credit? 

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

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

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

Should you pay a charged-off account?

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

Make sure to look at these things:

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

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

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

Is the charge-off is legitimate

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

If the charge-off is an error

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

How to pay charged-off accounts

• Communicate with the original lender.

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

• Settle the Debt 

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

• Pay the collections agency

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

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

Removing a Charge-Off 

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

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

Final Steps

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

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

The e-OSCAR System

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

What is e-OSCAR?

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

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

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

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

Credit Disputes and e-OSCAR

Credit disputes involve a 3-step process: 

1. The credit bureau receives a credit dispute letter.

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

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

e-Oscar Coding

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

• 001 — not his/hers.

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

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

• 010 — settlement or partial payments accepted.

• 019 — included in the bankruptcy of another person.

• 038 — claims account closed by consumer.

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

Issues with e-OSCAR 

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

What to Know About Disputes

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

Navient's Deceptive Practices

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

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

Borrowers Being Mislead

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

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

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

Navient Advises Pricey Options 

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

Lies and Collections

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

How This Affects Your Student Loans 

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

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

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

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

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

Does Navient Service Your Loan? 

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

Will Navient Forgive Student Loan Payments? 

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

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

Free Report Weekly Until April 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dispute Still Denied

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

Personal Statement 

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

Ask to send updated report

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

What to Know About the 3 Major Credit Bureaus

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

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

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

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

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

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

How They Get Your Information

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

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

Information the Credit Bureaus Collect

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

Categories:

1.Personal Information

• Name (current and previous)

• Addresses (current and previous)

• Date of Birth

• Employer

• SSN

2. Collections

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

3. Public Records

• Bankruptcies

• Previously included judgements and tax liens as well

4. Credit Inquires

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

5. Accounts 

• Credit obligations (current and previous)

• Account numbers

• Payment History

• Current Balance

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

• Credit Limit

• Date of account opening

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

Credit Bureaus Must Follow Federal and State Laws

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

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

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

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

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

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

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

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

Different Credit Bureaus Contain Different Information

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

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

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

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

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

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

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

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

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