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.

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.

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. 

You Can Repair Your Credit Without a Credit Repair Service

Credit repair companies can remove information on your credit report that is lowering your credit score but they cannot remove negative marks if the information is accurate, timely, and verifiable. Credit repair services can cost you around $100 a month, but everything the service does, you can also do on your own. 

Your credit score is calculated from information in your credit reports. A study from the Federal Trade Commission found that 5% of consumers had errors on their credit reports that could significantly lower their scores. 

Legitimate credit repair services check your reports for information that shouldn’t be there and dispute it on your behalf. They may also check to make sure the information does not reappear. Sometimes information that is accurate but cannot be substantiated is removed, but it could be reinstated if it is verified later. 

Errors that can be addressed: 

• Accounts that do not belong to you.
  

• Bankruptcy or other legal actions that were not yours.
  

• Misspellings, which may mix in negative entries that belong to someone with a similar name — or may mean positive entries aren't showing up when they should.
  

• Negative marks that are too old to be included.
  

• Debts that can't be validated and verified.

Using a credit repair service can cost between $79-$129, and the process could take several months to a year. You may also be required to setup a fee to begin. Credit repair services argue that you will save money because of lowered interest rates. It is true that lower interest rates go to borrowers with higher scores but it is also true that you can handle credit repair yourself. 

You can opt to fix your credit report on your own. Here is how: 

• Obtain your credit report: As of now you can retrieve your credit reports for free once a week at www.annualcreditreport.com until April 2022. Check all of your information and verify that it is accurate.

• Dispute errors: As a consumer, you can dispute errors directly with the three major credit bureaus. All three bureaus have an online dispute process, but it is more efficient to send in a complaint by certified mail. This provides proof of service and a real person will have to look at your information.

• Work on your payment history: The biggest factor affecting your credit score is your record of paying bills on time. If you have late or missed payments, that can drag your score down. It is important to bring your late accounts to current as soon as possible and consider writing a goodwill letter asking your creditor to remove the make from your credit reports.

• Use less of your available credit: How much of your available credit card limit you are using is known as your credit utilization ratio. The lower, the better for your score. If you can afford to do so, consider making multiple small payments in the billing cycle to help keep this ratio down.
  

Before deciding to use a credit repair service, know that you can do all of this on your own. It is as simple as looking through your reports and verifying the information without the cost. If you have inaccurate information on your credit report, you may be entitled to a settlement. 

If you find inaccurate information, be sure to dispute the information. If you need help, reach out to us for help in the process. We may also be able to obtain a settlement for you. 

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. 

Mistaken For Dead

Mistakenly Placed on Death Master File

Each year more than thousands of people are wrongly placed on the Death Master File. The Death Master File is a document that accounts for every American that has died since the year 1936. People usually do not realize that they have been placed on the Death Master File until they are informed by their bank or are trying to apply for credit. One woman from Philadelphia received an email from American Express in January of 2019 stating that they express their condolences on her passing. She was immediately set into full panic but thought that this was a minor mistake. She was wrong. She soon realized that she was financially powerless. Her AMEX was closed, and her bank account were frozen. (See next blog for the difference between frozen and locked accounts) Her job was not even able to deposit any of her pay into her account. This would eventually ruin or paralyze her insurance as well as her 401k.

Another woman in the state of Utah realized that something was wrong when her credit card was denied on a date night with her husband at a restaurant. She contacted her bank as soon as she returned home, and her credit card company informed her that she has been dead for two years. Since her accounts have been unfrozen, the Social Security Administration is trying to recoup 2 years of payments of tens of thousands of dollars that they believe should not have been paid out.

Funeral directors are the largest source for reporting deaths to the Social Security Administration. There has only recently been a change to switch from paper to electronically filed records. It is an easy mistake to mistype or write a social security number incorrectly. Even one number off can cause serious issues. The Electronic Death or EDR allows states to automatically verify the accuracy of a persons Social Security Number before it is sent to the SSA. Even with this system implemented, it is far from perfect.

The Social Security Administration has estimated that around 12,000 people are wrongfully marked as dead in their system each year. Once a person is in the Death Master File, it is not an easy fix, especially once the credit agencies have the death in their files. If you have become aware of being placed on the Death Master File, it is recommended that you immediately visit your local SSA office and to make sure to bring at least one current form of ID such as a driver’s license and/or passport. If they still have not removed the file, seek a lawyer to see what else you can do to make this right and possible receive compensation.

http://cancelthesefunerals.com/

How does Trans Union process consumer disputes?

In general, when Trans Union receives a dispute from a consumer, Trans Union investigates the dispute using one of two systems developed for the purpose of processing and tracking disputes, the Consumer Dispute Verification process (“CDV”) and the Automated Consumer Dispute Verification process (“ACDV”).  Through the ACDV process, Trans Union contacts the furnisher of the disputed credit information and, via an automated process, asks the furnisher to verify that the indicative (e.g., name, social security number, address, date of birth, etc.) information on the consumer matches the indicative information maintained in the furnisher’s records and is associated with the particular account being disputed.  Trans Union also asks the furnisher to verify the accuracy of the account information, e.g. account balance, payment history, credit limit, etc., being reported to Trans Union by the furnisher.

If the furnisher verifies that the reported information is correct, Trans Union updates the information on the consumer's credit file and notifies the consumer of that fact. If the furnisher reports that the information is inaccurate or can no longer be verified, or if the creditor does not respond within the required time, Trans Union deletes the information from the consumer's credit file and notifies the consumer that the information has been deleted.  Trans Union may employ additional procedures depending on the precise dispute involved and the circumstances of the case.