Credit Justice Services

Where to Find Scam-Free Credit Repair

Brokers should know how to discern which outfits actually will help their clients

TODAY’S HOUSING MARKET scares many consumers and mortgage brokers. Homeowners face dramatically increased monthly payments because of adjustable rate mortgages, and market saturation makes it almost impossible to sell a home. Mortgage professionals must also cope with a tight loan market while having to deal with clients with less-than-perfect credit scores.

One way for brokers to get through the hard times and to help consumers is to make sure that their clients’ credit scores are accurate.

Often, credit scores are affected negatively by inaccurate information. In fact, a 2004 study of the three major credit bureaus found that 79 percent of credit reports contain incorrect information. The same study reported that 25 percent of people had a credit report that was so inaccurate that it kept them from receiving financing.

Inaccuracies can have a major impact on the interest rate that mortgage borrowers receive. For this reason, some brokers have turned to credit-repair companies to help their clients.

In theory, the idea is perfect: Improve a client’s score before the borrowing process begins. Saving clients’ money can lead to more completed deals and to enhanced customer loyalty.

In reality, however, many brokers don’t know what to look for in a credit-repair company. Often, they find themselves searching for information and fighting against a lack of communication from unethical repair companies.

Some credit-repair companies charge exorbitant fees and deliver few results. 2ese events jeopardize loan closings and a broker’s reputation.

Here’s a look at what to avoid and what to embrace.

What to avoid

To avoid problems, consider the following tips when searching for an ethical credit-repair company to help your clients:

 1. Don’t pay by month: Many credit-repair companies charge monthly rates without a specified timeline. Because they get paid monthly, there is no incentive for these companies to expedite the repair process. Clients often never see the dispute letters, and the repair companies only send out a few each month. In reality, the dispute process usually requires three rounds of letters per unwarranted trade line. With three credit bureaus, it could require nine letters for each discrepancy.

2. Don’t pay upfront: Some credit-repair companies try to collect large payments upfront. This is illegal under the Credit Repair Organizations Act. Brokers should beware of companies that require any investments before the work is completed.

3. Don’t allow “piggybacking”: This illegal practice involves overriding password-protected documents and issuing fake credit accounts to customers. Piggybacking occurs when an individual becomes an authorized user on the credit card account of another person with excellent credit. Within a few months, the unknowing consumers have their scores used to increase the piggy backer’s rating.

4. Don’t allow password hacking: Another illegal tactic is to buy software that breaks into password-protected documents. This allows hackers to change credit reports.

What to embrace

Credit-repair companies that use unethical methods are largely responsible for the common belief among consumers that credit repair is a scam. Consumers and mortgage brokers, however, shouldn’t dismiss the industry altogether. There are several companies that truly act as consumer advocates. These businesses practice under the rules of the Fair Credit Reporting Act (FCRA) and aim to provide clients with legitimate and legal assistance.

The FCRA statutes are designed to provide consumers with quick, simple and effective methods to ensure that their credit reports are accurate and to allow them to correct errors. The average consumer, however, is hard-pressed to navigate through the procedural morass of FCRA successfully; it can require many steps to remove an inaccurate item from a credit report. Several of these steps have multiple parts, and others require some expertise in the fields of credit analysis and reporting.

For these reasons, ethical credit-repair professionals are needed.

Trustworthy credit-repair companies use consumer-protection laws to force creditors and credit bureaus to verify debt and negative trade lines. Specifically, the bureaus must prove that everything is 100-percent accurate. If they don’t have the documentation or if something is reported incorrectly, then that information must be removed by law.

Good credit-repair companies offer clients a transparent process and work within a specified time limit, such as 60 to 90 days. They use legal procedures to identify negative and unwarranted information and to remove inaccuracies systematically. As negative trade lines disappear, credit scores improve.

Such companies provide more than just dispute letters. They educate clients on how to use credit to their advantage, offering such lessons as paying off small balances on high-limit credit cards and closing cards that aren’t used.

Ethical credit-repair organizations also may offer legal advice and debt negotiation. Mortgage brokers should look for companies with an onsite legal staff; this is a good indicator that they abide by laws and regulations. Attorneys also can be beneficial when it comes to debt negotiation and can help clients reduce monthly payments while working to remove existing debt.

By helping clients find ethical ways to improve their credit scores, mortgage brokers can gain ground in a difficult market.

In the credit repair industry we are used to hearing about the plethora of inaccurate information contained in consumer credit reports. Now, it seems that credit card companies are also mistreating customers by producing flawed or inaccurate documentation and using it to sue consumers for balances that may be false.

These dubious debt-collection practices are strikingly similar to the recent misconduct in the mortgage foreclosure system, a practice known as “robo-signing” in which banks produced comparable documents for different homeowners and did not review them.

Noach Dear, a Brooklyn, NY, civil court judge, estimates that “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.” He should know, as he sees up to 100 cases come before his bench every single day. He says that employee witnesses for the credit card companies are known to provide “robo-testimony” – a generic testimony defending the company’s record-keeping practices. In one case, the same witness gave similar evidence in other cases. Not surprisingly, the credit card companies defend their practices.

In some instances, lenders are trying to collect money from consumers who have already paid their bills. Often they are attempting to increase the size of the debt by adding on bogus fees and improper interest rates. The specifics of the lawsuits run the gamut. Some consumers dispute that they owe money at all. More commonly, borrowers agree that they are behind on their payments but contest the size of their debts.

The problem, according to judges, is that credit card companies do not always follow the proper legal procedures, even when they have the right to collect the money. Worse, they usually get away with their unfair practices, as clients rarely show up in court to defend themselves. As a result, an estimated 95 percent of lawsuits result in default judgments in favor of lenders, even though the lenders often do not provide proof of the outstanding debt – such as the original contract. If the consumer were to appear in court, such a misstep on the part of the credit card company could get their case thrown out. However, once the credit card company has a judgment, they can legally garnish a consumer’s wages and even freeze their bank accounts to collect the debt.

The FTC is now working with courts across the country to improve the process by which banks and credit card companies pursue consumers who are behind on their credit card payments, mortgages, and other bills. Let’s hope change comes fast

Educating the Consumer,

Credit Justice Services

In today’s economy, it’s all about your credit scores — and that’s scary. A good credit score is between 730 and 850. In today’s market your credit score is being used for all types of things, like whether or not you will be approved for a car loan, mortgage, car insurance, or even a job. It’s more important now than ever to do all you can to raise your credit score.

Here are some things you can do to improve your credit score immediately.

** Use your old credit cards. The credit-scoring model at all three bureaus rewards people for having a longer credit history (amount of time you’ve had credit). This is why it’s a good idea to hold on to old credit cards instead of cancelling them. But your credit score also places more weight on recent activity than on a dormant credit card. So if you have an old credit card with a zero balance, fill up your car or SUV with gas to reactivate the Date of Last Activity (DLA) on the card. PLEASE DO NOT charge your card above 30% of the credit limit!!!

**Start to spread out your credit card debt. It is not good to have one credit card MAXED out and two others with small balances. Start transferring your debt amongst all your cards in order to keep the balances below 30% of the card’s limit. This will give your scores the most bang for your buck. Maxed-out cards are indications that you could be having financial troubles and will be a red flag to lenders, not to mention that it also crushes your credit score.

**Make payments before creditors update your file. To make your credit utilization ratio (credit limit divided by credit balance) look even better, have your credit report pulled and note what day of the month your creditors are sending updates to the credit bureaus (most creditors update your file on the 28th of the month). Then, make your payments so they are recorded a few days before that reporting date. This will insure that your creditors will be reporting the lowest balance on your accounts, which will increase your credit scores.

**Look out for inaccurate negative information on your credit reports. Consistently look for information that is inaccurate, too old (more than seven years), misleading, incomplete, or unverifiable, and work to remove this damaging information on your credit reports.

For a FREE evaluation of your credit report call or email us at the contact information above.

Credit Justice Services

As a CCC with Credit Justice Services, I relish the results people report to me after they have used our 90 Day Credit Makeover Plus to repair their credit. There’s nothing like the phone call that makes your heart sing a positive report from a satisfied client who has increased their credit score and is moving forward with their plans for their financial life.

This past week I spoke to a man who was in tears. He told me about a life situation that lead him to living off credit cards for a period of time and the crushing credit card debt he lives with every day. He had received a letter in the mail from his major credit card company informing him that they had raised his interest rate 3 times, because they had been monitoring his credit score and it had slipped below what they deemed reasonable. He was panicked, devastated and embarrassed. He called the credit card company who agreed to lower the rate to the original rate, but informed him that if he charged just ONE more item anytime in the future, they would put the rate back up to the 3 times level = 18%. He began to panic again, knowing him gym membership payment of $20 was due to be charged to that account any day. He frantically tried to contact the billing department of his gym to avoid the billing.

Unfair credit card practices are creating chaos in people’s lives. A bill to stop these practices has stalled on the floor of the House. Until something changes, and laws are put in place to protect American consumers, below is a list of credit card company tacks to be aware of:

(From American’s for Fairness in Lending, Credit Card Action Center, posted July 11, 2008) Credit card contracts are packed with fine print tricks and traps to increase the likelihood of paying fees and penalties. You will be hard pressed to find a credit card without these terms  at least until our government outlaws them but if you’re informed and cautious, you have a better chance of steering clear of the traps and saving money.

Fees and More Fees – On any given month, you might pay a late payment fee, overlimit fee, cash advance fee, balance transfer fee, foreign exchange fee, bill payment fee, Western Union fee, and whatever else your lender can devise. Not to mention monthly and annual fees.

Tricks to Make You Pay Late – These come in many varieties. If you’re late you’ll pay a hefty fee and your interest rate may go up. Check each statement carefully and pay your bill as soon as it arrives.

Changing Due Dates – Your bill will not be due on the same day every month.

Early Due Dates – Bills may be due just a few days after you receive them.

Weekend Due Dates – If your due date is on the weekend and your payment arrives on the date, it won’t be processed until Monday and you’ll be considered late.

Morning Due Times – Your payment may be due at 9am on the due date, not 5pm.

Approved Overlimit Charges – If a purchase puts you over your limit, your credit card company will approve the charge then hit you with an overlimit fee and maybe even raise your interest rate. Keep careful track of your balance and know that even approved charges may put you overlimit.

Universal Default – Pay Card A on time but pay late to Card B (or anything else monitored by your credit score) and your interest rate on Card A may jump!

“Any Time For Any Reason” Changes – Most contracts include this ominous phrase. It means just what it says – they can increase your interest rate on a whim.

Teaser Rates That Don’t Stick -An introductory 0% interest rate can jump to 30% with a late payment or if you go overlimit. Don’t bank on keeping that 0% rate for the entire promotional period.

Retroactive Application of Higher Interest Rates – To make things worse, if your interest rate increases, they can apply the higher interest rate to the entire existing balance, not just to new charges.

Allocation of Payments – If you end up with two or more different interest rates, they will apply your payments to the balance with the lower interest rate first. The rest of your balance will continue to generate high interest charges until the low-rate balance is entirely paid off.

Tricky Interest Calculations – For some cards, you can pay interest on purchases from previous cycles. This is known as double cycle billing. Look for a card that uses the “Average Daily Balance” interest calculation method.

Credit “Protection”“ Services like this may sound good, but they’re usually useless. The fee for the service likely exceeds the minimum payments it would cover if you became sick or lost your job. Avoid add-on products like this.

Binding Mandatory Arbitration (BMA) – This provision requires that you resolve any conflict with an arbitrator selected by the lender, which means you give up your right to take the credit card company to court.

Fortunately, like lemmings to the sea, there are plenty of great examples around us in our friends and neighbors as to how to model the “Ultimate American Consumer”. In case it escapes you, here is a simple “How To” guide that can serve as a great road map to this continued process. Enjoy!

– Always spend right at the level of your after tax earnings. Having surplus dollars is troublesome for most because it’s difficult to know exactly what to do with them.

– Avoid having 3, 6 or even 12 months of basic living expenses tucked into a liquid account such as a money market or CD.

– Repeatedly purchase, preferably on credit, items that rapidly depreciate such as cars and consumer goods. Why pay all cash for something when you can use other people’s money (OPM)?
– Be sure to maintain at least $7-12,000 of revolving credit card debt and preferably “store credit cards” and be sure not to read the monthly statements.

– In the event that revolving debt gets to be somewhat of a burden, be sure to take out a home equity line of credit (HELOC) to alleviate the monthly payments

– Look for and take advantage of “get rich quick” opportunities that offer simple and easy wealth accumulation plans with little effort. Leave the hard work to all the “drubs” who don’t know any better.

– Spend at least half of your allowable IRA contribution each year on Christmas and holidays (preferably on credit)

– If you have an investment or asset plan, be sure not to review it too often as this can be tedious, boring and rather dull. Once every 6-10 years should be fine

– If possible, avoid the toilsome task of creating asset accumulation strategies in favor of more dinners out with friends and fun vacations. After all, you only go around once

– Be sure to invest in insurance and protect yourself from disability, death, dismemberment, accident, ill health and be sure to insure your pets as well!

– Be sure only to buy new automobiles due their quality and reliability over used vehicles. Used vehicles can cost as much as $150/month in long term average maintenance.

– Avoid regular financial plan setting and goals progress

– If you have a home mortgage, be sure to refinance every couple of years to capitalize on low rates. Ideally you could own your house for 20 years and still have 20-25 years remaining on whatever debt is there at the time

– Avoid having financial coaches and truly objective advisor’s assisting you with your money plans

By following this plan, you’ll have every opportunity to engage in being the “Ultimate American Consumer” with all of the rank privilege that is conferred by that term. If, on the other hand, you want out of this, call us at the contact information above.