It was just 20 years ago that thousands of low profile “local” bureaus handled all the consumer credit records. Now, the data of 215 million Americans are controlled by the three remaining companies that gobbled up all these local bureaus.

Publicly traded Equifax, founded in 1898 by a Tennessee grocer who sold his customers’ payment records to other shopkeepers, now calls itself a “global leader in information solutions” with businesses as diverse as risk detection and database management. (According to its income statements, its consumer data unit remains its most profitable, boasting a 40 percent pretax profit margin.) The smallest, Chicago-based TransUnion, is owned by the Pritzker family who control the Hyatt hotel fortune and boasts credit-reporting operations in 25 countries. Experian, the largest of the three is a $4 billion company, based in Ireland, that uses consumer data to help businesses send more than 20 billion pieces of junk mail every year.

Together, the three credit bureaus have amassed a spotty record on consumer care. In 2000 they jointly paid a $2.5 million Federal Trade Commission fine for blocking millions of phone calls from consumers. Three years later Equifax paid a second fine because it still hadn’t hired enough people to answer the phone. In 2005, after new federal laws forced the bureaus to give away credit reports online, Experian was hit with a $950,000 FTC fine for marketing those reports through a Web site that automatically charged consumers for an $80 credit-monitoring service. Last year TransUnion agreed to pay $75 million to settle a class-action lawsuit over sales of consumer data for marketing purposes.

The bureaus, which never admitted wrongdoing in these cases do admit that credit-report errors can stem from glitches in their own systems. Some mistakes occur thanks to the algorithms used to match loans to individual credit reports. If the name or Social Security number on another person’s account partially matches the data on your file, the computer might attach it to your record.

Problems can happen in the gathering of tax lien and bankruptcy data due to the contractors employed that can transpose digits or misread documents they get from the courthouses and government offices.

But perhaps the scariest fact of all is the credit bureaus own admission that even if they never made mistakes of their own, they can’t possibly patrol the accuracy of the 3.5 billion pieces of account information they receive every month from lenders.

To put this in proper prospective, to help grasp the enormity of this system you’ll find three publicly traded companies, the smallest TransUnion generating 1.628 Billion in sales, Equifax generating 1.935 Billion in sales and Experian with a whooping 4.130 Billion in sales. The fining of Equifax $950,000 is like fining a person making $50,000 about $25, almost laughable! TransUnion getting hit $75 million is that same $50,000 being fined about $2303 more painful but hardly a deterrent to stop the sales practices they embrace.

The credit bureaus are looking for sales, sales of your most private information to other companies. They have neither the personnel or the policing systems in place to prevent errors, half truths and untruths to be told about you. The FTC is not active nor are they forceful enough to stop these abuses.

As all things in life it is the responsibility of you as the consumer to fight for your rights!

Be Bold!

Herschel

Did you know the credit card companies’ rules are changing?

Credit card companies have always had tricks for capturing fees and extra interest from the unknowing card user. Recently, legislation was passed on how credit card companies handle the hikes in interest rates and fees. Much to the credit card industries dissatisfaction, big changes are coming!

Let’s take a look at how these can effect you.

Credit card companies will now have to give cardholders forty-five days notice before their interest rates are raised. What does this mean? Well, those days of opening your statement and seeing interest rates jacked up 5 or 10 or 15% and more because of you being one day late are over! Now, if there is a rate hike you’ll have time to pay off or transfer the balance to another card before getting cracked on the wrist, or rather dinged in the wallet, for being late. 

Banks are now required to mail your credit card statements no later than twenty-one days before they are due. In the past, some credit cards standard operating procedure was to send their statements just a few days before they were due. Why? It’s all about money! A late charge here or a late charge there throughout the year, and you’ve added an extra $100 or $200 to the credit card companies coffers. Multiply that, by a few million cardholders and suddenly late charges are an income on their profit and loss statement that will make your head spin!

These same credit card companies try and tell you that this is not their intent. Believe me, this 21 day change alone will cost them millions in unjust charges and save you perhaps hundreds of dollars a year just because they give you ample time to mail your payment in.

Speaking of late fees, if you get your payments in by 5PM on the due date you will no longer incur a late charge. This eliminates that 12:01 AM deadline joke! This is something I never understood. Why have a deadline, of let’s say the 25^th of the month at 12:01 AM? If you want it in at midnight then just say the deadline is the 24^th. In addition, if the deadline falls on a holiday or a Sunday when the bank is closed the new law allows your payment to be processed the following day without incurring a late charge.

Another big change in the new law is to credit your payments to the balance with the highest interest rate rather than the balance with lower interest rate. In the past it was common practice if you owed say $5000 of which $2500 were misc charges at 8% and another $2500 was cash advance at 18%, to post your payment to the balance at 8% interest. This would mean your overall balance would be charged at the higher rate, thus it became much more difficult to pay off.

In addition, on cash advances the banks require your explicit permission in order to go over your providian automatic credit limit increase. This means no more check postings that you would be hit for an “over credit limit” charge which could also trigger a hike in the interest rate.

Overall, these changes will make it harder for the credit card companies to hold you in financial bondage by hindering your ability to pay off your accrued debts.  Keep in mind that this doesn’t mean you’re in the clear. You still need to be a good money steward, staying within your budget and making your payments in a timely manner. 

Be bold!

You get a new online credit card reports in the mail and just can’t wait to get some shopping done. You go and put a nice big balance on that nice new card just to break it in. In fact, you heard that having a balance on a card is a good thing. Well, sorry to disappoint you but doing so could hit your credit scores 6 ways. You have an inquiry on your credit report (1), you have a new account (2), you have a new account with no history (3), you have a new account with a balance (4), your balance could be over 45% debt to credit limit ratio (5) and you now have too many revolving charge cards (6).

The solution is to be cautious with your new credit card. You do not have to use it right away and instead use it for emergencies only, but be sure to use it a little every six months. A little means as little as a dollar every six months.

Home purchase is another area where many people go and shop for a loan thinking that the inquiries won’t hurt them. Again, pull your own credit at www.MyFico.com, print it out and take it with you to shop for a loan. The lender will see everything he needs to see to make a preliminary decision before you decide to go with them and then they will need to pull your credit. They would need to do it anyway if you are going to use them as a lender, so it’s ok to do.

Having a mortgage on your credit report is a good thing and will boost your credit scores. Getting the loan down below the 80% debt to credit ratio is good and will help to boost your credit scores. Not having too many inquiries is a good thing and will keep your credit scores from dropping. Keep all these things in mind and go get the home of your dreams and live happily ever after.

NOTE – As a former loan officer, I had a couple come in after shopping for mortgage companies to get a loan for them. They had started loans with 4 other companies and finally came to us because they heard that we could do hard cases. Well, the couple had shopped so much that their credit scores explained had dropped below where they could get a loan from anybody because of inquiries. The drop in score was over 80 points. Another couple went online with one of those mortgage-shopping services. When all was said and done, their score dropped over 120 points just from going to one mortgage shopping service and having their credit pulled by 27 companies. Beware, do your own shopping with your own credit report with scores.