In November 2011 I discussed CoreLogic’s new consumer report, the CoreScore Credit Report.  CoreLogic made this report available to lenders on December 7, 2011.  CoreLogic is another consumer credit reporting agency. They collect credit reports from the three major credit reporting agencies – Equifax, Experian and TransUnion – clean up the reports, merge them and sell them to the mortgage industry.  Now they have added proprietary and other data to the reports.

CoreLogic Credit Report

Approximately 100 million U.S. consumers will have a credit report at CoreLogic compared to 200 million at the three major credit bureaus. The CoreLogic credit report combines the traditional credit report data from the three major credit reporting agencies, along with CoreLogic’s proprietary data which includes: read more »

In early December 2011, TransUnion, one of the three U.S. credit reporting agencies, released its annual forecast on consumer credit for 2012.  Its forecasts are based on economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values.

Mortgage delinquencies are expected to rise and then decrease by the end of 2012; credit card delinquencies are expected to continue to decline.

Mortgage delinquencies

TransUnion predicts that mortgage loan delinquency rates (ratio of borrowers 60 days or more past due) will decline to 5.95 percent at the end of 2011 and decrease to 5 percent by the end of 2012.  Mortgages have declined from fourth quarter 2009 to second quarter 2011 and are expected to rise through first quarter 2012 and decline the remaining three quarters of 2011. Mortgage delinquencies declined by 7 percent in 2011 and are projected to decline by the same amount in 2010, while the year-to-year increases from 2006 to 2009 were 50 percent. read more »

The U.S. Consumer Financial Protection Bureau (CFPB) has been in the news quite a lot lately.  It was created to police financial products marketed to consumers. It has written a credit card agreement that is simplified and written in plain English. It is designed to be understood by a seventh grader, compared to present agreements that are at an eleventh grade level.  The purpose is to make the credit card agreements easier to understand minus the legalese and clarify credit card costs, risks and terms.

New Agreement

The average credit card agreement contains 5,000 words compared to this new agreement which is approximately 1,000 words and two pages long. It is broken down in three sections – costs, changes, and additional information.  There will be an online glossary to explain terms such as billing disputes, privacy, rights, interest rate calculations and the consequences of late payments. read more »

CredAbility, one of the largest nonprofit credit counseling and education agencies in the U.S., issues a quarterly index called CredAbility Consumer Distress Index.  This index tracks five categories to determine the financial condition of the average U.S. household – employment, housing, credit, how families manage household budgets, and net worth. Proprietary data collected from more than 630,000 individuals that CredAbility serves annually is also used to determine this Index. The index looks at each category nationally and by state.  The latest index is from third quarter 2011.

The Consumer Distress Index for U.S. households in third quarter 2011 was 66.7, which was a decrease for 69.2 in second quarter 2011. This was the largest drop since third quarter 2008 and the first time the index didn’t increase in the past six quarters. U.S consumers have been in financial distress for 12 consecutive quarters. The Consumer Distress Index is based on a scale of 1 to 100, with a score below 70 indicates financial distress.  Overall the housing and budget categories were below 70, indicating financial distress.  The credit category is not in financial distress and the Consumer Distress Index increased to 84.95, which is the highest in 15 years. read more »

I have discussed strategic defaulters in previous blogs.  To refresh your memory, strategic defaulters stay current with their debts but default on their mortgage because they have negative equity or are “upside down.”  They can afford to pay their mortgage, but choose not to do so.

FICO study

FICO conducted research on strategic defaulters compared to those that go delinquent (90 days or more late).  They identified the following characteristics:

Strategic defaulters have a higher FICO score and have had good payment history.

They haven’t used much of their credit limit on their credit cards, so their utilization is low. read more »

On January 15, 2012, the online shoe seller, Zappos.com, announced that a hacker may have accessed personal information on up to 24 million customers.  Access was gained through its internal network server in Kentucky.  The personal information possibly includes names, phone numbers, email addresses, billing and shipping addresses, encrypted passwords, and the last four digits of credit cards.

Only responsible for $50 of fraudulent purchases on credit cards

Since the complete credit card number was not in the server, they cannot use your credit card for other purchases.  Even if they did, you are only responsible for the first $50 that is fraudulently charged on your card, when it is due to identity theft. The card issuer usually waives this fee.  We can thank the Fair Credit Billing Act for that one. read more »

In what might win the award for most boneheaded public relations move of 2012, on Monday January 9^th the world woke up to the announcement that Suze Orman, host of the popular Suze Orman Show on CNBC, had partnered with The Bancorp Bank to introduce and endorse The Approved Card, a pre-paid debit MasterCard.  Pre-paid debit cards have very poor reputations and are generally believed to be among the worst financial services products.  They’ve also attracted marketing partnerships with other notable finance experts such as Russell Simmons, Kimora Lee Simmons, the Kardashian sisters, Lil Wayne and Alex Rodriguez (sic).

The primary criticism of pre-paid debit cards is the fee structure, which is usually extensive and complicated, regardless of the particular pre-paid card.  The fees are normally spread out over a large number of consumer actions, such as asking about your balance or requesting a paper statement.  The Approved Card, for example, has a fee attached to 20 different consumer actions and they vary from as low as $1.00 (Bill Payment Fee using a paper check) to as high as $30.00 (Bill Payment Fee – payment inquiry.)  There’s a $3 fee just to get the card and a $3 monthly “account maintenance fee” as well.   This sets up a virtual minefield of fees that consumers may not be able to avoid.

The Approved Card’s 20 “billable” consumer actions is on the high end when compared to other pre-paid cards.  The RushCard, Russell Simmons’ product line, has 17 consumer actions that generate a fee and Lil Wayne’s prepaid Discover card has 7.  The GreenDot card, another common pre-paid product, has 9.  American Express only charges one fee for their pre-paid card, which is a $2.00 ATM fee (the 1^st ATM use each month is free, according to Amex).  This is why the Amex pre-paid card is widely regarded as the best of breed in the pre-paid environment.

After The Approved Card was announced a flurry of media activity took place covering the new product and its pros and cons.  And with most online media articles, consumer comments were allowed.  As you can imagine, the consumer feedback hasn’t been great.  I’ve reviewed the consumer comments from 5 different online articles* about the new card; The New York Times, The Huffington Post, Yahoo Finance, The Consumerist, and CNNMoney.  Here’s what I came up with…

* I didn’t consider off topic comments

Another troubling aspect of prepaid debit card marketing is the suggestion that using them is going to somehow improve your credit reports and credit scores.  This is absolutely incorrect.  Prepaid debit cards, debit cards and stored value cards of any type are not reported to the credit bureaus because they’re not credit products.  They will do nothing at all the help your credit, period.  The marketing of this card is, unfortunately, no different.  What would you think if you saw this:

If you’re like several media outlets that have covered this new card then you might think that this is a suggestion that the use of the card is going to be reported to TransUnion and end up on your TransUnion credit report.  That’s a reasonable, if not the desired assumption.  The problem is you’d be wrong.

If you search around on the card’s website you’ll find this language, “This data will not appear on your TransUnion credit report at this time.”  And from an article written by Jeanine Skowronski with MainStreet.com, “It is important to understand that this data will not appear on any TransUnion credit report at this time” says Colleen Tunney-Ryan, a spokeswoman for TransUnion.  Hmmm.

The bottom line is this…if you are desperate to have a slice a plastic in your wallet and you simply can’t get any bank to give you a credit card, debit card or secured card then go for it and get yourself a prepaid debit card.  But be prepared to pay terribly high fees on most of the products and, at the same time, do nothing to get your credit back in shape so that you don’t have to pay to have access to your own hard earned after tax money.

Credit Damage Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

The Consumer Financial Protection Bureau (CFPB) issued its first report of consumer complaints against credit card issuers for the first three months it was opened from July 21 to October 21, 2011.  It was created to regulate consumer protection in the financial services industry.  The Consumer Financial Protection Bureau was formed to enforce the Dodd-Frank Wall Street Reform and Consumer Protection Act that became effective July 21, 2010. It interfaces with the public and listens and responds to consumer complaints on financial services products.

CFPB

The Consumer Financial Protection Bureau focused solely on credit card complaints and inquiries when it opened, because this industry had the most complaints historically.  It will begin taking complaints and inquiries related to home mortgages in December 2011, and plans to handle complaints on all financial products and services by the end of 2012. read more »

The Gramm-Leach-Bliley Financial Modernization Act of 1999 (GLB) requires companies to give consumers privacy notices that explain the financial institutions’ information-sharing practices. In turn, you have the right to limit some – but not all – sharing of your information. Financial institutions such as banks, credit unions, mortgage companies, finance companies, insurance companies and investment firms must provide their privacy policy to you, if you do business with them.

A company’s obligations under the Gramm-Leach-Bliley Act depend on whether the company has consumers or customers who obtain its services. A consumer has no business relationship with the financial institution.  A customer is a consumer with a continuing relationship with a financial institution.  Why is the difference between consumers and customers so important? Because only customers are entitled to receive a financial institution’s privacy notice automatically. Consumers are entitled to receive a privacy notice from a financial institution only if the company shares the consumers’ information with companies not affiliated with it. read more »

In late 2011 FICO, the company behind the ubiquitous FICO credit score, conducted research on score trends from October 2006 to April 2011 using a random sample of 10 million U.S. consumers with credit reports.  I have discussed this research in previous blogs and FICO has conducted more research to provide answers to the following questions:

How much has consumer credit behavior changed over these years of economic stress?

Do shifting levels of delinquencies reflect changing behavior?

How much impact is mortgage pressure having on bad credit behavior? read more »