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:

Property ownership and mortgage obligation records complied from mortgage applications.

Property legal filings and tax payment status collected from courthouses.

Rental applications and evictions collected from SafeRent, subsidiary of CoreLogic.

Inquiries and charge-offs from pay-day and online lenders collected by Teletrack, a subsidiary of CoreLogic.

Consumer-specific bankruptcies, liens, judgments and child support obligations collected from public records and courthouses.

In addition, CoreLogic is evaluating adding utility and cell phone payment history to the report. This would add more data on the population that has no credit report.

FICO will develop a score

By March 2012, FICO will develop a score on this data, which will be developed for the mortgage and home equity lenders first.  Other versions may follow.  This score will not replace the FICO score used in the automated underwriting systems owned by Fannie Mae, Freddie Mac or the Federal Housing Authority.

To request your copy of this credit report

Since CoreLogic is a consumer credit reporting agency, it is subject to the Fair Credit Reporting Act (FCRA).  Consumers can file disputes regarding errors in the data, receive free disclosure if denied credit based on the report, and receive a free report annually. The report will not be available online at www.annualcreditreport.com until December 2012; however, you can contact CoreLogic by phone at 877-532-8778 to request a copy of your report.

The Core Score Report and score will provide more information on those with little or no credit.  It will hurt some and help others.  Obviously, it will help those that have been paying their rent on time and don’t have any negative payment history.  It will not help those that have not paid their rent on time, have evictions and/or court judgments.  This is more information for credit grantors to make decisions on your creditworthiness.

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.

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.

According to TransUnion’s 2012 projections, mortgage delinquencies will decline in 38 states and increase in 12 and the District of Columbia.  The states projected to have the highest mortgage delinquency rates by fourth quarter 2012 are Florida Nevada and District of Columbia.  Those projected to have the lowest mortgage delinquency rates are North Dakota, South Dakota and Wisconsin.

“Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners’ ability and willingness to pay their mortgages,” said Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit. “If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower’s situation, mortgage delinquencies could fall as much as 16% in 2012 compared to 2011.”

Credit card delinquencies

Credit card delinquency rates (the ratio of bankcard borrowers 90 days or more past due  on one or more of their credit cards) reached the  lowest in 17 years during the second quarter of 2011 (0.60%).  TransUnion projects these rates will decrease 7 percent from fourth quarter 2011 (.74 percent) to fourth quarter 2012 (.69 percent).

According to TransUnion’s 2012 projections, credit card delinquencies will decline in 39 states and the District of Columbia and increase in 11.  The states, projected to have the largest expected delinquency rates by fourth quarter 2011, are Mississippi, Louisiana, and Missouri. Those projected to have the lowest delinquencies by that time are North Dakota, Wyoming and Alaska.

“Credit card delinquencies are expected to remain fairly steady in 2012 ranging between 0.69% and 0.76% — levels far below those typically observed in the last 15 years,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “In today’s uncertain economy, consumers have found that credit cards are among their most valued assets due to the flexibility they provide. As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances. In fact, credit card debt per borrower in the third quarter of 2011 stood at $4,762, approximately $1,000 less than the second quarter of 2009, the quarter in which the recession ended.”

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.

New Upward Trend?

This seems like a minor increase, but the trend may be shifting to an increase in insurance risk.  The Auto Insurance Risk Index increased for thirty-four states or 68 percent of the states in third quarter 2011 compared to the previous quarter, in which every state declined except Vermont.

“Prior to this quarter, the decline in Auto Insurance Risk Index has been gradually decelerating, reflecting the rebound in the auto market as consumers began replacing an aging automobile fleet,” said Kelley Buchanan executive vice president in TransUnion’s insurance business unit. “Stable and relatively low-loss ratios insurance carriers have experienced over the past several years may be coming to an end as consumers trade for newer automobiles, which generally are more expensive to repair,” added Buchanan.

What is the Insurance Risk Index?

TransUnion developed their Insurance Risk Index for the insurance industry to show expected insurance loss ratios for U.S. market segments such as by state. The benchmark for this Index is March 31, 2001, which the U.S. national average was 100.  For example, a state with an index of 100 is riskier than a state with an index of 95.

The Index is related to insurance loss ratios. Insurance premiums are tied to expected loss ratios and consumer risk. A key leading indicator is the number of new installment loans.  TransUnion’s Insurance scores are a key component of the Auto Insurance Risk Index.  Insurance scores predict the likelihood that the policyholder will file a claim. The higher the insurance score, the less likely the policyholder is to file a claim. Key components of TransUnion’s insurance scores are payment history, length of credit history, Installment debt activity and auto loan activity. These insurance scores are derived from TransUnion’s credit report.

Riskiest and least risky states

The five riskiest states for auto insurance are Montana (108.46), Washington (104.55), Mississippi (102.50), Arkansas (101.29) and Maryland (101.19).  The five with the least risk are Alaska (94.48), Minnesota (94.79), Massachusetts (95.60), North Dakota (95.62) and Hawaii (95.79).

What does this mean to you as a consumer? As more consumers begin buying cars and other installment purchases, the insurance risk index goes up.  Insurers may adjust rates when risk increases.   If insurance risk is increasing in your geographic area, premiums payments may also go up.  Your credit report is an important factor used by insurance companies in evaluating insurance risk.  To keep your premiums low, you need to pay your bills on time, pay them in full, keep your credit card balances low, and the obvious one is – don’t get in any auto accidents.

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.

Several government agencies have formed a task force to stop scams on homeowners applying for the Home Affordable Modification Program (HAMP).  The agencies include the U.S. Department of Treasury, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Consumer Financial Protection Bureau (CFPB). Their goal is to shutdown fraudulent illegal operations.  Home Affordable Modification Program is funded by Troubled Asset Relief Program to prevent foreclosure and is administered by the U.S. Department of Treasury. They investigate companies that charge fees and falsely promise to lower homeowners’ mortgage payments through the Home Affordable Modification Program.

Fraud Alert

The task force issued a fraud alert to warn consumers, so they could recognize the scams and avoid them. The alert is quoted below.

“If you are struggling to pay your mortgage and are seeking a mortgage modification, keep the following tips in mind:

You can apply to the federal Home Affordable Modification Program (HAMP) on your own or with free help from a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD). Applying to the program is always FREE. For more information on how to apply, call the Homeowner’s HOPE™ Hotline at 1-888-995-HOPE (1-888-995-4673) or visit www.MakingHomeAffordable.gov.

Only your mortgage servicer has discretion to grant a loan modification. Therefore, no third party can guarantee or pre-approve your HAMP mortgage modification application.

Beware of anyone seeking to charge you in advance for mortgage modification services – in most cases, charging fees in advance for a mortgage modification is illegal.

Paying a third party to assist with your HAMP application does not improve your likelihood of receiving a mortgage modification. Accordingly, beware of individuals or companies that ask you for payment and tout success rates or claim to be “experts” in HAMP.

If an individual or company claims to be affiliated with HAMP or displays a seal or logo representing the U.S. government in correspondence or on the Web, you should check the connection by calling the Homeowner’s HOPETM Hotline.

Beware of individuals or companies that offer money-back guarantees.

Beware of individuals or companies that advise you as a homeowner to stop making your mortgage payments or to not contact your mortgage servicer”.

The purpose of this alert is to inform homeowners that are in considering loan modification so they don’t fall prey to fraudsters.

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.

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.

Testing

It will be tested in the first half of 2012 at the Pentagon Federal Credit Union, which one is the largest credit unions with 350,000 members.  The form will be given to new credit card applicants. Some will be given the Pentagon Federal Credit Union’s current form for comparison purposes.

Adoption

The adoption of the agreement by credit card issuers will be voluntary.  The American Bankers Association (ABA), a trade association that represents the banking industry, is somewhat supportive of the standardized agreement. They thought it could be shorter and more protections needed to protect banks against lawsuits.  Some of the major credit card issuers were generally supportive, but were concerned that it would not cover the full range of financial products.

Research

There is research to support that consumers don’t understand the agreements. According to a study by J.D. Power, two-thirds of the credit cardholders don’t understand how their cards work.  Most of the complaints, the Consumer Financial Protection Bureau received, involved difficulty understanding the credit card terms, such as billing, interest rates, payments and fees.

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 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.

National Highlights

Housing Category – This category’s Consumer Distress Index dropped almost six points to 63.84. Mortgage delinquency rates rose from 7.08 percent in second quarter 2011 to 8.27 percent in third quarter 2011; delinquency rates for rental properties also increased. Housing expenses as a percentage of gross income increased from 31.60 percent in the second quarter to 31.99 percent in the third quarter.

Household Budget Category – The Consumer Distress Index dropped more than eight points to 66 for this category. Consumers’ discretionary income has dropped because of rising food and gas prices, lack of emergency funds and drop in consumer sentiment. The average household has a little more than 2 months’ worth of emergency funds.

Credit Category – The Consumer Distress index in this category increased more than two points to 84.95 in the third quarter 2011, which was the highest in more than 15 years. This is the best news. Consumers continued to manage their credit; delinquency rates fell on both credit cards and loans; and debt as a proportion of income also fell.

State Highlights

Lowest Distress Index States – Nevada has the lowest Index at 59.7, followed by Mississippi, Michigan, Georgia and Alabama. More than 60 percent (31) of the states had scores below 70.

Highest Distress Index States – North Dakota has the highest Index at 81.42, followed by South Dakota, Nebraska, Wyoming and Alaska.  Only 19 states and the District of Columbia had scores higher than 70.

No score improvements – None of the states had an increase in the Index over second quarter. This was due to housing issues and mortgage delinquencies. In fact, nine states went back to financial distress including Texas, New Jersey and Pennsylvania.

“The fragile gains made during the past one and a half years have been swept away in a single quarter,” said Mark Cole, chief operating officer of CredAbility and author of the Consumer Distress Index. “The mortgage delinquency rate is no longer improving and household budgets are being squeezed by rising gas and food costs. Unless consumers are willing to borrow, they’ll need to scale back their holiday spending.”

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.

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.

They spend less on retail cards and have low balances.

They have lived at their residence for a shorter period of time.

They have opened more credit in the past six months.

These individuals are not easy to identify by using credit scores to predict credit risk. They don’t fit the usual characteristics of those that are a poor credit risk, such as are currently and/or historically delinquent on some of their accounts, credit cards are highly utilized (close to their credit limit), spend more on retail cards, and opened new credit recently. FICO has developed an algorithm to predict who will be a strategic defaulter, which is being sold to the mortgage industry.

Experian study

Experian, one of the three U.S. credit reporting agencies, conducted a study on strategic defaulters.  Here are the results of their study:

Strategic defaulters are more likely to have a jumbo mortgage.

They had high credit scores.

They have had more than one house or investment property.

They have a higher than average household income.

They stay current on all their other bills (other than their mortgage).

Strategic defaulters can make their mortgage payments, but they are walking away because of negative equity.  They feel this is the only way out of a situation that will not improve for some time.  They are not looking at this issue from the impact it will have on their credit.  A foreclosure, deed in lieu or short sale will have a major negative impact on their credit. It will take several years to recover their once great credit scores.

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.

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.The real issue is what the hackers can do with your personal data.  They have enough information to open accounts, send official emails seeking information and have passwords that may be the same at other sites.

Hackers have data to access accounts

They have your email, address, encrypted password and last four digits of your credit card number. The hacker can send you an email from Zappos or another company and you would think the email is legitimate. This can catch you off guard, especially when they use the logo from the company which seems to be legitimate. Unfortunately, some hackers can decrypt passwords, especially those that aren’t very strong.  This information can be used to access other online accounts, if you reuse the same password for your accounts.

What should you do? 

First you need to change your password on your Zappos account, if you haven’t done so already.

Change the password on accounts using the same password you used for Zappos. Use unique passwords for all accounts; this will probably require a list that is stored in a safe place.

Don’t respond immediately to emails for Zappos or accounts using the same passwords. Make sure the emails are legitimate.  Don’t provide any personal information.

Monitor your bank statements and credit card accounts.  Zappos customers will probably be given free credit file monitoring and fraud alerts.

Consider freezing your credit file.

Avoid using your birth date or mother’s maiden name for security questions, use information not available anywhere.

A consumer has already filed a law suited against Amazon.com Inc., the company that owns Zappos.  The consumer wants to represent Zappos’24 million customers in a class action law suit. The suit claims Amazon violated federal consumer credit laws by failing to protect personal information.  This consumer is seeking unspecified damages and a court order requiring Amazon to pay for credit monitoring and identify theft insurance.

The bigger issue might be should you still be shopping online considering that the bad guys are becoming more savvy, more organized and more centric in their attacks. I expect cyber attacks to be as common as car accidents. Every time you put your information on the World Wide Web, no matter where you do it, there’s a possibility of someone finding it. But that doesn’t mean we’re going to stop doing it.  We shouldn’t allow this to put us in a mode of online paralysis. We’re all essentially at risk and need to be more careful.

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.

Number impacted

Approximately 8.6 million U.S. households had some type of identity theft in 2010 compared to 6.4 million households in 2005, which was a 34 percent increase.  According to the Department of Justice, “identity theft is the unauthorized use or attempted use of an existing credit card or another type of existing account, the unauthorized use of personal information to open a new account or for another fraudulent purpose, or a combination of these.”

The main reason for the increase was the unauthorized use of an existing credit card.  The number of households affected by this was 5.5 million in 2010 compared to 3.6 million in 2005, which was a 53 percent increase. The proportion of households who had another account misused, such as banking, savings or utility account, was unchanged during this time frame at 35 percent. Those whose personal information was misused for the purposes of opening a new account or committing another crime, declined from 23 percent in 2005 to 14 percent in 2010.

Financial loss

In 2010, U.S. household loss due to identity theft was approximately $13.3 billion, with an average household loss of $2,200. Less than 10 percent had their personal information misused to open a new account, but the financial loss represented 30 percent of the total financial loss, averaging $13,200 per household.  Even though over half (54 percent) of identity theft was from the misuse of existing credit cards, the financial loss was 32 percent of the total.  Although identity theft increased from 2005 to 2010, those with no financial losses dropped during this time frame.  In 2010, 24 percent of the households had no financial loss compared to 19 percent in 2005.

Identity theft is increasing and mainly due to unauthorized use of an existing card.  Is it because of the economic conditions?  Nevertheless, you need to safeguard your personal information, credit cards, and bank accounts. One way to monitor your credit cards is to review your statements, order your free credit report at www.annualcreditreport.com, and/or sign up for a credit monitoring service.  If you are a victim of identity theft, it takes time to handle this problem, it can be very costly and it can harm your credit.

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.

Banks and credit unions don’t usually lend money to customers for emergency purposes.  Now there are more consumers without credit cards or savings accounts, who don’t have the funds to pay for an emergency. Banks and credit unions are offering these loans more than in the past.

Credit Unions

This is an example of what some credit unions require to qualify for a short term loan.  The consumer must be a credit union member for 30 days and have proof of income. A credit report is not required and there is no penalty to pay it off early.  They are charged an interest rate of 18 percent plus an application fee.  They don’t plan to make money on the loan because of the risk involved; they are looking to gain a member.  In addition, some may also conduct financial counseling. A customer is a member of the credit union and considered an owner, so credit unions don’t usually charge extremely high rates to their members.

Banks

Banks, unlike credit unions, are not as concerned about charging high interest rates to their customers. Their loan officers are aware that consumers are going to get the loans from somewhere, so why not get it from them?

One bank conducted a survey of their customers and found out that 30 percent of its online customers were using payday loans, check cashing, pre-paid debit cards or electronic bill paying. They offered a loan that was marketed as an advance loan. Customers could pay back a maximum loan of $500 in monthly installments for up to 6 months at annual interest rates of 120% to 262%.

Some banks offer loans to those with payroll, unemployment, disability or social security checks that are deposited directly into their checking accounts.  In these cases, the principal is deducted on their payday from their accounts.  If there isn’t enough to pay the debt, more charges are added onto the debt such as overdraft fees.  This can end up to be a longer term borrowing cycle, if they don’t have the funds.

Credit unions are offering these loans to gain customers, while banks are using it as an income source to make up for the loss in debit card fees.  Seventeen states have a rate cap of 36 percent, so consumers in those states can’t be gouged.

If you are really in need of a short-term loan, this is an alternative to the payday lenders.  Make sure that you shop around for a lower interest rate and can pay the loan off quickly. Credit unions are usually your best alternative.

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 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.

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.The Consumer Financial Protection Bureau is required to provide semi-annual reports to Congress on the consumer complaints it handles. It is also asking for public feedback regarding a searchable complaint database available to the public; consumers have until January 30, 2012 to provide input.

Complaints and inquiries to the Bureau come in by many methods: through their website, online chat through the website, phone, fax, mail, and referrals from other agencies.  The call center, located in the United States, offers services for the hearing- and speech-impaired and can assist people in 191 languages.

Complaint highlights

It received 5,074 credit card complaints in the first three months. The breakdown of the status of them was as follows:

83.8 percent or 4,254 of the complaints were sent to the credit card issuers.

7.8 percent or 394 of the complaints were under review by the Consumer Financial Protection Bureau.

5 percent or 254 of the complaints were incomplete or the consumer didn’t want to send it to the issuer.

3.4 percent or 172 of the complaints were sent back to the consumer for more information.

Complaints sent to issuers

Consumer Financial Protection Bureau sent 4,254 complaints to the credit card issuers to review. Here are the results and status according to the card  issuers:

74 percent or 3,151 of the complaints sent to the issuers had full or partial resolution.

19.8 percent or 845 of the complaints sent to the issuers received no relief.

6.1 percent or 258 of the complaints are still being reviewed by the issuer.

Fully or partially resolved complaints

The consumers reviewed the resolutions reported back by the credit card issuers concerning their complaints.  Here is the status of the 3,151 complaints that the issuers reported as fully or partially resolved:

71 percent or 2,238 of the fully or partially resolved complaints were not disputed by the consumer.

16.3 percent or 513 of the fully or partially resolved complaints were pending the consumers’ review of the issuers’ resolution.

12.7 percent or 400 of the fully or partially resolved complaints were disputed by the consumer.

Top ten credit card complaints by consumers

1. Billing disputes was the top complaint for 13.4 percent (681).

2. Annual Percent Rate (APR) or interest rate was a complaint for 11 percent (556).

3. Identity theft, fraud or embezzlement was a complaint for 10.8 percent (546).

4. Closing or cancelling an account was a complaint for 10.8 percent (546).

5. Credit card payment or debt protection was a complaint for 4.8 percent (242).

6. Other fees, which excluded late or overlimit fees, was a complaint for 4.4 percent (224).

7. Billing statement was a complaint for 4.1 percent (209).

8. Collection practices was a complaint for 4 percent (201).

9. Credit reporting was a complaint for 3.9 percent (197),

10. Advertising and marketing was a complaint for 3.4 percent (173).

Three key observations

The report made three observations about the credit card complaints for the first three months:

1. Consumers had difficulty understanding the terms of credit cards and other products such as debt protection services.

2. There were fraudulent credit card charges made by third parties, such as scams. The Consumer Financial Protection Bureau helped to rectify this for some and contacted appropriate criminal authorities when necessary.

3. There were many factual disputes between the consumer and issuer; the issuers were willing to resolve the complaints.

More than half of the consumers who contacted the Consumer Financial Protection Bureau had inquiries or feedback on credit card issuers, so not all were complaints.  All the information will be used to identify problems and determine how to best address them, either by consumer education or regulation. It will also help them improve the system. It will be interesting to see the report for the next three months.

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.

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.

The privacy notice must be a clear, conspicuous, and accurate statement of the company’s privacy practices; it should include what information the company collects about its consumers and customers, with whom it shares the information, and how it protects or safeguards the information. The notice applies to the “nonpublic personal information” the company gathers and discloses about its consumers and customers; in practice, that may be most – or all – of the information a company has about you. For example, nonpublic personal information could be information that a consumer or customer puts on an application; information about the individual from another source, such as a credit bureau; or information about transactions between the individual and the company, such as an account balance. Information that the company has reason to believe is lawfully public – such as mortgage loan information in a jurisdiction where that information is publicly recorded – is not restricted by the Gramm-Leach-Bliley Act.

Can’t Opt-Out

Consumers and customers have the right to opt out of – or say no to – having their information shared with certain third parties. The Gramm-Leach-Bliley Act provides no opt-out right in the following situations:

If it shares information with its affiliates, which is an entity controlled by the company, you can’t opt out.

If the financial institution shares information with outside companies that provide essential services like data processing, credit reporting agencies, check printing firms or servicing accounts, you can’t opt out.

If the disclosure is legally required, you can’t opt out.

If the financial institution shares customer data with another company under a joint marketing agreement that promises to keep the data confidential, you can’t opt out.

The Federal Trade Commission has authority to enforce the law with respect to “financial institutions” that are not covered by the federal banking agencies, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and state insurance authorities. The law requires that financial institutions protect information collected about individuals; it does not apply to information collected in business or commercial activities.

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.

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?

What can we learn by looking at the characteristics of consumers whose risk scores have changed?

FICO identified four behavior segments that represented 51% of the sample population: Fallen Angels, Rising Stars, Prime Holders, and Moderate and Subprime Holders. The numbers in each segment were based on a population of 200 million, who have credit reports.

Fallen Angels

Fallen Angels are consumers whose scores dropped more than 150 points.  This segment represents 4.3 million of those with credit reports or 2.15 percent. This is the next to the smallest of the four segments. Their credit declined and did not improve. For 72 percent of this segment, mortgage issues weren’t the cause of their problems. In fact, 40 percent had no mortgage. Of the 60 percent with mortgages, 53 percent hadn’t defaulted. The 34 percent with defaulted mortgages were strategic defaulters; in other words, they defaulted only on mortgages and paid their other credit obligations.

Rising Stars

Rising Stars are those whose scores rose more than 100 points. This segment represents 3 million of those with credit reports or 1.5 percent, which is the smallest segment.  Approximately 45 percent have mortgages.  Even though their scores improved, they took on more debt between May 2009 and April 2011 as follows:

22.7 percent opened new auto loans.

33.6 percent opened new credit card accounts.

39.4 percent opened new installment loans.

64.8 percent opened at least one type of credit account.

Prime Holders

Prime Holders are consumers whose scores remained in the low-risk ranges of above 700. This segment represents 67 million or 33.5 percent, which is the largest segment.  Over half (52 percent) have a mortgage.  This segment has been able to maintain stable credit.

Moderate and Subprime Holders

Moderate and Subprime Holders are those whose scores stayed in the medium risk and high risk ranges of under 700.  This segment represents 28.6 million with credit reports or 14.3 percent. They struggle with credit and haven’t improved their credit.  For 86 percent of this segment, mortgage wasn’t the cause of their problems. Approximately 39 percent have mortgages and 63.8 percent of them haven’t defaulted, but have had problems paying other debt. Only 6 percent of those that defaulted on mortgages were strategic defaulters.

The segments with the most change were the Fallen Angels and the Rising Stars, which represent only 3.65 percent or 7.3 million consumers with credit reports.  The Fallen Angels struggled the most to pay mortgages and other debt, which was indicated by the 150 point drop in scores. Overall, approximately three million substantially improved their creditworthiness and less than 50 percent of them had mortgages.

Key Findings

FICO’s key findings comparing consumer risk up to and during the economic downturn are as follows:

Consumer risk score distributions, at a national level, have remained relatively stable during this period of economic difficulty.

Recent improvements in credit card delinquency were driven less by changes in consumer behavior and more by changes in credit policies, such as decreasing card credit limits, closing credit card accounts and approving fewer new accounts.

Lower spending is the most striking overall change in consumer behavior.

Mortgage payments impacted severe delinquencies less than expected.

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.

Terms of HARP 2

Here are some of the highlights of HARP 2 and more information is still coming out:

Applies to loans originally sold to Fannie Mae or Freddie Mac on or before May 31, 2009.

Eliminates the loan to value (LTV) limits for fixed rate mortgages.  The ratio ceiling was 125 percent for fixed rate mortgages with terms up to 30 years guaranteed or owned by Fannie Mae and Freddie Mac.

Adjustable rate mortgages (ARMs) with fixed terms of 5 years and more or loans for greater the 30 years are limited to loan to value of 105 percent.

Eliminates requiring a new property appraisal where there is a reliable automated valuation model (AVM) estimate provided by the Fannie Mae or Freddie Mac.

Applications can be accepted as of December 1, 2011.

Extends the end date for HARP to December 31, 2013.

Eligible if pay mortgage on-time for the last 6 months and have only been late once in the past 12 months.

Don’t have to re-qualify for the mortgage, unless the new principal plus interest payment increases by more than 20%.

Credit and income requirements don’t apply, but the lender can still determine if you are an “acceptable credit risk”.  This definition has yet to be defined.

Applies to primary residences, second homes or condominiums.

If you don’t have Private Mortgage Insurance (PMI) now, you won’t have it when you refinance.

Closing costs can be added to the loan.

Not eligible

If you were in the program under HARP 1, you are not eligible for HARP 2.

If your loan originated or was sold to Fannie Mae or Freddie Mac after May 31, 2009, you are not eligible.

If you have been late paying your mortgage in the past six months or have been late more than once in the past twelve months, you are not eligible.

If your loan was not guaranteed or owned by Fannie Mae or Freddie Mac, you aren’t eligible.

Jumbo loans are not included.

HARP 2 helps both the lenders and borrowers.  The lenders don’t have to keep the loans that are underwater, which could still face foreclosure. This program is voluntary to lenders, so not all will participate. Underwater homeowners can refinance and take advantage of lower rates, which they couldn’t do previously, due to lack of equity.

How many will take advantage of this?  Those that do so, what will they do with the amount they save each month?  Will they spend, save and/or pay off debt?

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.

Delinquency rate

The national credit card delinquency rate (more than 90 days past due) was .71 percent in Q3 2011, compared to .6 percent in Q2 2011 or an 18.3 percent increase. This was the first increase since fourth quarter 2009.  The Q3 2011 delinquency rate was a decrease of 14.46 percent from the .83 percent rate a year ago.

Debt

The average credit card debt per borrower was $4,762 in Q3 2011; compared to $4,699 in Q2 2011 or a 1.36 percent increase.  This is still at near record lows.  The Q3 2011 average card debt decreased 4.07 percent from a year earlier, which was $4,964.

New accounts by score

In Q3 2010, 23 percent of new credit card accounts were from consumers with Vantage Scores below 700, which is below a “C”. VantageScores range from 501 to 990.  A year later, in Q3 2011, 25.2 percent had a score below 700, which was a 9.6 percent increase.  The proportion of new accounts with VantageScores of 800 and above dropped from 49.7 percent in Q3 2010 to 45.9 percent one year later.  Even though proportion by score range changed, the number of new credit accounts during that time frame stayed about the same.

State statistics

Between second and third quarters 2011, all fifty states including DC had increases in credit card delinquencies.  When the Metropolitan Statistical Areas (MSA) were evaluated, 89 percent had an increase, compared to only 17 percent in Q2 2011, and 26 percent in Q1 2011.

States with the highest credit card delinquencies in Q3 2011 (U.S. average is .71%):

Mississippi 1.03%

Nevada .98%

Alabama .93%

Arkansas .91%

States with the lowest credit card delinquencies in Q3 2011 (U.S. average is .71%):

North Dakota .42%

Alaska .45%

South Dakota .50%

Wisconsin .51%

States with the highest credit card debt in Q3 2011 (U.S. average is $4,762):

Alaska $6,980

North Carolina $5,464

Colorado $5,378

Georgia $5,308

States with the lowest credit card debt in Q3 2011 (U.S. average is $4,762):

Iowa $3,770

North Dakota $4,078

South Dakota $4,090

Wisconsin $4,156

The key reasons for the changes were that credit card issuers were targeting those with lower credit scores and delinquencies increased.  Obviously, the issuers loosened up their underwriting policies.

According to TransUnion, “Based on revised economic assumptions, TransUnion forecasts that credit card borrower delinquency rates could continue to drift upward in the short term. This forecast is based on various economic factors such as anticipated gross state product, consumer sentiment, disposable income, and interest rates. The forecast changes as the economy deviates from a conservative economic forecast or if there are unanticipated shocks to the economy affecting recovery.”

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.

How it works

Yo-yoing scam or spot sale can work two different ways.  1. The consumer puts money down or has a trade-in, signs a loan agreement that is subject to approval, car keys are turned over and they drive off with the car.  The dealer assures them that they will be able to finance the car.  2. The other is the selling process has been completed with the contract of sale executed, signed title, down payment or trade-in received and keys turned over.  The difference being that loan is approved in situation number two and not in situation number one.  In both situations, the dealership now works with the finance company to buy the loan. If the finance company refuses to buy it or does so for less, the dealership can’t make the money they planned.

A few weeks may have passed and the dealership contacts the consumer to inform them that the loan did not go through and they have to come back to the dealership to renegotiate the deal. There are several outcomes, they pay a higher interest rate for the loan, they are put in a different car, or the car is taken back. If the consumer requests their trade-in back, they usually don’t get it back, because it has already been sold.  In addition, the dealer does not return the down payment and uses it toward mileage. If the consumer doesn’t return the car, the dealer often repossesses it.   You signed a contract but the dealership did not honor it.

How to avoid it

When you car shop, one of the first things that happens is the dealership pulls your credit report and credit score to determine your credit rating and the terms for which you qualify, such as interest rate. They should already know if they can sell your loan, unless your credit is poor and they have to shop around for financing.  The dealers are very familiar with what loans will be financed.  This only works with individuals who have poor credit and are not familiar with getting credit.

How do you avoid this? You need to know your credit score and also obtain financing at a credit union or bank or both, before you go to the car dealership. You have more leverage to negotiate with the dealer. If you finance through a dealership, make sure the loan paperwork is finalized such as the APR and guaranteed price.  If you have been scammed, you should contact your state’s Attorney General office and the Better Business Bureau.

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.

Highlights

76 percent of responders said it is more important to reach a specific dollar amount before retiring, while 20 percent said it is more important to retire at a certain age regardless of savings.

74 percent expect to work in retirement, which was broken down into 39 percent who will work in retirement because they need to and 35 percent who will work because they want to.

25 percent will need to work until age 80 due to lack of savings.

68 percent were not confident in the stock market to invest in it for retirement.

If they were given $5,000 to invest, 45 percent would buy a certificate of deposit (CD) and 50 percent would invest in stocks or mutual funds.

Responders saved a median of $25,000 toward retirement and estimated needing a median of $350,000 to support themselves during retirement.

42 percent expect to receive a pension or already receive one.

They expect to withdraw an average of 18 percent from savings each year in retirement.

50 percent were confident they saved enough for retirement.

“Eighty is the new 65,” Joseph Ready, executive vice president of Wells Fargo Institutional Retirement & Trust.  “It’s a real sea change.”

The economy has impacted retirement plans for many.  Some are unemployed or underemployed and had to dip into savings and/or retirement accounts.  Others haven’t been able to save enough for retirement, because of other debts. The good news is that people are living longer and are in better health, so they can continue to work.

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.

This is often called locate or skip locate.  Both creditors’ collection departments and collection agencies review credit reports to obtain information to assist in debt collection.  They use credit reports to try to locate the debtor and/ or determine their ability to pay.  They look at the last known address, phone number, current payment information and recent updates on the credit report.   This also lets them know whether the debtor owes money to other companies.

If the collectors are unable to contact the debtor, they can use services offered by three credit reporting agencies, Equifax, Experian and TransUnion, that alerts them when there are updates to the credit report.  Examples of alerts are personal information, credit information and credit inquiries.  The company can select what information triggers the alerts.

Personal information

When the debtor can’t be located by phone and the address is incorrect, the collection department or collectors set up alerts with the credit reporting agencies to be notified when there is a change to name, phone number, or current address.

For example, if the debtor’s addresses changes, the collector will be alerted with the new address information.  Now the collector has new information to use to contact the debtor.

When you move and change your address with your creditors, your address is also updated on your credit report.  Some consumers move and don’t update their address with creditors to avoid being found by collectors.

Credit information

Another alert is a change in credit information, such as a new account was opened or a payment was made.  Opening a new account indicates that the debtor was able to obtain credit.  Recent payments imply that they have money to pay their bills. This alerts the collector to contact them, because they now may be able to pay.

On the other hand, accounts that have just changed to past due 120 days or more or turned over to collections, indicates that the debtor may be unable to pay.  The collector may decide not to contact them, because they don’t have the money. Instead, collection efforts are concentrated on other debtors.

Credit inquiries

If the debtor is seeking new credit, this can be an indicator that the individual needs additional credit, which is considered negative. On the other hand, if they are approved for the card or loan, the collector could interpret this as a sign that their credit is improving and can pay their debt.

The Fair Credit Reporting Act, permits collection agencies and collection departments to review your credit report.  It is just one of the tools they use to help in collecting debt.  You should not avoid paying your obligations, but you don’t have to be harassed by creditors.

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.

Highlights

When the responders were asked their top financial obligations,  83 percent said credit cards,  59 percent  said utility payments, and 51 percent said mortgages or rent.  Payment priorities did not match their financial obligations. When asked about their highest priorities, 77 percent of respondents selected mortgage payments as the first, 52 percent selected utility payments next and 38 percent selected credit cards as third. Compared to 2009, credit cards were the first priority, mortgages were the second and auto loans were the third. The percentages were not given by Auriemma for the 2009 survey.

When asked the top reason for not missing a credit card payment this year,  57 percent said avoiding late fees,  41 percent said maintaining a card with either a low interest rate or rewards points, and 35 percent said  they were concerned about the impact on their credit scores.

According to Bob Taglin, Auriemma director, “ In 2009, foreclosures were not an instant reality, and many consumers chose to pay down card debt first instead of pay into failed mortgages. Now those foreclosures are coming to fruition and are more likely to happen if consumers do not make mortgage payments. We agree that a large percentage of mortgages have already been written off, settling the market. Homeowners who got burned or saw others get burned have returned mortgage payments to #1.”

The key reasons for the changes were that consumers don’t want to lose their home and don’t want to be without utilities; credit card debt was less important in comparison.  Consumers have been paying down credit card debt; does this mean that credit card debt will be rising again?

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.