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 »

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 »

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.

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 »

TransUnion, one of the three credit reporting agencies, analyzes their consumer database quarterly to determine how credit active consumers manage mortgages, credit cards and auto loans.  This analysis is called the “TransUnion Trend Data”; the latest study was from third quarter 2011 (Q3 2011).  Credit card delinquencies and the average credit card balance increased from the prior quarter, while delinquencies and debt decreased from a year ago.

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. read more »

The short answer is yes. The better answer is…

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. read more »

Auriemma Consulting Group conducted an online survey of 509 U.S. adult credit card users in September 2011 regarding payment priorities. Payment priorities shifted from credit cards to mortgages; credit cards were the number one priority in 2009 and 2010, but moved to number three in 2011.

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. read more »

Rent-to-own stores have been around for a long time.  In the 1980’s they were in the business of mainly renting furniture, appliances and electronics…not for ownership. They would later sell the used merchandise.  They changed their business model to rent for the purpose of owning, which is really similar to retail installment.  You pay a specific amount for a certain time frame.  These stores target those with poor, little or no credit.  As you can imagine, these guys have their pros and cons.

Advantages

No security deposit or down payment is collected.

No credit check is conducted.

Merchandise can be returned at any time.  If the consumer can’t pay, they can return it and not have to continue to make the payments.

Flexible payment schedule is available such as weekly, bi-weekly or monthly.  They have the convenience of low regular payments. read more »