FACTA – How it changed the world!

In 2003 , Congress passed a law, the Fair and Accurate Credit Transactions Act, that enhanced consumer credit rights in a number of ways. FACTA made credit repair efforts much easier for consumers by ensuring that they had accurate information and also aimed to help those who had been victims of identity theft. It also enhanced your rights to medical privacy and provided ways to opt out of financial marketing. The law is broken down into a number of provisions, each of which can affect you:

Free Access to Credit Reports

Under FACTA, consumers have the right to access their credit reports from the three major bureaus once a year. The most convenient way to do this is to go to AnnualCreditReport.com, the website operated by Experian, Equifax and TransUnion in cooperation with the FTC.

Protection Against Identity Fraud

The identity fraud protections are broken down into several different parts, some of which are intended to prevent identity fraud, others of which are intended to help consumers recover if ID fraud occurs. Protections include:

  • Truncated credit and debit numbers. Merchants are only permitted to print 5 digits of a card number to protect against theft. Those who violate this rule can be assessed for damages that are anywhere from $100 to $1000 per offense.
  • Fraud alerts. If you report to the credit agencies that you are concerned that you have been or might soon become a victim of identity fraud, they must put a 90 day fraud alert on your accounts.
  • Red flag rules. Financial institutions must have policies that help them assess whether one of their customers has been the victim of identity theft. Rules include ones that help them tell the difference between genuine and fraudulent change of address requests.

Enhanced Medical Privacy

Health issues can be used to discriminate against people when they are job or house hunting. Under FACTA, medical creditor names and addresses cannot be included in reports sent to third parties unless they are coded. This way, the details of your medical history won’t be inadvertently revealed.

Opting Out of Marketing

Under FACTA, you have the right to restrict businesses from sharing your information with affiliates for marketing purposes. Once you opt out, that restriction is good for five years.

Your Right to Dispute Inaccuracies in Your Credit Report

When you are working toward a home purchase, inaccurate negative reports can keep you from getting the loan that you want. Under FACTA, you have the right to dispute inaccurate reports directly with the agency that supplied the information. When you, or a credit repair agency working on your behalf, make a written request for validation of a debt, the creditor must respond within 30 days if they feel that the debt is valid.

Being aware of your rights under the law can help enhance your financial health and increase your opportunities. With this knowledge, you can expand your employment prospects, spend less money on financial products ranging from mortgages to insurance and increase your family’s prosperity.

Click here to find out more on how FACTA changed the world.

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FICO & Vantage Scores – Different Systems

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Different Systems, Different Scores

Those three little digits that control so many of your financial opportunities. Your credit score can be pulled when you apply for a job, shop for insurance, during the home purchase process and in many other circumstances. But, it might surprise you to learn that there are actually a number of different agencies that create credit scores, and your scores will vary depending on which one is used. Some financial institutions even have their own internal credit scores that they use in place of independent ones.

Some of the most common credit scores used to determine your credit worthiness:

FICO

The FICO score is the one that people are most familiar with. It uses information from the three major credit bureaus to assign a three digit score that estimates credit risk. The score uses a number of weighted factors that include payment history, age of the accounts, ratio of available credit to debt, types of credit used and how recently you’ve searched for new credit. Your FICO score might vary depending on which credit bureau’s records are pulled to estimate your score.

Vantage Score

This credit score was created through a joint effort between Experian, Equifax and TransUnion. The advantage of the VantageScore is that your score is the the same no matter which credit bureau’s information is pulled to calculate it. The score can range from 501 to 990 and also comes with a letter grade. It has not been adopted by many creditors and is currently only used for about 6% of credit score pulls.

PLUS Score

This score was created by Experian to give consumers an easy to understand their credit health. It is not used by lenders; instead, it is intended as a consumer tool. The scoring range goes between 330 and 830, with a higher score indicating lower credit risk. Since this is not the score that creditors use when considering credit-worthiness, do not be surprised if your PLUS Score is different from the score that your bank says that you have.

TransUnion New Account Credit Score

This credit score is available for free from financial monitoring site Credit Karma. (As an aside: Credit Karma is a great resource for those undergoing credit repair. They allow you to check your credit score in real time and also to test what affect different actions will have using their credit score simulator.) The TransUnion New Account score is used by many lenders to decide how risky it is to extend credit to you. This score ranges from 300 to 850. It is based on information from TransUnion. It is made up of a number of factors that include the age of your accounts, our payment history and other factors.

Auto and Home Insurance Scores

These scores are used by the insurance industry to determine risk of a claim if you are insured by them. The results can affect the rates that you are extended when you shop for a policy. The scores range from 150 to 950. While the use credit scores for insurance is controversial, industry members defend the policy because of a correlation between credit scores and insurance risk.

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15 or 30 Year Mortgage? – Mortgage Advice

As you move on with home purchase plans, you will discover that you have a wealth of choices when it comes to mortgages. Big bank or mortgage broker? Traditional or FHA? And finally, fifteen year or 30 year mortgage? Each has their advantages, and which will work for you will all depend on your personal financial situation.

Money Out of Pocket

A 15 year loan will mean a monthly payment that is hundreds of dollars higher than the one for a 30 year loan. But, you pay less over the life of the loan since the interest rate is lower and the term far shorter. Seems like an easy trade-off, right?

However, there is an opportunity cost that comes with those savings. A mortgage payment that high can prevent you from investing as much in other areas, such as putting money away for a child’s education or funding your retirement.

Also, depending on the interest rate on your loan, you could get a far better return on your money by investing than by paying off your mortgage as quickly as possible. Say, for instance, that you have a 3.5% mortgage rate. Historically, the stock market has grown an average of 10% a year. If a homeowner were to put those few hundred a month extra that a 15 year mortgage costs into investments instead, he or she could come out tens of thousands of dollars ahead by the time a 30 year mortgage was paid off.

Flexibility

Thirty year mortgages offer far more flexibility than 15 year loans. A 30 year loan gives you the freedom to pay it off faster, if you choose, by adding extra payments. If you have a life event such as an illness or job loss that make the higher payments unfeasible, you can simply return to your regular loan payment schedule.

With a 15 year loan, you are committed to higher payments every month. You could, theoretically, refinance the loan if you fall on hard times. But, the sorts of issues that would cause someone to need a lower mortgage payment, such as unemployment, or being financially over-extended, are red flags to lenders, and could prevent you from getting a new loan.

Interest Rate

Typically, you will find much lower interest rates on 15 year mortgages than on 30 year loans. This means that, even if you were to make extra payments on a 30 year loan, you will still spend thousands of dollars more over the life of the loan.

We advise those who are shopping for a mortgage to run many different scenarios to determine which loan is best for their needs. Do not just calculate the difference between payments on a 15 and 30 year loan. Consider your total discretionary income, and whether you have adequately prepared for college tuition and retirement. By taking your entire financial future into account when you are choosing a home loan, you can continue the healthy growth that started with the credit repair process.

For more information on how prepare your credit for a refinance or home purchase click here to request a free consultation.

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Zombie Debt – How to Deal with them

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What should you do when you get a collection call or letter for a debt you could swear that you don’t owe? Whether it’s an erroneous account that was removed during credit repair, something you’ve paid in full or a debt that’s been charged off, these phantom debts can come back to haunt you. Luckily, there are ways to send them back to the grave.

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How Does Zombie Debt Happen?

When a consumer defaults on debt, the original debt owner can sell it to a collection agency. These agencies usually pay only pennies on the dollar. If they can collect anything at all, they can usually make a profit. And, if they fail to collect on the debt, they can just go ahead and sell it to someone else.

But, with all of these debts being shoveled from one collection agency to another, it can be hard for collectors to keep their records up to date. Some debts are resold even though they are past the statute of limitations. In other cases, the debt collector’s records will not reflect that a debt was canceled during bankruptcy. As a result, these debts can pop back up years after they have ceased to be your responsibility. They can lower your credit rating and get in the way of home purchase plans.

What Is the Best Way to Handle Zombie Debt?

If you get a collection call about a debt that you do not feel that you owe, do not discuss it over the phone. Get a mailing address for the collection company and then hang up the phone. Unscrupulous debt collectors can try to make you take responsibility for the debt, so, telephone conversations are not worth it.

Instead, write a letter requesting written verification of the debt. They must provide this within 30 days and are not permitted to pursue collection until they have verified what you owe. Do not pay a debt collector to stop harassment. This can be construed as admission that the debt is legitimate, and can lead to further harassment.

If they cannot prove that you are legally responsible for the debt, they are not entitled to collect. While there is no law against them contacting you in writing, you can safely ignore most contact. The exception is if they send a notice saying that you are being sued. In this case, you need to show up in court, if only to maintain that the debt is not yours.

How Can You Fight Back Against Bad Collection Agencies?

Check your credit report regularly to make sure that old or discharged debts have not been improperly reported. If a debt collector reports a debt to credit monitoring agencies or tries to sue you after the statute of limitations, that is a violation of federal law. Report them to the Attorney General in your state. You may be entitled to damages.

Always make it clear to debt collectors that you know your legal rights. They are less likely to pursue you if they know that you cannot be tricked into paying a debt that you do not owe.

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The Fastest Fixes for Your Credit Score – Tips

Are you this close to approval for a home loan? It can be frustrating to go to so much work in your credit repair efforts but still fall just a bit short. Luckily, there are a few tactics you can use to increase your credit rating fast:

The Fastest Fixes for Your Credit Score

Go over your credit report with a fine tooth comb to ensure that there are no errors that are lowering your score. You can request copies of your report from the three major reporting agencies. This can be done free once a year or after being denied credit or for a small fee at any other time. Common errors include:

  • Failing to remove old negative reports. If these linger after they are resolved, they can lower your score. Contact the credit bureau to get these removed.
  • Failing to report increased credit limits. If the limits shown on your credit report are too low, it can look like you are maxing out a card when you are not.
  • Failing to show accounts that have been paid off.
  • Duplicate report entries. If a debt has been transferred from one creditor to another, it can sometimes appear twice on your credit report, making it look like you owe more than you do.

Contact creditors and the credit reporting agencies, in writing, to get these potential negatives fixed. There are also errors that matter less, such as outdated address or employer information. These do not negatively affect your score, so correcting them is not worth your time.

Pay Down Balances

This is one of the quickest way to increase your credit score. The ratio of available credit to balances makes up about a third of your credit score. If you are carrying a high balance on one of your cards, it can be worthwhile to dig into savings to pay it off. Experts recommend carrying a balance equal to no more than 10% of your available credit. That means, if you have a $10,000 credit limit, keep your balances under $1,000 at any given time.

Use an Old Credit Card

The age of your accounts is one of the factors that go into your credit score. Lenders like to see that you have had an account for a long time; it is a sign of stability. But, if you stop using an old card, your credit card company might close it for lack of use or stop reporting on it. If you have a credit card that you haven’t used in a few years, put one of your recurring payments like a health club or your Netflix account on it. This way, a small amount gets charged to the card each month without affecting your regular spending habits. Just remember to pay it off in full every month.

Don’t let minor credit issues hold you back from your home purchase goals. By finding the problems and correcting them, you can increase your score and get lenders to take a second look.

For more information on professional credit restoration services you can reach out to us monday through friday between 9am and 8pm.

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