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Posts Tagged ‘FICO’

We’ve all heard of horror stories of someone stealing a credit card or hijacking your identity online to “party like it’s 1999” and leaving you with the bill.  It’s become a cultural cliche and even popularized in TV sitcoms and commercials.

But it’s anything but funny when a scam is played on you.  So prepare to protect yourself and your credit.

Credit is vital in this economy.  We depend on it to get us through the day.  It’s part of our identity (and the credit reporting bureaus know it and charge lots of money to sell soci-economic demographic data to marketers keen on target marketing.)

And in a time when banks and lenders of all sorts are skittish about lending and getting burned, it’s all the more important to maintain a good (if not great) credit score.

The difference between a credit offer and interest rate for someone with a 780+ FICO score and someone with “only” a 700 can be 0.25% on a mortgage, maybe more for an auto loan.  Doesn’t sound like much but believe me when you’re making that payment each month you’ll appreciate the lower payment resulting from the reward you get for great credit.

This brings me to my tale of woe for today.

Check Your Credit Reports Regularly

I’m kind of obsessive about maintaining my credit and paying bills on time.  I’m no stranger to disputing charges.  I check my credit report regularly.  If you don’t you should.  And you can do it for free.  Just go to www.annualcreditreport.com which is a site offered in conjunction with the Federal Trade Commission.

The FTC has set up the site to help consumers get a copy of their credit report for free each year.  Since there are three main credit bureaus to which virtually all creditors report:  Trans Union, Experian and Equifax.  You can get a free report from each of these reporting agencies.

Once you log in and verify yourself you can choose which bureaus to compile your report.  The best tip I can suggest is to stagger your requests.  Order one report from one bureau and then order another free report from a different bureau three months later.  And then repeat three months later with the third and final bureau.

Why go through the trouble?  Well, each bureau will more than likely have the same information as the others.  Not always but most times.  So you can basically monitor your credit for free by staggering your requests throughout the year.

So while there are services out there offering “free” credit monitoring services (and they have really catchy jiggles), you can do it yourself for free.

The Robo-Call That Started It All

So what happened to me?  Well I started getting “robo-calls” in December from a “Kelly Smith” of ER Solutions located in Renton, Washington.  Kelly had a wonderful British accent.  Her sister must reside as one of the voices in my car’s GPS.  Kelly asked me to call her.

Now, I’m a married guy (and Spencer’s dad if you can’t tell in the pictures posted here) but it’s certainly flattering to have a woman with a sultry voice ask you to call her even if it is just a business call.

So I call the young lass.  While I don’t get her on the phone, I do find out that ER Solutions is a nationwide collection agency.  I’m told this by the message I receive from the robot attendant when I call. While not pleasant, I’m sort of used to calling collection agencies.  In my past life I used to own and run a credit reporting agency that produced credit reports used in mortgage lending or property rentals.  So calling these kinds of companies was a necessary chore every now and again to verify the legitimacy of something that appeared on a consumer’s raw credit data file.

But in this case, I’m calling for me. Now once I get past the shock that I’m calling a collection agency on an account that supposedly belongs to me, I try going through the frustrating voice mail tree.  Ultimately, I get to a point where I’m asked to leave a message but before I can another message tells me that the “mailbox is full.”

Not one to be stonewalled, I do my best to find out more about this company. I search online and find another phone number.  I call it with the same result.  I do this over the course of a couple of days.  But despite the time of day or day of week I am unable to ever reach a live attendant or leave a message.

I do more research.  I check the government records at the Secretary of State’s office for my state (Massachusetts) and the corporate HQ (Washington).  I file complaints with the Washington Office of the Attorney General and with my state’s regulator for collection agencies, the Massachusetts Division of Banks.  I also go online to the FTC and use their online complaint process at www.FTC.gov. I send a certified letter to the company demanding that they verify the debt per my rights under the law.

In my research I find several websites that have posts from many irate consumers who have had dealings with this company.  All of them report various kinds of abuse.  Many show how seedy collection agencies try to scam consumers by trying to collect on fictitious charges, using abusive tactics in their calls and ignoring any inbound contact with the consumer.  You can check out the consumer reports on this company online at Ripoff Reports, Complaints Board and Complaints.com.

In many cases the stories sound like mine.  It’s either a fictitious debt or a debt that was in dispute with a creditor that should not have been turned over.  But being big faceless corporations that they are, one hand doesn’t know what the other is doing.

Without any help from my British friend at ER Solutions, I tracked down the problem.  Since the folks at ER Solutions never answer their phones and never provided any account reference in their call, I checked my free credit report that I got from http://www.AnnualCreditReport.com.  I found a cryptic reference to Verizon Wireless, my cell phone carrier.

One Computer Glitch Leads to Another

After a long and frustrating runaround I found the problem.  I had transferred my old individual wireless account to a new family plan account with Verizon.  This was supposed to be seamless but it was apparently not.

Despite paying through Verizon’s One Bill bundled service, the wireless side of Verizon had a wrong address for me. While they had no problem confirming where to send my new phone, they didn’t bother to correct an incorrect entry in their billing system tied to an address I haven’t had for more than 8 years.  While I had been told that the old account would be merged with the new account, the faceless phone rep was very wrong.

So while the family plan account was being paid in full each month, a statement for the old account with a charge for the new phone I bought was being mailed to a defunct address.  And even though I would call and speak with customer service from time to time no one bothered to mention that there was anything outstanding despite my inquiries.

Protect Yourself

Protect yourself by vigilantly monitoring your credit report and disputing erroneous and false information quickly.  Don’t simply roll over and pay the amount without verification.  Often when someone is going through a loan process an underwriter will require that old debts get paid off before closing on the loan.  While good for the lender this is bad for you and your credit score. Since credit scores are skewed toward the most current activity, paying on a disputed amount will likely result in a hit to your score as the creditor or collection agency updates the record with the payment activity.

As the veteran cop on Hill Street Blues would say after morning roll call, “Be careful out there.”

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Let me offer the classic unsatisfying answer:  It depends.

Before you offer your John Hancock you should understand the risks involved.

Just like any other financial decision, it’s best to try to do this without the emotion, drama and angst that can complicate a relationship.  Easier said than done, I know.

But like your investments, you should do your own due diligence and follow your own values.

Sometimes it’s absolutely necessary to get a cosigner for a loan, credit card or apartment lease.  The best terms are offered to those with the lowest credit risks.  A credit card issuer, mortgage lender or landlord will rightly offer someone with an established good credit history and deeper pockets a whole lot better set of terms than a newly minted college grad or someone with a bunch of blemishes on their credit report.

I remember a favorite uncle of mine.  He was single, very responsible with money, a great saver.  He once went to buy a car but needed a younger nephew to consign for him for the auto loan because our uncle had no established credit.  He had paid cash for everything all his life making him an invisible man to a loan underwriter.

I also remember once walking across campus and a friend stopping me as I passed the financial aid office.  He asked me for a favor.  He needed a cosigner for his student loan and it was my lucky day to be the guy to help him.  Don’t worry about a thing, he told me.  I’m good for it, he had said.

Luckily he was but that’s not always the case.  The FTC reports that three out of four cosigners are asked to pay because the primary borrower hasn’t.

Know the Risks

There are risks in life and in every decision we make.  It’s not a matter of avoiding all risks but managing them, understanding them. Don’t just think that you can walk away once you’re on the hook for the loan.  Just because your signature may not appear first doesn’t mean that you won’t be the person they turn to collect the debt.

Landlords typically require a parent to cosign on an apartment for a child.  They know if the kid skips or the keg party gets too wild that Mom and Dad will not want to risk their good credit and will be there to cover the bill.

Remember that each loan or credit card you have will have an impact on your own credit score.  The payment history and amount utilized compared to the maximum line of credit can have a potential adverse impact on your own credit score.

And the amount of the debt will be counted as if it were your own.  This may make it difficult or impossible to get a loan when you need one.  I had a client who had cosigned for a car loan for her adult son.  The son has made every payment on time.  But when his mom applied for a home equity line of credit the car loan fixed payment was included in calculating the underwriter’s debt ratios.  Combined with her other debts it was enough to push her over the maximum qualifying debt ratio allowed resulting in a loan decline.

Put Yourself in the Lender’s Shoes

If you treat this like an investment or a loan, you should be prepared to ask questions.

You should be asking the same sort of questions that any would.  Why do they need the money?  What’s the default risk? Can they afford the debt?  How will they manage to pay it back?

Curb Your Enthusiasm … Set Limits

Like all financial decisions, consider the risk and find ways to limit it.

For a credit card you can request that the limit be set low so that the card can only be used for emergencies and not big ticket discretionary purchases that will leave you on the hook.

For apartment leases with roommates, make sure that all the parents are also listed on the lease so you’re not the only one that the landlord will call when there’s a problem.

For other large ticket items requiring a loan, consider being listed on the title for the car for example.  If there is a default, you’ll have the right to sell the car.

At the very least you can ask to receive duplicate statements so that you can monitor that payments are being made as promised.

For larger loans like a mortgage, you may even want to consider offer your help in the form of an intra-family loan.  There are services that will manage the payment processing so that it avoids getting ugly if there ever is a payment problem.  Just remember that if you choose to lend a hand to someone to buy a home in this way, they will need to declare it on the application as a debt and they’ll have to qualify for the new loan with this payment as well.


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Remember leisure suits? Remember bell bottoms? How about skinny ties?

Fashion sense changes. And so has money sense over the last couple of decades. But like the old song title: Everything Old Is New Again.

Over the past couple of decades we loaded up on debt, used our homes as piggy banks and became part of the “ownership” society investing more in real estate, mutual funds, stocks and our 401(k)s.

Like a pendulum, things change and old fashions that fell out of favor seem to come back into style.

Unfortunately, some of those fashions when it comes to money should never have been forgotten.

1.) Live Below Your Means: Easier said than done especially if living in a high tax or high cost state. But it’s worth remembering mom’s advice on this one.

2.) Skip the McMansion: They cost too much to heat, furnish and maintain. And they don’t produce any income for you (unless you consider taking on roommates). And who are you gonna get to buy the McMansion anyway when you want to downsize?

3.) Protect Your Credit: Use it sparingly and only if you can pay it off soon. Consider using a snowball method to get yourself out of debt (focusing on a credit card balance and then as that one gets paid off redirecting your payments to the next balance). And keep your credit score high by not closing out accounts. Use them every once in a while to keep them active. This will help maintain your credit score and allow you to qualify for better terms.

4.) Pensions Are A Thing of the Past: Secure your retirement income by saving in whatever tax-efficient options are available to you. This includes your 401k and IRA. Add a Roth IRA to stay diversified regarding future income taxes. Consider a lifetime income annuity – no frills, no bells and whistles, low expenses, laddered and divided among different insurers to reduce your risk.

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