credit score - The Finance Gourmet

Is Credit Repair Legit, or Just a Credit Repair Scam?

Written by Finance Gourmet Leave a Comment

Is it just me, or are you getting a lot more offers for real credit repair these days?

Legitimate Credit Repair

Is there a way for someone to do legit credit repair? After all, there are all of these people out there selling credit repair services, so there has to be some real credit repair that isn’t just a scam, right?

The reality is that credit scores, credit reports, and the credit bureaus that run the whole racket is big business. While you may know about credit scores and credit reports as what determines if you get credit or not, on the other side of the equation are big banks and investors who build billion dollar portfolios off of pools of borrowers. The key to both buying and selling these pools is the credit scores of the borrowers. Getting fake credit scores, or borrowers who fixed their credit with a scam, would be a big problem.

Check out my Credit Karma review.

The reality is that there really isn’t any legitimate way to fix your credit, other than to do better with your credit.

Once upon a time, back before the housing bust and the Great Recession, you could fix your credit temporarily by disputing all of the negative information on your credit report. Back then, while the dispute was active, they would not count that information in your credit score. Of course, the banks and the credit bureaus figured that out, and that isn’t how it works anymore.

In fact, a large number of disputes on your credit report is actually grounds for rejection, no matter what your score. After all, what reason would there be so many disputes other than you are a troublesome borrower, or someone has stolen your identity and opened a bunch of fraudulent accounts.

Credit Repair Hackers

What about a credit repair hacker, or someone on the inside?

There is always the possibility that someone could hack into any computer system, including the computers at the credit bureaus. However, the value in a hack like that isn’t in charging people $100 onsie-twosie out in the public where you will get caught. So, while it’s possible, it isn’t very likely.

What about an insider helping with your credit.

One credit repair scam I received claimed to have someone on the inside at a major bank. That’s an interesting claim, but it wouldn’t be useful repairing your credit unless they were at the bank that put negative information on your credit report.

You see, while banks are the major users of credit reporting information, they don’t actually have anything to do with creating and maintain the credit reports themselves. They are separate businesses. So, while a credit repairing insider at Wells Fargo might be able to send a report to the credit bureaus saying that your mortgage is not late after all, it won’t help with that default reported by Capital One.

Anyone who claims they can get you a new credit identity or a new Social Security number is operating outside the law. And, don’t fall for the trick about getting an EIN or a ITIN. Those numbers are for filing taxes, and while you CAN get credit for a business via an EIN, you have to build it up just like regular credit. In other words, the next question a lender will ask after you give them a business FEIN, is for your own personal Social Security Number.

Legitimate Credit Repair Help

Unfortunately, there are no quick fixes for credit problems. The good news is that your credit report is self-repairing, it just might take a little while.

Your credit report is a combination of your past and present. The further something is into the past, the less it counts against your current credit score. So, as time passes, your credit report slowly repairs itself. Everything except bankruptcy drops off your report (and credit score) after 7 years, so in about 8 years, your credit would be fully repaired — assuming you didn’t do any more credit damage.

Is Acorns a scam? An Acorn review of the app.

You can speed up your credit repair by adding good data on top of your bad data. Again, since newer data counts more, each good standing account increases your credit score, while your negative accounts count less and less each day.

The best thing you can possibly do to repair your credit is to use credit responsibly. Even student loan payments count, so every on-time payment you make helps your score. Throw in a car loan you never miss a payment on, and a credit card you pay off every month, and in just a year or so, your score can be hundreds of points higher.

Of course, top-tier credit takes years to build but most lenders are ready and willing to work with lenders with just “good” credit. It doesn’t have to be “best” credit, or even “great” credit.

While interest rates are important, remember a loan interest rate takes time to cost you money in the reverse of the way it takes compound interest a long time to work. In other words, the difference on a car loan at 4.5% versus 4.8% won’t be that much over a few years. Not enough to risk losing money to a credit repair scam at least.

Check out my Ebates review.

Credit reporting is so universal because it works so well. If there were easy ways to trick your credit score, financial companies wouldn’t rely on it so much.

Should I Worry About the Equifax Hack?

Written by Finance Gourmet 1 Comment

If you are wondering whether to be worried about the Equifax hack, the answer is yes. You should be worried. However, you do not need to panic.

By now, you should probably have some rudimentary credit monitoring whether it comes through a free credit score service like Credit Karma, or from your bank, or one of your credit cards. You’ll want to read all of those emails more closely from now on. It you see something that isn’t right, contact the credit issuer right away to let them know about fraud, as well as call the credit bureaus.

You can go check if your information was some of the one affected, however, even if you check now, check again in a few weeks. The ALWAYS find more accounts were affected than they originally thought after they bring in experts and begin devoting resources to investigating what happened.

What Should I Do About the Equifax Hack?

You should probably write a letter to your Congressman and Senators demanding they do something. It’s time to come up with a new way to uniquely identify citizens for credit purposes. You should also be able to freeze and unfreeze access to your credit report for free.

Next, if you don’t do it already, you should get your free credit reports on a spread out, rotating basis so you can compare what is on it now, with whatever might get put on it in the future.

Equifax is offering free credit monitoring but that isn’t as big of deal as you might think. The reality is that they will just send you a notice. It is still on you to do something with that information.

Should I Freeze My Credit?

Maybe. If you personal finances are currently setup the way you like and you see no need to open any additional credit in the next six months to a year, a credit report freeze can’t hurt. However, the credit reporting companies charge you to put a freeze on your credit report. How much it costs typically varies based on state law. At this point, you may want to write your state Congressperson and Senators as well and demand a law that says credit bureaus must give you a free freeze and unfreeze each year.

The credit bureaus make it difficult to freeze and unfreeze (notice how you can do anything else online) on purpose so that more people don’t do it. Otherwise, if you could have free, online, credit freezes on demand, the smart thing to do would be to freeze your credit and leave it frozen until you are ready to apply for something. But, that would cut into their earnings because they make money off of people accessing live credit reports. No financial institution is going to pay for reports that a frozen.

Should I File a Fraud Report?

This can be like a credit report freeze-lite. You contact one credit reporting company and tell them to put a fraud alert on your report. By law, they are required to notify the other two credit bureaus, but you may as well notify all three of them.

A fraud alert is a huge red flag and reputable lenders will not extend you (or hackers) any credit while there is a fraud report on your credit. The downside is that if you legitimately need someone to access your credit report, you’ll have to get the fraud report taken off first.

Fraud reports last 90 days. This sounds like a lot, but remember this data will be out there forever, and constantly accessed and reaccessed every time a bad guy gets an idea how to use it, so don’t go complacent after the 90 days.

What If My Credit Card Number Was Exposed?

If your actual credit card number was exposed, Equifax will notify you by mail. They may also notify the credit card company. Either way, if you learn your number was exposed, call your credit card company right away and ask for a new card with a new number. Tell them why. They’d rather not be liable for any fraudulent charges on your credit card.

I’ll update this with more information when I get some time. For now, don’t panic, but go into proactive, protection mode.

Credit Scores Make No Sense

Written by Finance Gourmet Leave a Comment

I spend a lot of time talking about whether or not the free credit scores from CreditKarma, or the WalletHub free credit scores, or the credit scores from Credit Sesame are “real credit scores” or not. The reality is that most of the time, it doesn’t actually matter. If it’s a Tuesday afternoon and you are sitting on your porch with a cold one, it is irrelevant whether your credit score is 714 or 723 or 815. The only time it matters, is when you are actually getting a loan.

An interesting situation this weekend has shown me that even those real credit scores aren’t really real.

Real Credit Scores

When most people talk about a “real” credit score, they mean a FICO score. Most lenders rely upon FICO scores to make a decision about lending or what interest rate you get. The catch is that there are numerous kinds of FICO scores ranging from those used to judge creditworthiness for credit cards, a different one for car loans, and another still for mortgages. Beyond that, there are three major credit bureaus and all three of them can yield a different score depending upon what has been reported to each company. In other words, your real credit score can be many different numbers at any given time.

Here is where it gets really weird.

credit score real number — A credit score as real as the pot of gold at the end of the rainbow…

As a former financial planner, I still have people reach out to me from time to time about financial matters. Usually, I’ve seen it before, and I’m happy to help, but this time was a little different.

The person was applying for a certain kind of loan. For the purposes of this loan, you get the best possible terms with a credit score over 735. They pulled two different credit reports, and as I mentioned above they did have two different numbers. One was 736, and one was 733.

In this particular case, they go with the lower score, so just 2 points short of the best range.

As it turns out this person has a Citibank rewards credit card that they use to buy everything during the month. When the bill comes, it gets paid in full and they never pay any interest. So, the points get racked up, but no interest is paid. This is smart.

However, depending upon when Citibank reports the current balance to the credit reporting bureaus, the balance could be very low (just after being paid off), or very high (just before getting paid off). In this case, a balance of just over $5,000 had been reported. It was projected that if he had a balance below $300, then that would increase his score by 4 points.

Here is where this is ridiculous. This person has $30,000 in savings, and a non-retirement brokerage account nearing $200,000. Paying off the card is a trivial matter, which anyone could see by looking at both the history of the card (no late payments, no interest payments) and the cash available. But, that isn’t how credit reports work.

So, sure enough, he logged on to the website, paid the card to zero, and called back the lender who requested a printout of the screen showing the new low balance.

Result?

The 736 is now his low score, and he gets the best terms for his loan.

All because of this new REAL credit score.

Experian Free Review – Scam, Legit, Worth It?

Written by Finance Gourmet 3 Comments

Did you see commercials for a free credit service from Experian. They do something clever in that they de-emphasize the free credit score idea and instead play up the concept that “credit is a skill” rather than a number. This is actually true advice, even if it isn’t what most people are looking for.

This new push is undoubtedly a response to the growing number of free credit score services out there like Credit Karma, Credit Sesame, and WalletHub. Keep in mind there is no Experian free credit score offering, but we’ll get to that in a minute. This is also not the same thing as getting your annual free credit report that is required by federal law.

Free Experian Credit Report Not Free Experian Credit Score

Is Experian a scam? There are plenty of unsavory things about Experian’s business, but at least they are not some new free credit report, or free credit score business. Experian is one of the three major credit bureaus, and they have been around for a long time. If you have ever had a credit card, mortgage, car loan, or personal loan, chances are, they already have a report on you with all of your information. Which means, unlike some of the other newer free credit report businesses, you don’t have to worry about giving them your data, they already have it.

The credit bureaus lobbied Congress hard to keep people from being able to get their credit reports for free. They lost that fight (sort-of) several years ago when Congress required them to give you ONE free credit report every year. While this is better than nothing, credit fraud, and inaccurate information on credit reports is an epidemic in America, and the only defense is to monitor your credit report regularly, so that once per year thing doesn’t really cut it. Since, many lenders report your information to all three credit bureaus, you can work the system to get a free credit report more than once a year by staggering your requests for your free annual credit report to every four months.

However, in the last few years, many financial companies have begun offering a free look at your credit report as a way to market their services. Some of these offers are pretty legit, others are scams that actually sign you up for expensive credit monitoring subscriptions. So, at risk of becoming ignored, it looks like Experian is going to play ball.

It is important to be careful about what you sign up for. Experian is a scam when it comes to signing up for a free credit score. (That’s SCORE not REPORT, there is a difference.)

Actually, you can get an Experian credit score for $1… until you read the fine print. The reason they charge you that one dollar, instead of giving you a free credit score, is so that they can get your credit card number. And, they’ll use that credit card number to charge you $21.95 PER MONTH for a membership in something called Experian CreditWorks, which is essentially nothing more than an email alert if there is a change on your credit report. The annual cost is $263.40 for that! So, CreditWorks is a scam, no matter how much “credit is a skill.”

That being said, you can sign up for a free monthly credit report from Experian. The Experian free monthly credit report is not a scam. You don’t even need a credit card number to sign up.

This is IMPORTANT! Do NOT sign up for anything that requires a credit card number. If you do, you are signing up for the wrong thing, and YOU WILL BE CHARGED.

The free credit report from Experian is much the same as you’ll get from other companies, or even from your existing bank accounts or credit card companies. It’s basically a list of information about you, including all the credit accounts you have open, and even the ones that you have closed, along with a payment history.

This is a valuable tool to use to improve your credit score, even if you don’t have the actual credit score number. Most the free credit score services actually give you a fake, or FAKKO, credit score anyway. What IS important is the information on your credit report is what is used to calculate your real credit score.

The most critical thing is to make sure that everything on your credit report is accurate. If you see accounts that you don’t recognize, call them. Often, it’s an old account that you forgot all about. There is no reason to close them if they have a zero balance. It still counts as a paid, existing, line of credit, which is a plus for you.

If there is anything that shows up as negative, correct it as soon as possible. Everything on your credit score ages, so the sooner you correct any issues, the faster negative information gets taken off your credit report. It takes years to fully disappear, but a missed payment five years ago, counts less than a missed payment five months ago.

Be sure to only sign up for the FREE service (it won’t ask for a credit card number) and use it to keep an eye on your credit report. If everything is correct, and you’re making all of your payments on time, your credit score will take care of yourself, even if you don’t know exactly what it is.