Experian is being sued for fraud; customers say the company doesn't provide relevant information in the credit reports it provides to customers. Photo Credit: Swampyank/Wikimedia Commons/CC-BY-SA

A lawsuit has been brought against credit bureau Experian in California. Experian is one of the three main credit bureaus, along with TransUnion and Equifax, and credit ratings from those bureaus are used in creating a persons’ credit score. The plaintiffs in the suit, which may become class action, are alleging fraud.

Plaintiffs say free credit report sites give false info to consumers

Plaintiffs in the California lawsuit against credit bureau Experian are saying the bureau has defrauded. They say Experian provides misleading information on the websites where the company sells copies of credit reports, according to MSNBC. The suit claims that Experian provides the wrong score, purposefully, through FreeCreditScore.com and FreeCreditReport.com. The sites, which charge a $14.95 per month fee to users so they can monitor their credit report activity, provide the Experian PLUS score. The reason why the plaintiffs are seeking a class action status is because that isn’t the score lenders would look at if a person applied for a personal loan.

Lenders look at FICO scores

When lenders or other parties check a person’s credit score, they aren’t looking at a score that one credit bureau comes up with. Lenders look at the FICO score, or the number from the credit scoring system developed by Fair Isaac and Company. Fair Isaac scores are calculated by looking at certain data about a person and coming up with a numerical rating of that persons’ credit worthiness. Experian, Equifax and TransUnion all produce credit scores with the FICO formula, and those scores are reported to lenders. The lawsuit accuses Experian of fraud because the PLUS score is not reported to anyone and would not be considered if someone applied for a job or installment loan. The suit says Experian misled consumers by advertising worthless information for sale. Experian had to be compelled by threat of a Federal Trade Commission suit to advertise the link to the government site where consumers can request the one free report from each bureau that people are allowed by law.

States trying to get employers to mind their own business

Labor rights advocates have never been enthralled with the idea of employers checking the credit scores of potential new hires. At least half of the United States isn’t either; 49 bills in 25 states are currently before state legislatures to legally bar employers from checking credit scores of a potential new hires. Though credit bureaus that sell the reports to businesses and some businesses contend that it can catch a potential problem employee, civil rights and labor advocates insist that it is prying into an area that no employer has a right to.

Sources

MSNBC

USA Today

A bad credit score or unfixed credit score errors can rob a person of thousands of dollars over a lifetime. Image: CC everydayminimalist.com

Consumers who don’t know their credit score or don’t think a credit score is important are robbing themselves. A credit score factors into everything from getting a job to getting a good deal on a house or a car. The simple process of checking a credit report can lead to action that results in thousands of dollars in savings over time.

A bad credit score costs money

Just about everyone a person does business with, from landlords to mortgage brokers to wireless carriers, uses credit report information to decide how much credit will be extended and how low, or how high, the interest rate will be. The difference between a good credit score and a bad one can add up to $5,000 in interest payments on a $20,000 auto loan. Maxing out credit cards or not paying bills on time could add 25 percent to the cost of that vehicle. The time and effort it takes to optimize a credit score can save an individual hundreds of thousands of dollars over a lifetime.

Correct credit report errors

For most responsible people, ensuring accuracy is the key to a good credit score and credit reports should be checked frequently. Credit scores are available online through FICO and the three credit-reporting agencies: Experian, Equifax and TransUnion. The government site annualcreditreport.com offers one free credit report per year, but it does not include the credit score. The different credit reporting agencies interpret information in different ways, so the best approach is to check all three resources. Information on credit reports can often be erroneous. Federal law requires that credit reporting agencies must correct inaccuracies free of charge. However, the agencies are known for making the process of correcting credit report errors difficult. Sometimes the money spent hiring a law firm that specializes in correcting erroneous credit report information is worth the time saved.

A good credit score saves money

One of the best examples of how a bad credit score costs money is current mortgage interest rates. Mortgage interest rates are lower than they have been for decades, but not for everybody. Borrowers with weak credit scores will pay several percentage points more on a fixed rate loan. According to FICO, a borrower with an excellent credit score might get a 5.9 percent interest rate on a $200,000 30-year fixed rate mortgage and pay $259,074 in interest over the life of the loan. A borrower with a bad credit score, if he or she can get a loan, may qualify for an 8.5 percent interest rate and end up paying $355,200 in interest. The bad credit score will have cost more than $127,000.

Sources

MarketWatch

FinanceTalks

BankRate.com

Before you pop the cork on the New Year, make some financial resolutions to make sure it's a good year. Image: CC geishaboy500/Flickr

Now is the time to get your personal finances in order. A new year is a good occasion for tying up loose ends on your financial checklist. Get off to a good start in 2011 by taking care of tax issues and re-evaluating your financial priorities.

What to put on your year-end financial checklist

Take financial steps in the week between Christmas and New Year’s Day that will make 2011 a better year than 2010. There are a few days left to address some critical tax issues for 2010. Charitable donations are still good for a 2010 tax deduction until Dec. 31. For another 2010 tax deduction, now is also a good time to dump depreciated stock. You can sell it and write off a loss up to $3,000. Consider converting an IRA to a Roth-IRA. You will pay tax on your Roth-IRA conversion, but if you do it by Dec. 31 you can spread the tax out until 2012. This week is also your last chance to get a free credit report in 2010 to make sure it’s accurate.

Financial resolutions for the new year

Find new ways to be thrifty. Start with credit card debt. Getting rid of credit card debt should be an even higher priority than saving money. Why? because the return you get on savings doesn’t come close to the high interest rates you’re paying on credit card debt. Pay down the expensive credit card debt first, then start saving. You’ll be able to save more. To help pay down credit card debt faster, figure out how much a habit costs and give it up. Make your own coffee or ride your bike to work. Take the money you would spend on lattes and gas and increase your monthly credit card payments.

Work together on financial goals

A lot of personal finance advisers recommend writing down your financial goals for the coming year. However, most people who do that soon forget them. In addition to writing down your financial goals, tell a member of your family or a friend you trust what your priorities will be. Ask them to hold you accountable to your promises and offer to do the same for them. Together you can both be more successful than you would going it alone.

Sources

Sacramento Bee

Wall Street Journal

Renting with bad credit is a challenge more people are facing. It requires a clear strategy to succeed. Image: Thinkstock

Renting with bad credit is a challenge a great number of people are facing these days, thanks to the housing crisis, mortgage lending meltdowns, unemployment, foreclosures, etc. Circumstances beyond their control have put many people in the bad credit doghouse. But a decent place to live, or simply a roof over one’s head, is a fundamental need that must be met. The bottom line is simply that the rent must be paid. For people with bad credit who can pay the rent, securing a place to live requires a strategy.

Know the facts about your credit score

It’s tough for renters with bad credit to lease an apartment or house, whether the economy is good or bad. AOL Real Estate says that credit scores, income and employment history, are the major factors landlords use to evaluate renters. The first priority a renter must address is to know where they stand with their credit. Anyone can get a free credit report at annualcreditreport.com. This is the official government site for the free credit report everyone is entitled to by law once a year. Credit scores are available for purchase from any of the nationwide credit reporting agencies providing the credit report via this site.

Stay away from a credit check

The best way to successfully rent with bad credit is to avoid getting a credit check. According to CNN, houses or apartments rented by an independent owner may be more easygoing than properties managed by a professional management company. Start by checking Craigslist, free newspapers and bulletin boards. Landlords advertising in these venues are trying not to invest any money in advertising rental units, and the odds are better they won’t do credit checks. When you ask about the place, ask them about the criteria they use to evaluate renters. If a credit check isn’t on their list, you’re a step closer to success.

Other bad credit rental options

The reality for renters with bad credit is that most landlords require a credit check and a completed application before they will lease an apartment. According to About.com, options are still available. Getting someone to vouch for your financial responsibility can help offset bad credit. A family member or good friend with good credit can also act as a co-signer on the lease. Getting a roommate with good credit could help. But keep in mind that if your name isn’t on the lease, you’re not building your credit with a rental history.

Credit Karma is one of many sites emerging on the web supported by advertising that allows users to access credit score information for free. Vramak/Flickr photo.

Credit Karma is one of many websites that have emerged offering free credit scores. Learning your credit score is easier now, thanks to the financial reform bill signed into law this month. Financial reform legislation, otherwise known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires lenders to show you the credit reports they used to turn you down. But you can keep that from happening by knowing your credit score beforehand and taking steps toward credit repair. Websites like Credit Karma offer to make your credit score available for free anytime, as often as you want to check on it.

Credit Karma service supported by advertising

Credit Karma is a free service supported by advertising. That makes it different from most websites that offer free credit information and then try to lure you into paying for your credit score. Consumer Commentary reports that Credit.com offers a similar free service. Among their differences, Credit Karma evaluates more categories than credit.com when assigning users their credit grade. However, credit.com offers a range for several different types of credit scores. Credit Karma only offers one score directly from one of the reporting bureaus that isn’t a FICO Score.

Is Credit Karma enough for credit repair?

When it comes to credit repair, the usefulness of the credit score available from Credit Karma is questioned by some. At mymoneyblog.com, there’s a catch: it’s not a real FICO score. Your credit score from Credit Karma is a “FICO clone” with a range from 300 to 900. FICO scores range from 300 to 850. Credit Karma, which says it pulls data from Experian, Equifax and Transunion, doesn’t say which bureau supplied the data your credit score is based upon. Plus, you only get your credit score, not who’s pulling your credit, how often they are doing it or information about your existing credit lines.

Are free credit scores really free?

Objections aside, Credit Karma and credit.com appear to be extremely helpful for building, maintaining and repairing credit. Giving up some personal information in exchange for useful credit data is much better for most people than paying $89.95 a year for FICO’s Score Watch. Free credit information is also available at the government-sponsored credit site AnnualCreditReport.com. The site will not give you a numeric credit score, but it will deliver a detailed rundown of factors that affect your credit score. Stay away from sites like creditreport.com and freecreditreport.com. They say you can sign up for free, but after seven days they start billing your credit card $14.95 per month until you make them stop.

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

Knowing your credit score is the most basic fundamental of credit repair. But it’s even more important to know what affects  your credit score. And even more important than that is knowing what you can do to improve your credit score.

Your credit score is free

Thanks to financial reform, doing something about your credit score is easier than ever. Free credit report services are advertised all over the Internet. Until now, those free credit reports didn’t include your credit score. You had to pay extra for that. But part of the recently passed financial reform bill ensures that you can get a free credit report that includes your credit score once per year.

Why is your credit score so low?

When it comes to credit repair, most people don’t know how they affect their credit score. For instance, Wallet Pop reports that many people assume if they pay their bills on time, their credit score is good. The truth is, even if you always pay on time, when your credit cards are maxed out, your score is lower than it should be. When credit bureaus see borrowing to the limit, they see risky behavior. To improve your credit score, tackling excess credit card debt is your first priority.

Credit repair: pay off credit cards first

To raise your credit score, pay off credit card debt first. There are two basic types of debt. Installment debt is secured by collateral, like a car loan. Revolving debt is your credit card balances. For some people, credit card debt revolves forever, which is not good for the credit score. Since credit card balances are unsecured, credit report companies like FICO say they’re more risky than installment loans. So paying off your credit cards will do more to raise your credit score than paying off your car.

Pay off collection agencies last

Unfortunately, if you’ve been taken to collections, your credit score is already hurt. Paying the collection agency won’t change the numbers. Bankrate.com reports that by the time your debt goes to collection, your creditor has already written you off. Although paying the collection agency will end the harassment, the payment won’t erase the delinquency from your credit report. Bear in mind that a surprise call from the collection agency can result from missed payments on everything from utility bills to library fines. The key to protecting your credit score is to avoid collection in the first place.

No thanks to charge cards

To keep your credit score from dropping, keep refusing that charge card every department store tries to sell you. This is because opening and closing credit accounts can lower your credit score. Wallet Pop said FICO credit bureau research has found that opening any type of credit account is automatically seen as more credit risk. If you do get that charge card and pay it off in full, your credit score will rebound in a few months, but it won’t rise above the level it was before you bought that new outfit.

Don’t cancel your credit cards

Sometimes when it comes to credit repair, it looks like the deck is stacked against you. Especially when canceling credit cards can lower your credit score. When you cancel a card, the line of credit it carries goes away. With less credit available, your credit score goes down. Instead of canceling, just zero the credit card out and throw it in your dresser drawer. New credit card rules prohibit credit card companies from canceling cards you don’t use–which used to hurt your credit score–so you don’t  have to worry about that anymore.

Use installment loans wisely

Taking out an installment loan for credit repair is risky, but it can work to pay off credit card debt with personal discipline. If you have a bunch of maxed out credit cards, the new installment loan won’t negatively impact your credit score as much as those debts. For this strategy to lower your credit score, you have to make yourself pay off the credit card debt with the installment loan, and throw the credit cards in the drawer until the installment loan is paid off.

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

The Senate passed a "free credit score" amendment to the financial reform bill. It requires credit scores be included in free credit report offers. Flickr photo.

The financial reform bill will soon add meaning to government-mandated free credit reports by making free credit scores part of the reports. An amendment to the financial reform bill requiring that credit reports include the numerical score was approved in the Senate on Monday. Americans have been entitled by law to receive a free credit report once a year since 2003. But the actual credit score, which is the only information in free credit report offers that lenders would care about, hasn’t been part of the deal.

Free credit report offers

Free credit reports online have been available for years. The Internet is infested with scams disguised as free credit report offers. One site in particular, freecreditreport.com, lures consumers by offering a “free” score in return for signing up for a credit monitoring service that costs $14.95 a month, if they don’t opt out before the end of a seven-day trial period. In April, the Federal Trade Commission started requiring websites advertising free credit reports online to disclose their bait and switch up front, and direct consumers to the government-approved www.annualcreditreport.com. TV and radio ads must do the same starting Sept. 1.

Free credit scores once a year

The free credit score measure in the financial reform bill expands a law passed in December 2003 that gives consumers the right to one free credit report once a year from each of the top three consumer reporting agencies — Equifax, Experian and TransUnion. CNNMoney.com reports that the credit score covers a consumer’s entire credit history — all debts, payment habits and jobs held. Except for pay day loan companies, the credit score is widely used as a shortcut by most lenders,  so monitoring it is crucial. Yet a recent survey from the National Foundation for Credit Counseling found that some 65 percent of adults have not checked their reports in the past year. Nearly one-third of adults don’t know their credit scores.

More on the financial reform bill

Making free credit scores mandatory on free credit reports has little to do with the broad scope of the financial reform bill. But the New York Times reports that the adoption of the free credit score measure by an overwhelming margin underscores the keen desire by lawmakers to appease the electorate with pro-consumer initiatives in an election year. Senator Sheldon Whitehouse, Democrat of Rhode Island, is pushing for another amendment that gives states the right to limit credit card interest rates, regardless of where the issuing bank is located.

Will free credit scores make a difference?

Some experts are skeptical that free credit scores won’t really make a difference if consumers don’t realize that lenders use multiple scores to assess creditworthiness. Boston.com reports that which version you’ll get depends on the credit bureau you go to. A company called FICO develops the most widely used scores. VantageScore has gained popularity. TransUnion sells both to consumers, but Equifax only sells FICO scores, which range from 300 to 850. Experian sells VantageScores, which range from 501 to 990. Consumers often get different credit report scores issued by the different credit bureaus because there is no universal standard for the formulas they use.

Auto and mortgage loans require some homework before you apply. There are numerous secured and unsecured loan options out there. (Photo: picasaweb.google.com)

A review of credit scores must be done by the consumers planning to apply for either a mortgage loan or an auto loan. The credit scores of an individual are among the primary factors that decide the eligibility for the loan. While a good credit score can get you the loan easily, a bad score can either mean loans with exorbitant interest rates or even denial. A person can apply for a free credit report annually from any of the three main credit agencies. The report thus obtained will show the credit worthiness of the individual.

Types of Loans

Once the credit rating is determined, the next step is to decide on the type of loan to opt for. When it comes to mortgage loans, the consumers can choose from either a fixed rate mortgage loan or adjustable rate mortgage loan. Secured loans and unsecured loans are the two options that consumers have when it comes to auto loans. There is also the aspect of indirect and direct financing that needs to be considered. With so many options available, a thorough groundwork is needed to find a loan that best suits your budget and needs.

Budget Carefully

Consumers who are buying a house for the first time should especially keep this point in mind while making their decision. The monthly payment for the mortgage loan or auto loan should not exceed 30 percent of total monthly income. This will help provide a cushion during unforeseen circumstances. While there are loans programs that cap the limit at 31 percent, there are many others that allow consumers to go beyond this point. Hence, considering this carefully before making a final choice is a must.

Set Realistic Expectations

Setting sky-high expectations for the car and home under consideration is another common mistake that is made by many buyers who are purchasing these items for the first time. Most of them end up choosing houses in an expensive neighborhood and are willing to pay through the nose to own it. Though these might seem well within reach initially, you will begin to realize the pinch in a few months. This is the reason most financial analysts recommend chalking out expectations from your house or car and then comparing it against the budget allotted for it. In addition to this, take the eligibility limit into account too. Considering these factors beforehand will also help avoid disappointments.

Compare the Details

Consumers applying for mortgage or auto loans should get quotes from more than one financial institution. Since these loans are the biggest loans one might ever borrow in the lifetime, comparing these quotes with each other allows them to weigh the pros and cons of each quote carefully before arriving at a decision.

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