Take for example FreeScore.com. This is the service being plugged by Ben Stein from Ferris Bueller’s Day Off fame. The problem is the advertising of their service pushes the bounds when it comes to truth in marketing. According to Stein if you ““wanna get a new job, you’re at the mercy of your credit score.” Of course this is not true as employers don’t have access to your credit scores as part of their employment screening processes. They do have access to your credit reports though.

Additionally Stein states that the service “gives me unlimited access to the 3 major credit reports and scores.” Now, I’m pretty sure anyone in the credit industry would recognize the FICO® score as being the “major” credit score used by the lending world. In fact, according to the FICO website 90% of the largest banks use your FICO score to make credit decisions. The score being sold by FreeScore.com (yes, you are signing up for a subscription service when you get your score so I don’t call it free) is likely your TransRisk Score or VantageScore. Neither of those scores are can be called your “major credit score.”

Next is LifeLock. This is the service hocked by Todd Davis, the company’s CEO, as he supposedly drives around the streets with his Social Security Number printed on the side of a truck. I wasn’t there and I didn’t see the truck so I’m calling bologna on that gimmick. LifeLock isn’t a credit monitoring service but they do market themselves as the “#1 Identity Theft Protection” service.

A description of how their service works is on their website. So, here’s a breakdown of some of what you get for $10 per month, and how you can get it for free.

- Monitoring of unregulated Internet and file sharing networks for your identity information. A free alternative would be setting up Google alerts with your name and address. You can do this here for free… http://www.google.com/alerts

- Sex offender records for your zip code. A free alternative can be found via a variety of websites. Google the term “sex offender registry” and be sure to add your city or state name at the end. For example, here’s Illinois’ list. http://www.isp.state.il.us/sor/sor.cfm

- Free annual credit reports. You can do this for free here… https://www.annualcreditreport.com/cra/index.jsp. In all fairness to LifeLock, they do say you can do this on your own for free.

- Reduction in preapproved credit offers. On one of their television commercials they state, “You’ll see a huge reduction in junk mail and preapproved offers.” You can do this for free here… https://www.optoutprescreen.com/?rf=t

- $1 million dollar service guarantee. On one of their television commercials they state, “If anything happens while you’re a client of LifeLock we will cover all losses and all expenses up to one million dollars.” But on their website they state they will NOT cover “lost wages or business profits, loss of business or lost opportunities and direct out-of-pocket expenses like postage stamps, gas or mileage to go to local authorities, or any notary public fees, etc. And they will not cover “any direct losses as a result of the theft.” That hardly sounds like ALL losses and ALL expenses. And the “etc” in the list of things they don’t cover leaves the door open for the list to be much larger.

Next is FreeCreditReport.com, which is owned by Experian. And, twice the Federal Trade Commission has sued them because of their marketing. The credit report being given away isn’t really free; it’s free only if you sign up for a trial period to a credit monitoring service. And if you don’t cancel the service during the trial period then you are billed on a monthly basis for the credit monitoring subscription.

In fact, on April 1, 2010 a new law goes into affect that will clean up how they market their conditionally free credit report. They, and any other service that uses a free credit report as a loss leader, must state the following…

THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV.

You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law.

And finally we end with FreeTripleScore.com also known as Privacy Matters 1-2-3. As with FreeScore.com the data being provided is coming from TransUnion, which means the scores being “given” away are either your TransRisk or VantageScore scores. And, despite their efforts to not disclose their ownership, it appears that the same company is behind FreeTripleScore and FreeScore. Nice try guys.

The new law requiring the more overt disclosure about free credit reports will help to clean up what many believe is a marketplace filled with out of control and deceptive marketing practices. And remember, before you choose to spend the money on any of the credit related products and services listed you should at the very least research free options.

The mainstream card issuers have a shrinking window of time to remold their cardholder base to their liking. This means consumers will continue to suffer the at the hands of their credit card companies, unless they employ one or more of the following strategies.

1. Don’t Not Use Your Card – Ok, the poor grammar was intentional and corny but I think I’ve made my point. Credit card issuers are in business to make money and make a profit. They can’t do either unless you are using your credit card. And, the best news is that you do not have to carry a balance from one month to the next in order to drop a few dimes in your credit card issuers’ pockets. Each time you use your credit card the merchant (aka the place you used the card) has to pay the bank a fee. This fee is called interchange. It technically comes out of your pocket because many retailers will build the assumed fee into the price of the merchandise but it sure doesn’t feel that way when we buy stuff with our credit cards.

2. Shut Up! – In the past a viable strategy to get fees waived and interest rates lowered was to call your credit card issuer and complain or otherwise plead your case. That’s still a decent strategy but beware. Your credit card issuer might turn the tables and start asking YOU questions in order to determine whether or not they still want to do business with you. If you call them and THEY start asking questions about your job status and salary then hang up or you might just end up with a closed credit card.

3. Open Another Card, NOW – One of the worst strategies I see people employing today is the 1-card strategy. This is a consumer who has swallowed the Dave Ramsey gospel hook, line and sinker. The problem is that it’s unrealistic and appealing only to the lowest common credit denominator. You should have MORE cards, not fewer cards. Clearly this is a credit score play as well since having more available and unused credit limits are always good for your credit scores. So, if you have one or two credit cards right now, think about opening at least one more. This gives you options in case one of your credit card issuers starts behaving badly towards you. Nothing is more empowering than saying “I’ll take my business elsewhere” and then actually doing it.

4. Don’t Hide Behind Great FICO Scores – FICO published a study earlier this year and the findings showed that the median FICO score for a consumer who has seen his or her credit limit reduced was 770. A 770 FICO score is fantastic in any lender’s book and especially in this credit environment where lenders are gravitating to stronger borrowers. What this means is that just because you have great FICO’s it doesn’t fully shield you from adverse treatment from lenders.

Stay tuned for Strategies 5 through 7 coming soon!

1.) Pay the debt in exchange for deletion

This situation is best for smaller collections ($500 or less), like medical collections or utility bills. You get the collection agency to agree to remove the listing from your credit report in exchange for payment.

2.) Settle the debt for a % of what is owed

This technique deals with debts that are more sizable (over $1000). This method involves negotiating with the collection agency to reduce the amount of the debt to an amount that you will be able to pay in one lump sum.

3.) Debt Validation

This method leverages the Fair Debt Collection Practices Act to force the collection agency to provide documentation that the debt is valid. It involves writing letters to the collection agency, but if the collection agency is non responsive, it requires a threat of filing a lawsuit.

4.) Dispute with the creditor

Disputing involves the Fair Credit Reporting Act which allows consumers to dispute a negative listing directly with the company reporting it on your credit report.

5.) Dispute with the credit bureaus

This method is the basic credit repair technique of writing letters to the credit bureaus to request an investigation of a collection on your credit report.

Using these techniques will help you fare better with collections on your credit report.  Just like anything else in life, practice makes perfect – Wellness Credit has perfected these techniques and has an incredibly high success rate negotiating collections.  Don’t hesitate to contact us to see how we can help repair your credit.  To see our success rates at settling collections and other debt, click this link: http://www.mywellnesscredit.com/our-success-rates/

FICO scores are created to be as objective as possible.  According to the Equal Credit Opportunity Act, lenders cannot use this type of information when issuing credit.  The scores do not consider your race, color, religion, national origin, sex or marital status. Other factors not considered are your age, your salary, occupation, title, employer, date employed or employment history.

According to Fair Isaac Corporation, “independent research has shown that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.”

 1)   You have a new credit law, The Credit Card Accountability Responsibility and Disclosure Act of 2009, which partially became law in August 2009 and will completely become law in either February of 2010 or December 1, 2009 if Democrats have their way.

2)   You have a new FICO® score, FICO 08, which is now live and commercially available at all three of the credit reporting agencies. This new FICO score promises to do a better job of predicting future credit risk.

3)   You have millions of credit card holders who have seen their credit limits reduced, accounts closed, interest rates increased and/or their minimum payment requirements increased.

4)   In addition you have billions in lost home equity, which means no more safety net for those consumers who have excessive credit card debt.

5)   You have debt settlement companies aggressively marketing their services like vultures circling a dying carcass without fully disclosing the downside of possible lawsuits and severe credit damage to their customers who use their services.

6)   And finally, you have media and the undereducated that are spreading fallacies about the credit world, and are causing panic.

All in all, it’s a tough environment to survive and thrive in. Here are what I believe are the most important things that we consumers should be focused on over the next 24 months:

• Continue to Improve Your Credit Scores
  • Continue to make your payments on time regardless of what you read or hear – Debt settlement companies would have you believe that the best way to serve you is to suggest that you stop making your payment to your credit card issuers. The theory is that a lender who isn’t getting paid might be more flexible for a consumer who isn’t making their payments. I guess it’s the “I’m lucky to get something” hypothesis. The problem is that many credit card issuers will gladly work with their debtors and work out settlements or payment plans directly, without the intervention of debt settlement companies.
    This helps them to collect more than what they’d get from a 3rd party settlement company and it will also mean that you are paying them more of what you owe them, which is a good thing. It will also protect you from litigation should the credit card issuer grow tired of you avoiding them at a debt settlement company’s request.
  • Pay down your debt to no more than 10% - The new FICO score, FICO 08, is more sensitive about your revolving utilization percentage, which is the relationship between your balances and limits on credit card accounts. This means those of you who are highly utilized will suffer more as lenders continue to convert to this newer credit score, and many have already made the switch.If you can’t get your balances to less than 10% of your credit limits then get them as low as possible and your score will benefit. Why is this important? It’s simple. Lenders are being more critical about credit scores than in the past 36 months. A good score, say 700, two years ago would have gotten you approved at their best deal a lender had going. Today it will get you approved but not with the best terms. Shoot for 750 to ensure you of the best terms. And, be aware that mortgage lenders not only want 750 but they also want a larger down payment in many cases.

• More Cards Are Better, Shoot for Five –This is counter intuitive but we’re living in a bizarre credit world. Those of you who have less than five credit cards are in a bad position. A bad position because of a couple of reasons, which are:
  • You have fewer options if one of your credit card issuers changes your terms – Tens of millions of consumer have seen the terms of their credit card accounts changed adversely over the past 18 to 24 months. This means lower credit limits, higher rates, higher minimum payments and closed accounts in some cases. If you have only one or two cards then you leave yourself without options should one or more of your credit card issuers start misbehaving. And for those of you who think you’re immune from this because you have good FICO scores, think again. FICO released a study several months ago that showed that, at a 2 to 1 ratio, cardholders who saw their credit limits decreased had median FICO score of 770. Nobody is immune.With more cards you give yourself the option to move your business elsewhere and not lose the access to the capital that a credit card provides.
  • Think About Litigation If You Know You’re Right –
    Fair Debt Collection Practice Act (FDCPA) lawsuits are going to eclipse 8,500 this year, which will easily be a record. According to John Ulzheimer, a professional expert witness, “many consumer are finding that they can’t get legitimate errors corrected on their credit reports. The choice they have is to live with it for seven years or take someone to court and force them to listen.”Many collection agencies are finding it hard to avoid lawsuits despite a huge growth in outstanding delinquent receivables. Some are calling for a revamping if the FDCPA but any politician that chooses to reduce consumer protections at this time in history is asking to be voted out of office.

In fact, 74% of consumers still believe that their credit scores are influenced by income! Even more surprising was that many consumers also believe that marital status, age, level of education and race, are also significant contributing factors to credit scores.

Here are some of the credit scoring myths that are still prevalent:

Myth 1: The more money you make, the higher your score will be.

No, no, no…this is flat out wrong. The only information used to determine your credit score is the information or data that is reported in your credit reports. This doesn’t necessarily mean that everything in your credit report is used in the score calculation – it has to be legal and it must be valuable in order for it to be used as a determining factor.

Your level of education, marital status, and race are also not in your credit reports. This means that while some would argue that some of these factors should have an impact on your scores, the fact remains that if it’s not in your credit report, it’s not going to have an impact on your credit scores.

Myth 2: Closing old, unused credit cards will help improve your credit scores.

No sir. In fact, this one can sink your credit scores. Closing old, unused credit cards can actually have a negative impact on your credit scores. This is because a large portion of your credit score is determined by your revolving utilization or proportion of balances to your credit limits on your credit card accounts. When you close a credit card account, you take the available credit limit on that card completely out of the revolving utilization calculation. This can cause an immediate increase in your utilization percentage and lower your scores. And since this is such an important category the damage to the scores can be off the charts.

Statistics show that consumers who have a great deal of unused available credit are actually less risky than consumers that don’t. A little piece of advice for you: If a lender advises you to close credit card accounts, don’t do it. Search for another lender.

Myth 3: Paying off a collection account will automatically remove it from your credit reports and increase your credit scores.

Paying off a collection account will not cause the item to be removed from your credit reports. All the payment will do is update the balance to show that the account has been paid off or paid down.

The derogatory record will remain on your credit report because for 7 years from the date it was assigned. What surprises most people is paying off a negative account really doesn’t help to improve your scores. It’s the fact that the collection occurred in the first place that matters.

So what’s the purpose of paying off a collection account if it won’t help your scores and it won’t be removed from your credit reports? It’s simple: If you don’t, you stand the chance of the collection being sold to another collection agency which can spiral into one collection turning into numerous collections, which all show up on your credit reports.

The collection agency can also hire an attorney to sue you and possibly garnish your wages. And if they’re able to obtain a judgment against you, well I don’t think I need to remind you that a judgment will blemish your credit reports for another 7 years.

These situations make it nearly impossible for credit repair to help someone needing results within six months to a year. Please keep in mind even when you can’t be helped in the short term, the advice that can be given now, if coming from a professional, can prevent you from making a mistake in the near future that may worsen your situation.

Here are examples of situations where not much can be done with-in a six to twelve month period.

1. If more than 50% of the negative accounts showing on the credit report appear as unpaid collections, charge-offs, repossessions, or foreclosures and you do not have the money to either pay the accounts in full or settle them. Due to the negative accounts remaining unpaid, these items will simply reappear on your report once removed. Any negatives, even unpaid accounts, can be removed-but, unless the negative account is current, paid or settled, it will simply reappear in 10-90 days.

2. Credit repair is nearly impossible if you can’t pay your minimum monthly payments and you keep adding new late payments to your report. This is a “spinning wheels” scenario that rarely yields much improvement to your credit score.

If you’re working with a credit repair company that is taking your business and disregarding the above criterea, YOU’RE WASTING YOUR MONEY! Contact the pro’s at Wellness Credit where these 2 rules are the first things we ask!  Schedule your FREE consultation today.

The two limiting factors are:

(1) your financial situation, and

(2) the time frame within you need to reach your results.

It is possible to remove anything from a credit report, even accurate items, if the creditor does not adhere to the law that outlines what needs to be done and by when. Just because you have a certain type of account removed at one time does not mean that other, similar items are going to be able to be removed, even with the same circumstances. A hit-or-miss aspect exists in credit repair, because credit repair relies not only on the strategies of the person attempting to repair the credit, but also on the effectiveness or ineffectiveness of the creditors and credit bureaus in adhering to the laws.

The reason credit repair has received such a bad name is due to the abundance of scam artists who flock to the easy money made available by people desperate for this type of service. This unfortunate reality leads the credit bureaus and the FTC to make blanket, untrue statements such as, “Credit repair does not work ever and there is nothing a credit repair company can do for you that you can’t do for yourself.” Given that more than 90% of credit repair companies are scam artists, promising the world and then disappearing when you pay, the credit bureaus and the FTC are forced to make such bold statements. It would be impossible for them to explain the truth to consumers without causing them to make a bad choice that would result in the getting scammed. As a result, the credit bureaus and the FTC must adhere to the “credit repair does not work” position.

As I have stated, credit repair does work, but…don’t let anyone tell you that credit repair is effective every time. Its success varies with the number of players in the game, some of whom never perform consistently.

Even if you have a true master of credit repair on your side, you have to take into account that sometimes the other players perform in a way that throws your master of his game.  Sometimes the opposing side shows up strong, other times they don’t. Even if you follow the same approach with every situation that arises when doing credit repair, your results will still vary due to the other players involved.

So the next time someone tells you they can get everything repaired on your credit, run the other way, because, at best, the pendulum will swing widely both ways for the same situation!

A highlight of the new law and its provisions is as follows:

Gift Card Longevity – Today gift cards have descending value, meaning that as the gift card remains unused the balance can be reduced a few percentage points each year. This self-reducing balance is important to the card issuer, especially if they are publicly traded because of current accounting rules that prevent a company from claiming the revenue until the card is actually redeemed.

What this means is that if you buy a $500 gift card from an Apple Store and never use it, Apple cannot claim that $500 as revenue despite having the $500 in the bank. This is why many companies reduce the value of unredeemed gift cards over time. Under the new CARD Act a gift card cannot be reduced in value for a full five years.

There are studies that have shown that the longer the “safe harbor” period for gift cards the less likely they are to be redeemed. So, it seems as if the lawmakers may have gone the wrong way with this provision. Think about it from a consumer perspective. If you have a gift card that expires in 7 days aren’t you more likely to use it quickly rather than a card that retains its full value for five years?

Under 21 Marketing Restrictions – Today you just have to be over the age of 18 in order to obligate yourself to a credit card agreement. That will change under the CARD Act. In fact, you will now have to be 21 years old starting next March if you want to apply for a credit card. An exception will be made for those who can prove that they have the capacity to make credit card payments and for those who can convince a parent to co-sign for them.

This is a “good news/bad news” provision in that it prevents consumers from establishing credit at 18. This costs you a full three years of credit history and credit experience, both of which are essential to someone who wants to build up his or her credit scores. Now someone who can’t find a parent willing to co-sign will have to wait until they turn 21 before they can get their credit career started. An obvious question to ask would be “exactly what happens between the ages of 18 and 21 that all of a sudden indicates that a consumer has learned the value of proper credit management?”

The good news is that many students who would have ended their college career with a nice degree and a ton of credit card debt will now end their career with just the degree. According to a study performed by Sallie Mae in 2008 found that 84% of college undergraduates had a credit card. And, the same study found that the average senior carried more than $4,100 after graduation. Both of these numbers will surely decrease with the new law.
Prevents Double Cycle Billing – Most credit card issuers have scrapped this practice voluntarily but the new law makes it official. Double cycle billing is the practice of using your average daily balance for the current and most recent past billing cycle and use that figure to determine finance charges. It’s complicated but safe to say that if you carry a balance from one month to the next then this method costs you more interest.

Longer Guaranteed Grace Period – Today many issuers are reducing grace periods, which is the number of days after your bill is mailed before it is due. This is the “free loan” period. If you pay your balance in full before the grace period ends then you’ve just enjoyed a free short-term loan.

Many issuers were reducing this grace period to 14 days, which caused many consumers to miss payments because their due date would fall between paychecks. The longer grace period guarantees that you will be paid at least once before their bill comes due, assuming you’re employed.

Prevents Universal Default – Universal Default is the practice whereby a credit card issuer adversely changes the terms of your credit card account because of your actions with another lender. Today credit card issuers practice universal default and then publicly decry the practice, depending on which way the wind is blowing.

Allows Consumers To Control Over-Limit Spending – This provision allows consumers to avoid over-limit fees. In fact, a consumer would have to contact a credit card issuer and proactively opt in to allow over limit transaction approval. Otherwise the issuer will decline the transaction while you’re standing at the register or waiting for the waiter to return with the bill. Fees represent a multi-billion dollar revenue stream for credit card issuers. This provision will cost them big time.

Allows Consumer to Earn Back Lower Rates – Consumers who have gone 60-days past due can still see their credit card interest rates increased. This act, according to the American Banker’s Association, is meant to punish a consumer for doing something that they didn’t want them to do, which is the pay late. This allows credit card companies to still punish the delinquent consumer but it also allows the consumer to earn back their lower rate if they can make their payments on time for six months. Today all you can do is ask for your rate to be returned to its lower baseline.

This provision also guarantees that your rate will not increase for the first year after you’ve opened a credit card account. And, if also guarantees that promotional rates have to last at least six months. This provision is neutral and doesn’t benefit either side.

So there you have it, the CARD Act. Still the best way to not have to concern yourself with legislative protections is to not have credit card debt. Doing so makes many of these provisions interesting but not applicable.

In normal economic times a credit card issuer would only take such adverse action against one of their cardholders if they’ve done something wrong, such as miss a payment. However millions upon millions of cardholders are seeing their terms changed because of seemingly innocuous actions such as “a change in spending patterns” or “inactivity.” I guess we can attribute this to the fact that we’re not in normal economic times, but it’s not fair to consumers to leave it at that. Closing accounts and lowering credit limits can harm your FICO® credit scores. And since these actions are being taken against consumers who, in many cases, have fantastic credit scores the damage can be dramatic. Here’s what you can do…

Knock the dust off that old credit card – An inactive credit card, one that is open but never used, actually costs the credit card issuer money each month. Your account information is taking up space in their databases and they’re still likely buying credit scores on you each month trying to decide how to entice you to actually use the card. If you never use the card you are not generating merchant fees, or interchange fees, for the credit card issuer. And, obviously, if you’re not using the card you won’t have a balance rolling month over month so you’re not generating interest income for them either.

In many cases, now, the issuer is simply choosing to lose you as a customer by closing your account. You want to avoid this so you’ll have to appease them by generating a little bit of revenue. The good news is that it won’t come out of your pocket. Simply move the card to the front of your wallet and the next time you fill up your car or buy a pair of shoes, use that dusty credit card. This will reset the clock of activity and generated a little bit of income for the issuer. Pay off the bill when it shows up so you don’t pay any interest and repeat this strategy at least once per quarter.

Watch your spending patterns – This is a friendly way of your issuer telling you that you don’t have enough debt. For example, if you have a card with a $25,000 credit limit but have never charged more than a few hundred dollars in any month, and you pay it in full, then the issuer is questioning the need for such a high credit limit. They still have the risk of the “open-to-buy” (unused credit limit) so many have made the decision to adjust credit limits so they are more in line with your spending patterns.

Of course to avoid this you’d have to get into much more debt with that issuer, which could hurt your credit scores and cause other credit card issuers to take adverse actions too. If you’ve received a letter lowering your credit limits because of spending patterns there’s simply not much you can do other than be happy that they didn’t close the account, which would have been worse. Continue to use the card sparingly and think about opening a new card to help replace the lost credit limit. Eventually we’ll get back to the time when we can pay our credit cards on time and not have to worry about credit card issuers being scared of their customers, but for now you need to think outside of the box to prevent the bank from putting you outside of the vault!