Credit Laws Archives | Ovation Credit Repair Services

“No Reason” Is No Excuse

By | Credit Laws, Credit Repair, Credit Reports

Looking at your credit report is a bit like being in an episode of CSI. You’ll need to carefully pick apart the scene of the credit crime looking for the right clues. “No reason” really means “I don’t know” when it comes to credit score drops, and it usually takes nothing more than a little old-fashioned sleuthing to discover the no-reason reason.

The first step in your CSI Credit Crime adventure is to request copies of your credit report, which are available free to you once per year by law. The first crime you should eliminate is length of credit history. Not having enough of a credit history is an often hidden clue. In the industry this is called a thin credit file.

Have you closed a credit card lately? Recently closed accounts also provide a reason for “no reason” credit drops. Solve this credit crime by opening new accounts and being careful about what accounts you close in the future.

To get away with a credit crime or two, you need to know how to close accounts when you need to. As with all things in credit, there’s a right way and a wrong way. Keeping between four and six accounts open allows you to show companies you are using credit regularly and responsibly. Use one, pay it off in full every month and pay down on the rest. This is what creditors and credit-reporting bureaus want to see.

Don’t, however, close the oldest account you have. This is one of the most serious credit crimes you can commit. It makes your credit history appear shorter than it is and can cause your credit score to take a hit. Definitely don’t cancel several accounts all at once and don’t over-consolidate your cards so that you have too much debt in one place. Another reason your credit score can drop for “no reason” is when you use too much of a single available line of credit. Keep your credit balance below 30% of the total available credit.

Many no-reason credit crimes are committed unintentionally. While it’s often stated that your credit score takes a hit due to inquiries, this is largely overstated. You credit rating likely receives several inquiries per month from people wanting to issue you credit. These have a negligible effect on your credit. Even an inquiry into your credit rating from an employer or credit card application has a minor effect on your credit rating. Don’t spend too many crime scene investigation resources looking into inquiries.

When your credit score takes a dive for “no reason,” chances are it’s taken a dive for a reason – just not one you understand. Investigating your credit report with the attention of a CSI unit allows you to better appraise what “no reason” is the reason for your credit score’s recent dip so you can make the necessary repairs.

Managing Your Credit to Protect Your Credit Score

By | Credit Cards, Credit Repair, Credit Scores, Revolving Debt

The responsible use of any kind of line of credit, whether it is home equity or credit card, can have a tremendous affect on your overall credit score. High balances and late payments can sink your score fast. If you’re going to have a balance on your card, you want it to be 30 percent or less of your available credit.  And, you always want to be focusing on moving your balance down. Think of credit like a pie. You may want to eat the whole thing, but it isn’t good for your waistline. So you nibble on and savor one little piece. It’s the same thing with credit: nibble at your credit and don’t gorge yourself.

You should be able to pay your credit balance(s) in full each month.  This reduces the impact of interest rates and keeps a healthy line of credit to use when needed. It may not always be possible, but it should be a goal. Think of it like a marathon race. People don’t start out going full force and maintain it for the whole 30 miles because they would eventually drop to the ground exhausted. Instead, they pace themselves.

Lines of credit are often used for emergency situations, such as car repairs, when the money isn’t there. It may be impossible to take care of the bill in a single month, but you should set a goal to pay a specific amount off every month (far more than the minimum) until it is paid off. Pace yourself. An emergency line of credit isn’t any good if your balance is too high to pay for the emergencies.

Be cautious when using lines of credit as a buffer for expenses. If you have a  $10,000 or $12,000 limit on a credit card with a $3,000 balance you are paying on, then something happens to drop your credit score significantly, you risk an evaluation at the bank level. The bank can decide that whatever balance you currently have is your new limit. There’s nothing like having the rug pulled out from under you by a credit card company.

Credit is expensive. Even low interest rates on large balances can be financially crippling to the point where even minimum payments can be tough to make. Lines of credit are an important part of maintaining and improving your credit score and can be important financial tools, but only when used correctly. Too many people become caught in the credit quagmire and become lost, with their credit gone, their credit score decimated and their lives impacted. Don’t be ruled by credit debt. Use it sparingly and in ways that it will give you the most financial gain. Time for pie?

Handling Credit

By | Ask a Credit Expert, Credit Cards, Credit Reports, Credit Scores, Debt

A line of credit can be a valuable tool for a consumer, but only if it’s used responsibly. It can also be a trap that is very difficult to escape. Your new credit card may have a $5,000.00 limit, but should you go out right away and buy $5,000.00 worth of home theater equipment? If you couldn’t afford to buy all that gear before the card, chances are you’ll be stuck making just minimum monthly payment and carrying the balance for a very long time. By handling your line of credit irresponsibly, you’ve essentially trapped yourself.

So how do you avoid the trap? Under ideal circumstances, you should only carry a balance on your line of credit that can be paid in full every month. Two key things are accomplished when you get into this habit of credit use:

1)      You establish discipline over your spending patterns.

2)      You avoid revolving interest charges incurred by carrying an ongoing balance.

This approach, however, isn’t achievable for everyone’s financial situation. If you must use a line of credit to make a purchase, come up with a plan to pay off that balance in four to five months. You will incur some interest charges along the way, but you still get the all-important benefit of practicing discipline in your spending and reduce the amount of interest you pay. Remember, the goal here is responsible use.

A common pitfall is the idea that an available line of credit can serve as a buffer in times of financial hardship. If you’re carrying a balance of $3000.00 on a card with a $12,000.00 limit, you’re probably thinking, “Hey, I’ve got a $9,000.00 cushion I can use if something bad happens.” What most people don’t realize, however, is that banks and other credit lenders have the power to lower your credit limit if your risk level changes.

Let’s say the crisis hits. You lose your job, start paying bills a little later, and before you know it your credit score starts to drop. The bank’s risk evaluation department now determines that you are a higher credit risk and decides to drop your limit all the way back down to $3000.00 until you pay off the balance. Poof! The buffer you were depending on to get you through this financial drought is gone in the snap of a finger. The lesson here is that, in the end, saving money is the only way to create a reliable financial buffer to get you through life’s stormy seasons.

Use credit lines wisely. Don’t trap yourself with undisciplined spending and no savings. Make a payment plan and stick to it. Handling credit well is one of the most important keys to your overall financial freedom.

How Long Can Information Be Reported On Your Credit Reports?

By | Bankruptcy, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Credit Reports, Fair Credit Reporting Act, Your Credit

One of the first credit repair steps involves removing information that is outdated.  The problem is that many consumers cannot tell when information is outdated.   On the surface, it seems like a simple exercise – just compare some dates.  While that is correct, the more difficult part involves determining which dates to compare.  The answers are provided in The Fair Credit Reporting Act, section 605.  According to section 605, the following items may not be reported on your credit reports:

  1. Bankruptcy: Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
  2. Civil suits, civil judgments, and records of arrest:  Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
  3. Paid tax liens: Paid tax liens which, from date of payment, antedate the report by more than seven years.
  4. Collections and Chare Offs: Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
  5. Other Adverse Items: Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.

So What Are The Exceptions?

There are exceptions to these general rules.  Most of the exceptions are based upon the use of the report.  The general rules are not applicable in the case of any consumer credit report to be used in connection with the following:

  1. Credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
  2. Underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
  3. Employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.

If you have ever wondered why there are so many different credit scoring models, this is one of the primary reasons.  The information that is permitted to be included on the credit report can vary depending on what the credit report is being used for.

So When Does The Time Period Start?

In regards to bankruptcy, the 10 year period starts at the date of entry of the order for relief or the date of adjudication.   In regards to the other items, the 7 year period begins, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.   Clear as mud, right?

So What Does This Mean?

In order to understand if items on your credit report are outdated, you need to understand how the dates are calculated.  Remember, you should review your credit reports frequently for errors and signs of identity theft.  It is not uncommon that dates are incorrect.  In fact, in the case of debt collection, errors in the proper dates are very common.  These errors may result in negative items being reported longer than necessary.  Check the dates on your reports and verify that the information is correct.  If you need help, give us a call – we would be happy to assist you.


Can Debt Collectors Contact Friends and Family Members?

By | Ask a Credit Expert, Collections, Consumer Rights, Credit Repair, Debt, End Debt Collector Abuse Act of 2010, Fair Debt Collection Practices Act

It is not uncommon for debt collectors to go to extreme measures in order to get information about a debtor.  In fact, many debt collectors call friends and family members of debtors they are trying to reach.  While this practice is permitted and regulated by the Fair Debt Collection Practices Act, it is frequently abused.

Are Debt Collectors Harassing You About Someone Else’s Debt?

Debt collectors are permitted to contact third parties for the purpose of acquiring location information about the debtor.  Section 804 provides the following:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring location infor­mation about the consumer shall identify himself, state that he is confirming or correct­ing location information concerning the consumer, and, only if expressly requested, identify his employer.

Debt collectors are prohibited from stating that such consumer owes any debt.  They may not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.  Debt collectors may not communicate by post card and they may not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communi­cation relates to the collection of a debt.

By the way, if the debt collector knows the consumer is repre­sented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, they may not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.  In this case, family and friends may not be contacted at all.

How Can You Stop Debt Collectors from Harassing You About Someone Else’s Debt?

The purpose here is to allow debt collectors to try to obtain location information.  That makes sense.    However, many debt collectors abuse this provision to harass family members and friends in an effort to get the debtors to respond.  This practice is unethical, and it is illegal.  If you are being contacted by a debt collector regarding someone else’s debts, and the debt collector is violating the provisions above, let us know.  We’ll help you locate an attorney in your area that can help protect you from this type of abuse.

By the way, if the debt collector knows the consumer is repre­sented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, they may not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.


Can An Employer Check Your Credit Reports?

By | Consumer Rights, Credit Laws, Credit Repair, Credit Reports, Credit Scores, Fair Credit Reporting Act, Your Credit

In most states, checking an employee’s credit report is considered a permissible purpose.  Employers check employee’s credit reports to assess the overall risk of the employee.  Employees with better credit reports are generally deemed to be more responsible and organized.  Whether or not you agree with this assessment, you need to be prepared.  If you are currently looking for a job, or your current employer decides to check your credit report, it is imperative that your credit report be as strong as possible.  This includes making sure that your credit report is accurate and also that you manage your credit accounts responsibly (Learn more about credit repair).

 Conditions for Furnishing and Using Consumer Reports for Employment Purposes: 

A consumer reporting agency may furnish a consumer report for employment purposes only if the employer who obtains such report from the agency certifies to the agency that the employer has complied with the disclosure requirements in the Fair credit Reporting Act with respect to the consumer report, and that the employer will comply with the conditions for adverse actions, if applicable, with respect to the consumer report.  The employer is not permitted to use information from the consumer report in violation of any applicable Federal or State equal employment opportunity law or regulation; and the consumer reporting agency must include a summary of the consumer’s rights with the report.

 The Consumer Must Provide Permission in Writing:

Generally, a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.  The consumer must provide written authorization to the employer before the employer may procure the credit report.

What if Your Employer Takes an Adverse Action Against You Based on Your Credit Report?

Before taking any adverse action based in whole or in part on the report, the employer intending to take such adverse action must provide to the consumer to whom the report relates a copy of the report.  The employer must also provide a description in writing of the consumer’s rights under the Fair Credit Reporting Act.

Do Not Take Any Unnecessary Chances:

If you have not checked your credit report lately, you should.  Studies show that only about ten percent of consumers check their credit reports regularly.  Before you potentially lose an opportunity for a new job, or even possibly lose the current job you have, check your credit reports and take proactive steps to make sure that your credit reports are as strong as possible.

The Truth About the Credit Bureaus

By | Ask a Credit Expert, Consumer Rights, Credit Laws, Credit Repair, Fair Credit Reporting Act, Your Credit

Let’s talk about the Credit Bureaus. A lot of consumers think that because they are called bureaus that they are some type of government run agency – however, that is incorrect.  The Credit Bureaus are for-profit businesses just like any other business and the majority of their money comes from lenders/creditors. Our creditors pay the Credit Bureaus to store, collect, and report our credit information – good or bad. They also make money from creditors buying our credit reports, so they can review our credit history and decide if they want to grant us credit or review our credit for our current accounts. Another way they make money is from consumers, when we buy our credit reports, credit scores, and credit monitoring directly from them.

There are three main credit bureaus: Experian, Equifax, and TransUnion. There is also a fourth company that is trying to become one of the large Credit Bureaus and that is Innovis. The majority of creditors and lenders do not report to them at this time. The main law that governs the Credit Bureaus and how they report our credit information is: the FCRA (Fair Credit Reporting Act). The agency that governs the Credit Bureaus and makes sure they do not violate the FCRA is the FTC (Federal Trade Commission). If you ever have a problem with a Credit Bureau where they are violating the FCRA, you can file a complaint against them through the FTC at www.ftc.gov.

The Credit Bureaus are the only ones that can change, update, and delete information on a consumer’s credit reports. If there is an error on your report, you would need to dispute to the Credit Bureaus. The Credit Bureau then contacts the creditor to investigate the error. The creditors have 30 days to investigate and update the Credit Bureau. If the creditor finds there is an error then they tell the Credit Bureau to update the information or delete it from the credit report. It is the Credit Bureau’s job to fix the information on the credit report.

The Credit Bureaus are not perfect, as I said before they are businesses and just like any other business they make mistakes. As a matter of fact 79% of all credit reports have errors. Check your credit reports at least once a year for any errors. You can obtain all three credit reports and scores by clicking here. This site offers consumers credit reports and scores with a FREE seven-day trial in monthly credit monitoring. You will not be charged for anything as long as you cancel the service during the free seven-day trial membership. If you need any assistance ordering your credit reports, please give me call.

Once you review your credit reports, if there are any errors you can dispute them directly with the Credit Bureaus. You can dispute with the Credit Bureaus online, over the phone, or by sending a letter. For more information about disputing with the Credit Bureaus you can go to their websites: www.equifax.com, www.experian.com, and www.transunion.com. If you want professional assistance in disputing your credit reports then call the BEST in the industry: Ovation Credit Services at 1-866-639-3426 Option 2 or go to the website to get more information www.ovationcredit.com.

For specific questions about your credit or disputing, ask our Credit Expert Kristi Thornton, email your questions to [email protected].

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