Archive for May, 2011|Monthly archive page

Accuracy in credit reports

In Uncategorized on May 26, 2011 at 7:52 am

From today’s New York Times editorial:

The credit reporting industry has vast reach and power. The information it gathers and sells is used to determine eligibility for credit cards, mortgages and even some jobs. Federal regulators haven’t had the authority or the means to protect consumers who have been victims of inaccurate reports. The new Consumer Financial Protection Bureau will have that authority. It has a big job ahead.
Reporting agencies gather consumer payment histories from creditors that are sometimes less concerned with accuracy than they should be. Those aren’t the only problems. As The Times reported earlier this month, the agencies sometimes merge the credit records of people with similar names and Social Security numbers.
Estimates of the error rate in credit reports vary anywhere from 3 percent to 25 percent. But even 1 percent would mean that two million people could be saddled with erroneous credit histories that cause them to pay higher interest rates or to be denied credit altogether.
Judy Johnson of Louisiana told The Times about how a credit reporting company confused her records with those of another woman. She tried for nearly seven years to get a credit bureau to correct errors in her record, finally suing the reporting company after being denied a credit card. She has since reached a settlement, but a sheriff recently showed up at her door to serve her papers for a debt she says she does not owe.
Its important to check your credit report. I obtain a credit report for all my clients when preparing a bankruptcy case. Its just as important to check your credit report at the end of the bankruptcy. You want to see that the credit agency shows the debts as discharged by the bankruptcy. You need to bring errors to the attention of the credit agency. Write to them. They must respond within 30 days.


How To Avoid A Deadly Trap

In Uncategorized on May 3, 2011 at 9:20 am

Credit cards are so useful and convenient. At least until you suffer a loss of income. Or unexpected medical expense. Or divorce. Or any other problem that impacts your ability to make monthly payments. Then credit cards become a trap. Think you can talk to the credit card company about lowering payments? Don’t count on it. My clients tell me that they get nowhere when they ask for a break. Miss three payments and watch your interest rate climb to 30%. Good luck trying to catch up payments after that.

You could get lucky and have a way to pay off the card. You could borrow against your home, but that is getting hard to do. You may have a retirement account you could tap into. If you can get together a lump sum payment, your creditor may settle for 50 cents on the dollar.

Other alternatives include debt consolidation companies and bankruptcy. Be careful with debt consolidation. I hear many horror stories from clients about them. It’s an unregulated industry. Many companies are being sued for false promises and fraud.

Chapter 13 bankruptcy lets you adjust payments on your debts based on an amount you can afford. You get the payment amount approved by a court trustee. You don’t need your creditors to agree.

If you are in default on your payments, your credit score has already taken a hit. Bankruptcy can stop the downward slide and help you to rebuild it. It’s a way to avoid the deadly credit card trap.