2004 Credit Suit

More lies: "Seven Credit Do’s and Don’ts."

I just received an e-mail from "Identity Guard" , with a link to http://www.identityguard.com/newsletters/05/lead_html.htm

"Seven Credit Do’s and Don’ts.

Follow these rules of the road to keep your credit profile safe and sound."

Because that's an outrageous lie, I'll briefly point out what's wrong with their advice:

"Maintaining a clean credit rating can sometimes seem like driving down a winding road in the dead of night. One wrong move, and you’ll wind up in the financial ditch, dialing for roadside assistance.

But keeping your credit on the straight and narrow can be a lot easier once you understand the factors lenders and credit agencies use to judge your creditworthiness. By following these few, simple rules of the road, you’ll make sure you arrive at your financial future, safe and sound:"

-- Hell no, there's NOTHING easy, and following their advice is the road to wasting a lot of money AND having awful credit.

"Don’t ignore credit problems and hope they’ll go away.

They won’t go away. More likely, they’ll get worse. Just ask anyone who’s had to dig themselves out from under a pile of bad debt. Creditors don’t easily give up on collecting what they’re owed, and the aggressive tactics they use can affect your credit record for many years to come.

Better to address problems as early as possible, when you’ve still got all the credit tools at your disposal. If you’ve got outstanding debt, contact your creditors right away to let them know that you’re ready to make amends. By arranging for a monthly payment plan, you’ll avoid a lot of phone calls and prevent serious damage to your financial future."

-- 1) If creditors complied with the FCRA, all credit problems WOULD go away. Accounts wouldn't be reaged, and if correctly reported, most problems would be insignificant after a few years and DELETED after 7 years from the first permanent delinquency.

-- 2) It is absolutely FALSE that creditors will not damage your credit if you make payment arrangements. If they report to the CRAs, MOST creditors will continue to report you delinquent, and instead of charging off the account for nonpayment after a few months, they will CONTINUALLY charge you overlimit or late fees. I documented this many times.

I've seen $200 credit lines turn into $1,000+ charge-offs after consumers made $500+ in payments and never charged anything again. All the payments, made in good faith by succers who followed awful advice, resulted in over limit and late fees.

If you can't bring the account CURRENT and BELOW your limit immediately, let them charge it off.

-- 3) There are MANY ways to avoid the obnoxious calls. Some as simple as getting an unlisted or a free K7 #.

"Do use your credit responsibly.

Now that you’re on the road to fiscal recovery (or even if you’ve never left it), you shouldn’t be afraid to use credit wisely in the future. The fact is, the surest way to gain – or regain – a stellar credit rating is through long-term responsible credit management. And the time to begin that terrific credit history is right now."

-- This is downright stupid.

"Do pay your bills on time.

Believe it or not, nothing (excepting bankruptcy or tax liens) has a greater negative effect on your credit than the failure to pay monthly bills on time. In fact, credit agencies count payment punctuality as making up as much as 35% of the average credit score. And the more recent the late payment, the greater the penalty to your score.

If you wind up in a dispute about an item you’ve purchased or a charge made to your account, be sure to continue paying the monthly minimum on that account while you pursue the dispute. It will do you little good to eventually gain satisfaction from the creditor, if your credit becomes ruined in the meantime."

-- It is of course false that bankruptcy has a greater negative effect than not paying your bills. Just about all consumers with delinquent accounts immediately have higher FICO scores as soon at they filed for bankruptcy and got the discharged accounts reported CORRECTLY.

You can easily have 700+ credit scores only 2 years after a bankruptcy filing, while people who try to make payments on delinquent accounts are stuck in the 500's literally forever.

"Don’t apply for too much credit in too short a time.

Potential credit providers will view you with suspicion if you’ve tried to open too many lines of credit in the recent past. Even if you haven’t spent or borrowed a dime on your new accounts, the applications alone will count against your credit score.

If you’re shopping around at multiple sources for a good rate on a new loan or credit card, be sure not to inadvertently “apply” for the account, when you’re really only seeking information. To prevent that from happening, keep your Social Security Number to yourself (a good idea for protecting against identity theft, as well), since without it, an account can’t be opened in your name."

-- False again. It is not the prospective lenders, but the FICO scores who punish consumers for shopping for good rates and terms, as well as applying for jobs, cell phones, moving and applying for utilities, etc.

"On the other hand…

Don’t try to improve your credit by closing accounts.
You don’t need all those credit cards…and they’re probably just using up your valuable credit. So by just dropping a few of them, you’ll improve your credit score…right?

Wrong. That’s a big-time mistake made by lots of credit consumers. Lenders look at the dollar difference between your total available credit and the amount you owe against it. By closing accounts, you reduce your available credit and so worsen your borrowing ratio."

-- This is true. Finally, a correct statement.

"Do avoid maxing out your credit cards.

This probably goes without saying, but if you’re near the credit limit on one or more of your credit cards or revolving charge accounts, do your best to pay that amount down as soon as possible. Potential lenders will assume that such large balances mean you’re having trouble handling your current credit, and so will be reluctant to trust you with more of it."

-- False. It is not the "large" balances that are considered by most lenders. A lousy $250 balance on your Capital One account will destroy your scores if that's your only credit card and you never charged more than $250. It doesn't matter that your limit is 100,000, since Capital One doesn't report it.

Please read about the very important B/L ratio for the facts about this score factor.

"Don’t be a stranger to your credit information.

Just like any other aspect of your financial life, successfully managing your credit takes some effort on your part. But thanks to the many tools now available to consumers, that task is far easier than it once was.

You can view your credit report online, if you wish – and get an instant snapshot of your current credit picture. By subscribing to a service that monitors your credit files on a daily basis, you can spot and correct any potentially damaging entries before they take a toll on your long-term credit."

-- This is partially true, although it does not matter how much money you spend on monitoring when you follow their crappy advice.

And, their reports are INCOMPLETE, don't waste your money.

"And now, you can even look into your credit future, with online, interactive simulation tools that let you see how making certain financial choices, like applying for a mortgage or paying off a balance, can alter your credit score."

-- This is more crap - proven to be about as accurate as roulette.

"While avoiding credit missteps can sometimes sound complicated, the basics are as easy as 1-2-3: Watch your credit. Use it responsibly."

False. There is absolutely NOTHING easy.

Credit scoring is MUCH more complicated than the federal tax code, and to make things worse, the code is SECRET. I've been lied to by Fair Isaac, sued for answers, and got most of my knowledge by researching the actual client reports and analyzing the results of changes on the reports.

Thousands of hours, and as much as I've learned, there is so much more I don't know. I do know however that the FICO scoring software is buggy as hell and Fair Isaac needs to be sued out of existence and their fortune should be used to compensate the many millions of consumers who have suffered damages due to the artificially low scores.

E-mailed to "Identity Guard" :

Attn: Legal Department

Please send out a correction with at least a few *true* facts about credit.

FYI: http://www.creditsuit.org/blog/archives/000499.html#more

I realize that your objective is debt collection and the sales of your crappy reports, but that doesn't entitle you to mislead consumers.

Sincerely,

Christine Baker
http://www.creditsuit.org

Posted by Christine at April 29, 2004 05:55 PM | TrackBack