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Tuesday, September 25, 2012

See, I told you so - the scores the credit bureaus sell you may not accurately reflect the score they provide to your potential lenders!

From the Consumer Financial Protection Bureau:


CONSUMER FINANCIAL PROTECTION BUREAU STUDY FINDS CREDIT SCORES USED BY CONSUMERS AND LENDERS CAN DIFFER
One out of Five Consumers Likely to Receive Meaningfully Different Score than Creditor

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a study comparing credit scores sold to creditors and those sold to consumers.  The study found that about one out of five consumers would likely receive a meaningfully different score than would a lender.

“This study highlights the complexities consumers face in the credit scoring market,” said CFPB Director Richard Cordray. “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.”

The complete Analysis of Differences between Consumer and Creditor-Purchased Credit Scores is available at: http://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the CFPB to compare credit scores sold to creditors and those sold to consumers by nationwide credit bureaus and to determine whether differences between those scores harm consumers. Today’s study analyzes credit scores from 200,000 credit files from each of the following credit bureaus: TransUnion, Equifax, and Experian.  It is a follow up to a study the Bureau released in July 2011 that described the credit scoring industry, the types of credit scores, and the potential problems for consumers that could result from differences between the scores they purchase and the scores creditors use.

The study released today determined:

·        One out of five consumers would likely receive a meaningfully different score than would a creditor: When consumers purchase their score from a credit bureau, the score they receive may be meaningfully different from the score that a lender would consult in making a decision. A meaningful difference means that the consumer would be likely to qualify for different credit offers – either better or worse – than they would expect to get based on the score they purchased. 

·        Score discrepancies may generate consumer harm:  When discrepancies exist between the scores consumers purchase and the scores used for decision-making by lenders in the marketplace, consumers may take action that does not benefit them.  For example, consumers who have reviewed their own score may expect a certain price from a lender, may waste time and effort applying for loans they are not qualified for, or may accept offers that are worse than they could get.

·        Consumers unlikely to know about score discrepancies:  There is no way for consumers to know how the score they receive will compare to the score a creditor uses in making a lending decision.  As such, consumers cannot exclusively rely on the credit score they receive to understand how lenders will view their creditworthiness.

The Bureau recommends that consumers consider the following in evaluating the credit score they receive:

·        Shop around for credit.  Consumers benefit by shopping for credit.  Regardless of the scores different lenders use, they may offer different loan terms because they operate different risk models or face different competitive pressures.   Consumers should not rule out of seeking lower priced credit because of assumptions they make about their credit score.  While some consumers are reluctant to shop for credit out of fear that they will harm their credit score, that negative impact may be overblown.  Inquiries generally do not result in a large reduction in a consumer credit score. 

·        Check the credit report for accuracy and dispute errors.  Credit scores are calculated based on information in a consumer’s credit file.  Inaccurate information may be the difference between a consumer being approved or denied a loan.  Before shopping for major credit items, the Bureau recommends that consumers review their credit files for inaccuracies.   Each of the nationwide credit bureaus is required by law to provide credit reports for free to consumers who request them once every 12 months. 

The Bureau will begin supervising consumer reporting agencies as of September 30, 2012.  The CFPB’s supervisory authority will cover an estimated 30 companies that account for about 94 percent of the market’s annual receipts.  The Bureau’s examiners will be looking to verify that consumer reporting companies are complying with federal consumer financial law, including that the companies are using and providing accurate information, handling consumer disputes, making disclosures available, and preventing fraud and identity theft.

Wednesday, September 5, 2012

BIG news!!!

Big happenings going on in my household right now, which explains at least partially my silence of late.  Two major events are occurring as I type this.  First, the wife and I are moving the family from Clarksdale, Mississippi to Hernando, Mississippi.  Hernando is about an hour northeast of Clarksdale, so not really a long distance move but still a major event.

Even bigger than that is the other news.  Not only are we moving, but the wife and I are starting the Kittell Law Firm.  That's right, I have made the huge step of going out completely on my own.  No more law partners.  Just me and my wonderful and beautiful wife, who is going to be the firm's paralegal and office manager.

We are close to being completely open.  The office needed some renovations, which were completed first.  Then came office furniture.  Now, today, our computers are being installed as well as our phones and Internet.  Since leaving the old firm, I have been referred to by my wife as the "Lincoln Lawyer" since, much like Matthew McConaughey in the movie of that name, I have been practicing out of our vehicles, usually with one or more kids in the backseat.

So life is very exciting right now.  And, for the first time in a long time, the practice of law is both enjoyable and fulfilling once again.  So watch out credit bureaus, collection agencies and credit card companies, the FCRA lawyer is back ... and soon to be out of his Tahoe and back in an actual office.