Ten Things the Credit Bureaus WON'T Say

The lastest blog post from the Kittell Law Firm website:

Kudos to AnnaMaria Andriotis at MarketWatch.com for penning a very detailed, in depth article about ten things the Credit Bureaus won't say.  I have taken her ten items (in quotes below) and added my thoughts for each one.  I even added an eleventh thing you won't hear the Credit Bureaus dare say.  

Ms. Andriotis' ten things include:

1.  "We track a lot more than just your credit."  What else do the credit bureaus track?  Pretty much anything they can.  Like how often you change addresses, your income, your neighbors' income, your city's average credit score, how often you change jobs.

2.  "Selling your secrets is how we make our money."  That's right.  We are not their customers.  We are the credit bureaus' inventory.  And they get that inventory virtually for free (and sometimes even paid to receive it).  Our creditors provide our payment history to the credit bureaus, sometimes paying a fee to do so.  The credit bureaus then turn around, compile the information provided by thousands of creditors into your credit report, then sell it to you and to your potential creditors.  If they assign the oh so magical "credit score" to your report, you pay even more just to have this number (which is not even uniform among the credit bureaus, creditors, or any one else).  Craziness.  Even crazier ... the credit bureau industry raked in about $4 billion in 2011 selling you to your potential creditors.  Bet you did not see a dime of what your information was sold for.

3.  "What we know could cost you a new job."  That's right.  Your credit report is not just used to determine your credit eligibility.  Its also used by many employers (roughly 47%) during the hiring process.  That often leads to a catch 22 type situation that I have talked about before, where you can't pay your bills because you are unemployed but no one will hire you because your credit score dropped when you didn't pay your bills.  Again I say ... craziness.

4.  "Good thing no one's reporting on our mistakes.  Oh, wait."  That's right, the credit bureaus sure wish there was no one paying attention to their accuracy level, or lack thereof.  But watchdog organizations and even governmental entities are watching and keeping track.  US PIRG releases a report on the credit bureaus every few years.  And, recently, the Federal Trade Commission issued a very damning report that showed that one in five (20%) of consumers had at least one error on one of their credit reports.  13% had errors serious enough to effect their credit score (i.e. making their interest rates go up or their credit limits lessen) and 5% had errors so bad that the errors would cause them to be denied credit in their entirety.  5% may not sound like a big number but that equates to about 10 million consumers.  Crazy scary.  

The Fair Credit Reporting Act requires the credit bureaus to follow reasonable procedures to assure maximum possible accuracy of the credit reports they create (and profit off of).  Obviously, a 20% error rate is not "maximum possible accuracy" or anything close.  Add that to an investigation procedure that does not come close to cutting it, and you have a recipe for a disaster for hardworking consumers.

5.  "You all look so much alike..."  This one hits on the faulty matching logic used by the credit bureaus.  When the credit bureaus generate credit reports about you, they use the personal identifying information inputted by the entity seeking your credit report to match you to your accounts.  At least that's how its supposed to work.  But the credit bureaus do not require an exact match of your identifiers to the identifiers on an account before putting that account on your report and publishing it as your history, good bad or ugly.  This leads to what us consumer lawyers call mixed files.  

I once represented a man whose brother had bad credit.  They shared the same last name (most brothers do).  Their first names started with the same first initial (again, a lot of parents name their kids like that).  Seven out of nine numbers of their SSN match, but that's not uncommon.  If they got their SSNs in the same state and at the same time, its very likely the first five numbers match, since (back then) the first three numbers identified the state where the SSN was obtained and the middle two numbers indicate the grouping of SSNs.  So if their parents got their SSNs at the same time (again, not uncommon), the first five numbers are very likely to match.  The two brothers in my case also shared the same address at one point in time (about 10 years before, again not uncommon for brothers to at one point live at the same address).  And their dates of birth were within ten years of each other, again not unusual for brothers.  So the only personal identifier that match was the brothers' last name.  But that was enough for one of the credit bureaus to merge their credit histories together, ruining my client's stellar credit with his deadbeat brother's terrible credit history.  And, even worse, the credit bureau refused to fix the problem, despite years of dispute from my client, until he finally hired me and we sued.  Crazy crazy.

6.  "... its tough to tell you apart from someone pretending to be you."  Ahhhh, identity theft.  The reason I got into this area of law to begin with.  While its often the fraudulent credit grantors that are to blame for the problems caused by identity theft, the blame also rests with the credit bureaus.  What the credit bureaus want to ignore is the Fair Credit Reporting Act's requirement that they perform reasonable investigations of disputes lodged with them.  They want to pretend that only the furnisher of the disputed information has such a duty (the furnisher does have such a duty, but its in addition to the credit bureaus' duty to investigate).  So all the credit bureaus do to "investigate" is forward your dispute to the furnisher of the erroneous data and then ... wait for it ... the credit bureaus believe whatever the furnisher tells them, no matter what proof you have provided of your innocence.  Unlike in baseball, where "a tie goes to the runner", in the credit bureau's world, you are out no matter how much you beat the throw, simply because the umpire says you are.  And the umpire gets paid if he calls you out.  Twice as crazy as crazy crazy.

7.  "Your 'credit dispute' doesn't quite capture our attention."  This ties into number 6.  The Fair Credit Reporting Act requires the credit bureaus to forward all relevant information provided to them by the disputing consumer to the furnisher of the information being disputed.  But what's nuts (I've run out of ways to say crazy)?  The credit bureaus do not even have a system in place that allows them to forward any documentation or other proof from consumers to the furnishers.  All they provide is a two digit code that is translated on the furnisher's end to a basic dispute like "identity theft" or "not mine" or "never late".  So send proof that you were never late, including bank statements and cancelled checks.  But don't expect your proof to make it to that umpire waiting to get paid by calling you out.

8.  "But bypass us on a dispute, and it'll cost you."  This is one of the main weaknesses of the Fair Credit Reporting Act.  There is no liability on the part of the credit bureaus or the furnishers of erroneous information if you do what most think is natural - dispute directly to the furnisher.  For the duties to perform reasonable investigations under the FCRA to be triggered, the dispute must be made to the credit bureau, even though all they are going to do is pass the buck on to the furnisher.  Many consumers do not know this and end up with no claim because they went straight to the furnisher instead of disputing to the credit bureaus.  

But disputes to furnishers are important.  See number 6 and 7.  Because the credit bureaus do not pass on your proof to the furnishers and do a lack luster job translating your two page dispute letter to a two digit dispute code, sometimes it is up to you to let the furnisher know what  your dispute really is.  And disputing to the furnisher in addition to the credit bureaus eliminates a common defense I see from the furnishers where they claim ignorance as to a consumer's dispute because they did not know what the credit bureaus meant by their two digit dispute code.  So, all you consumers out there, be sure to lodge your disputes with both the credit bureaus (to trigger the FCRA) and with the furnishers (so they can't avoid the FCRA by claiming ignorance).  

9.  "By the time you're done fighting us, your toddler could be a teen."  This one I don't necessarily agree with but only because the author of the Marketwatch.com article did not mention that you can stop the errors in most cases by suing the credit bureaus and/or furnishers.  So, consumers, dispute the errors.  Dispute them often.  Give the credit bureaus and the furnishers multiple opportunities to do the right thing and fix their errors.  And, if and when they don't, hire a consumer lawyer like me and sue the bureaus and furnishers for all the heart ache their refusal to follow the law caused.

10.  "Be careful what you pay for."  I've blogged on this topic multiple times at my blog located at www.fcralawyer.blogspot.com.  The credit score that the credit bureaus so eagerly want to sell you is not even a score that is used by your potential creditors in most instances.  It can be enlightening to see what your score is, but that's about it.  Creditor use different scoring models than what the credit bureaus sell.  The most common used score is the FICO score which consumers can buy, but not from the credit bureaus.  To see your FICO score, go to http://www.myfico.com.  

All in all, a very informative and well researched and written article about the true story of the credit bureaus.  But I will add a number 11 of my own:

11.  "We spend top dollar to investigate your disputes."  Not only do they not pay top dollar, the credit bureaus do not even pay minimum wage to its investigators. Your disputes are being handled by outsourced investigators in such places as Chile, Jamaica and the Philippines, where the credit bureaus do not even have to pay minimum wage.  And they work their third world work force by placing quotas on how many investigations they perform a day.  One such credit bureau expected its investigators to perform an investigation every two minutes.  That's simply not enough time to "reasonably" investigate anything.  Craziness to the nth degree.

Please read the full article at http://www.marketwatch.com/story/10-things-credit-bureaus-wont-say-2013-02-15.  Again, the article is very well written and a must read.

You'd better start reminding your neighbors to pay their bills on time!  Now, at least one of the big three credit bureaus is keeping track of credit scores by metro area as a reflection on your personal likelihood to pay your bills.

This should go in the "surely they've got to be kidding" file.  But its apparently true.  Trans Union, one of the big three credit bureaus and perennial defendant in Fair Credit Reporting Act lawsuits filed by the Kittell Law Firm, is tracking not just individuals' credit scores, but the average credit scores for metropolitan areas.  This means that, even if you pay all your bills on time, you are at risk for getting turned down for a loan or credit card just because the area you live in has a low average score, which, according to Trans Union, could indicate that you are less likely to repay your creditors.  

Calling them "metro ratings", Trans Union has determined the average risk for a collective group of people based upon where those people live.  Trans Union contends that a low metro rating does not just reflect a geographically localized group of lackluster bill payers, but could indicate places where the unemployment rate is high or that were hit hard by home foreclosures.  

Talk about hitting where it hurts.  Trans Union, who cares about nothing other than its bottom line, is now making it harder for entrepreneurs who want to start a new business in an economically deprived community to get a loan because the unemployed workforce who need the jobs the entrepreneur is trying to create have low credit scores because (duuuhhh) they are unemployed and can not pay their bills.  I have not seen a vicious cycle like that since employers started reviewing credit reports during the job application process, which lead to the old "you don't have a job so your credit score is low so I can't give you a job because your credit score is low" catch 22.  

So, neighbors of mine, don't be surprised if I start calling you once a month to make sure you are paying your bills timely, particularly since the area I live in (the Memphis Tenn-Miss-Ark area which us local folks call the Mid South) has the worst metro rating in the nation at a measly score of 638 (using a scoring range of 501 to 999).  

The complete list of the worst metro scores are:

Memphis, Tenn-Miss-Ark. 638;

McAllen-Edinburg-Mission, Texas 639;

Jackson, MIss. 642;

El Paso 650;

Columbia, SC 650;

Las Vegas-Paradise 650;

Little Rock-North Little Rock-Conway 651;

Baton Rouge 651;

Lakeland-Winter Haven, Fla. 651; and

Augusta-Richmond County, GA-SC 651.

The best metro scores are:

San Jose-Sunnyvale-Santa Clara, Calif. 700;

San Francisco-Oakland-Fremont, Calif. 696;

Madison, Wis. 694;

Honolulu 693;

Minneapolis-St. Paul-Bloomington, Minn.-Wis. 691;

Bridgeport-Stamford-Norwalk, Conn. 690;

Boston-Cambridge-Quincy, Mass.-N.H. 689;

Oxnard-Thousand Oaks-Ventura, Calif. 685;

Portland-South Portland-Biddeford, Maine 685; and

Seattle-Tacoma-Bellevue, Wash. 685.

What's next?  Trans Union tracking people's credit worthiness by the average score of their Facebook friends?  Now where was that "unfriend" button again?!

Or how about by party affiliation?  Interesting to note that the 8 of the 10 bad metro scores came from "red" states while all 10 of the best metro scores came from "blue" states.  I guess Trans Union will now be claiming that Democrats are better financial risks that Republicans!

Trans Union being sold for $3 Billion

According to reports from Trans Union, one of the three national credit bureaus, A group led by Advent International and a Goldman Sachs investment fund are purchasing Trans Union for a reported $ 3 Billion dollars. That's a lot.

Although Trans Union announced an IPO last year, it never went through with it and is therefore still privately owned, primarily by the private equity firm Madison Dearborn Partners and the Pritzker family. The Pritzker family originally the Marmon Group, which at some point spun off Trans Union.

The sale is expected to go through in the second quarter. According to Trans Union, it's CEO and its top management will remain with the company.

Trans Union takes on Asset Acceptance

Trans Union has filed a lawsuit in the Circuit Court of Cook County, Illinois (i.e. Chicago - TU's home town) against Asset Acceptance, a collection agency notorious among us FCRA and FDCPA lawyers for reporting incorrect information and being pretty ruthless, immoral and unethical in its collection tactics.  For instance, I have sue Asset Acceptance many times.  I can think of one client who I have represent in not one, not two but three lawsuits against Asset Acceptance due to its illegal collection attempts against him.

Apparently, Trans Union's lawsuit against Asset Acceptance arises from a federal class action filed against Asset Acceptance alone.  This case is styled "Johnny Wang v. Asset Acceptance, LLC," Case No. C09-04797 SI in the U.S. District Court for the Northern District of California.  According to Trans Union, Asset Acceptance's reporting of incorrect information to Trans Union to be included in the credit reports it generates led to Trans Union being added as a co-defendant with Asset Acceptance in the class action.  This opened Trans Union up to some major financial exposure.

According to Trans Union's Complaint, which I have seen a copy of, at some point Asset Acceptance informed Trans Union that it "had some serious problems" with a file on 5.7 million consumers that it had previously reported to Trans Union for inclusion on Trans Union's credit reports regarding those 5.7 million consumers.  In particular, Asset Acceptance suspected that disputed accounts it had reported to Trans Union did not include the changes made as a result of the disputes.

Since Trans Union had already incorporated these accounts into its credit history database, it informed Asset Acceptance that it was removing all of Asset Acceptance's accounts from it database and that Asset Acceptance needed to re-report to Trans Union (correctly this time) all of its accounts.  But instead of providing corrected information, Asset Acceptance again provided incorrect information to Trans Union.

Trans Union was then added as a Defendant to the Johnny Wang federal class action, prompting Trans Union to sue Asset Acceptance for indemnification pursuant to its contract with Asset Acceptance that required Asset Acceptance to report correct information to Trans Union.

I'm not sure why Trans Union is surprised that Asset Acceptance is reporting incorrect information.  Like most junk debt buyers, Asset Acceptance has little if any proof to back up the debts it claims it is owed by consumers.  Yet, these bottom feeding junk debt buyers routinely "verify" to Trans Union and the other credit bureaus that the debts they report are indeed owed, even though they have no proof to back it their so called "verification".  If Trans Union really wanted the credit reports it generates regarding consumers to be more accurate, it would bar Asset Acceptance and the other junk debt buyers from including their accounts on Trans Union credit reports until such time as these companies actually present proof of the debts they claimed they are owed.  Until then, Trans Union's credit reports will continue to be chock full of inaccuracies.

The Fourth Credit Bureau?

If you have been reading this blog much, you have probably seen me refer to Equifax, Experian and Trans Union as the Big Three.  They could also be called the Three Stooges, but I'd hate to insult Moe, Larry and Curly.

But what a lot of people don't realize is that there are many, many consumer reporting agencies outside of the Big Three.  I was reminded of this recently when I read a Washington Post article entitled "Five Facts about the Fourth Bureau".  At first I thought there might be a new bureau emerging (kind of like Shemp, the fourth stooge).  Instead, the article lumps together all the smaller, unorthodox consumer reporting agencies as the "fourth bureau".

The other bureaus tend to cover topics that are missed by the Big Three.  Some can be seen as niche market CRAs, such as the ones that collect information about rent paying history, which they then sell to potential landlords.  Other types of information collected by the "fourth bureau" are payment histories regarding utilities payments, cellphone bills, magazine subscriptions and gym memberships.  Some even keep up with whether consumers return their rental movies on time.  Others include companies that compile investigative consumer reports and that provide criminal history type reports that can be used for background checks.

These smaller bureaus can play important roles as over 30 million U.S. consumers don't show up in the Big Three's databases.  These consumers are in a credit morass, as they can not get a loan without a credit history and can not get a credit history without getting loans.  But they can rent apartments, rent movies, sign up for utilities, etc.  The payment histories generated by these actions can sometimes be used in place of a more traditional credit report.

But these types of payment histories can also hurt a consumer's chances of getting credit if they do not reflect a responsible payment pattern, or if they contain damaging errors, which they are apt to contain.  Approximately 25% or more of the Big Three's reports contain damaging errors, so the other bureaus are likely to have a similar error rate.  The good news ... even though these companies are not the "Big Three", they are still subject to the vast majority of the requirements of the Fair Credit Reporting Act, including the requirement that they provide to consumers upon request a complete report of all information in their database about the consumer and 15 U.S.C. 1681i's requirement that they reasonably investigate consumer's disputes of inaccurate information.

The down side ... to get your report from the small bureaus will cost you some money (approximately $11) since the yearly free credit report requirement only applies to the Big Three.  Consumers can also get a free credit report from any CRA if they are denied credit (or suffer some other adverse action) as a result of the contents of the CRA's report.

The same rules regarding disputing errors also apply to the "fourth bureau" ... namely disputing in writing and dispute often.  If that doesn't work, hire someone like me to sue for damages resulting from the errors (which usually also includes the benefit of a corrected credit report.  Funny how a lawsuit will do things that a multitude of even the best dispute letters can not.)  If any of  you need help with the Big Three or the "fourth bureau", I'm only an e-mail away.

Horrible decision on s-2(b) claim

A bad decision was rendered recently, dismissing a consumer's claim against a furnisher who failed to perform a reasonable investigation of the consumer's dispute of the collection of a fraudulently opened account.

In Healey v. Trans Union, a decision rendered May 18, 2011, by the United States District Court for the Western District of Washington threw out a consumer's 15 U.S.C. 1681s-2(b) claim against a furnisher because the Court found that the furnisher's investigation, which was non-existent as best as I can tell, was sufficient.

Healey was the victim of identity theft.  The impostor opened an account with Sprint, which eventually resulted in the fraud Sprint account being sold to DRS, a collection agency.  Despite numerous disputes made by Healey to DRS regarding the fraudulent nature of the collection account, DRS continued to report the account to the credit bureaus for inclusion on Healey's credit reports.

Healey then disputed the DRS collection account to the credit bureaus, including Trans Union and Experian, pursuant to 15 U.S.C. 1681i.  Apparently, Healey did not possess evidence that Trans Union forwarded the 1681i dispute to Trans Union and thus could not establish that DRS's requirement to perform a reasonable investigation of the dispute pursuant to 15 U.S.C. 1681s-2(b) was ever triggered.  Thus, dismissal of the s-2(b) claim against DRS relating to the Trans Union dispute was proper.

However, the dismissal of the s-2(b) claim related to the Experian dispute is another matter.  There was proof that Experian complied with 1681i and forwarded the dispute to DRS.  However, the Court found that summary judgment was appropriate because there was no evidence regarding what exactly DRS did to investigate and it was Healey's duty to establish that DRS' investigation was not reasonable.  DRS obviously failed to include in its "investigation" a review of its own files regarding Healey's previous disputes.  As a result, it is clear that DRS did not perform even the most elementary investigation of Healey's dispute to Experian regarding the DRS collection.  However, the Court did not think so and, as a result, wrongly (in my opinion) granted summary judgment.

Unfortunately for Healey, it was a sad day for justice in the western district of Washington.

FTC cracks down on advertising for non-free services while ordering your free credit reports

NewJersey.com reports on new restrictions by the FTC -

In an attempt to make sure credit reporting agencies don't put a fast one over on consumers seeking free credit reports, the Federal Trade Commission has adopted tough new disclosure rules in response to more than 1,000 comments it received from consumers and others last fall.

Under a federal law passed in 2003, the three credit reporting agencies — Equifax, TransUnion and Experian — are required to provide consumers with a free copy of their credit report each year, but the agencies have found ways to recoup fees they used to get for those reports.

Part of the problem is that the gateway to the free reports — AnnualCreditReport.com — takes you through sites for the individual agencies. There, they try to sell services for which there is a fee, such as monthly reports (rarely needed) or your credit score (needed only occasionally).

And it's not just the three agencies, as other commercial sites use bait-and-switch tactics, drawing you in with the lure of free reports before pushing you to pay services.

Starting April 1, the commercial enterprises will still be able to sell their wares, but they'll have to do a better job of distinguishing between free and paid services.

The rest of the article can be found here - http://www.northjersey.com/news/business/85754242_Indeed__a_free_credit_report.html.

Credit Denial Codes

You would think that its is the credit lender that comes up with the reasons why it does not want to grant your credit application.  Wrong.  The lender makes the decision but it is the credit bureaus that provide the reasons why your credit application is denied to the lender which the lender then inputs on the adverse action letter they send you informing you that your application was denied.  Every time a credit bureau sends out your credit report to a third party, it includes four reasons why you should be denied credit, no matter how good your credit history is.  Even if your payment history is flawless and you have a "perfect" credit score, the credit bureaus still provide 4 reasons you shouldn't get credit.  Crazy, right?

The four reasons come in the form of four code numbers.  Here is a list of what those code numbers mean -

EQUIFAX – BEACON Score Codes


39 – serious delinquency

38 – serious delinquency, and derogatory public record or collection filed

34 – amount owed on delinquent accounts

33 – proportion of loan balances to loan amounts is too high

32 – lack of recent information on installment loan accounts or lack of installment loan accounts

31 – too few accounts with recent payment information

30 – time since most recent account opening is too short

28 – number of accounts established

24 – no recently reported revolving balances

23 – number of bank or national revolving accounts with balances

22 – accounts not paid as agreed, public record, or collection agency filing (FORECLOSURE)

21 – amount past due on accounts

20 – length of time since derogatory public record or collection is too short

19 – too few accounts currently paid as agreed

18 – number of accounts with delinquency currently or in the past not paid as agreed

17 – no non-mortgage account balances or non-mortgage balances not recently reported

16 – lack of recent revolving account information

15 – lack of recent bank revolving information

14 – length of time accounts have been established

13 – time since delinquency is too recent (or unknown) or trade narrative reported

12 – length of time revolving accounts have been established

11 – amount owed on revolving account is too high

10 – proportion of balances to credit limits is too high on bank revolving or other revolving accounts

09 – too many accounts recently opened

08 – too many inquiries last 12 months

07 – recent payment history is too new to rate

06 – too many consumer finance company accounts

05 – too many accounts with balances

04 – too many bank or national revolving/open accounts

03 – too few bank or national revolving/open accounts

02 – level of delinquency on accounts

01 – amount owed on accounts is too high

O – beacon not available, no recently reported account information

FA – number of inquiries adversely affected the score, but not significantly

TRANS UNION – EMPIRICA Score Codes

42 – length of time since most recent consumer finance company account established(**factor not currently in use)

41 – no recent retail balances (**factor not currently in use)40 – derogatory public record or collection filed

39 – serious delinquency

38 – serious delinquency, and public record or collection filed

36 – payments due on accounts (**factor not currently in use)

31 – amount owed on delinquent accounts (**factor not currently in use)

30 – time since most recent account opening is too short

29 – no recent bankcard balances

28 – number of established accounts

27 – too few accounts currently paid as agreed

26 – number of bank revolving or other revolving accounts (**factor not currently in use)

24 – no recent revolving balances

23 – number of bank or national revolving accounts with balances

22 – serious delinquency derogatory public record or collection filed (FORECLOSURE)

21 – amount past due on accounts

20 – length of time since derogatory public record or collection is too short

19 – Date of last inquiry too recent

18 – number of accounts with delinquency

17 – no recent non-mortgage balance information

16 – lack of recent revolving account information

15 – lack of recent bank revolving information

14 – length of time accounts have been established

13 – time since delinquency is too recent or unknown

12 – length of time revolving accounts have been established

11 – amount owed on revolving accounts is too high

10 – proportion of balances to credit limits is too high on bank revolving or other revolving accounts

09 – too many accounts recently opened

08 – too many inquiries last 12 months

07 – account payment history

06 – too many consumer finance company accounts

05 – too many accounts with balances

04 – lack of recent installment loan information

03 – proportion of loan balances to loan amounts is too high

02 – level of delinquency on accounts

01 – amount owed on accounts too high

00 – no adverse factor

MODEL NOT SCORED: INSUFFICIENT CREDIT message occurs when a credit file does not contain
a trade line opened for at least 6 months and trade line updated within the last 6 months.

FA – in addition to the factors listed above, the number of inquiries on the consumer’s credit file has adversely affected the credit score.

MODEL NOT SCORED: DECEASED message occurs when the subject’s Social Security Number matches the Social Security Administration’s deceased Social Security Number file, or is reported as deceased by a credit grantor.

EXPERIAN – FAIR ISAAC Score Codes

40 – derogatory public record or collection field

39 – serious delinquency

38 – serious delinquency and public record or collection filed

37 – number of finance company accounts established relative to length of finance history

36 – length of time open installment loans have been established

33 – proportion of current loan balance to original loan amount


32 – no recent installment loan information

31 – too few accounts with recent payment information

30 – length of time since most recent account established

28 – number of accounts established

26 – number of revolving accounts

25 – length of installment loan history

24 – lack of recently reported balances on revolving/open accounts

22 – account(s) not paid as agreed and/or legal item filed (FORECLOSURE)

21 – amount past due to accounts

20 – length of time since legal item filed or collection item reported

18 – number of accounts delinquent

17 – no recent (non-mortgage) accounts balance information

16 – insufficient or lack of revolving account information

15 – insufficient or lack of bank revolving account information

14 – length of time accounts have been established

13 – length of time (or unknown time) since account delinquent

12 – length of revolving account history

11 – current balances on revolving accounts

10 – proportion of balance to high credit on bank revolving or all revolving accounts

09 – number of accounts opened within the last 12 months

08 – number of recent inquiries

07 – Unable to evaluate recent payment history

06 – number of finance company accounts

05 – number of accounts with balances

04 – Too many bank revolving accounts

03 – Too few bank revolving accounts

02 – delinquency reported on accounts

01 – current balances on accounts

Exclusion Messages

9003 – Experian/Fair Isaac Score Not Available Due to Lack of Credit History – The Profile report does not contain any trade lines which have been open for at least six months

9002 – Experian/Fair Isaac Score Not Available Due to Model Exclusion Criteria – The Profile report does not contain any trade line which satisfies both of the following:

1. Status date within the last six months, or a balance within the last six months if the status code is not “11″ (“Current account”)

2. Does not contain disputed information

9001 – Experian/Fair Isaac Score Not Available Due to Report of “Deceased” Status – The Profile report contains a subscriber transaction with a status code of “21″ or an association code of “X” indicating the consumer is deceased

9000 – Experian/Fair Isaac Score Not Available Due to System File Size Parameters – The Profile report contains more than 100 subscriber trade and inquiry transactions

Do consumers in hard times pay their mortgage first or their credit cards first?

From ConsumerLoanWire.com:

The economic downturn has forced many consumers to make difficult financial choices, one of them being the choice to make a credit card payment or a mortgage payment. Historically consumers would protect their mortgage while letting a credit card fall delinquent if forced to make the choice, but a new trend shows that consumers are choosing to pay off credit debt at an increasing rate.

A study released by Chicago-based credit bureau Trans Union found that 6.6% of consumers were delinquent on mortgages but current on credit card payments in the third quarter of 2009 but that only 3.6% of consumers were delinquent on credit card payments while remaining current on mortgage payments.

Sean Reardon, author of the study, attributed this shift to a “perfect storm” of lowering housing prices and rising unemployment. Consumers know that they may be losing equity on a mortgage but they need to stay current on credit cards since they may be living on them for day-to-day expenses.

This strategy almost always makes no sense.  Why risk your most valuable investment, your home, just to keep your credit score better.  The only time this strategy does make sense is apparently what is happening - i.e. the home is not the most valuable investment.  Thanks to the collapse of the housing market, a lot of people owe much more on their house than what they are worth.  Thus, even if they make their house payments on time, they are not gaining any equity.  But they may need their credit cards to survive (like if they are currently unemployed). 

But missing payments on anything puts your credit score at risk, which also puts your credit card limits at risk, at least until the final provisions of the new credit card law finally go into effect.  Currently, if a credit card company sees something that worries them about your credit report (like missing payments), the credit card company can lower your limit, raise your interest rate or cut you off completely.  Once the new credit card law completely goes into effect, credit card companies will lose their draconian ability to unilaterally change the terms of your agreement, so long as minimum payments are made on the credit cards, regardless of what is happening with the rest of your credit.  But until that goes into effect, be wary of this strategy if at all possible.

Trans Union mixes multiple consumers' credit histories

Here's an all too familiar story about Trans Union merging two or more consumers' credit files together.  I have seen this way too much and have represented multiple consumers against the various credit bureaus as a result of the mixed file problem caused by the credit bureaus' loose matching logic. 

Here's a link to the article - http://www.nbclosangeles.com/news/local-beat/Credit-Report-Mistakes-Cost-Consumers--78470792.html.  Ms. Martinez, if you happen to see this and need legal representation against Trans Union, please e-mail me at ckittell@merkel-cocke.com and I'll help you find one of the few competent attorneys that actually have experience in this type of case.  There are only a few of us out there.

E-mails trying to get you to check your credit report due to "problems" is probably a scam

I have heard people complain about getting unsolicited e-mails from Equifax telling them there are problems with their credit report and advising them to buy their credit report.  This is either a scam by some perp trying to obtain your personal information or a ploy by Equifax to get you to sign up for a credit monitoring service you likely don't need.  Either way, its something to avoid.

If you want to check your credit report, try http://www.annualcreditreport.com/, which is the website that federal law required the credit bureaus to establish to provide one free credit report per credit bureau to each consumer per year.  Better yet, print out and mail in the pdf request form found at http://www.annualcreditreport.com/ and get your credit reports for free without any arbitration clause taking away your right to a jury trial.  You see, http://www.annualcreditreport.com/ redirects consumers to the websites of Experian, Equifax and Trans Union to complete the process of obtaining the free credit reports.  One or more of the bureaus' websites require the consumer to agree to an arbitration clause to access the credit report.  Sending in the pdf form, though, does not activate any such arbitration clause.

History of the credit bureaus

Here's an interesting post about the history of the credit bureaus - http://bankfiesta.com/All/History-of-Credit-Bureaus-Equifax-Experian-TransUnion-amp-Innovis.

Free credit score at quizzle.com? No, not really

Quizzle.com is getting a lot of buzz lately, particularly after being mentioned by Clark Howard as a place consumers can get their credit score for free.  While consumers can purportedly get a free credit score once every six months, the problem is that its not a credit score that actually used by lenders. 

In other words, quizzle.com is about as useful as say ... I don't know ... me telling you faithful readers what your credit scores are.  You right there, your score is 684.  You over there, your score is 575.  You in the red shirt, yours is 702.  Guess what, my credit scoring model is not used by lenders either, so its just as useless as quizzle.com's score. 

Don't take this to mean that I am suggesting buying your score from one of the credit bureaus like Experian, Equifax or Trans Union.  Oh, much to the contrary, that would be even worse.  Then you would be paying for a score that's also not used by lenders.  That's right, folks, lenders don't use the big three's credit scores either. 

Lenders typically do one of two things - they either set their own criteria for what's important to them, which means that particular lender's scoring model is unique.  Or lenders use one of the pre-made scoring models, such as Fair Isaac's scoring model.  So if you really want to get your credit score that could actually be a credit score that a lender might use, then you should buy your score from Fair Isaac by going to http://www.myfico.com/.  The basic credit report (from Equifax or Trans Union) and FICO's scoring model costs $15.95.  The myfico website touts this score as one "lenders use".

Credit Reports, not Credit Scores, Affect Employment Chances

As I have reported previously, potential employers have a permissible purpose to obtain your credit report with consumer consent.  According to Pamela Yip with the Dallas Morning News, the credit bureaus do not get your credit score with a credit report obtained for employment purposes.  Pamela reports the following as the positions of each of the credit bureaus:

• "The key point to consider here is that credit scores are not predictive of employment performance," said Steven R. Katz, director of consumer brand at TransUnion. "They are designed to predict the likelihood of such things as an individual defaulting on a loan or filing for bankruptcy."

• "We don't provide credit scores with an employment report because they're not extending you a loan," said Michele Boddavice, president of product management and development at Experian Credit Services. "There's no relevancy there to your credit score and an employment decision."

• Equifax doesn't "provide credit scores or files [credit reports] for pre-employment screenings," said spokesman Tim Klein.

New FCRA case - McDonald v. Equifax

It is quite difficult to lose an FCRA case via summary judgment.  As long as you can show an inaccuracy appeared on your credit report, you should be able to survive summary judgment since, once an inaccuracy is shown, the question becomes whether or not the credit bureau's procedures and/or actions were reasonable, which is almost always a jury question.  Thus, as long as there is an inaccuracy, losing via summary judgment is difficult to do.  But this pro se plaintiff was able to lose via summary judgment not once but three times.  This is yet another example of why consumers need to hire attorneys experienced in FCRA litigation to represent them and never, ever, should consumers represent themselves.

In the case styled Michael L. McDonald v. Equifax, Experian and Trans Union pending in the United States District Court for the Northern District of Texas, Dallas Division, McDonald filed claims against all three national credit bureaus for violations of unspecified sections of the Fair Credit Reporting Act.  While he did not identify the statutes in his Complaint, his case appeared to claim garden variety 1681e(b) claims for failing to follow reasonable procedures to assure the maximum possible accuracy of the credit reports regarding McDonald and 1681i for failing to conduct reasonable investigations of the disputed information.

According to the opinion penned by U.S. District Judge Jane J. Boyle, McDonald learned of various inaccuracies on his Equifax credit report when he was denied a loan.  He then obtained copies of his credit reports from Experian and Trans Union and learned of additional errors appearing on his credit reports published by those companies.  He lodged several disputes regarding the inaccurate credit information with all three credit bureaus.  However, the CRAs failed to correct the errors.  McDonald then filed litigation against Equifax, Experian and Trans Union.

Apparently, McDonald failed to correctly serve Experian with the Complaint.  The opinion does not indicate how McDonald messed up service of process, as Experian had already been dismissed from the case prior to the motions before the Court.  Trans Union and Equifax both filed motions for summary judgment, arguing that McDonald failed to present any evidence of any inaccuracies on his credit report.

All McDonald had to do was come up with some type of sworn testimony or documentation that his credit reports contained inaccuracies.  It could have been as simple as an affidavit from McDonald himself swearing that the reports contained inaccurate information.  Or he could have produced some type of documentation that demonstrated the inaccurate nature of the information.  Any competent attorney could have easily beaten the credit bureaus' motion for summary judgment in this case.  However, lawyerless McDonald failed to provide any documentation or any sworn testimony.  As a result, Judge Boyle was correct in dismissing McDonald's claims.

New FCRA case - Eller v. Experian and Trans Union

A new case was released on August 20, 2009 in the United States District Court for the District of Colorado.  The case was filed pro se by Gerald Hansen Eller but he apparently hired attorney Steven T. Nolan after Trans Union moved to dismiss his Complaint as not containing sufficient facts to support his claims that Trans Union violated the FCRA. 

Since attorney Nolan did not have sufficient time to review the complaint or determine whether the complaint should be amended, the court viewed the motion to dismiss using the standard applied to pro se filed complaints, i.e. very liberally.

While the Court did find that Eller did not provide sufficient facts to establish his claims of violations of the FCRA, the Court found that amendment of the complaint was the appropriate remedy, not dismissal.  As a result, the Court granted Trans Union's motion in dismiss in part (the part that claimed lack of sufficient facts) but denied dismissal, instead opting to give plaintiff and his new counsel an opportunity to amend the complaint to allege sufficient facts.

I agree that amendment is appropriate, however, I do not think it is required.  The Federal Rules of Civil Procedure merely require "notice" pleadings, i.e. pleadings sufficient enough to put the defendant on notice of the claims filed against it.  The plaintiff's complaint provided sufficient notice to Trans Union for Trans Union to discern the types of claims lodged against it.  Trans Union could then have used the discovery period of the litigation to flesh out the facts supporting the claims against it.  That's what discovery is for.  Fortunately, the Court avoided a complete injustice by giving the plaintiff an opportunity to amend his complaint.

That's my opinion, at least.  But what do you think of the Court's ruling?

New FCRA case - Hamilton v. DirecTV

A new FCRA opinion was handed down on August 14, 2009 by District Judge W. Harold Albritton in the United States District Court for the Middle District of Alabama, Northern Division.

The case is styled Annie Hamilton v. DirecTV, but includes claims against Experian, Equifax and Trans Union.  Hamilton claimed that DirecTV had placed seven fictitious accounts on her credit reports with Experian, Equifax and Trans Union.  Hamilton disputed the accounts to the credit bureaus, who all removed the accounts only to reinsert one of the accounts back onto all of her credit reports.  NOTE TO PLAINTIFF'S ATTORNEY - that's a claim right there - violation of 1681i's requirement that the credit bureaus inform the consumer before reinserting an account that was previously deleted.  After the reinsertion of the account, Hamilton disputed the account to the credit bureaus again, who refused to remove it.  Equifax did remove the account for a while, only to reinsert it again.

The issue before Judge Albritton was a motion for partial dismissal filed by Trans Union and joined by Experian and Equifax.  The motion sought to dismiss Hamilton's claim for injunctive relief, namely seeking a declaratory judgment that she did not owe DirecTV and enjoining the CRAs from publishing the account on her credit reports. 

The problem is that the FCRA does not provide for injunctive relief as only the FTC can "enforce" the FCRA while private consumers can only receive compensation for their injuries caused by violations of the FCRA.  The Plaintiff tries to do an end run around the FCRA by claiming that she can get injunctive relief via her defamation claim.  While I agree that the Plaintiff's defamation claim is not preempted by 15 U.S.C. 1681h(e) of the FCRA, a defamation claim is not a means to get injunctive relief. 

Based on this. Judge Albritton correctly granted the Defendants' motion for partial dismissal, thereby eliminating Hamilton's claims for injunctive and declaratory relief. 

While this is a correct decision, what does it really get the CRAs?  Are they really going to reinsert the fictitious account again and just subject themselves to more litigation and liability to the Plaintiff?  Surely not.  The only reason to even file such a motion was to run up attorneys' fees for the defense lawyers and to make the plaintiff's attorney work harder to get justice for his client.  I can tell you for a fact that the CRAs lawyers do this to lawyers new to suing the credit bureaus to try to dissuade them from filing more litigation in the future.  They no longer file such frivilous motions in cases where I am involved, probably because they realize that I'm too stubborn (or stupid) to run off.  Unfortunately, the CRAs' motion in this case was a waste of the Court's resources, even though it was correctly granted.

New FCRA case - Cornock v. Trans Union

New FCRA case out of the United States District Court for the District of New Hampshire - Troy Cornock v. Trans Union, 2009 WL 2252886 (July 29, 2009). The opinion was handed down by District Judge Joseph N. Laplante.

The lawsuit alleged that Troy Cornock was the victim of identity theft by his e-wife. Apparently, Cornock's ex-wife allegedly obtained a credit card from MBNA before their divorce but after Cornock had moved out of the marital home. The ex-wife made various purchases on the alleged fraud account and even made some payments. After the payments stopped, MBNA attempted to collect the amount owed from Cornock. Cornock disputed the account, informing MBNA that he had not opened, used or even knew about the account. MBNA did not believe Cornock and filed an arbitration action against him.

Cornock defended the arbitration by informing the arbiter that he was a victim of his ex-wife's identity theft. The arbiter ordered MBNA to produce documents that Cornock had previously requested to prove his innocence. MBNA conveniently claimed not to be able to produce the documents but said that the documents were not relevant since payments were made in Cornock's name (even though Cornock neither made the payments or knew about them). The arbiter amazingly bought this argument and entered an award against Cornock. The Court called this argument "imaginative". Sounds like a completely pro-business, anti-consumer arbiter to me. But that's what you usually get with arbitration.

MBNA sued Cornock to convert the arbitration award to a enforceable judgment. In the interim, Cornock disputed the MBNA account to Trans Union as a fraud account. Trans Union relayed the fraud dispute to MBNA who verified the account to Trans Union, resulting in its continued inclusion on Cornock's credit report. Trans Union apparently did not perform any investigation of its own.

Cornock successfully defended MBNA's litigation to enforce the "imaginative" arbitration award, resulting in the arbitration award being voided. Cornock then sued MBNA, Trans Union and other CRAs for violations of the FCRA. After being sued, Trans Union removed the fraudulent MBNA account from Cornock's credit report. Cornock settled his claims with all defendants other than Trans Union, who filed a motion for summary judgment.

Cornock's sole claim against Trans Union was that Trans Union violated 1681i of the FCRA by failing to perform a reasonable investigation of his dispute of the fraudulent MBNA account. A necessary prerequisite to a 1681i claim is that the disputed information must be inaccurate.

This Court (I think incorrectly) held that Cornock could not prove an inaccuracy on his credit report because any investigation by Trans Union would not have revealed any inaccuracy. This is in my opinion a terrible decision. Trans Union did no investigation. Instead it chose to rely on MBNA's "investigation" which of course got the wrong answer. Trans Union could have performed its own investigation by requesting MBNA's documents and compared the signatures on the payments and/or receipts to Cornock's true signature. Or it could have checked to see what Cornock was allegedly buying. Instead, Trans Union merely parroted what MBNA said and, as a result, clearly violated 1681i. Yet, unfortunately, the Court did not see it that way and granted Trans Union's motion for summary judgment. Unfortunately for Cornock and other consumers, the Court got it wrong.

More coverage regarding Experian's win against LifeLock

The following is an article from Jeff Blyskal at ConsumerReports.org about a case I reported on a while back (see my post at http://fcralawyer.blogspot.com/2009/06/another-article-about-lifelock.html).

"The days of paying companies $10 a month to place fraud alerts on your credit report every three months may be numbered, thanks to a recent U.S. District Court ruling. Two identity theft protection companies have already stopped placing the paid alerts.

In late May, Judge Andrew Guilford, of the U.S. District Court for the Central District of California, ruled that the federal Fair Credit Reporting Act (FCRA) prohibits commercial enterprises from placing fraud alerts on paying consumers’ credit reports. The partial summary judgment was in favor of Experian, one of the big three credit bureaus, which had sued LifeLock, one of the first fraud alert placement companies.

As the Consumer Reports Money Adviser first reported in December, 2007, LifeLock made a big business out of charging consumers $10 a month to place fraud alerts on their credit reports, which are supposed to stop ID thieves. When a crook tries to open a new credit account in your name, the prospective lender is supposed to see the alert when he pulls your credit report, and to call you to check whether the person who says he’s you really is you.

Problem was, we pointed out, the FCRA gives consumers the right to place fraud alerts themselves for free. What’s more, fraud alerts are no guarantee against ID theft, since some lenders don’t see them and let crooks open accounts in other people’s names anyway. 'We know this isn’t 100 percent bulletproof,' LifeLock CEO Todd Davis told us. 'You can still be a victim. If that happens, we’re there to clean up the mess' with a $1 million guarantee.

Davis was not available to comment on the ruling, but a company spokesman said, 'We have filed our motion for the court to reconsider its ruling in light of new evidence we have uncovered since the hearing in January of 2009. We have provided the court with extensive arguments and expert information, which we believe prove that the court's initial ruling should be changed.'

LifeLock did not respond to our request for a copy of its motion and new evidence.

'Experian is pleased with the ruling of the court, as it upholds the regulations outlined by the Fair Credit Reporting Act,' an Experian spokesperson said. 'Experian believes that the court has rightly recognized Lifelock’s unfair business practices. This ruling is not just positive for Experian, but for consumers. Experian will continue to work with consumers to provide education and services to assist them with understanding the credit reporting system.'

One other identity protection company, Debix, already has stopped providing fraud alerts. (See more on Debix’s better fraud-alert system in my next blog.) And IdentitySecure has shifted to letting consumers place their own alerts directly with the credit bureaus through a simple web interface and sending customers a reminder e-mail every 90 days so they can renew the alert. Equifax also has stopped accepting fraud alerts from LifeLock. 'Our decision to stop accepting LifeLock generated fraud alerts is based completely and solely on our interpretation and understanding of FCRA and is consistent with the recent interpretation by the U.S. District Court for the Central District of California. And in that interpretation there is what we consider an unequivocal ruling that LifeLock’s practices are in violation of public policy,' an Equifax spokesman said.

What will happen to LifeLock now? The company wouldn’t answer further questions. But a customer service representative on LifeLock’s toll free line told me that the company continues to place fraud alerts through TransUnion, which, in turn, told me, 'We are aware of the litigation and the decision of the court as to LifeLock's practices related to Experian. Pending a specific ruling in this matter from the court, we have continued to operate as in the past, in support of each consumer’s right to choose.'”

Interesting that Experian actually think the FCRA required something. They usually claim the opposite in my cases, that whatever I am claiming they didn't do was not required by the FCRA.

For more about LifeLock, see here - http://fcralawyer.blogspot.com/search/label/LifeLock.

Reduce the risk of having your identity stolen

One good way to reduce the risk of having your identity stolen (while saving some trees in the process) is to stop the stacks and stacks and stacks of junk mail being sent to you. The FCRA provides for one way to help stop junk mail.

You can opt out of pre-approved screening lists that potential creditors use to decide whether you might be eligible for whatever they are trying to sell, be it cars, insurance or new credit cards. Most of the companies mailing you junk mail get your name, address and, in some cases, how well you match up to their criteria, directly from Equifax, Experian and Trans Union. Opting out of pre-approved screening lists keeps your name off these lists and, as a result, drastically reduces the amount of junk mail. You can opt out by calling the credit bureaus at the following numbers:

Experian - (800) 353-0809
Equifax - (888) 567-8688
TransUnion - (800) 680-7293.

Call 'em, opt out and tell the credit bureaus that I say "hi".