The Case for being Your Own Accountant

“I never balance my checkbook”. “I just pay what they tell me to.” “I don’t have time to be so precise about my statements.” These are all just excuses to be lazy with your money. Did Donald Trump or Warren Buffet make money because they didn’t care if their creditors upheld their end of their agreements or didn’t hire auditors to ensure accuracy for their income and expenses year to year? I doubt it. In their case a mistake could cost them millions but in today’s world a mistake for any one of us could costs us more in lost money than we can afford.

One client found out after several months that the agreed upon interest rate for his credit card was never changed. There were two credit cards available from his financial institution. The first, a $2000 credit limit would give him a 12.99% interest rate for all unpaid balances while the second program allowed a $5000 balance and a 9.99% interest rate. He was approved for the lower program and used that over the last 5 years. This year he applied for and was granted an increased credit limit of $5000 which would drop his interest rate to 9.99%. He’d been busy the last few months and was behind putting his statement activity in his Quicken ™ personal financial software. When he finally gathered his statements, he found that his finance charges were way out of line. He saw that for several months the interest rate stayed at 12.99% and was not changed according to his agreement. He called the financial institution and asked about the mistake. The finance company admitted that the interest did not change as it should and finance charges would be credited on the next statement.

Had this client not paid attention to his own situation no one would have caught this oversight of being overcharged in fees. This would be an unfortunate waste of money. It’s kind of like having a hole in your pocket and losing it along the way. While the monthly amount of a 3 percentage points may seem insignificant to some, simplistically over the course of a year he could have cost himself roughly $150.00 more in finance charge than he should have been paying. Think of what having an extra $150.00 could do for you.

Situations like this occur all the time only with much larger consequences. Just look at the mortgage and foreclosure fiasco. How many poor consumers were led blindly to accept foreclosure when, in some instances, proper legal procedures were not followed? Then there are many cases of unauthorized or duplicate charges in one’s checking account, identity theft issues, fraudulent applications, misappriopriation of loan payments and charges and the list goes on. People make mistakes. Computers are only as smart as those who program them and they mistakes. Sometimes these mistakes are made knowingly and some are not. If no one is left to examine the results frequently, costly errors go unchecked. Nothing is infallible and being a responsible consumer means being aware that banks, credit card companies, mortgage banks, credit bureaus and any company that involves our money and our information must be checked by the very customers who use them.

Copyright 2010
Consumerwarfare.com

Inquiry Dropped Credit Score by Another 5 Points

It’s not much but it adds up! When a creditor or solicitor looks at your credit there are a number of codes that they must fill out to request your credit report. Those codes indicate to the credit bureau why a company is looking at your credit. If used correctly, those codes are designed to indicate whether a consumer is actively seeking credit, more credit, employment, insurance etc. or simply being used to solicit and offer credit. The codes, developed by the credit bureaus themselves help score your creditworthiness.

Typically there are two types of credit inquiries you see on your report depending on the code the creditor uses when they request your credit. One, often referred to as a “hard pull” counts against your credit score. Hard inquiries are supposed to indicate that you are actively seeking credit. These are the inquiries that will start to reduce your score about 5 points each after 3-4 inquiries in a year. The other type of inquiry, often referred to as “soft pulls” should be those that are requested to make financial offers, make solicitations and used for marketing and informational purposes only. These are generally not known by the consumer. These will not count against your credit score according to the credit bureaus.

Fair Isaac Corporation on MyFICO.com, home of the most used FICO score says, “…only inquiries that count toward your FICO score are the ones that result from your applications for new credit.” Well that is not always entirely true. In my case, my second mortgage company pulled my credit but I had not initiated any further credit from them nor had any issues with paying my account. I found that their inquiry dropped my score by at least 5 points and was classified on my report as an inquiry that impacted my credit score. The mortgage company was simply doing a random review but I was docked points as though I was seeking more credit. What happened is that the mortgage company filled out a form and selected a purpose code for them to pull my credit when submitting their request to the credit bureau. Here’s the problem. The type of inquiry selected rests entirely with the accuracy of the code selected by the creditor and at times the integrity of the code selected is subject to personal choice and human judgment. In this case, I wrote to the mortgage company and said they had harmed my score by their inquiry and to please remove it since I believed their pulling my report “ to only review” was misleading the scoring model into determining I was seeking more credit.

They wrote back saying , “Please note that as servicer of your loan, we are authorized to perform inquiries on your credit report. However, pursuant to your request, we have submitted an update with the credit bureaus to remove credit inquiry (if any) made by us on your loan. “

They were right, the Fair Credit Reporting Act allows them to review my credit at anytime. It is the scoring models of the credit bureaus that determine why my credit is being reviewed and whether or not my score will be harmed from such an inquiry. We are at the mercy of whatever code a creditor selects to get the report. It’s highly unlikely the creditor knows which code will harm a score and which won’t normany even care or think about it. Some creditors may just standardize their selection for all their credit inquiries where requests for information are harmful despite whether or not the consumer asked for credit.

While your score may not lower significantly at first, it is nonetheless a lower score and even 5 points can mean the difference in the interest rate you get on any credit you borrow. Your solution? Be diligent and make sure any inquiries that show up on your report are legitimately there because you asked for credit. If not, contact your company directly and ask them to remove the inquiry or recode the inquiry because they mislead other potential creditors into thinking you are seeking credit when you are not. Disputing inquiries with the bureaus themselves will rarely change your report as it is the creditor that leads the bureaus to classify the inquiry as they do.


Copyright
Consumerwarfare.com
October 4, 2010

Banks Stop Foreclosures Due to Botched Paperwork – Is this any surprise?

Can anyone honestly not believe that bad processing, customer service and underwriting were going to be the tip of the day given our mortgage fiasco? It comes as no surprise to me that this inexcusable and unprofessional trend rears its rather ugly head again. Besides approving home loans that should never have been given in the first place causing this housing mess, it follows now that lack of fiduciary duty (responsible financial analysis) might also show up in handling the residual effects of our housing disarray. In the foreclosure process, employees have even admitted their neglect in fulfilling all requirements of proper processing within the financial institutions. Possible Notary signing without signers being present, signatures different from document to document, multiple banks declaring primary ownership of the same property due to unclear documents and I’m sure the list goes on is further insult to stressed homeowners. How do you think all these loans were approved in the first place? And it’s not just the homeowners that “shouldn’t have been” but the now victims of rising unemployment who did everything right that I feel sorry for. Nothing has been fixed. “It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”


In my experience negotiating with the mortgage companies on behalf of clients trying to manage one of the government bail-out programs or re-negotiate an in-house mortgage restructuring, the right hand knows nothing of what the left hand is doing or simply could care less. After a long maze of numbers to press on the phone and a significant wait time, Customer Service is often out-sourced to another country or if in the states, is just not efficient, knowledgeable or in the least helpful. You are told on no uncertain terms that there is nothing they can do to help you. They could care less. They are stressed. They read what is written on your account and offer nothing more. They don’t even document conversations as reference points for the next customer service rep/processor. Only when you demand further explanation or want to complain, are you told you either need to fax or write a Customer Relations/Investigations department and wait for them to send you a note saying they got your letter. Sometimes you receive a letter that won’t even address your particular problem/questions as their final answer. No one is accountable. The processors will not speak with the clients to make sure they have everything they need. They simply process and good luck. And here is the rub. If the processors mess up you are basically out of luck. It suggests to me that the same way we “gave” away potentially default mortgages, we are now taking them away.

I would guess that Banks and mortgage companies are so swamped with their first mess, approving improper loans when they shouldn’t have, that they have forced themselves into inefficiencies and are simply trying to clean up their own mess. Gretchen Morgensen of the New York Times columnist on October 3rd, 2010 agrees with me, “There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.” And who’s fault was that? We are simply now on the back-end of default tsunami and the clean-up isn’t going very well.

There is no frugally financial excuse for this mortgage mess we are in and there is less of an excuse for the poor customer service, loan processing and proper underwriting of a problem now so vast as to fleece the average consumer out of the one basic need under which all other needs can be met, a shelter, a home.

Freeescore.com - Come now Ben.

Ben Stein, that monotoned, subtly humorous, financially savvy little brother to Shaq doesn't tell it all. He hawks getting your credit reports and scores from Freescore.com and even better tells you to join the monthly subscription because they send you special alerts. Obviously Mr. Stein was rewarded for his kind words in this advertisment but is the script leaving something out?

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Beware of Scavenger Collection Agencies

Just recently consumers have been receiving notices of debts that leave them scratching their heads trying to remember something they may have forgotten. In most of these cases consumers have not forgotten an old debt when prompted by some notice with triggering identification and simply have no clue. However, this new twist leaves many in a state of confusion, checking their backs and their finances for remnants of a possibly long forgotten debt.

Truth is they are victims of scavenger credit and debt collectors who purchase old unpaid debts from other collectors who were unsuccessful in their attempts to collect the debts they purchased from original companies owed. That was a mouthful. These scavengers may have very little information to find the debtor and will look extensively for consumers who fit what little information they have. That may be as little as similar names in the same state as the debt. They then prepare collection notices and send them out to perhaps several matches for the same issue. The hope is either that the debtor will be found or a consumer will pay thinking the debt was forgotten and may be theirs or perhaps both.

Warning. If you get a notice from a debt collector out of the blue for a debt you do not remember then DO NOT pay it. Challenge it. Write them and tell them the debt is not yours. If they believe it is you can demand they provide you with complete documentation that will prove they are correct. In most cases you will never hear from them again. In other cases you may receive documentation that still cannot identify you such as social security number and birthdate along with addresses you can identify. DO NOT volunteer information or call the agencies as you could be giving them information they will use to link you to a debt that is really not yours.

Write them back immediately keeping your personal information private. You must respond to keep them honest. Give no back ground, former addresses, social security numbers, birthdates or any other private information to protect yourself. Make them prove the debt is yours to your satisfaction. If the debt is not yours and they try to report it to any credit reporting agency you have a possible lawsuit available to you against the debt collector. If the debt is yours check first with your state's statute of limitations on debt. They may be trying to collect a debt that is no longer collectible but hoping you are not aware of 1) your rights and 2) the laws.