Thanks for tuning in. With debts being transferred around today like so many baseball cards, it happens that some consumers pay a debt, only to learn later that the debt collector that they paid does not owe the debt. We handle these types of cases.

Gerri Detweiler, a consumer credit consulting expert, has referred a question on this from Jay in Indiana. I answer Jay’s question about how to handle this situation, where you are not sure that the debt collector trying to collect from you really owns the debt. Here’s the question and answer:

“I am trying to do the right thing and pay off a judgment but cannot locate who to pay. The judgment is from Sears and the debt has been purchased by Sherman Financial Group initially who was the plaintiff for Sears, then it was bought by Eltman Eltman and Cooper then by LVNV Funding or Resurgent Capital Services, then by Capital Recovery or Recovery Management Systems Corp.

“Recovery Management Systems is saying that a third party is involved (Sherman Financial Group)and that they are having a hard time finding out the information from Sherman Financial Group (Even though they are related).

“I would like a settlement offer if at all possible so I can get my life back together.

“Any Advice?

“Jay in Indiana

“Dear Jay in Indiana,

“Gerri Detweiler has asked me to assist with this question.
“When you cannot determine who owns a debt you would like to pay off, there are two things you need to do:
“1. For the party (usually a debt collector) who apparently owns the debt currently, request of them all documentation showing that they indeed own the debt. Minimally, there should be an agreement showing that they have bulk-purchased a bunch of debts, of which yours is one. It may not conclusively prove that the current debt collector owns the debt—it probably will not—but it is a document which you can keep in your files to protect yourself against future claims for the same debt. These types of future claims, “second bites at the apple,” occur frequently, so put the document into a safe place.
“2. This is the most important one: make the current debt collector indemnify you against any future claims on the same debt if you pay it. “Indemnify” means, essentially, insure. You are making the debt collector, in writing, promise to pay for your defense and for any damages assessed against you if you are sued on the same debt in the future. Put this in writing: “[Current Debt collector] warrants and guarantees that it currently owns the debt of $***, originally incurred through a credit charge with Sears. [Jay in Indiana] has agreed to pay this debt, in full, with a payment of $*** made payable to [current debt collector]. If [Jay in Indiana] is, at any future time, sued for the same debt, [current debt collector] will fully defend and indemnify [Jay in Indiana] for all costs, attorney’s fees or expenses or damages which [Jay in Indiana] may incur as a result of such future suit.” If the current debt collector will not agree to include this language in the release, which the current debt collector signs, then don’t pay them. Simple.
“I hope this helps.

Robert F. Brennan, Esq.
BRENNAN, WIENER & ASSOC.
La Crescenta, Ca.

Welcome to the “Dog Days,” so named because the “Dog Star” is high in the nighttime sky and very visible. My grandmother used to tell me that “Dog Days” were so named because dogs went blind with the heat of the late summer, but, upon further inquiry, I regret to report that my dear grandmother was misinformed.

On the subject of “misinformed,” you need to know that credit scoring is actually performed by the bureaus, using “algorithms” supplied by Fair Isaac. For those of us who did not major in mathematics, traditionally an “algorithm” referred to a set process or function through which you could put a number to obtain a result. A very simple algorithm might be “3x,” and then you would supply the specific number. So, if you supplied the number “4″, then the algorithm would give a product of 12.

Obviously, when calculating something by a highly complex computer system, the algorithms become more and more complex.

The essential point that you need to understand, however, is that the “algorithms” are the functions or processes through which your personal credit information is put to create a credit score. However, it is not nearly as scientific as most people believe. Below is a short article reprinted from the New York Times which identify, correctly, the credit bureaus as the ones who create the score, using algorithms licensed from Fair Isaac Co. This really is a classic example of “garbage in, garbage out,” because if the bureaus do not include positive accounts (which happens all the time) or if they include false or inaccurate negative accounts, your credit score takes a big hit.

Enjoy the article and enjoy the “Dog Days”. Here it is.

It is not FICO that comes up with a borrower’s score — it just sells the algorithms. The companies that do are the big three credit bureaus, TransUnion, Equifax and Experian. They gather input about the prospective borrower’s lending history from various lenders like credit card companies and auto dealers, plug them into a formula and derive a credit score.
You would think, given the critical importance of an accurate score, that there would be rules about the information that is submitted to them. There aren’t. Lenders can submit information about your credit history to one of the bureaus, all of them or none of them. Some of them turn over information right away; some take months; some don’t do it at all. Some are sticklers for accuracy; others are sloppy. The point is that the credit score is derived after an information-gathering process that is anything but rigorous.
And finally, they don’t take into account the many, many mistakes that are found in credit reports. My own credit reports, which I looked up for this column, are a case in point. Although my score was O.K. — the low 700s — the reports themselves were full of unpleasant surprises. They listed credit card accounts I didn’t have, and failed to list at least one big one that I did have. Two of them noted that five years ago, I was late on a car payment. (I was?) My daughter’s old Brooklyn address was listed as my former address. According to Experian, I was still writing for Fortune magazine. It said I no longer lived in a house that I just bought two months ago. TransUnion, meanwhile, listed The New York Times as my former employer. Currently, TransUnion said, I am an employee of Rite Aid.
Rite Aid? I know, I know — it is supposed to be up to me to catch their mistakes (which is also why they don’t have to care about the mistakes.) But what I find incredible is that we have imbued credit scores with these magical predictive powers — and yet the companies coming up with the scores can’t even get the borrower’s address and employer right. It would be funny if it didn’t matter so much.

We get a lot of inquiries about LifeLock and other similar services, wherein you pay the company a monthly fee to protect your credit report. Guess what? You could do this all yourself if you followed the advice on my website or on the Federal Trade Commission website, www.ftc.gov. For the most part, LifeLock simply places security alerts or security freezes for you, which is something you can and should do yourself anyway. It is not a service you need to purchase. It is the financial equivalent of paying a lot of money to have someone put gas in your car when you can do it yourself for less.

Evidently the Federal Trade Commission and several states Attorneys General agree with me. Today LifeLock (What a Crock!) paid out $12 million to settle fraudulent advertising claims. Here’s the story.

LifeLock Will Pay $12 Million to Settle Charges by the FTC and 35 States That Identity Theft Prevention and Data Security Claims Were False
LifeLock, Inc. has agreed to pay $11 million to the Federal Trade Commission and $1 million to a group of 35 state attorneys general to settle charges that the company used false claims to promote its identity theft protection services, which it widely advertised by displaying the CEO’s Social Security number on the side of a truck.
In one of the largest FTC-state coordinated settlements on record, LifeLock and its principals will be barred from making deceptive claims and required to take more stringent measures to safeguard the personal information they collect from customers.

Most of you remember the tale of the Trojan Horse, where the Greek Army gave a gift to the embattled city of Troy of a great wooden horse in which were hidden 30 of the best Greek troops. The rest of the Greek Army pretended to sail away, only to return in the evening when the secreted Greek soldiers emerged from the horse to open the gates to the city. The upshot of the tale is that sometimes supposed gifts can contain some very unpleasant, and even destructive, surprises.

And so it is with the new credit card law. The bank lobby fought for time to “prepare for its passage,” and has spent that time figuring out all manner of devilry to avoid it and make consumer credit even more disastrous than it was before the law was passed.

Here’s a current article from The Associated Press which I found has given some good insights on the effects of the new law. Hope this is helpful to you. Thanks for reading.

NEW YORK (AP) — Your next credit card statement is going to contain an ugly truth: how much that card really costs to use.

Now, thanks to a long-awaited law that goes into effect Monday, you’ll know that if you pay the minimum on a $3,000 balance with a 14 percent interest rate, it could take you 10 years to pay off.

“Jaws will drop,” said David Robertson, publisher of The Nilson Report, a newsletter that tracks the industry. “I don’t doubt for a nanosecond that it’s going to give a lot of people a sinking feeling in their stomachs.”

That’s not all that will make them queasy.

During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.

It wasn’t supposed to be this way. The law that President Barack Obama signed last May shields card users from sudden interest rate hikes, excessive fees and other gimmicks that card companies have used to drive up profits. Consumers will save at least $10 billion a year from curbs on interest rate increases alone, according to the Pew Charitable Trust, which tracks credit card issues.

But there was a catch. Card companies had nine months to prepare while certain rules were clarified by the Federal Reserve. They used that time to take actions that ended up hurting the same customers who were supposed to be helped.

Consumer advocates say the law still offers important protections for the users of some 1.4 billion credit cards.

“We expected some rate increases; we expected some annual fees,” said Ed Mierzwinski of the U.S. Public Interest Research Group, an advocacy organization that lobbied for the law.

To be sure, the law takes effect while credit card companies are still reeling from the recession.

In 2007, the top 12 card issuers earned a combined $19 billion from credit cards, according to The Nilson Report. A year later, amid the financial meltdown, profits for those companies fell more than 65 percent to $6.32 billion. The plunge was largely because defaults ballooned as unemployment soared.

Profit figures for 2009 aren’t yet available. But banks wrote off about $35 billion in credit card debt last year, as the unemployment rate topped 10 percent. Analysts predict the default rate will remain at least twice as high as normal through this year, and longer if unemployment stays high.

At the same time, the law is expected to cut into future profits. FICO Inc., the company best known for its credit scores, projects the average card will generate less than $100 a month in revenue within three years, down from $200 a month before the law.

That helps explain why the industry reacted so aggressively to the legislation. Among the moves it made:

– Resurrected annual fees.

Annual fees, common until about 10 years ago, have made a comeback. During the final three months of last year, 43 percent of new offers for credit cards contained annual fees, versus 25 percent in the same period a year earlier, according to Mintel International, which tracks marketing data. Several banks also added these fees to existing accounts. One example: Many Citigroup customers will start paying a $60 annual fee on April 1.

– Created new fees and raised old ones.

These include a $1 processing fee for paper statements for cards issued by stores such as Victoria’s Secret and Ann Taylor. Another example is a $19 inactivity fee Fifth Third Bank now charges customers who haven’t used their card for six months.

Other banks increased existing fees. JPMorgan Chase, for instance raised the cost of balance transfers from one card to another to 5 percent of the transfer from 3 percent.

– Raised interest rates.

The average rate offered for a new card climbed to 13.6 percent last week, from 10.7 percent during the same week a year ago — meaning cardholders had to pay almost 30 percent more in interest, according to Bankrate.com.

For millions of other accounts, variable interest rates that can rise with the market replaced fixed rates. The Fed is expected to start raising its benchmark interest rates later this year, which would likely trigger an increase on those cards.

Besides making credit more expensive, banks also made it harder to get and keep credit cards. One big reason: Since the financial meltdown, many credit card issuers have been trying to reduce risk.

The number of Visa, MasterCard and American Express cards in circulation dropped 15 percent in 2009, for example. Rarely used cards were among the first cut off. Some cards linked to rewards programs for purchases like gasoline were likewise shut down.

Card companies also slashed credit limits for millions of accounts that remain open. About 40 percent of banks cut credit lines on existing accounts, according to the consultant TowerGroup, which estimated that such moves eliminated about $1 trillion in available credit. Much of that was unused.

Credit lines were frequently cut in regions most affected by the housing crisis and high unemployment, such as Florida and California, said Curt Beaudouin, a senior analyst at Moody’s Investors Service. “They’re not doing it willy nilly, they’re doing it systematically,” he said.

Companies are also making fewer solicitations. Mailed offers for new cards increased in the final three months of 2009 for the first time in two years, but there were only about 575 million. That’s about a third of the average number of quarterly offers from 2000 through 2008, according to Mintel.

Because the law makes credit cards less profitable, some subprime borrowers may not be able to get cards at all, at least for the next few years. There’s no fixed definition, but subprime borrowers generally have a FICO score below 660. For a good portion of this group, options may be limited to alternatives like PayPal and other electronic payment services, prepaid cards and payday lenders.

“Not everyone either deserves or should have an open-ended credit card,” said Roger C. Hochschild, chief operating officer of Discover Financial Services.

Joining those who won’t easily get cards: college students and others under age 21. The law strictly limits card marketing on campuses, ending giveaways like T-shirts and pizza Cards can only be granted to applicants who show they have the means to repay, or those who have a co-signer who can pay.

“Some of the more vulnerable parts of the population are a little bit more protected,” said Georgetown University finance professor James Angel. But he predicts card companies will find ways around most of the new restrictions. And once the economy recovers, he expects the lending spigot to open again.

In the meantime, there is one group of consumers that banks will chase after — those who carry a balance from month to month for at least part of the year, and pay their bills on time. They’re the most profitable and least risky group for banks.

Also a target customer: anyone willing to do more business with the bank that issues their card, say opening a checking or savings account or taking out a mortgage.

“What we want is a deeper relationship with our customers,” said Andy Rowe, an executive vice president with Bank of America’s card business. Customers willing to stick with a single bank may even be able to get annual fees waived or get a better interest rate, he said. “That’s where the competition will be.”

Copyright © 2010 The Associated Press.

When I talk about debt in this article, I’m referring to your personal credit card debt, not the many other debts which are probably equally painful, such as car loans, home mortgages, home equity loans, student school loans or tuition, etc.

This article is not intended to teach you how to avoid or get out of debt. It is intended to teach you how to avoid the second four-letter word being experienced by a growing number of consumers trying to manage and reduce their debt: scams perpetrated by ‘scam artists’ – unscrupulous debt industry members (collectors, consolidators, counselors) who want you to believe they will help you get rid of your debt, but are, in reality, con-men who are out to profit from your debt misery by convincing you to give them your money (or worse, your identity).

Debt scam artists know you are in debt. They know you need help, and that if they can be convincing enough (usually by phone) they can persuade you to give them what they want: your money or your personal information, before giving you their ‘assistance’ (in advance), in exchange for their ‘guarantees’ or ‘promises’ to help you reduce or eliminate your debt using their debt services!

Your loss is literally their gain.

The scary part is how easy it is to be victimized (ripped off) by these smooth-talking debt scam predators. Why? Because they seem so real! They know so much about you. They know you are vulnerable because your need for their help is great and your defenses are down. You will likely give them money or information to get the debt relief they promise! They are like water to a parched, thirsty person in a hot, dry desert. Your thirst for debt relief makes you desperate –they know it and are eager to profit from your misery.

Questions and Answers

Two common debt scam questions I often hear are:

1) How can I differentiate the legitimate company from the scam operation? I want to avoid the scam and select the legitimate firm to get the help I need, and not be burned again, and

2) What can I do if I have already been victimized by a debt scam? Can I get my money back? My identity?

Answers to these questions will help consumers facing the twin plagues of debt and scams.

1. How can I differentiate legitimate companies from scammers, to avoid the scam while finding a firm that can really help me reduce my debt?

• Scammers often say they are attempting to collect a debt related to an internet payday loan obtained by the consumer, but which the consumer never repaid.

• If, when questioned, the caller refuses to disclose the full name or address of the collection agency they claim to represent. It is a scam.

• If you are threatened with arrest for fraud or some other fictitious crime unless you agree to immediately wire money via Western Union, don’t do it. It’s a scam.

• If a fictitious caller tries to frighten and confuse you into paying a debt by using legal sounding terms like “We’re filing an affidavit against you” or by stating a lawsuit has been or is in the process of being filed against you. It is likely a scam.

• A hallmark of scams is calling consumers repeatedly at their place of employment.

• If the caller refuses to provide any identifying information to allow you to send a written dispute, it’s a scam.

• If the caller continues to call you, numerous times a day, regarding a payday loan you never obtained, it’s a scam.

• If you are not provided with written validation of the debt, you refuse to pay without it (which is your legal right), and you are then threatened with bring arrested, it is a likely a scam. (One person was told, ‘If that’s the case, I will have local law enforcement come to your place of business and drag you out kicking and screaming’.)

• Scam debt collectors persuade you to pay just a little of your total amount due, then use your bank information to improperly withdraw more money from your bank account.

All of these practices are typical indicators of a scam debt collection operation.

Legitimate debt collectors are legally prohibited by the Fair Debt Collection Practices Act (“FDCPA”) from making false or misleading representations (such as telling you that you have committed a crime), stating (or implying) that your nonpayment will result in your arrest, or threatening violence if you refuse to pay.

It is important to remember that legitimate debt collectors can, and do, violate the FDCPA. If a debt collector violates the federal FDCPA in trying to collect a debt from you, you indeed have legal rights which can include your damages and having your attorney’s fees paid by the debt collector. Go to www.socaldebtcollectionabuse.com for a more detailed description of your rights under the FDCPA.

Naming Names:

In addition to such typical debt scammer practices and ‘language’, some debt scam operations have been identified by federal and state law authorities by name. Scam artists have most recently identified themselves as: ACS, National Affidavit Processing Department and United Financial Crime Division. Though, like criminals, they may also use additional phony names. If you should have any questions, contact the Federal Trade Commission (www.ftc.gov) or your state’s attorney general to find out if the alleged debt collector shows up on any of the lists of phony scam artists posing as debt collectors.

2. I’ve already scammed! What can and should I do now?

As described earlier, there are two valuable things you can lose to a debt scam: your money and your identity. These are the two things that most scammers want from you. It is the reason why they contact you (either obtaining your money directly from you, or obtaining enough of your personal (financial) information (i.e. Social Security number, bank account number, etc) from you to access your money themselves.

a) If you have given a debt scammer money, your primary remedies are: filing a complaint with local, state or national law enforcement authorities (state Attorney General, Federal Trade Commission (FTC)) or business organizations (Better Business Bureau), consumer advocacy organizations), media (consumer reporters), and/or web sites (blogs, etc).

Don’t expect that any of these agencies or organizations will get your money back for you quickly (if at all). On the other hand, you will be helping other consumers who use these sources in their research of debt assistance services. Your complaint can help them avoid the same scam you just suffered.

Public law authorities such as the FTC and state Attorney General will take legal action against debt scammers when they get enough complaints about a scam to show a pattern of legal violations. Their enforcement can lead to recoupment of money from a consumer scammer, but, again, the enforcement and results do not happen overnight. (The FTC receives more consumer complaints about debt collectors than any other industry.)

Victims of debt scams can also file a lawsuit against a debt collector in state or federal court. If you believe that your rights have been violated by a debt scammer and you are in Southern California, please feel free to call me at 1-818-249-5291. You can also visit our website at www.socaldebtcollectionabuse.com.

If you are elsewhere, look for a local credit damage and consumer protection attorney at www.naca.net

However, please be advised: many scam debt collectors are “fly-by-night” operators, and suing them will do little good—they’ll simply fold their tent and go elsewhere. If my firm determines that a given debt collector is a “fly-by-night,” we will not pursue the lawsuit—it will be nothing but an exercise in frustration. Believe me, I know this from experience.

b. If you think your identity has been stolen you should:
i. Contact the three major credit bureaus (Equifax, Transunion, and Experian) as soon as possible after the theft occurs, and place a ‘fraud alert’ on your credit file. This advises your potential creditors who use that report that you are an identity theft victim (or potential victim.) Ask for an extended fraud alert, which lasts for seven years. Fraud alerts expire after 90 days. Identity thieves know this and often try to re-apply for credit with your credit information 90 days after they find out about the fraud alert.
ii. Fill out a police report about the identity theft, and make several copies. Send these copies to all three credit bureaus, and any creditors who have opened fraudulent accounts in your name. Include directions to cancel any fraudulent accounts. Send all copies by certified mail. ‘
iii. Monitor your credit report at least every week while the identity theft situation is occurring. If you see any false or fraudulent charges, immediately send a certified letter to the creditor, with a certified cc to the credit bureaus, informing them that the charges are false. Keep copies of all letters and continue to monitor your credit reports to see that the false charges are corrected.
iv. If you suffer damages as a consequence of your identity theft and wish to consult a lawyer, please contact our offices (if you’re in Southern California) at 1-818-249-5291. You can also contact us online at www.socalcreditdamage.com. If you are elsewhere, look for a local credit damage and identity theft attorney at www.naca.net

v. As with lost money, file a complaint with federal and state consumer law enforcement authorities (the FTC, your state Attorney General’s office). The FTC uses the information to coordinate with the FBI to track down the larger identity theft rings and break them up.

vi. File complaints on-line with consumer advocacy/fraud organizations such as the National Consumer League’s Fraud Center, at www.fraud.org, or the National Consumer Law Center, at www.consumerlaw.org.

vii. Share your information with a local newspaper’s consumer reporter.

viii. Share your experience through social networking sites, blogs, and elsewhere on the internet. The more people learn about your experience, the more you will help them avoid such scams and perhaps help law authorities find and stop the debt scammer.

There are many types and forms of debt and debt scams. Any time you owe money to another party, including a bank, other lender, business, or person, it is a debt. This article focused on debt scams involving consumer credit-related debt. Future articles will focus on avoiding scams associated with other common kinds of debt –home mortgage, equity loan (2nd mortgage), car loan, student loans, and more.

Copyright © 2010 by Robert F. Brennan. All rights reserved. If you should have any further questions about your rights with respect to debt collection or credit reporting, go to www.socalcreditdamage.com or www.socaldebtcollectionabuse.com, where you can send us an email. You can also call us at (818) 249-5291. Thanks for reading!

I just received this question from Bankrate.com and thought I’d share both the question and the answer, since this is a very relevant inquiry:

Question: With the practice of payment for deletion, a consumer agrees to pay a debt collector and the debt collector agrees to delete the collection account from the consumer’s credit report. Is it correct that a debt collector that complies with such a request would be in violation of the Fair Credit Reporting Act?

Answer: technically, yes. Under the Fair Credit Reporting Act, creditors are legally bound to accurately report a consumer’s known credit and debt activity, and this includes accurate reporting of negative, or derogatory, information. Debt collectors have the same obligation. 15 U.S.C. Section 1681s-2 (a) (1): “A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.”
Of course, any creditor or debt collector can determine that a derogatory mark is, in its own judgment, false, inaccurate or that cannot be verified. 15 U.S.C. Section 1681s-2 (b) (1) (E). In such a case, a creditor or debt collector can delete the derogatory credit reporting, but, to comply with the law, the creditor or debt collector would have to have a good faith basis for concluding that a derogatory is false, inaccurate or cannot be verified.

My firm has seen several cases where debt collectors specifically have promised deletion of a derogatory mark in exchange for payment of the debt. What the debt collector is not disclosing is that the debt collector may, in reality, be promising to cease reporting on its own reporting of the debt, but the debt collector has no ability to change the reporting from the original creditor. So, for instance, let’s say someone has a “Dinosaur” credit card which runs late and Dinosaur reports to the credit bureaus a 30-60-90 days late derogatory. Dinosaur then assigns or sells the debt to XYZ Debt Collectors. XYZ may tell the consumer that it will cease credit reporting the debt in exchange for payment, and in fact, in a misleading way, XYZ is telling the truth—it will cease its own negative reporting. However, XYZ does not disclose that it has no ability to affect any reporting being done by Dinosaur. Thus, the derogatory mark remains on the consumer’s credit. By law, it remains on the consumer’s credit report for seven years and six months following the date of first delinquency.

I have also encountered cases where the debt collectors simply lie to collect payment. Remember, the individual debt collectors are usually working on commission, and are given to lying, cheating and stealing to get the consumer to pay the debt. The individual collector rarely is the person at the debt collection agency who is responsible for changing credit reporting, which instead is a task usually given to someone in at least a supervisorial role. The individual debt collectors try just about anything to get the consumer to pay. It is the game. They can and will lie about credit reporting, and the only way a consumer will ever prove that they lied would be if the collector made the promise in writing. However, this will never happen—the promises to clean up credit will always be verbal only, because the individual collectors usually do not have the power to change credit reporting on the accounts.

Also, what debt collectors frequently do is simply to change the reporting from, say, “30-days late” to “settled for less than full amount.” The credit bureaus have created a special derogatory mark for consumers who negotiate down a debt—“settled for less than full amount”—for reporting on consumers who do not pay the full debt and/or who settle it for less than the full amount. This is considered a derogatory mark. So far as is known, it has the same effect as a derogatory mark for “30-days late,” so it makes little difference that a debt collector changes one derogatory for another. However, some debt collectors may believe that they are “cleaning up a consumer’s credit” by making this change. The proof is in the pudding, however—the consumer’s credit score will not change, or will change very little, when one derogatory mark is exchange for another.

So, if someone promises to “clean up your credit” in exchange for paying the debt in full, this promise is probably bogus.

Experian has compiled a list of traits common to many identity theft victims. Definitely worth reading! There’s a lot of information which is of course irrelevant–the fact that many ID theft victims enjoy tennis is not relevant to identity theft unless it’s an identity theft that occurs at a tennis club, for instance–but really what Experian is releasing is a description of the “ideal target” for an identity thief. It’s a good read and check it out. Here’s the article:

Most Common Traits of ID Theft Victims
by Jeremy M. Simon
Friday, January 29, 2010

Wealthy consumers who enjoy leisure activities such as tennis, skiing and international vacations are top targets for identity thieves, according to a new report.

A report released Wednesday by credit bureau Experian shows that fraudsters are on the hunt for the most affluent suburban consumers. Compared to the general population of credit applicants, Experian says these consumers live in and around metropolitan areas, favor leisure activities, have college diplomas or advanced degrees and more often tend to be married.

Affluent are more often victims of ID theft, report shows”The crooks are going where the money is,” says Gail Hillebrand, senior attorney with Consumers Union, the nonprofit publisher of Consumer Reports magazine.

Most Common Traits, Activities

Experian identifies the common activities of those most often victimized by ID theft:

• Tennis
• Politics
• Foreign travel
• Charities/volunteering
• Cultural/arts
• Skiing

Where — and how — these consumers live also seems to make them more of a target. “The opportunities to steal discarded documents would be greater in suburban areas,” says Linda Sherry, director of national priorities with advocacy group Consumer Action. “More affluent households may have domestic help and service people who may have the opportunity to steal personal info from the home that can be used to acquire credit.”

How did Experian identify this group of wealthy victims? The bureau’s Fraud and Identity Solutions group — in conjunction with Experian Marketing Services — compared credit application data with thousands of individual fraud records between January 2007 and November 2008. It found that three of its 12 demographic groups were the most highly sought-after by identity thieves: “affluent suburbia,” “upscale American” and the more middle-class “American diversity” category of consumers.

Experian found that compared with the general population of credit applicants, the consumers most often victimized by fraudsters tend to own more new and luxury vehicles and live in higher-income neighborhoods that contain many more homeowners than renters. Additionally, these borrowers tend to be based in densely populated metropolitan areas and often reside in multifamily homes or condos.

Thieves aren’t the only group focusing on wealthy borrowers. “Lenders are obviously targeting some of these demographics as well,” with better and more frequent offers of financial goods and services, says Keir Breitenfeld, director of product management for Experian’s Fraud and Identity Solutions group. As a result, thieves who target these consumers and steal their information have an easier time getting credit and services in their victims’ names. “If you’re a fraudster, you want to assume the identity of someone who can go out and get high-value services,” Breitenfeld says.

How to Protect Yourself

Consumer advocates, meanwhile, say that if the affluent can be victimized by ID thieves, anyone can. “You can’t protect yourself. Even the most affluent suburban households, it’s still happening to them,” Hillebrand says. She says that banks and other institutions have an obligation to better guard consumer data. “We don’t have much control over that as individual consumers. People who receive our data decide how carefully to protect our information,” Hillebrand says.

However, Experian says lenders need to strike a balance between guarding consumers and not making them struggle unnecessarily to get approved for credit. If consumers must jump through too many hoops in order to get a loan, Experian says, the bank may end up losing their business. Still, Experian says its report suggests that financial institutions may want to do more to protect certain high-risk borrowers.

But it’s not only lenders who need to take steps to guard against identity theft. “If you fall into that category, you may want to consider those services” aimed at preventing ID theft, says Maxine Sweet, Experian’s vice president of public education.

Those services include:

• Credit Freezes. Both Experian and Consumers Union say freezes offer benefits, but they can also mean added work for the consumer, such as getting a cell phone or utility service. “You have to be willing to be actively engaged in managing your credit report if you freeze,” Sweet says.

• Credit Monitoring. Credit monitoring, meanwhile, offers alerts about credit report activity — typically for a price. Monitoring offers “piece of mind that every month there has been no activity and if there is activity you get a warning,” Sweet says.

Consumers may also decide to fight for more ID theft protection from the government, including more oversight of players in financial system and restrictions on how borrowers’ personal data can be collected and how long it can be kept, Hillebrand says.

She points to one of the interests highlighted by Experian’s report. “If the people who are getting ripped off are interested in politics, they should get politically active,” she says.

I guess “the other shoe” has dropped on credit score requirements. Lenders are now treating a FICO score between 680 and 739 as mid-range, not suitable for the best rates. Now the minimum score required for the best rates is 740. Here’s the article from BankRate.com, which includes some good pointers on managing your credit score in the coming year. Thanks for reading.

Good Credit Score Not Good Enough Anymore by Melissa Ezarik Tuesday, December 29, 2009, provided byBankrate

With historically low rates, many homeowners are watching closely for the right time to refinance their mortgages. Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score.

That was then. This is now.

A few years ago, a score of 620 or higher was good enough. That increased to 680 in early 2008. Then it jumped to 720 in April last year and 740 in August, says Rodney Anderson, senior managing partner of Plano, Texas-based Rodney Anderson Lending Services.

In the past, any score of 700 or higher would get a double thumbs-up from credit experts. Now, rate adjustments begin kicking in at 740, with every 20-point drop adding another adjustment.

In other words, many people who were taking pride in their credit habits either must pay significantly higher or try to make quick changes to nudge their scores upward. “What used to be great is now only good,” says mortgage broker Todd Huettner, president of Denver-based Huettner Capital.
Refinancing that would have worked a year ago might well not make sense, he adds.

“I have clients all the time who literally wind up with a score of 739, 719, 699, 679 … and it costs them money to either fix it or pay for it,”
Huettner says.

One of Huettner’s clients, who always had a score of about 740, went to do a refinance and found her current score at 719. “The reason was, she put a new washer and dryer on a store credit card,” he says. Many store cards are actually revolving credit, and your limit may well be equal or about equal to the purchase you’re trying to make that day.

Take the application that Stamford, Conn.-based Luxury Mortgage Corp. got recently. Interested in lowering the rate on an existing mortgage, the borrower could verify substantial income, assets and personal credit history, says chief executive David Adamo. But the borrower’s credit score had taken a hit after co-signing an auto loan for his son that had not been paid timely.

“As a result, the borrower, who otherwise met every other criterion, was unable to refinance the loan at a rate that made economic sense,” Adamo says.

Another wrinkle in today’s market: Even those with FICO scores of 740 or higher are penalized for buying in a geographic market on the downswing.
“This adjustment affects all borrowers, regardless of score, if in a declining market,” says mortgage broker Jim Heidelberg, president of Heidelberg Capital Corp. in Tampa, Fla.

In many cases, the added costs of rate adjustments are “enough to make a refinance that would otherwise make sense have no benefit to the borrower,” Huettner says.

The road to new scoring

How did we get to this new reality?

The nation’s two largest mortgage lenders, Fannie Mae and Freddie Mac, suffered major losses in the market last year and then redefined risk, announcing price adjustments for borrowers with FICO scores below 720, says Sean Cragg, vice president of sales for Ann Arbor, Mich.-based Gold Star Mortgage Financial Group.

And, in case you were wondering, “these fees have nothing to do with your mortgage company or its various products and cannot be negotiated away,”
Cragg says.

All mortgage bankers, brokers and credit unions must comply with the higher interest rates and delivery changes in all traditional mortgages, says Heidelberg. Only entities intending to hold the mortgages in their own portfolios can follow their own guidelines.

Worse news may be on the horizon. “There are many factors, including proposed legislation and regulation, that continue to change the mortgage lending landscape,” says David Chung, managing director of Towson, Md.-based CreditXpert Inc., which provides credit analysis services to consumers. “In the near term, it is more likely that this benchmark will continue to rise than fall.”

Surprise, surprise

Joe and Jane Homeowner have likely heard of the new credit restrictions.
But the actual cost to them is often a surprise when they sit down with a broker.

“Often, lenders will quote rates that include the adjustments, without calling attention to them in order to avoid a negative reaction from their customer,” says James Guthrie, a partner in New Home Finance in Suwanee, Ga.

Less surprising are other factors that go into securing financing for a new or existing mortgage. Paola Kielblock, national products manager for Sun Prairie, Wis.-based Fairway Independent Mortgage Corp., clarifies today’s requirements:

• Good credit.
• Stable job, with a minimum of two years of employment.
• Reserves after closing, including a minimum of two to six months of mortgage principal, interest, taxes and insurance.
• Down payment from the borrower’s own funds.
• Low debt-to-income ratio. The required ratio varies between banks but is generally less than 40 percent, according to many in the industry.
• Good loan-to-value percentage. It also varies, but it’s often cited as less than 80 percent.

Having equity in your home is a major factor in getting approved for a refinance and in finding the best rate, says Cameron Findlay, chief economist for LendingTree.com. The more equity in the home, the less risk there is to the lender if the home is repossessed.

Taking action on your score

What can a homeowner who wants to refinance do with a good FICO score that’s not good enough?

“Virtually everyone can raise their scores by at least 10 (points) to 20 points, sometimes significantly more in 30 days,” Anderson says. Here’s what to do.

1. Find out what might have gone wrong. Applicants should know their credit score, understand what it means to their loan rates and ask their loan officers to use credit analysis on their behalf, says Chung. Credit analysis tools are a simple way to identify key score influencers by scrutinizing the information contained in each of an individual’s three credit reports to look for inconsistencies, errors and omissions that may artificially depress the score.

2. Correct any inaccuracies. Although consumers can improve scores on their own, Kielblock notes that credit agencies offer services to mortgage brokers to help consumers raise their credit scores if something is reported inaccurately and there is proof of a discrepancy.

3. Decrease the percentage of available credit used. This can be done by paying down balances or increasing credit limits, says Guthrie. Ideally, this means keeping balances as close to zero as possible, and definitely below 30 percent of the available credit limit, experts say.

“We’ve seen people increase their scores by as much as 90 points or more, simply by paying off the right cards,” Anderson says.

4. Move things around. If one income can be used to qualify for the loan, transfer accounts to “park” the debt in the other party’s name, Guthrie says.

5. Get a rapid rescore. It’s the only way to find out fast if an attempt to improve a score was successful. It’s done through your lender and a rescoring company. The process takes about a week, but it can get the loan process back on track. The downside is it costs a few hundred dollars. The credit bureau Experian has seen an increase in rapid rescoring requests, says spokeswoman Cynthia Baker. “While we haven’t done a direct cause-and-effect analysis, anecdotally, the volume does appear to have increased as interest rates have dropped in March,” she says.

Aside from working toward a better score, there are two additional options. One is paying points to buy down the interest rate. “This is only a good idea if the borrower will then live in the house beyond the break-even point, meaning the time where the money they’ve paid in points is made up for by way of less expensive monthly payments,” says Findlay.

The other option: shopping around. Some lenders, such as Palo Alto, Calif.-based Addison Avenue Federal Credit Union, have loans, known as “portfolio” loans, that aren’t subject to blanket rules on credit scores because the lender intends to keep them rather than sell the loans in the secondary market.

Michelle Edwards, national mortgage sales director, reports that for these loans, her company increases the cost of a mortgage only for consumers whose credit scores are below 680. One customer looking to refinance avoided a pricing adjustment because of compensating factors such as loan-to-value ratio, assets and length of employment.

In a perfect world, anyone contemplating a refinance or a new mortgage anytime within the next year or so would start working on getting the ideal credit score now.

But what if that didn’t happen? Try not to let your emotions drive how you feel about your interest rate. A mortgage is a financial decision that should be driven by economics, “not the pursuit of the world’s lowest rate because having it would make you feel good,” Heidelberg says.

He also says some consumers wait six months for a slightly better rate when a refinance could save $500 a month means missing $3,000 in savings.
As Heidelberg says,

“This is foolish.”
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