Is your credit report everywhere you want to be?
Photo by: Philippe Ramakers (Stock Exchange)

These days, as more and more people have found themselves dealing with creditors on unfavorable terms and fighting to pay household bills with mounting credit card balances, consumers are inundated with calls to keep an eye on their credit report.

Receiving a credit report from each of the three reporting agencies once a year is free, and it’s also a key step in detecting fraud and preventing identity theft.

Today, UWSA discusses the credit report: how to obtain it, how to read it, and how it relates to the credit score.

Obtaining Your Free Credit Report

Though there may be similar outlets with catchy jingles advertised on television, the official website maintained by the three credit reporting companies to meet their legal obligation to provide one free credit report per company per year; other services offering “free” credit reports usually do so under the condition that the user agree to credit monitoring or another fee-based service.

Using AnnualCreditReport.com, you can easily obtain reports from Experian, TransUnion, and Equifax. The website requests personally identifying information, including your Social Security number, and asks you several questions about your major credit history and past addresses to prevent fraud. Once verified, you are able to select one, two, or all three companies to receive credit reports from. Though the details of presentation differ, these reports are all essentially the same in intent and use.

Contents of Your Credit Report

Some essential features of your credit report include …

Complete transaction history. Your credit report includes past and present credit, loan, and other financial accounts and their status. You should explore these accounts, ensure that each one was legitimately opened by you, and verify that all accounts closed in the past are designated as such. Also included is the average age of opened accounts; a higher average age indicates a longer and more stable credit history, and therefore, a lower risk.

Potentially negative items. Modern credit reports generally single out “potentially negative items” such as account defaults for your attention. The website interface permits you to open a dispute case for these items from within your credit report. “Zombie debt” and other fraudulent or abusive practices, both from identity thieves and from creditors, can be detected by examining these entries.

Total indebtedness. Many modern credit reports allow you to estimate the total amount of payments due to all of your outstanding accounts and the type of debt that each one represents. Having a high amount of credit use in relation to your total credit line or total income are major factors that might prevent you from getting loans on favorable terms, and may result in restriction of current credit lines as consumer credit stagnates.

While much of a credit report is simple and easy to understand for a non-expert, there are a large number of features and facts not mentioned here. You can only access your free credit report once per year, and once you log off from your session, you generally cannot return to it. Be sure to set aside no less than an hour to understand your report thoroughly.

What About Credit Scores?

Your credit score is a numerical representation of overall credit risk, derived from the contents of your credit report. It’s an easy shorthand to understanding the health of your credit history, and is used constantly to determine your level of credit risk. Unfortunately, credit reporting companies are not legally obligated to provide your credit score with your credit report, and have monetized this as an add-on feature. We’ll discuss the credit score specifically and describe what each score means in a future UWSA post.

Don't let your expired debts "rise from the grave!"
Photo by: dhollister (Flickr)

In a previous post, we focused on debt collectors and unfair collection practices.

Today, we’ll discuss “zombie debt”: debt that continues to linger “in collection” long after it is paid.

This is a recent phenomenon, owing to the huge proliferation of third-party debt collectors and debt buyers touched on earlier.

Because of low levels of communication between these middlemen, not to mention the possibility of unscrupulous practices, different companies may attempt to collect on the same debt multiple times as it passes from hand to hand.

Zombie debt can be the result of honest error, but requires even more vigilance and persistence to solve than other forms of debt collection abuse.

The Credit Report: Key to Your Zombie Debt Arsenal

The problem of zombie debt makes it even more important to monitor your credit score on a regular basis. Negative marks on your credit report are generally removed after seven years and cannot be used as the basis of your credit score; a debt collector can attempt to manipulate this by telling credit agencies that an old debt is a new one. If the debt has “changed hands”, this ruse could go undetected unless you catch it yourself.

There are three major credit reporting agencies: Experian, Equifax, and TransUnion. The best information is obtained by reviewing your reports from all of them on a regular basis. Luckily, under the Fair Credit Reporting Act, you are entitled to a free credit report from each agency once every 12 months. The official web “hub” for ordering a complimentary report from any or all of the three agencies is AnnualCreditReport.com.

If you find an error on your credit report, it’s up to you to dispute it with the three agencies. Remember: zombie debt abuses are based on the idea that you won’t fight back! If you believe a debt collector is intentionally engaging in unfair practices, whether in regards to credit card debt, household bills, or any other transaction, communicate with them only in writing and keep copious records. Consider retaining an attorney: many zombie debts are related to violations of the Fair Credit Reporting Act, a federal law that can carry stiff penalties for those who do not follow it.

The Statute of Limitations: Sunlight to Turn Those Old Debts to Dust

Another important thing to remember is that there is a statute of limitation to any debt. After the statute of limitation, creditors and debt collectors can no longer take legal action in pursuit of the debt. The specific amount of time in each case varies by state and by the type of debt under consideration; however, every debt has a limit, and the countdown generally begins within a short time after the account first goes delinquent.

Because a lawsuit is no longer possible after that time, any claim to the contrary by a debt collector violates federal standards, which may include the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. In short: regardless of fault, no one has the legal right to collect on an “ancient” debt. Any activity or claim to the contrary may constitute fraud. Consider sending a “cease and desist” letter to any debt collector you know is in the wrong; this puts them in the position of outlining the legal action they plan to take against you. In the case of real “zombie debt”, the only safe answer for them is “none.”

Have zombies lurking around your credit report?
Share you zombie stories and zombie fighting tips.

Bill collector acting like a pirate? The law's on your side
Photo by: Bill Davenpot (Stock Exchange)

Every day, thousands of Americans get calls from debt collectors.

If you’re in the middle of settlement, debt consolidation, or even in the early stages of seeking debt relief, you don’t deserve unwanted and harassing calls; and you don’t have to let them disrupt your life.

Today, we’ll discuss facts and resources to help you use existing consumer credit protection laws to your advantage and cut through the climate of fear that a small minority of abusive debt collectors create for hard-working people.

The Basic Facts on Debt Collection

Many major banks and other firms have their own debt collection wings which may be empowered to help you work with your creditor and develop payment plans and other strategies for getting your accounts current. However, depending on factors like your creditors’ policies and the age of the debt in question, many businesses “outsource” debt collection to a third-party agency.

“Debt buyers” may even purchase your debt from a legitimate creditor at a fraction of the debt’s value, in the hopes of profiting by collecting it. These agencies are less motivated to adhere to ethical standards in dealing with you; you are not their customer or client. Confusion or misrepresentation between creditors, third-party agencies, and payees can result n “zombie debts” that payees may be coerced to pay repeatedly. More on that later.

What Are Your Rights?

Under the Fair Debt Collection Practices Act, you can file a complaint against a collector for several violations. Here are some of the most common:

1) Repeated or continuous phone calls;

2) Use of abusive or vulgar language or threats;

3) Calling before 8 AM or after 9 PM, regardless of their own timezone;

4) Informing a third party about your debt;

5) Calling you at work after one warning against this behavior;

Furthermore, you have the right to request, in writing, verification of the amount that you owe and the name of the creditor. It’s advisable to send these requests via registered mail or care of a law firm; debt collection cannot continue after receipt of your verification request until after the information is provided in full. Making indisputable, written requests is a first step toward preventing “zombie debt.” You also have the right to request all communication in writing rather than by phone; but as individual collectors can often claim they were “not informed”, this should also be certified in writing.

A final option is a “cease and desist” letter, which requires the debt collector to cease communications after a final written notice that informs you of actions the collector may or will take. Written correspondence is the most direct way to deal with collectors; but if you are not ready to move to “cease and desist” or still need to gather more information by telephone, remember that in many jurisdictions you are permitted to record phone conversations as long as you inform your calling partner. Debt collectors, like many other businesses, often record calls for analysis; there is no reason you cannot gather information this way as well. If debt collectors refuse to speak to you “on the record” (and you should always be gathering records that will protect you against unlawful abuse!) they cannot continue harassing you, either. Be sure to get advice on the relevant laws, and be clear and upfront about your intentions.

How Widespread is Debt Collection Abuse?

Figures are hard to pin down, but it’s widespread enough to provoke revolt against unethical debt collectors. Over 8,000 violations of the Fair Debt Collection Practices Act were alleged in federal lawsuits over the course of 2009, and according to a recent Supreme Court decision, ignorance of the law is no excuse: collectors cannot be shielded from lawsuits by claiming they erred in interpreting the law. Plus, if a debtor wins a lawsuit under FDCPA, the debt collector may be obligated to pay court costs. More information and resources on the “debtor revolt” movement can be found in this recent CNBC article: “Learning How to Fight Back Against Debt Collectors.”

In Conclusion …

No one claims that consumers should be exempt from legitimate debt. But debt collection is now a profit industry, with more involvement by “middlemen” than ever before, and more complex relationships between the parties affected. Don’t get taken advantage of: protect yourself with a vigorous understanding of your rights, and the services of a financial adviser and legal counsel where necessary.