Credit Technologies, Inc.

FTC Announces Expanded Business Education Campaign on ‘Red Flags’ Rule

To assist small businesses and other entities, the Federal Trade Commission staff will redouble its efforts to educate them about compliance with the “Red Flags” Rule and ease compliance by providing additional resources and guidance to clarify whether businesses are covered by the Rule and what they must do to comply. To give creditors and financial institutions more time to review this guidance and develop and implement written identity theft prevention Programs, the FTC will further delay enforcement of the Rule until November 1, 2009.

The entire press release is available at http://www.ftc.gov/opa/2009/07/redflag.shtm

To learn more about Red Flag, or to register for an upcoming free EasyRedFlag webinar, please visit www.EasyRedFlag.com.

Critical data needed to help mortgage applicants improve their credit report and FICO scores is often hidden on tri-merge credit reports.

FICO^®scoring is the most misunderstood facet of credit reporting. Before undertaking any actions in an attempt to improve your borrower’s score, it’s important that you first understand “why they have the score they have.” The biggest surprise to most loan originators is that your tri merge report hides most of your borrower’s credit data.

“When reviewing a tri merge credit report, you are able to see only 1/3 of the consumer’s actual credit history.”

It’s difficult, (depending on your credit provider – it may be impossible) to accurately assess your borrower’s credit file based on reviewing a tri-merge report, as the logic used in creating the report, hides most (two thirds) of the consumer’s credit data.  Here’s an example,

Most creditors report data to all three repositories (Experian, Trans Union and Equifax.) Every tri-merge report contains data from all three sources, but you don’t want to see three examples of every trade line (three copies of each mortgage, car loan and credit card…) so CRAs employ a de-duping process we refer to as  “pick and choose logic.” Essentially, all examples of a given trade line are compared, and the most recent version containing the most derogatory data is selected and placed on your credit report. The other two versions of that item are suppressed and an abbreviation or code is added to the trade line to reflect which repositories contain data from that creditor. The problem with this method is readers assume that what they see on their tri-merge report is the same data that appears on the other “hidden” repositories – rarely is this the case.

This is why you can conduct a line-by-line review of a file that has significant differences in the FICO scores between the three repositories and be unable to determine “why” the scores are different. The answer is hidden in the 2/3rds of the data you cannot see. This is also the reason why so many rescoring attempts end in failure. Credit Technologies created a simple, free solution to this problem. With a single mouse click, we compare the data on all three repository files and highlights the variations. We call this the ability to see “the data behind the score”. This makes it simple for you to determine why the scores are different, and what steps are required to reach the needed score goals.

Adding to scoring frustration, loan originators often develop “tunnel vision’ when assessing an applicant’s credit and scores, focusing on any derogatory items that may appear. Very often, those items (especially if they are more than 24 months old) have little to do with the negative score result. The answers lie in the factors or comments listed directly below each score value. These comments are listed in order of what had the most negative impact to the score. To maximize score improvement, you should focus on the top listed items. Let’s look at an example…

SCORE: 629    Trans Union FICO Classic (04)
010 – Proportion of balances to credit limits is too high
014 – Length of time accounts have been established
005 – Too many accounts with balances
002 – Level of delinquency on accounts

This is a classic example of a file that often causes mortgage professionals to miss opportunities. This consumer has many prior delinquencies reported on their file but…they are all older (24+ months.) Because of the ages of the derogatory trade lines, they are having little impact on the consumer’s FICO score. As the factors indicate – the key to improving this consumer’s score is to avoid derogatory “tunnel vision” and focus on the issues affecting the consumer’s score – in this case, revolving ratios.

As with many things, the key to success is education – this is especially true with FICO scoring. To learn more about FICO scoring education and the advantages of rescoring, please visit http://credittechnologies.com/MortgageAlchemy.asp

Thomas P. Conwell III
President, Credit Technologies, Inc.^®
Director, National Credit Reporting Association (NCRA)

© Copyright 2009 , Credit Technologies, Inc. – All Rights Reserved.  FICO^® is a registered trademark of the Fair Isaac Company

“We’ve Never Seen a Legitimate Credit-Repair Operation” 
Steven Baker, director of the Federal Trade Commission’s Chicago regional office.

Credit repair can damage your credit report, FICO score and finances...

Despite the phenomenal claims made by most credit repair companies, all they do is dispute trade lines in the name of the consumer. The filing of a consumer dispute is the only method anyone other than the creditor, a credit reporting agency or the repository itself has to affect change in any repository file.  A credit repair company cannot do anything the consumer cannot do themselves for free and faster, in fact – they cannot even obtain a copy of the consumers’ credit report as credit repair companies are prohibited access to Experian, Trans Union and Equifax. 

Consumers can obtain free copies of all three repository files in minutes at AnnualCreditReport.com and if errors are found, dispute them online at no cost. They are also provided a toll-free number to reach a live person that can answer questions and assist them with the process if needed, including faxing documentation all at absolutely no cost. Except for credit rescoring, this is fastest method possibly of updating a consumer’s credit file.  

Here’s the step-by-step for the only free credit repair solution

Credit Repair poses real risks to Consumers…

Besides the monetary risks associated with credit repair, the actions of a credit repair company can damage your FICO score.  Most credit repair companies simply dispute every derogatory item appearing on your credit report. Those creditors that verify the disputed items often update the data reported to the repositories including the reporting dates. The result of frivolously disputing trade lines often results in lowering your FICO scores. The dispute process also means you are providing your current address to creditors, which can also result in new collection contacts and phone calls. Here are a few other warning signs to look out for…

Charging up-front fees in violation of Federal law
Many credit repair firms violate Federal law by requiring up-front fees often disguised as “account set-up” or analysis fees. Some require you to purchase a training manual for hundreds of dollars just to access “free” credit repair. Credit Repair Organizations Act – Public Law 90-321, 82 Stat. 164 “404. Prohibited practices. b) Payment in Advance. — No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.”  The entire text of the CROA is available at http://www.ftc.gov/os/statutes/croa/croa.shtm

Does not accept credit cards (or attempts to disguise PayPal^® as a merchant account)
This is an important warning sign, it often means the firm is unable to gain approval to process credit cards (a physical inspection and positive financial history is required). Companies with questionable pasts or practices instead will often require you pay using a third party credit card processing company, check by phone, ACH/direct debit or other means which may provide less protection in the event of fraud. Some will demand post-dated checks before providing any service (you’re expected to trust them with your confidential credit and banking information, but they don’t trust you for payment.) 

Web based, no physical location or allows contact by email only
Any company can provide a few positive references. Do your homework on any credit repair firm before sharing any confidential credit data or credit card information with them. You can verify how long their website has existed using any domain lookup tool such as  http://www.domaintools.com/ You will often find that although they may claim to have been in business for “decades”, in reality their websites are newly formed. Most credit repair companies found on the Internet are simply re-selling services provided by other companies – so you’re often unable to determine just who will have access to your personal information.

A Special Warning For Mortgage Professionals

In an attempt to help mortgage applicants qualify, (or as a means to generate additional income), we often see mortgage brokers and bankers recommending credit repair for their borrowers.  While there are usually options to assist consumers in improving their FICO scores (often in 24 hours) – credit repair is almost always a bad choice.  Aside from the problems identified above, credit repair presents a special risk to mortgage professionals. 

Engaging in credit repair is a violation of every repository contract – regardless of the credit reporting agency you utilize.

Over the years we have seen numerous audits conducted by the repositories that result in the termination of that broker or lenders access to credit data. These audits are often triggered by borrowers, who at the recommendation of credit repair companies, frivolously dispute items contained in a credit report provided to them by a mortgage professional. The repositories monitor patterns on frivelous disputes received, matching them to recent inquires into that consumer’s credit report.  All three repositories (Experian, Trans Union and Equifax) publish a monthly list of mortgage companies (and individuals) which are barred access to credit data through every credit reporting agency – Essentially putting that firm out-of-business.

Mortgage professionals – Before recommending your applicant dispute items on his/her credit report, either directly or through a credit repair company, it’s important that you understand how the data on your applicants credit report impacts their FICO score and the potential impact of any changes (see Mortgage Alchemy.) Because FICO scoring is often counter-intuitive (e.g. paying off a collection account usually results in lowering the consumers FICO score)  the best advice is to first talk to your credit reporting agency. Here are a few examples of how what you don’t know may be hurting your applicants…

• When reviewing a tri-merge report, it’s often difficult (depending on your credit provider, it may be impossible) to determine what is being reported by each repository. In many cases, you are unable to tell which items to dispute through which repository.  The merge logic used to produce the tri-merge is often responsible for errors on the tri merge report, in which case no dispute of the repositories is needed.
   
• If your borrower disputes any trade line, that item is locked from any further actions until the dispute is resolved. It might have been possible through re-scoring tools to correct the item in as little as 24 hours. This would no longer be an option once a dispute is lodged.
   
• There are other options that are much faster than filing a dispute (such as e-Oscar whereby the trade line can be updated in minutes.)
   
• It is possible that removing an item (even if that item contained derogatory data) can cause a drop in the FICO score, or worse yet – that item might have been part of the minimum required to produce the FICO score. Once removed – you’ve lost your FICO score entirely.

You can’t un-ring a bell, unless you are certain of what you’re dealing with and the resulting change (if any) to the credit score, it’s best to have your credit reporting agency confirm your actions will provide the expected results. If your credit reporting agency can’t provide these crucial services, you need a new CRA.

Thomas P. Conwell III
President, Credit Technologies, Inc.^®
Director, National Credit Reporting Association (NCRA)

© Copyright 2009, Credit Technologies, Inc. – All Rights Reserved.  *PayPal^® is a registered trademark of PayPal, Inc.

House Introduces HVCC Legislation

On Friday, June 26, Representatives Childers (D-MS) and Miller (R-CA) introduced H.R. 3044, a bill calling for an 18 month moratorium on the HVCC. NAMB President Marc Savitt, CRMS called the legislation a “victory for consumers and members of the industry alike.

To view NAMB’s press release, click here. For a copy of H.R. 3044, click here.

Red Flag requirements take effect August 1, 2009 requiring more than 2,000,000 entities – virtually all types of lender including banks, credit unions, mortgage brokers and lenders, auto/motorcycle dealers, utility companies and cell phone providers take significant steps to detect and prevent identity theft.

 Credit Technologies provides a simple, free way for mortgage professionals to learn how to comply with FACTA section 114 (commonly referred to as the “Red Flag” rules.) EasyRedFlag is a fully interactive webinar-style training course designed to dramatically simplify FACTA Red Flag compliance – and is provided free of charge to all mortgage professionals. This interactive online course teaches you how to comply with FACTA Red Flag including:

• Covered accounts – How to develop the required detection, response and mitigation methods
• Required procedural and training documents – Implementing the annual update requirements
• Simple, free online solutions and templates to create the needed documents and processes
• State and Federal enforcement and penalties for non-compliance

“Every mortgage professional should attend this webinar to understand the requirements, and a simple way to comply – all provided by Credit Technologies absolutely free of charge.”

The EasyRedFlag Webinars run about 45 minutes with lots of Q&A time at the conclusion to address your specific questions and concerns. Register for an upcoming webinar at  http://credittechnologies.com/RFregistration.asp.   

For more information on Red Flag compliance, or any mortgage credit, FICO scoring or other mortgage related information, please visit www.CreditTechnologies.com

Due to unprecedented increases in 4506 volume, typical IRS Service Center turn-around times are increasing – and are now approaching 2 business days. This increase in volume is likely a result of more lenders requiring tax and W-2 transcripts be executed on every file.

In an effort to provide the fastest turn times under these new circumstances, we have adjusted our suggested cut off time to 11:00AM Eastern. The IRS is often treating requests received after 11:00 as having been received the following day.

Please try and submit your 4506T requests no later than 11:00AM. This earlier transmittal time gives us the best chance of obtaining your needed tax data within the expected 24 hours time frame. We will continue to monitor the situation and keep you advised of any further changes.

For more information on ordering and pricing, please contact your sales representative or visit http://www.credittechnologies.com/4506_Lender.asp

Please call 800.445.4022 Option 4 should have any further questions or concerns.