EasterSeal/Freddie Mac CreditSmart Training Credit Questions & Answers

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1 Bankruptcy What Is Bankruptcy? Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all creditors from seeking to collect debts from you, at least until the debts are sorted out according to the law. What are the different types of bankruptcies? Chapter 7 is known as straight bankruptcy or liquidation. It requires an individual to give up property which is not exempt under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep all their property except property which is very valuable or which is subject to a lien which they cannot avoid or afford to pay. Chapter 11, known as reorganization, is used by businesses and a few individuals whose debts are very large. Chapter 12 is reserved for family farmers and fishermen. Chapter 13 is a type of reorganization used by individuals to pay all or a portion of their debts over a period of years using their current income. How long after a client files Bankruptcy can a person apply for a mortgage loan? Each lender is different, from 2 4 years depending on the loan product. How long does a Bankruptcy remain on your credit report? Here s the general rule of thumb: The Fair Credit Reporting Act allows bankruptcy to be reported for up to 10 years. The key word is allow because it is not mandatory. The general rule has been 10 years; however, each bureau has its own internal policy on how long they report bankruptcies. The Counselor s Corner, LLC 4/25/18 1

2 If you are receiving Public benefits, will it be protected under a bankruptcy? Yes, all public benefits, such as welfare, Social Security, and unemployment insurance, are fully protected. Is bankruptcy counseling a requirement? Yes, to qualify for bankruptcy relief, you must show that you received credit counseling from an agency approved by the U.S Trustee s office within the 180-day period before you file your bankruptcy. Once you complete the counseling, the agency will give you a certificate of completion that you must file no later than 15 days after your bankruptcy filing date. Is there a cost for counseling? Most approved agencies charge between $30-$50 for the pre-filing counseling. However, the law requires approved agencies to provide bankruptcy counseling and the necessary certificates without considering an individual s ability to pay. If you cannot afford the fee, you should ask the agency to provide the counseling free of charge or at a reduced fee. What Property Can I Keep in a Bankruptcy? In a chapter 7 case, you can keep all property which the law says is exempt from the claims of creditors. It is important to check the exemptions that are available in the state where you live. What will happen to the client s home and/or car if they file bankruptcy? In most cases, they will not lose their home or car during a bankruptcy as long as the equity in the property is fully exempt. If the property is not fully exempt, the client will be able to keep it, if they pay its non-exempt value to the creditors in chapter 13. Refer the consumer to an attorney for more specific information. The Counselor s Corner, LLC 4/25/18 2

3 Can I Own Anything After Bankruptcy? Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. Consumers can keep exempt property and anything obtain after the bankruptcy is filed. However, if the consumer receives an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to the creditors if the property or money is not exempt. Have your client check with a local attorney for specific information about this topic. Will bankruptcy wipe out all my debts? Yes, with some exceptions. Bankruptcy will not normally wipe out: debts not listed on the bankruptcy petition; money owed for child support or alimony; most fines and penalties owed to government agencies; most taxes and debts incurred to pay taxes which cannot be discharged; student loans unless you can prove to the court that repaying them will be an undue hardship; loans received by knowingly giving false information to a creditor, who reasonably relied on it in making the loan; debts resulting from willful and malicious harm; debts incurred by driving while intoxicated; mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor). How does bankruptcy impact the credit of a co-signer? If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt. If you file a chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan. The Counselor s Corner, LLC 4/25/18 3

4 Will a bankruptcy affect my credit? There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you ve filed a bankruptcy can appear on your credit record for ten years from the date your case was filed. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit. If you decide to file bankruptcy, remember that debts discharged in your bankruptcy should be listed on your report as having a zero balance, meaning you do not owe anything on the debt. Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult or costly to get credit. You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct. How does a bankruptcy affect a judgment or lawsuit? The filing of either a Chapter 7 straight bankruptcy or Chapter 13 debt adjustment immediately stops any lawsuits from being filed or judgments being taken against a filer. If a lawsuit is pending at the time of such filing, it can go no further. If a judgment has been taken, its enforcement can go no further. If a creditor has a judgment and is garnishing the borrower s wages, the garnishment can be stopped. Filing for Chapter 7 straight bankruptcy may relieve you of the obligation to pay the judgment. In a Chapter 13 debt adjustment, you may be able to satisfy the judgment over a period not to exceed five years. If the judgment has placed a lien on your home, that lien can be removed if it interferes with your homestead. If lawsuits or judgments are a threat or reality, the protection afforded under the bankruptcy laws may be an appropriate solution for you. Always refer the client an attorney for specific information. How many times can you file bankruptcy? You can file for bankruptcy twice or even three times, even if you have received a discharge. The key is that you will often have to wait a certain period after you have filed and have received a discharge, to file for bankruptcy again and get a full discharge. The Counselor s Corner, LLC 4/25/18 4

5 Credit Reports How to Get Free Copies Credit Reports Per Year? As a consumer, you may request a free copy of your credit report from each of the three national credit bureaus every twelve months. Accessing and reviewing your credit reports from each of the three bureaus annually helps you ensure the accuracy of the information. It also allows you to monitor your account history to protect against identity theft. Are "Credit Bureaus" Government Agencies? No. Credit reporting companies are just that - companies. They are in business to make money, and they generate their income by selling credit reports to creditors. What information is not in a credit report? Data about race, religious preference, medical history, personal lifestyle, political preference, friends, criminal record or any other information unrelated to credit. Why does student loan information appear more than once on the credit report? Student loans are reported individually by enrollment periods. Therefore, the loans cannot be combined. What is a security freeze on your credit report? A Credit Freeze, also known as a Security Freeze, is a way to have maximum control over access to your credit. Placing a freeze on your credit report will prevent lenders and others from accessing your credit report in response to a new credit application. How are you able to include a statement on credit report? By writing to each bureau. Remember this state should be 100 words or less. The Counselor s Corner, LLC 4/25/18 5

6 How do I place a security freeze on my credit report? If you currently have a security freeze on your credit file and would like to temporarily lift it for a creditor there are two options: You may request a temporary lift for a specific credit grantor, or. You may request a date range lift for a specific period of time, ranging from 1 day to 1 year. Does a credit freeze stop prescreened credit offers? No. If you want to stop getting prescreened offers of credit, call 888-5OPTOUT ( ) or go online. The phone number and website are operated by the nationwide credit reporting companies. You can opt out for five years or permanently. However, some companies send offers that are not based on prescreening, and your federal opt-out right will not stop those kinds of solicitations. Can anyone see my credit report if it is frozen? Certain entities still will have access to it. your report can be released to your existing creditors or to debt collectors acting on their behalf. government agencies may have access in response to a court or administrative order, a subpoena, or a search warrant. What s the difference between a credit freeze and a fraud alert? A credit freeze locks down your credit. A fraud alert allows creditors to get a copy of your credit report as long as they take steps to verify your identity. The Counselor s Corner, LLC 4/25/18 6

7 What are the three types of fraud alerts? Initial Fraud Alert. If you're concerned about identity theft, but haven't yet become a victim, this fraud alert will protect your credit from unverified access for at least 90 days. You may want to place a fraud alert on your file if your wallet, Social Security card, or other personal, financial or account information are lost or stolen. Extended Fraud Alert. For victims of identity theft, an extended fraud alert will protect your credit for seven years. Active Duty Military Alert. For those in the military who want to protect their credit while deployed, this fraud alert lasts for one year. What are the limits on financial losses due to Identity Theft? You have limited liability for fraudulent debts caused by identity theft. Under most state laws, you re not responsible for any debt incurred on fraudulent new accounts opened in your name without your permission. Under federal law, the amount you have to pay for unauthorized use of your credit card is limited to $50. If you report the loss to the credit card company before your credit card is used by a thief, you aren t responsible for any unauthorized charges. If your ATM or debit card is lost or stolen, you can limit your liability by reporting the loss immediately to your bank or credit union. How to really build your credit? Pay your bills on time. Your payment history weighs heavily in your credit score. Keep your balances low. Your credit utilization ratio, or the amount you owe compared with your total available credit, also plays a big role. Aim to use no more than 30% of your credit limit on any card. Take the long view. The length of your credit history is also important. Keep old accounts open, even if you don t use them often, unless there s an annual fee or another good reason to close the account. Avoid opening lots of new cards in quick succession. The Counselor s Corner, LLC 4/25/18 7

8 Credit Report Disputes What can a consumer do if their credit report contains inaccurate information? Everyone has the right to examine their credit file and to dispute inaccurate information. If inaccuracies are found on the credit report you always dispute the inaccurate information with the credit reporting agency. You can also file a direct dispute with the creditor that provided the inaccurate information to the consumer reporting agency. Do you recommend that a consumer mail in a dispute letter or complete the dispute online? I ve had more success sending in a dispute by mail. How can I dispute an error on my credit report? If any information is incorrect on your credit report, you should dispute it with the credit reporting agencies. Some of them have their own form you can fill out, or an online process, or you can write them a letter. Remember to make a copy for yourself of any letter and to keep proof that you sent the letter, such as a certificate of mailing from the post office. The agencies will investigate and write back to you within 30 to 45 days. What must the bureau do when they get a direct dispute? Once the bureau receives the dispute it must: Conduct a reasonable investigation; Review all relevant information provided with the dispute notice; and Report the results of the investigation to the consumer. If the bureau s investigation finds that the information it reported was wrong, the furnisher must promptly update incorrect information. This process can take 30 to 45 days. The Counselor s Corner, LLC 4/25/18 8

9 What s the contact information for the three credit reporting agencies? EQUIFAX Online: By mail: Download the dispute form Mail the dispute form with your letter to: Equifax Information Services LLC P.O. Box Atlanta, GA By phone: Phone number provided on credit report or (866) EXPERIAN Online: By mail: Use the address provided on your credit report or mail your letter to: Experian P.O. Box 4500 Allen, TX By phone: Phone number provided on credit report or (888) TRANSUNION Online: By mail: Download the dispute form Mail the dispute form with your letter to: TransUnion LLC Consumer Dispute Center P.O. Box 2000 Chester, PA By phone: (800) The Counselor s Corner, LLC 4/25/18 9

10 Are "credit counselors" required to have specific licensing/certification like "credit repair" companies do? It depends on the state. If I dispute something with Equifax, will Experian and TransUnion report the dispute as well? Do they share that info? No, they don t, you would need to submit the dispute with each bureau. Aren't the credit bureaus supposed to stop reporting public records in the very near future? Yes, we should see it starting July 1 st. I thought it was 30 days for a dispute to be investigated. Section SPECIAL RULE FOR DISPUTES DIRECTED TO RESELLERS When a consumer disputes information in his or her file with a reseller of consumer reports who has received information from another CRA, the reseller must first determine whether the disputed item is inaccurate or incomplete because of its own act or omission. If so, it must correct or delete the item within 20 days. If not, the reseller must convey the dispute (and all relevant information) to any CRA from which it received the disputed information. The term reseller means a consumer reporting agency that-- (1) assembles and merges information contained in the database of another consumer reporting agency or multiple consumer reporting agencies concerning any consumer for purposes of furnishing such information to any third party, to the extent of such activities; and (2) does not maintain a database of the assembled or merged information from which new consumer reports are produced. When a debt is paid how long does it take for the credit score to increase? The score will change once the information is updated with the bureau. Whether or not the score will go up depends on the overall credit profile. The Counselor s Corner, LLC 4/25/18 10

11 In a presentation about 6 months ago I noticed some pattern of percentages of score ranges (i.e.: 10% have , 12% have , 12% have , etc.) Is there a limit of how many consumers can be in each credit score bracket? If so, is this information published anywhere that you know of? It sounds like your question is related to the FICO score distribution. I would search the Fair Isaac Corporation website. How can a consumer add a statement to their credit report? The consumer should go directly to the bureau and request the statement be added to their credit profile. Does a creditor have to notify the consumer if it decides that a dispute is frivolous or irrelevant? Yes. The creditor must notify the consumer in writing if it decides that the dispute is considered frivolous or irrelevant. The notice must be sent within five business days of the determination. The bank will send the notice by mail unless the consumer has agreed to receive electronic communications. The notice must include the reasons for the decision and identify any information that the consumer may need to submit to the creditor to further investigate the disputed information. What is a frivolous or irrelevant dispute? A dispute is frivolous or irrelevant if: the consumer did not provide enough information to investigate the disputed information; the direct dispute is substantially the same as a dispute previously submitted by the consumer or by someone else for the consumer and the creditor has already satisfied the applicable requirement of the Act; or the creditor is not required to investigate the dispute because one or more exceptions listed in the regulation applies. The Counselor s Corner, LLC 4/25/18 11

12 What if an old judgment appears on my credit report, what can I do? If you paid the judgment but it appears unpaid on your credit report, you can go to the clerk of the court where the case was filed and ask for the file of your case. Check the file to see if it contains a document called a satisfaction of judgment. If it does, make a copy and send it to any credit reporting agency that doesn t list the judgment as satisfied. If there is no satisfaction of judgment in the file, you should contact the plaintiff or its attorney and ask that a satisfaction of judgment be filed with the court. The plaintiff should also mail you a copy so that you can forward a copy to the credit reporting agencies along with a letter stating that you have paid the judgment. This is important! Is there anything that cannot be removed from a credit report? No, all information reported by the credit bureaus are subject to the same laws and criteria. Anything can be challenged and the credit bureaus must investigate. It s important that you not dispute items that you know are correct. Can deleted items reappear back on the credit report? Yes, on occasion a negative listing that was recently deleted may eventually be verified by the creditor. Once verified, under the Fair Credit Reporting Act this information can be re-report to the credit reporting agencies. Who can remove items from my credit report? Only the credit bureaus have the power to remove items from your credit report. But, as required by law, the credit bureaus must delete inaccurate, unverifiable, or outdated information. The Counselor s Corner, LLC 4/25/18 12

13 Who has permissible purpose to access a consumer s credit file? Under the Fair Credit Reporting Act, a credit reporting company may only disclose a consumer s credit report if someone is: Granting credit, reviewing consumer s account, or collecting on a debt Reviewing your application for employment purposes Reviewing your application for insurance Reviewing your eligibility for a license or government-related benefits Providing information for a business transaction, such as renting an apartment Has a court order Has an IRS subpoena Someone to whom you have given written permission If a client files for bankruptcy and then changes their minds and the filing shows up on the credit report - can that be disputed? It can be disputed; however, it may not be removed from the credit profile. It s not a legitimate Should the information be checked and disputed with the three reporting agencies? That s a best practice. What is a Form 1099-C? A 1099-C reports a debt that was canceled, forgiven, never paid back or wiped out in bankruptcy. Here are some reasons why someone could receive a form 1099-C: Negotiated a deal with a credit card issuer and it agreed to accept less than the amount owed. A home that goes into foreclosure and sold for less than the balance owed or when a "short sale" is negotiated. A student loan or part of a student loan forgiven. The Counselor s Corner, LLC 4/25/18 13

14 Do you normally have to pay taxes when you get a 1099-c? Not always. The IRS will also get a copy of the tax form, but there are several exclusions and exceptions that can reduce the amount a person owe. Here are the most common exemptions: Filed for bankruptcy. Had mortgage debt that was forgiven between 2007 and 2016 that was used to buy, build or renovate your primary residence. (The Mortgage Forgiveness Debt Relief Act allows up to $2 million to be excluded from your income. Originally set to expire in 2014, it was extended through Had a student loan that was canceled because you agreed to work for a set time period in a certain profession -- including as a doctor or teacher assigned to a low-income area. It s been determined that the consumer was "insolvent" at the time the debt was canceled, which basically means they were broke. This is typically the best option for people dealing with canceled credit card debt. Does the 1099-C form mean that the debt is canceled and can no longer be collected? Receiving a 1099-C should always mean the debt is canceled and no longer subject to collection. But it may be up to the consumer to make sure. Until 2016, IRS rules allowed creditors to file a 1099-C if no payments had been made on a debt for 36 months. Cora gave an example of filing a dispute saying "I have " Should she instead be saying "My client has never... " No, the dispute letter used is coming from the client not the agency. The Counselor s Corner, LLC 4/25/18 14

15 FICO Score What is a credit score? A credit score is a number that summarizes your credit risk. The score is based on a snapshot of your credit file at a point in time, and helps lenders evaluate your credit risk. Your credit score influences the credit that s available to you and the terms, such as interest rate, that lenders offer you. How are Credit Score Calculated? Understanding the components that make up credit scores can help you wisely manage your credit decisions. To see how it all breaks down, here's an example of how scores are calculated with a popular algorithm. Your payment history makes up 35% of your score, while the amount you owe lenders represents 30%. The length of your credit history contributes 15%, and the types of credit accounts you maintain comprise 10%. Finally, new credit accounts are responsible for 10%. All of these values are then broken down into a credit score, which ranges between 300 and 850 the higher the number the better. What is a good FICO Score? The point above which a lender would accept a new application for credit, but below which, the credit application would be denied, is known as the score cutoff. Since the score cutoff varies by lender, it s hard to say what a good FICO Score is outside the context of a particular lending decision. For example, one auto lender may offer lower interest rates to people with FICO Scores above, say, 680; another lender may use 720, and so on. The lender may be able to give you guidance on their criteria for a given credit product. How does being an authorized user affect your credit score? The impact is based on how the account is being handled; i.e. paid, the balance vs. the limit and more. The Counselor s Corner, LLC 4/25/18 15

16 Are FICO Scores the only risk scores? No. While FICO Scores are the most commonly used credit risk scores by lenders in the US, lenders may use other scores to evaluate your credit risk. These include: FICO Application risk scores. Many lenders use scoring systems that include the FICO Score but also consider information from your credit application. FICO Customer risk scores. A lender may use these scores to make credit decisions on its current customers. Also, called behavior scores, these scores generally consider the FICO Score along with information on how you have paid that lender in the past. Other credit scores. These scores may evaluate your credit file differently than FICO Scores, and in some cases a higher score may mean more risk, not less risk as with FICO Scores. The FICO Score is the score most lenders use when making credit decisions. Why are my scores at each of the three credit reporting agencies different? Your FICO Score is based on the credit information in your credit file at the time your score is calculated. The information in your credit file is supplied by lenders, collection agencies and court records. Some of these sources may provide your information to just one or two of the credit reporting agencies, not all three. Differences in the underlying credit data will often result in differences in the FICO Scores. What are the minimum requirements to produce a FICO Score? In order for a FICO Score to be calculated, a credit file must contain these minimum requirements: At least one account that has been open for six months or more At least one undisputed account that has been reported to the credit reporting agency within the past six months No indication of deceased on the credit file (Please note: if you share an account with another person and the other account holder is reported deceased, it is important to check your credit file to make sure you are not impacted). Will closing a credit card account impact my FICO Score? The Counselor s Corner, LLC 4/25/18 16

17 Yes, but not in the way you might expect. We never recommend closing a credit card for the sole purpose of helping your financial health. This may sound a bit counter- intuitive; after all, cleaning up your credit profile by getting rid of old or unused credit cards sounds like a good idea and it may be from an overall financial health management perspective. If you are tempted to charge more than you should just because you have more availability to credit, then getting rid of that temptation by closing some credit cards might be your best course of action. However, your FICO Score takes into consideration something called a credit utilization ratio. This ratio or proportion basically looks at your total used credit in relation to your total available credit; the higher this ratio is, the more it can negatively affect your FICO Score. This is because in general, people with higher credit utilization ratios are more likely to default on loans. So, by closing an old or unused card, you are essentially wiping away some of your available credit and thereby increasing your credit utilization ratio. Will Checking My Credit Report Hurt My Credit Scores? No. Checking your own credit report won t hurt your scores. Credit inquiries are defined as either hard or soft inquiries. Reviewing your own credit report is considered a soft inquiry, and soft inquiries don t hurt your scores. Checking your credit report at least once a year allows you to identify any mistakes and helps you manage your personal finances. What is a Hard inquiry? Hard inquiries are credit inquiries where a potential lender is reviewing your credit because you've applied for credit with them. These include credit checks when you've applied for an auto loan, mortgage or credit card. Hard inquiries may or may not affect your FICO score the same. The Counselor s Corner, LLC 4/25/18 17

18 Inquiries that may or may not affect your FICO score. A FICO score considers only voluntary inquiries that result from your application for credit. The information about inquiries that can be factored into your FICO score includes: Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account. Number of recent credit inquiries. Time since recent account opening(s), by type of account. Time since credit inquiry(ies). A FICO score does not consider any involuntary inquiries made by businesses with whom you did not apply for credit, inquiries from employers, or your own requests to see your credit report. What is a Soft inquiry? Soft inquiries are all credit inquiries where your credit is NOT being reviewed by a prospective lender. These include inquiries where you're checking your own credit (such as checking your score in myfico), credit checks made by businesses to offer you goods or services (such as promotional offers by credit card companies), or inquiries made by businesses with whom you already have a credit account. Is it true that a bankruptcy has no bearing on the credit score after 2 years? There s always an impact, it s just less of an impact. When a debt is paid how long does it take for the credit score to increase? Your credit score will change as information in your credit bureau changes How long do inquires stay on a credit report? 24 months If you close out a credit card with a 0 balance does it still have a negative impact? It could, make sure you understand that you re not closing out history and a large limit. The Counselor s Corner, LLC 4/25/18 18

19 Garnishments What is a Garnishment? A Garnishment is a way of collecting a debt where the judgment creditor takes (garnishes) money or property that belongs to the judgment debtor but is in the possession or control of another person. Can my salary be garnished without a court proceeding? Usually not. In most cases a creditor must win a judgment against you and get a court order before it can garnish your wages. However, some Federal Government agencies, Internal Revenue Service (IRS), may garnish your wages without a court order. Can all of my earnings (wages) be taken by Garnishment? No. Only part of your earnings can be taken by garnishment. Earnings includes wages, salary, commissions, and bonuses. The percentage or amount of your earnings that can be garnished will be calculated based on disposable earnings, which means earnings after deductions that are required by law (e.g. state and federal tax withholdings). The percentage or amount of your earnings that can be garnished may depend on how much you make, in general, as much as 25 percent of your paycheck can be withheld for consumer debts. Certain types of income, such as child support or alimony/maintenance receive from someone else, SSI, social security, Veterans benefits, public assistance, and unemployment, may be completely exempt from garnishment or exempt from certain types of garnishment. Your client should speak with an attorney for more specific information How does a person find out if their wages are being garnished? Wages cannot be garnished until there is a judgment. In order for a creditor to obtain a judgment, they must serve you with a summons and complaint. This will notify you that there is a pending judgment against you and will allow you time to prepare and defend your rights. You will also be notified when a judgment has been passed. If a creditor obtains a judgment against you, they will then be allowed to garnish your wages. The Counselor s Corner, LLC 4/25/18 19

20 Why ask whether there are children over 18 in the household? If your state protects head of household this is an important question. A person is considered head of household if there are minor children (under the age of 18) in the household. Wage garnishment - If you were Head of household and wages were garnished, how far back can you go to recoup the amount withheld? Remember this is only if your state protects the Head of Household from garnishment in your state. The affidavit would be filed at the time the garnishment is filed on the employer. Can a wage garnishment be stopped after it has been started? It is a very difficult but possible to stop a wage garnishment once the creditor has received a writ of garnishment from the court. Your employer has no choice but to allow the garnishment once the writ of garnishment has been issued. However, you could go to the court that ordered the garnishment and file a claim of exception. In order to gain a claim of exception, you will need to show that the garnishment hinders you from meeting your daily needs. Another option would be to file for bankruptcy to free you from the creditor obligation. However, bankruptcy would be a last resort option to resolve your financial predicament. Are there any cases in which my Federal benefits are not protected from garnishment? Yes, some funds can always be garnished. Federal benefits can be garnished if: The garnishment order comes from the Federal Government, such as from the Internal Revenue Service (IRS). The garnishment order is to pay delinquent child support payments. Can an employer fire an employee because his or her wages are garnished? No. It is an unlawful employment practice to terminate an employee because of a garnishment or a support order. The Counselor s Corner, LLC 4/25/18 20

21 General When you pay off a debt through a Settlement (that s paying less than the amount owed), can they make you pay the amount remaining unpaid? Yes, it depends on how the settlement was negotiated. If the settlement was for Payment in Full they may not come for a remaining balance. All settlements should be in writing, not verbal settlements Can a creditor close an account due to inactivity? YES Can a store put up a sign with the names of persons that have bounced checks at their store? Not sure, I ve seen this before. However, I would think the consumer may have some protections. Check with an attorney in your local market. What if you are added to an older account by a family member with a good payment history as an authorized user? Will this add to your length of time accounts have been established to raise your credit score? YES While there are errors on reports, these errors are NOT what is making their credit score low. If the errors bring adverse tradeline information, this is what causes the score to go down. What service do we use to pull a client credit report? Is it the same that the client will use? There are several vendors you can use; Credco, Kroll Factual Data, Equifax, Merit Credit System and others. The Counselor s Corner, LLC 4/25/18 21

22 I have helped my daughter get cable/internet and her address is now on my credit report should I ask to have it taken off. Not really, if you willingly gave your credit information to assist your daughter, it s like you ve co-signed for the obligation. You cannot just remove your name form the debt obligation. Regarding an auto repossession: You owe $12,000 on an auto and it's repossessed. Car is sold for $10,000. Do you still owe the $2,000? Yes, the remaining balance is called a deficiency balance. How do you view settlement of debt? Debt settlement is an option, you must take into consideration the entire report before you make that as a recommendation. Also remember any time the savings is more than $600 the consumer will receive a 1099 tax form. Did Congress finally make it law that if a consumer seeks credit (i.e. car buying, home purchase) that it will be only a 1 time inquiry if it's done w/in a 14-day window? Looking for a mortgage, auto or student loan may cause multiple inquiries on your credit report, even though you are only looking for one loan. To compensate for this, FICO Scores ignore mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your scores while you're rate shopping. In addition, FICO Scores look on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. The Counselor s Corner, LLC 4/25/18 22

23 How do we obtain the news about the judgements and tax liens not being included on the credit report? National Consumer Assistance Plan press release, here's the link: How can I pull credit through the company I work for as a soft pull? For a borrower who may be shopping and doesn't want credit to be dinged. You will need to set up an account with a local credit bureau, they will register your agency as a non-profit. Once you're registered your credit report pulls should be coded as a soft pull. How long will negative information remain on my credit file? It depends on the type of negative information. Here s the basic breakdown of how long different types of negative information will remain on your credit file: Late payments: 7 years Bankruptcies: 7 years for a completed Chapter 13, and 10 years for Chapters 7 and 11 Foreclosures: 7 years Collections: Generally, about 7 years, depending on the age of the debt being collected Public Record: Generally, 7 years, although unpaid tax liens can remain indefinitely Keep in mind: For all of these negative items, the older they are the less impact they will have on your FICO Score. For example, a collection that is 5 years old will hurt much less than a collection that is 5 months old. How do I get my free credit report? You can get one free credit report from each of the three major credit reporting agencies (TransUnion, Equifax, and Experian) once every 12 months. Go to The Counselor s Corner, LLC 4/25/18 23

24 What information does a consumer credit report contain? Identification information your name, current and previous address, telephone number, reported variation of your Social Security number, date of birth, employment and spouse s name. Account history specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment, payment status and payment history. Public records federal bankruptcy records, tax liens and monetary judgements; and, in some states, overdue child support payments. Rent payments Not all bureaus report rental information; however, Experian is one that does. This would include rent payment information. Inquires a record of those who have reviewed your credit history. This information is collected by the credit reporting agency at the time of the inquiry. Inquiries remain on your credit file for two years. I was asked if someone could remove themselves from a title, transferring property to another individual to avoid judgement attached to the property. Is this true? Yes, however don t make this as a recommendation, because there could be legal consequences. If your name is on property for ownership, but never lived at the address, should you dispute that information. Not necessarily, you have been a signer on the loan application How do you handle tax liens if the tax year was back in 2005, 2006 or 2007? My best response would be to setup a repayment plan. The IRS is really good about working with those of us who owe themj Why do you suggest that consumer use as oppose to CreditKarma or other self-proclaimed "free" credit score website? The other sites are not providing the FICO score, so the consumer is not given the opportunity to compare like scores. MyFICO scores are similar to the scores the lenders use. The Counselor s Corner, LLC 4/25/18 24

25 What methods can a creditor use to collect a debt? Under the Fair Debt Collection Practices Act (FDCPA) "Self-Help" Remedies and Collection Agencies Many creditors' first attempts at debt collection do not involve the courts. The creditor may simply contact the debtor directly and demand payment. If these attempts fail, the creditor may transfer the debtor's account to another business whose focus is debt collection. Secured Transactions Secured transactions, for instance, are sale or loan transactions in which the debtor gives the creditor a claim to the debtor's property to ensure payment of the debt. A secured creditor takes priority over an unsecured creditor if there are competing claims to the property or to the proceeds from the sale of the property. Court-Based Remedies Sometimes, a creditor will initiate court proceedings in order to collect on a debt. In cases involving emergencies, the creditor may be able to seize the debtor's property even before the court decides the matter. Replevin and Attachment Two of the more common pre-judgment remedies are replevin and attachment, which is similar to garnishment. In a replevin action, a creditor that holds title to property that is the subject of a debt may take that property back if the debt is not repaid. Lawsuits and Liens If all of the remedies described above fail, the creditor can sue to collect the debt. The creditor will be entitled to an enforceable judgment if it proves its case or if the debtor fails to contest the claim. The Counselor s Corner, LLC 4/25/18 25

26 I was asked how to dispute a cell phone bill increase, when the cell phone company did not get the customers authorization to change plan. I would file a complaint with the CFPB or the Federal Communications Commission's Consumer and Government Affairs Bureau Is there a law that can be used to stop Debt collectors from calling family and friends? Yes, it s the Fair Debt Collection Practices Act. Where do we find third party people to work with? Are there legitimate third party companies that will help people negotiate bills? Yes, there are; you have to do your due diligence to identify them in your community. Which bureau use the FICO score? Equifax usually sell the FICO score to consumers. They also use the Vantage scoring model and their proprietary scoring model. What is the statute of limitations for IRS Liens The federal tax lien continues until the liability for the amount assessed is satisfied or becomes unenforceable by reason of lapse of time, i.e., passing of the collection statute expiration date (CSED). IRC Generally, after assessment, the Service has ten years to collect the tax liability. Is it still true that if you have a foreclosure that you will need to wait 3 year to apply for a mortgage? I have a client that was told that she didn t have to wait to apply. Yes, that s true, there are products that may allow for 2 years after a foreclosure with compensating factors i.e. improved credit, time on job and a higher credit score. The Counselor s Corner, LLC 4/25/18 26

27 Trended Credit Data What is Trended Credit Data? Trended credit data provides an expanded, more granular view of the consumer by leveraging up to 30 months of a consumer s past balance, payment, and credit utilization history. It provides a fuller picture of a consumer s credit behavior, supplementing the traditional moment-in-time credit snapshot with a more dynamic 2-year picture of a consumer s history of managing revolving accounts. With this additional historical data (such as payment and balance,) lenders may be able to see how consumers have managed their credit accounts over time, allowing them to better predict future behavior and assess risk. When will Trended Credit Data be available? It s available now. Please note the size of the files will be significantly larger than the current credit reports, because of the amount of information being disclosed. Can a lender request verification of Trended Credit Data? Yes, lenders may request verification of trended credit data on tradelines. Verification is limited to a maximum of 24 months of historical data and will incur an additional cost per tradeline. What is a Transactor? Lenders have a term for consumers who pay off their credit card balances every month: "transactors." Consumers who carry balances month-to-month are called "revolvers." And when credit bureaus gather information on how you manage your credit card balances, the info is called "trended credit data." What is a Revolver? Those who make lots of transactions but only make the minimum payment (or some payment less than the full amount due) are known as revolvers because they let their balances carry from month to month. The Counselor s Corner, LLC 4/25/18 27