Everyone should have good credit

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Enlist the CFPB to help fight Credit Report Inaccuracies

Attempting to have inaccurate information corrected or removed from your credit report can often seem like a David-and-Goliath battle for consumers. I know this from experience.

As you may be aware, the Consumer Financial Protection Bureau is the new federal agency tasked with protecting consumer rights in the wake of the financial scandals of the past few years. If your credit issue falls within one of the five areas that the CFPB is currently accepting complaints in, I encourage you to add a CFPB complaint to your arsenal.

Here is the link to CFPB’s official complaint form.

For credit card disputes, there is even a category of complaint called “credit reporting”.

It’s still too early tell whether the CFPB will become a genuine force in consumer protection or just another toothless government tiger that creditors and credit bureaus laugh off. But it is a resource you should be aware of. And if you’re truly committed to correcting your credit profiles, it’s certainly worth a try.

Short Sale or Foreclosure – Which is better for your credit score?

This one is easy. From a credit scoring perspective, there is NO DIFFERENCE between a short sale and a foreclosure.  The FICO scoring algorithm views and scores both of these negative events exactly the same way.

FICO has publically confirmed this for consumers here and for lenders here.

6 Laws Every Consumer Should Be Aware Of

Being aware of the following six laws will prevent you from being a deer in the headlights of unscrupulous telemarketers, debt collectors and credit card companies.

Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act is a wide-ranging federal law that, starting in 2010, gave the federal government broad powers to regulate the financial industry. The most pertinent component of the law from a personal credit perspective is the establishment of the Consumer Financial Protection Bureau, which in concept provides a powerful new tool to help consumers resolve disputes with large companies, specifically including credit card disputes and mortgage loan modifications. We’ve written about the CFPB’s dispute process before.

The CARD Act of 2009 – The Credit Card Accountability Responsibility and Disclosure Act of 2009, aka The Credit Card Act, overhauled the regulation of credit card issuers and outlawed many longstanding abusive practices in the credit card industry, especially those relating to interest rate increases, questionable fees and application of payments.

FACTA – The Fair and Accurate Credit Transaction Act is a 2003 federal law that expanded and modernized the legal rules governing credit reporting, primarily by amending the 70’s era Fair Credit Report Act. FACTA is the law that required credit bureaus to give consumers access to a free copy of their credit reports once annually (and, by the way, is the official and only site to take advantage of this right online – don’t be fooled by imitators.)

FCRA – The Fair Credit Reporting Act is the cornerstone law governing credit reporting in the United States. It regulates how credit information can be collected and used. It also forms the backbone of regulation over the credit reporting agencies. All credit information that is used for background checks and employment verification must meet stringent guidelines put into place because of this act.

FDCPA – The Fair Debt Collection Practices Act is a 1978 statute that established firm guidelines regarding how debt collectors should do business and clarified what collectors are and aren’t allowed to do when collecting a debt. The law sought to eliminate the abusive debt collection practices that had become widespread prior to its adoption. The FDCPA gave consumers strong rights, including rules requiring debt collectors to actually verify debts and cease communication and collection activity upon request.

TCPA – The Telephone Consumer Protection Act is a little-known 1991 act that governs telemarketing in the United States, including the rules regarding the abuse of automatic dialers, text messages and fax machines. The TCPA is best known for its establishment of the National Do Not Call Registry. You may have never heard of it, but it’s the reason you don’t get telemarketing calls at 7AM every Sunday morning (and the law you can mention to make a telemarketer never contact you again.)

Knowledge is power.

Credit Basics: Hard Pull vs. Soft Pull

This post is part of our series on the basics of personal credit.

HARD PULL – A third-party inquiry of your credit report that affects your credit scores and is visible by others. Each hard pull typically lowers your credit score by a few points and having too many inquiries in a short period of time is a common cause of credit denial, which is why hard inquiries should be closely monitored and managed. Hard pulls remain on your credit report and visible to others for up to two years from the date of the inquiry, but they only affect your credit score for the first year.

SOFT PULL – An inquiry of your credit report that does NOT affect your credit score and is visible only by YOU. There are many types of soft inquiries, including most types of account reviews by your existing creditors. When you access your own credit report, it is a soft pull.


A popular credit myth is there is a law which dictates how long a hard inquiry can stay on your credit report. There is no such law. However by convention all three credit bureaus delete inquiries older than 2 years.

Another popular myth is that multiple inquiries of the same type, such as mortgage or auto loan inquiries, acquired within a 14 or 30 day period are viewed as a single inquiry for credit scoring purposes. This is partially true, but the problem is that this benefit only occurs when all of the inquiries are coded the same way by the various entities pulling your credit, which they rarely are. Also keep in mind that even if you acquire 10 hard inquiries that only reduce your score as if they were 1 inquiry, all 10 will still be visible on your report and taken into consideration.


Before applying for credit that you know will involve a credit pull, ask the potential creditor if they can use a soft pull instead of a hard one. You’ll be surprised at the number who will. After all, the creditor gets the same data either way.

Try to spread your hard inquiries among your three credit profiles (Trans Union, Equifax and Experian) so you don’t accumulate too many in one place. Before applying for credit, ask the potential creditor which bureau they use or look them up in the Credit Pulls Database.

Think carefully before disputing an inquiry. Although inquiries can be legally disputed like any other incorrect information in your credit file, doing so frequently gets a fraud alert attached to your file (because disputed inquiries are often a sign that someone has fraudulently applied for credit in your name without your consent). Don’t get me wrong, if your identity has been stolen or someone is applying for credit in your name without your consent, you should by all means dispute the fraudulent inquiries and do everything else prudent to protect yourself. But if the inquiry is legitimate, you’ll find that having a fraud alert on your file will be a much bigger headache than the few points you’ll lose by letting it remain.

Another Case of Credit Misinformation

Although the focus of this site is personal credit, I recently came across an article in BusinessWeek about the importance of the personal credit scores of small business owners that’s so full of inaccuracies that I had to call it out.

To Wit:

  • The “Debt-to-Net Worth” ratio has nothing to do with your credit score. The most important ratio for your credit score is Current Balance-to-Available Credit, the so-called Utilization Rate that makes up 30% of your FICO score;
  • The link to myFICO in the article is the site to get two versions of your official FICO score and at $20 per score they’re far from free. Furthermore, only 2 of your 3 FICO scores are available there (Experian doesn’t participate). As I’ve pointed out many times, the officially sanctioned site to get the free report you’re entitled to by law is
  • Contrary to the article, input from your businesses’ trade suppliers will most definitely affect your credit score if that supplier reports to any of the 3 personal credit bureaus or any of the 3 business credit bureaus (D&B, Experian Business and Equifax Business).
  • This line really irked me: “The main component of the credit score is your outstanding debt to total income ratio.” No part of your credit score is based on your income. Credit bureaus do not even store information about your income.

This is yet another case of bad information about credit from an otherwise reputable source.

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