Did you get tricked by Credit Karma into thinking you were pre-approved for a credit card? Did Credit Karma waste your time and cause you to have another hard inquiry on your credit report?
The Federal Trade Commission doesn’t like trickery, nor does it like a big company taking advantage of consumers, and today, it has taken action!
The FTC alleges that the company used claims that consumers were “pre-approved” and had “90% odds” to entice them to apply for offers that, in many instances, they ultimately did not qualify for.
The agency’s order requires the company to pay $3 million that will be sent to consumers who wasted time applying for these credit cards and to stop making these types of deceptive claims.
“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”
Important Facts to Know if you have a bankruptcy in your credit history:
1) It is legal to have the bankruptcy (BK) removed from your credit report prior to 7 years (Chapter 10) or prior to 10 years (Chapter 7). The law limits the maximum time it can stay on your credit report, not the minimum time.
2) If your bankruptcy does not show on your credit report and you are applying for a home loan, you MUST truthfully declare it on the mortgage application. Falsifying an application by checking the box for “no” rather than “yes” on the question, “Did you file bankruptcy in the last ten years?” is a FELONY CRIME.
3) The purpose of removing a bankruptcy early from a credit report is so your credit scores goes up; thus, enabling you to get a lower interest rate on all types of financing. It is never to lie on an application.
4) You can get a good FHA home loan just 24 months after a Chapter 7 BK is discharged. Two years is not too long to wait! It gives you time to re-establish good credit and save money for a 3.5% down payment.
5) You do not get a bankruptcy removed early by sending a “609 Letter” or other dispute letter. You must take steps prior to correct your personal identifiers and to get the individual accounts that say “included in bankruptcy” fixed/updated/removed. The complete step-by-step guide is here.
There is no shame in having declared BK. It is a legal tool that enables people who need a fresh start. No one should have thoughts about suicide or robbing a bank due to being overwhelmed with debt. That is what bankruptcy is for. Each state has its own laws, so speak with a local BK attorney if you need to explore that option.
When getting a mortgage (either buying or refinancing), you have the option of buying down the interest rate.
With the traditional buy down program, you pay a lump sum up front (called points or discount fee) to get a lower interest rate. Technically, you are paying some of the interest upfront for a lower monthly interest rate.
But now there is a twist on the buydown that could make sense for some buyers.
Most first time buyers are not purchasing their dream home right from the start. They stay in their home for a few years, watch the value go up, then sell and purchase a better home. If this is you, then consider the new Temporary Buydown.
What is a Temporary Buydown?
The temporary buydown lowers the interest rate on the first two years’ payments, not on the entire 30 years. Thus, your interest rate is reduced more initially than it would have been. (See example below.)
When you’re not going to keep the property for 30 years anyway, then why not use the money where you really need it the most, those first couple years?
The Seller Can Pay for Your Buydown
More good news: the seller can contribute to the buydown fee. Your real estate agent will add a Seller Concession to the Purchase & Sale Agreement. Then tell your loan officer that you want to spend it on the Temporary Buydown, not on any other closing costs and not to buy down the rate for 30 years.
This brings us to a potential “catch.” If you are short on cash to close, then you will need to use the Seller Concession for your normal closing fees rather than buying down your rate.
You and your loan officer should add up the monthly savings for the first 24 months of the loan, then compare that to the cost of the buydown. That way, you will see whether or not it makes sense for you.
Example of the Temporary Buydown
You might use the buydown like this: If the rate on a 30-year fixed rate is 5.25%, then your first year would be 3.25% and the second year 4.25%. This gives you a significantly lower payment for the first two years of your loan. Starting on the third year, the rate would be 5.25% and stay there for the life of the loan.
How to Get the Temporary Buydown
You can get the Temporary Buydown program through your mortgage broker who will shop wholesale lenders to find you the best pricing. United Wholesale Mortgage is a national wholesale lender that offers this program.
As always, thank you for reading my blog. I do my best to inform people on ways to save money on their mortgages.
I have written several times in the past about junk fees added onto mortgage loans and junk fees added by escrow companies. There’s a whole chapter about that in my first book, Mortgage Ripoffs and Money Savers. But I have not written about automobile loan junk fees. Until now.
Santander, the subprime lender for auto loans, was in the news for several violations of law regarding their repossessions. A class action lawsuit and settlement agreement followed. Among other remedies, Santander agreed to remove the derogatory items of their victims’ credit reports.
Now Santander is in legal hot water for another reason: their “convenience fee.”
I would say LOL, except that it is not funny at all. Tacking on an extra fee to their customers’ bills when they paid by phone or or paid online? Come on, paying online is mainstream nowadays, and it saves the company from opening envelopes and processing checks.
Talk about an oxymoron! Charging people each and every time they paid their bill for “convenience”!?! Nothing could be more inconvenient, if you ask me.
Santander has agreed to pay $800,000 and help clean up the credit reports of their victims. But you must act fast!
The DEADLINE IS AUGUST 29,2022.
Please share this with anyone you know who may have had an auto loan with Santander, so they can get the recompense they deserve.
First, some information about the class action lawsuit, including who can and how to join. Second, why I think there’s a whole more behind the scenes than anyone has said so far — and why Equifax isn’t the only one at fault.
EQUIFAX ADMITS CODING ERROR MESSED UP CREDIT SCORES
Between March 17 and April 6, Equifax had a coding error that decreased Equifax scores erroneously. Equifax was transitioning to a new technology system, and somehow the mistake occurred. The score drop was inaccurate and unfair, and it was fixed by April 7, 2022. About 300,000 people who applied for financing during those three weeks were negatively impacted by this error. (Although millions of scores were affected, most people were not financially harmed, according to Equifax.)
In May, Equifax reached out to its customers (lenders and creditors), to inform them of this mistake.
Earlier this week, the news exploded all over the media, and now the law firm Morgan and Morgan is seeking a jury lawsuit and collecting data for the class action.
Steps To Take If You Were Affected
If you applied for credit, such as an automobile loan, credit card, or mortgage, between March 17 and April 6, AND you believe you might have been put into a higher interest rate than your credit deserved or denied the loan altogether, then your first step is to gather your documentation. Find the denial letter or your contract. Find the credit score disclosure that came with it. If you were denied credit, then you have the right to receive a copy of the credit report the lender used. If you were approved, you have the right to know the score the lender used.
Second, call the loan officer or sales person who handled your sale. Speak with them to confirm that your financing was penalized by the false low Equifax score.
(Auto loan lenders and credit card companies often use only one credit bureau. If they used Experian or TransUnion, then you were not affected. If they used Equifax, then you may or may not have been affected — depending on if the error caused your score to drop to a lower tier or not. Most people’s scores did not drop more than 25 points and/or did not put them into a lower tier for qualification. But some did and were denied or put into a higher interest rate.)
(Mortgage lenders pull a tri-merge credit report with scores from all three credit bureaus. They throw out the lowest score and go by the middle score. Your loan officer can help you sort out whether or not your financing was negatively impacted.)
The third step, if it is determined that you are a victim of the Equifax scoring error, is two-pronged. Your lender should work with you to refinance or rectify the situation. At the same time, you can apply with Morgan and Morgan to join the class action lawsuit. The link is here. (This is the same law firm that sued Equifax for the 2017 data breach.)
MY PERSONAL COMMENTARY: THREE THINGS SMELL FISHY
There are a few things about this whole scenario that give me major pause and provoke more questions.
1) If Equifax contacted its customers, the lenders and creditors, back in May right after this happened, then what did those lenders do to look up the customers they had between March 17 and April 6? It’s not hard for a company to hold a sales meeting and then for each sales person to look up their closed transactions to see who might have been harmed.
Did any lenders research and reach out to their customers to rectify the situation? I know if I had a mortgage client who had been put into a higher interest rate loan than they deserved, I would have put the wheels into high motion to get their loan modified asap.
JP Morgan Chase Bank says it is now “working proactively” with its customers and Equifax on a fix. But why did they wait until now, August, to take action? Weren’t they informed back in May? Did it take a media blitz for them to care enough to help their own clients? And if so, do they bear some responsibility for the financial loss of people who have been paying higher rates than they qualified for?
2) The first plaintiff in the class action lawsuit is Nydia Jenkins of Jacksonville, FL. She was shopping for a car loan in January. When she found her car in mid-March and applied for financing, her score had dropped by 130 points due to the Equifax coding error. She no longer qualified for the best financing. She said she was “forced” to seek sub-par auto financing. Thus, her car payment went from $350/month to $504/month.
Jenkins has been paying $154 more per month for four months = $616 she has been unfairly penalized, so far. Not counting emotional distress, if that’s a factor here.
Now here is what’s making me scratch my head and say something doesn’t smell right about this scene:
If I had been shopping for a car and suddenly my score “dropped” I would know that I had not done anything bad between January and March to cause that. I would have asked. Which credit bureau did you pull my report from? Why are you using only Equifax? (Oh, because you don’t want to spend the money to order three reports?) Could there be something wrong with your system, because nothing negative happened to ruin my credit? You can’t get me a decent loan? Then I am going to a bank and I’ll be back with good financing. There is no way someone can “force” you to take a loan-shark subprime loan! You go apply with a better lender who doesn’t rely on only one credit bureau. If Jenkins had gone to a local mid-size bank, she may have gotten the financing she deserved. Why did she toddle off to the subprime lender that the dealership recommended? Am I being too hard on her? I don’t mean to, I’m just saying that she didn’t handle the situation right either. My husband says “not everyone has read your books.” True enough. But if you have read Build and Protect Your Credit Like the Pros or Credit Repair Mindset, then I would love to hear from you, because I bet you would not have signed for a subprime loan when you knew very well that you had good credit. Am I right?!!!
3) I pity the poor souls on that engineering team who made the coding error. My husband, the brilliant software engineer, says when moving to a new technology platform, you always do a Unit Test to make sure any errors are discovered and fixed before releasing it to your customers. I asked him what he thought would happen to those engineers. He said, “They probably quit already and are working for someone else by now.” Hmmmmm. He’s a funny man, my husband.
I’ve received some questions about the Tally app that manages credit card debt, so I thought breaking down the facts might be helpful to my valued blog subscribers.
Tally is an app designed for getting people out of debt faster and saving money on high interest by prioritizing their account payments, setting up auto-pay, and making sure they never pay late.
Tally is NOT a debt consolidation service. (Which is good.)
Tally does NOT negotiate payments or collections.
If you have five or ten credit cards, all with balances, and you are struggling to get them all paid off, and you are wasting money on the high interest charges, and all of this is stressing you out, then Tally can help.
TWO WAYS TO USE TALLY
#1 If your credit score is 580+ and qualifies, then Tally will offer you a Line of Credit to pay off all your debt. This gives you one payment at a lower rate. Their best rate is 11.99% APR, which is lower than many credit cards. If you’re paying 18% to 24% on credit cards, this will help a lot.
The Line of Credit has an annual fee of $300 which is paid out of the LOC itself, not cash out of pocket.
#2 App Only, No Line of Credit
If the Line of Credit doesn’t make sense for your situation or your credit doesn’t qualify, then you can use the Tally app to set up automatic payments. Tally will prioritize which of your accounts should be paid off faster first in order to save you the most money. It also prevents you from getting late fees and eliminates the time and stress of paying all those accounts manually.
The monthly fee for using the app is $4.99.
Better than Tally is if you don’t need Tally! If you follow Build and Protect Your Credit Like the Pros, then you do not carry a balance month-to-month, and you do not overspend for your budget. You are pay $0 in credit card fees and 0%. However, not everyone is in that favorable situation at this moment.
For people who benefit more than $5/month, then using Tally can be a great help. Lots of people are using it and are very happy.
The goal is to use Tally until you don’t need it anymore.
Once your credit and finances are back on track, then you can say, “Thank you and goodbye” to Tally.
It looks ultra-legal and so smart, adding 15 U.S. Code § 1681s–2 in your dispute letter to demand removal of a derogatory account. But what does it really mean? And does it make sense for your situation?
Feel free to read the code for yourself HERE. What it boils down to is a list of requirements for the creditors (also called furnishers, because they furnish/give information to the credit bureaus). It tells them the information they report must be “complete and accurate.”
If you dispute the information, they must promptly report that it is disputed by the consumer (so anyone reading the report will know that account may or may not be accurate).
Upon receiving a dispute from you, they must conduct an investigation, review all relevant information you provide to them with the dispute, and then report the results.
They have a duty to correct “incomplete or inaccurate” information.
When reporting a delinquency, collection, or charge-off, they must report it in a timely manner, which is specified as within 90 days. (It is to your benefit that they aren’t required to report it sooner; although, most do. Student loans don’t.)
If you are an attorney, it makes perfect sense for you to include the U.S. Code in your letter that is printed on law office stationery. If you’re not an attorney, then read the code for yourself and make sure it makes sense to put in your letter. Otherwise, you will sound like a foolish person or someone copying down legalese without even checking to see if it applies. You don’t want your file to get flagged as “frivolous”!
Another thing: write your letter in such a way that it sounds like you wrote it. If you’re not in the legal business, you don’t normally speak like a lawyer, do you? The person reading your letter is not stupid, and they can tell the difference between a genuine letter and an attempted “snow job.”
Letters are included in Repair Your Credit Like the Pros, and when you request the templates in .docx form for easy edit, you also get real life sample letters that have worked for others in the past. Reading these gives you ideas for how to customize your own letter without going overboard.
As always, thank you for reading. I do my best to provide useful information in an easy-to-understand way.
Good news for people who want to buy a home but don’t have much credit to show!
“Thin credit” means there is not enough data on the credit report to make a determination of being credit-worthy. This is especially tough when you’re trying to qualify for a mortgage to buy a home, because getting a mortgage has more requirements than getting a credit card or auto loan.
As a mortgage broker for over 23 years, my definition of thin credit is having less than three accounts that are either open or were active in the last five years. Example: one credit card open and one car loan paid off six years ago is a thin file.
Experian’s definition is stricter than mine: less than five accounts on the credit report. I like my definition better, because I have successfully closed loans for many people with three accounts on their credit report. (Also two accounts, but I had to go with FHA rather than conventional.) Nevertheless, Experian prefers five accounts for their credit scoring purposes.
Back to the good news!
Your rent payments can be included on your loan application to beef up your credit profile. Here’s how it works:
You give your loan officer proof of payment for the most recent 12 months’ rent, paid on time. Your loan officer manually adds that into your loan application and uploads it to Freddie Mac’s conventional loan.
The mortgage lenders can choose either Fannie Mae or Freddie Mac as a source of money. Your loan officer needs to choose Freddie Mac, also known as LP (Loan Prospector software system). This is for a conventional loan, which is the best and cheapest financing.
It is important to pay your rent on time and to keep a consistent record of doing so. Don’t split your monthly rent into two payments. Don’t pay by Zelle one month and by check another month. Pay the same way every month, on time, and keep a record. That will make it easier for you to get credit for paying rent.
Thank you, Freddie Mac, for taking this step to help more good people become home owners!
Please pass on this information to your loan officer and to your realtor.
You might not know this, but the current law allows credit bureaus to ignore dispute letters from credit repair companies. And that’s not all!
They can also ignore a letter from the consumer if they believe it was a template that came from a credit repair company.
Enter H.R. 7919! This bill introduced into Congress by Al Lawson, Jr. (FL) would remove the language that allows credit reporting agencies to ignore correspondence from credit repair companies. It has not yet passed. Proponents are working to gain bipartisan support to increase the chances of success.
In the meantime, you can see how D.I.Y. credit repair can work brilliantly — when you don’t use those legalese letters that look like they are from credit repair companies. That is why Repair Your Credit Like the Pros includes letters that are written in normal consumer language and are completely editable for readers who request the .docx file here.
Starting today, July 1, 2022, Experian, Equifax, and TransUnion will remove paid medical collections from credit reports.
From now on, medical debts less than $500 will not go onto credit reports.
There will now be a ONE YEAR grace period between the time a late medical debt occurs and when it goes on the credit report.
This is all according to a report titled “Medical Debt Burden in the United States” by the Consumer Finance Protection Bureau (CFPB).
They estimate that these new practices will remove about 70% of negative medical accounts off of credit reports.
That is GOOD NEWS for sure!
For your edification and inspiration, I wrote Credit Repair MINDSET. You can read the first chapter by using the “Look Inside” feature here In the companion Journal, I include my own personal story of going from a broke renter to a homeowner. .
