How Loans And Credit Cards Really Work

I have to admit upfront that I borrowed the title of this post from the video I am posting below.  I decided to post this video because I have so many friends and clients that always say that they really feel they should pay these old alleged debts because they did sign a contract with the creditor and they did use the card or account, so they really think they owe it.  I sure hope everyone who reads my posts gets it that you DON'T OWE Any 3rd party collector.  You have NEVER signed a contract with them and they were Never on the original contract.  The law and AmJur are very clear about this.  They do NOT have the right to substitute themselves into or onto a contract that they originally were not on. They are a VOLUNTARY PAYEE - a "stranger to the transaction" and the alleged debt was wiped out a number of times, including when they purchased the alleged debt.  That is the absolute truth!

But, original creditors, well, people have a very hard time wrapping their minds around the truth about not owing them.  We have been programmed, manipulated, and brainwashed by just about every institution, media outlet, and legal entity, to believe that we owe these alleged debts.  They don't want you to know the truth. Why? Follow the money, first of all, and secondly, the media pundits and many of the different sources that regurgitate this nonsense haven't bothered to do their homework so they are ignorant of the truth.

Hopefully, this video, which I absolutely love, and it makes it so clear, will help you understand why I continue to fight the system and scream the truth about credit and money.  Heck, even the mainstream news media "reported" during the "debt ceiling" debates that the FED (Federal Reserve) was going to "print more money..., create more money out of thin air."  I doubt that these blabberheads actually knew what they were reading, though.  Well, in this video, you are going to learn what the truth is and what the majority of people world wide are ignorant to.  This gentleman is not from here in the states, but that's okay.  The fraud is universal and is just as applicable here as there, and everywhere.  Its about an hour long, but one of the best hours spent.

Please watch, learn, and enjoy!

Debt Collectors ALWAYS Commit Fraud!

I constantly proclaim that you should never, ever pay a 3rd party debt collector.  I sure hope many of you listen to me.  It doesn't mean that they will just go away. Sometimes, yes they will.  But there are times when you will have to fight.  If you don't fight, if you don't demand validation, you are not going to win.  We need to stop being afraid of these thieves and fraudsters.  Demand they provide the proof that they have the right to collect. Demand that they prove you owe any money. Demand that they prove they have a valid contract with you.  THEY DON'T!! 

I don't go into extremes on this blog about my opinions on original creditors because plenty of people would think I'm nuts or have gone off the deep end.  Well, here's the the facts for me.  You don't help people with their credit repair and help improve their credit reports for over 2 decades and become extremely successful without researching and studying and digging into areas that the financial industry would rather you not find out about, without turning up proof after proof after proof that validates the facts of their outrageous, criminal behavior.  

I have done the research.  I still do the research. I love researching, and I apply what I learn. Guess what?  When I apply it to validation and dispute letters, when I apply it to my clients' case defenses when they get sued, these lying, thieving, law violating, tax cheating, insurance law breakers and fraudsters hit the road! They have to.  They don't want to be exposed for the thugs that they are. They are in violation of many federal laws. Harassment, extortion, RICO Act, mail fraud, bank fraud, FTC violations, FDCPA violations, FCRA violations...the list goes on and on.

I don't usually post videos, because I like to write and share information from my heart and soul with you.  I do have a passion for this.  But, today, this video falls right in line with my passion for justice, truth, and consumer advocacy.  I'm not a loon, and the gentleman on the video is not a loon.  This video shows how original creditors sell your alleged "debt" and how they and the 3rd parties make money whether or not you "pay off" the alleged debt.  You will hear from an actual bank employee who is in charge of selling these "bonds" (yes, they illegally convert to securities which create the "bonds"), and he admits, flat out acknowledges the fraud, without calling it fraud, of course! If you have about 20 minutes to visit here, please relax and watch the video.  It will be an eye opener for many of you.  

Please Enjoy!

Pitfalls Of Paying Late On Credit Cards

Before February of 2009 there was this horrendous practice by creditors called a "Universal Default" that could catapult you into credit devastation.  The main practice was if you were to make a late payment to one creditor, all of the rest of your creditors could hike your interest rate to oblivion (okay, a little exaggerated but pretty common to see around 30%) even if you had never been late on those cards or credit extensions.  They would repeatedly be checking their consumers' credit reports for these late pays and then swoop in like vultures to reap the financial paydays they were allowed to render on mostly unsuspecting "debtors."  They could raise the interest on both current and future purchases, making the interest hike RETROACTIVE!  It may have been legal, but it certainly wasn't ethical or moral.  But, since when are banks or creditors ethical or moral? You should know by now that its always about money and profit to them.

Well, in February 2009, there was new legislation that went into effect that claimed to prohibit this practice of  "Universal Default."  I say claimed because, typical of anything that affects banks or lenders and is within reach of unscrupulous lawyers, there's going to be lobbying and backroom deals to make sure that any legislation would have plenty of loopholes and spin to still stab the consumers and rake in the money for them.  The legislation is called the CARD Act (Credit Card Accountability, Responsibility, and Disclosure Act).  It was supposed to protect consumers more and rein in the creditors a bit.  It was touted as the end of  the "Universal Default" practice.

So here we are now and there's no more Universal Default.  Except, there kind of is, its just that they call it by different names and it plays out a bit different.  Here's how the CARD Act works.  If you have a credit card, or credit line, whatever, some sort of credit agreement with a lender, and you've become 60 or more days late, they can hike up your interest rate if they want to (and you know they want to), to however high they want - there is no cap on the amount they charge for a "penalty interest".  However, under this act, if you are good little children and pay your bill on time for the next 6 months in a row, they have to restore your interest rate back to what it was before you got behind.  They also can't raise your interest rate based on your performance on other credit obligations. Kind of sounds like they care about us consumers doesn't it? 

Don't be fooled.  Those are about the only "good" things for consumers in this legislation.  How about this:  You are one of the best of the best.  High FICO Scores, never late, pay more than minimum, had the credit card for over a year. Can you believe that if they want, they can practically arbitrarily increase your interest rate to whatever amount they feel like?  And the fees -- oh the fees!! They are endless!  They can fee you now if you don't go paperless, or fee  you to pay by phone, or in person, or fee you for the convenience of accepting your payment, or an annual fee, you name it. They can make up all kinds of fees and call them whatever they want, to squeeze every last dime out of you.  

If you're late on a different credit card bill or credit account that is unrelated to them, they can give your situation another name, put you into a category where they can spank you.  So, if you are a bad child and end up as a potential defaulter, they can cancel your account or lower your credit limit, or raise your minimum payment or both the last 2, if they want.  If they raise your interest rate for whatever reason they make up, they can raise the minimum payment to an amount that would allow you to pay off the balance in 5 years.  That could be quite a payment hike!  They do have to give you a 45 day notice for raising your interest rate. But, if they don't raise the interest rate, they can raise the minimum payment as high as they want, and they don't have to give you an advance warning.  They don't have to give you an advance warning if they decide to close the account, either.

So, is there anything else that is "good" about this new-ish CARD Act?  Here's a few.  If they raise your interest rate and you say, "uh, no, you don't deserve my business, cancel the card," they can't make you pay the balance off in full in such short notice.  They have to allow you to make payments and pay it off in up to Five Years.  They can't "penalize" you with a higher interest rate for being late on some other company's card, and they can't raise the interest rate as a "penalty" for being late on their card, unless you are more than 60 days past due.  They have to review your account in 6 months from the start of the "penalty phase" and lower your interest rate back to what it was.  They can't post that you were late making a payment on your credit report(s) until after you are over 30 days late.  They have to keep the same due date every single month.  They have to send you a bill at least 21 days prior to it being due.  They cannot charge you for being late for not paying them midday. The cutoff time has to be at least 5 pm, their time.

So, for those of you that are still using credit cards, make sure that you're not late, at least more than 60 days late because that is when the heavy penalties can take affect.  Just be careful, read all your disclosures carefully, especially for those accounts you've had a long time.  They put those small print, contract changing enclosures in your bills.  You don't want an unwelcome surprise and not respond in time, if you cannot accept their new terms.

If they've already beaten you down and you can't or don't want to pay them anymore, no doubt your credit report has suffered.  You may want to think about fixing your credit.  If its not a job you look forward to, and don't want to handle all on your own,  feel free to call me or email me for some help.  Fighting these out of control creditors and scum of the earth  3rd party collectors is what I completely enjoy.  I would love to help you as well!

How Bad Credit Affects Your Credit Score (Part 3/3)

Part 3:  The effect bad credit habits have on your credit score

In the first 2 parts we talked about 2 of the most popular credit scoring models. Now I'm going to try to expose how the different bad categories affect your credit.  When I say "categories" I'm talking about collections, charge-offs, liens, late pays, judgments, bankruptcies, and accounts that are showing "Settled".  All of these things are negatives and hurt your credit score.  What's worse, is that they cost you money in higher interest rates, higher insurance rates.  Even your ability to get a better paying job, (or a job at all, in this economy), can be affected.

When you have negative credit on your credit report, the negatives cost you the most points when they are newly reported.  As time goes on, your score will raise a bit, regardless if you paid off the negative tradelines or not.  I always tell people that a negative is bad and once bad, always bad - even if its paid. It is just a "Paid" bad and costs you points.  In fact, when you pay an old negative, it sets a new date for how long that negative can stay on your credit.  That's one of the reasons why I don't advocate paying old debt at all.  You need to get those off, not just showing paid.

Exactly how the scoring and how many points for each baddie is figured, I can't say.  I do know some general information.  They like to keep the percentages and algorithms a secret.  Its my opinion that they do this because they don't want everyone having good credit.  Bad credit is Big Money.  Think about it, when you are offered pre-approved cards in the mail, they are almost always attached to higher interest rates, annual and sometimes monthly fees, teaser rates to start off with and then the rate jumps, and almost always, the type of cards offered are for people needing to rebuild their credit.  

These companies get your information from the bureaus.  The bureaus sell your information. They have lists of people grouped and categorized for sale. Those with bankruptcies approaching 2 years, those with paid collections or charge-offs, low FICO score range lists.  This is one of the main ways bureaus make money.  Now, these companies offering the credit cards, the ones that buy the lists from the bureaus, they stand to make a ton of money because the interest rates and fees are higher than what someone with A credit will accept.  As I said before, bad credit is big money, its big business.

So how many points do these negative items cost you?  Its not the same amount for every person. One thing that affects the amount your score will drop is what the FICO score was before the negative was placed on the credit.  The higher the credit score, then the more points a negative mark will cost you. I believe because this is true, that the points it costs you is a percentage of the starting score.  Also, the amount of points you get back when you get the negative removed is generally going to be less than the amount it cost you because the longer the negative is on your report, the less it costs you.  In other words, every time your credit score is updated, you may gain a few points.  Sometimes it updates because a new negative is put on, but it can be offset by the score raising a little bit, from the length of time older baddies have been on the report.  So time and changes to the report affect the score.

Here are what some of the different "baddies" will cost you in points, and why you need to get these deleted from your report, not just paid off.  Remember, its based on what your starting score it.

New Collection:                   Avg. 50 - 150 point drop for each one
Points lost are based on your starting score and the dollar amount of the collection reported.  It is a confusing formula, but this is what I have learned through research.  Initial points lost 50-100 for the first $236 then another 35-50 points lost for each additional $354. Then, they add back some points ranging from 76-175.  On a $1200 collection with a starting score of 700, there would be a loss of approximately 112 points.
Charge Off:                          Avg. 50 - 150 point drop for each one
Points are lost based on your starting score, but don't forget, this point drop is in addition to all the drops your score has suffered from the points lost for each 30 day late pay (and 60 - 180+ late pays), and then, when they sell it to a collection agency, you get dinged again when they report!
Late Pays:                            Avg. 60 - 110 point drop for each one
Points are lost based on your starting score.  The higher your score was to start with, the more points it costs you. With each successive late payment, it should drop less and less because the score is lowering each time.  But, late pays really hit you hard and cost you a lot of points.
Bankruptcy:                        Avg. 130 - 240 point drop
Points are lost based on your starting score.  You see the effect right away, but it causes all the collections, judgments, anything included in the BK to show paid. By the end of 2 years, your credit score can really see some recovery.  I've seen some credit reports that had the whole payment history removed on accounts that were included in the BK.  Removing all those late pays, helps offset the huge point loss you get from BK's.
Foreclosure:                        Avg. 85 - 160 point drop for each one
Points are lost based on your starting score. Don't forget, you have been losing a ton of points all along with the late pays and NOD's (I don't know what an NOD point cost is - I figure probably similar to another late payment).
Judgment:                           Avg. 50 - 150 point drop for each one
Points are lost based on your starting score. Again, you've most likely lost points already for late pays and charge off, and collection. This is just another hit with a hammer. Time passing does help. Paying it helps because it really affects your debt ratio, and if you try to buy or sell a house, it will have to be paid before escrow can close.
Settled Account:                 Avg. 45 - 125 point drop for each one
Points are lost based on your starting score. You've probably been hit with late pays, charge off, and / or collections, costing you a ton of points before you get to this scenario, then you get to lose more!  But, I absolutely loathe settling accounts. First, I don't agree that you actually owe most creditors, and definitely not a collector.  But what's worse, is you will get a 1099 Tax Form making you pay taxes on the amount forgiven as if it was income!!!!  Can you hear me screaming not to do this?
Maxed Out Account:             Avg. 10 - 45 point drop for each one
Points are lost based on your starting score. I think the higher monthly payments you have to make on the account are worse than the point drop you get.  Besides, as you keep making payments, you'll recover from this one fairly quickly - at least if you can make more than just the minimum payments.
"Hard" Inquiries:                   Avg. 5 - 55 point drop for each one
Points are lost based on how many you have in a short amount of time. If you're applying for credit all over the place, that's going to cause a lot of "hard" inquiries - the kind that cost points and everyone that pulls your credit can see. If you're applying for a mortgage, they don't count multiple pulls against you though, if they are within a 30 day period, because they know that loan officers may be required to pull several times when "shopping" your loan to get you the best rates.  Also, points from inquiries only affect your score for 1 year, and then there is no impact from them at all.

When you remove negatives like these from your credit report, you can expect to see your score increase.  I don't know the formula for that either, but you can sort of figure it will be about half the points from the low end to half the points of the high end in the point range for each item.  This is because time heals a bit and the points you initially lost are greatest right away then slowly you start getting some back.

Well, I hope I was able to give some information that may answer some questions. Please remember that because the algorithm is not disclosed, these numbers are just from testing and tracking done by research groups trying to have a better understanding of the scoring formula, and bits of information that FICO releases to give a little insight into how they score in order to help people manage their credit.