Well, we have been indoctrinated, vaccinated, hyperventilated, isolated, inoculated and just about every reason "why" the credit system is a mess by everyone from the top to the bottom. All fingers are pointing at "bad mortgages" Bull crap! Plain and simple. Do you think for a cotton pickin minute that all of a sudden people with bad credit or loans made to people with weak credit is some "brand new baby".
The mortgage industry is partly to blame for sure. Greedy lenders, investors and brokers have all pulled their chair up the to "buffet table" of profits and helped themselves. Now, prior to these "portfolio loans" we relied mostly on FHA, GI, Fannie Mae and conforming loans.
A lot of people bought a home using the FHA guidelines. The credit criteria was relaxed and folks with credit issues were given a chance to own a home and pay competitive rates. Yup, if you had some minor credit issues, you were given some leeway to explain them and if you had a job, paid your bills on time for one year and proved to the underwriters that you deserved a home, by golly, you got a mortgage. Have these folks lost their homes? Not in a long shot. WHY NOT? Because the FHA fully understood credit issues and produced a credit guideline that enabled these folks to qualify.
But, what really has happened stems from a few years back. I mentioned in one of my other articles the "rule of 72". I guess a lot of folks just didn't get it or just didn't care. But lets get on with the business at hand. When I say we are faced with the likeness of the notorious KGB in our system, I am speaking directly about the credit reporting agencies.
I don't care what you think or what you say, facts are facts and until the politicians quit fighting for turf and handouts and pay attention to what is happening, we will be facing this credit crisis for a long, long time.
Why do I say this? Well, read very carefully. The credit reporting agencies have more power than the Federal Reserve. If you don't believe me, take a close look at them. They are "for profit" companies owned by stockholders for profits. In fact, Experian is owned by a group from the UK. Here is where there power affects you and I and we are helpless to do anything about it.
You see, as a consumer, you do not own the data on your credit report. They own it. They have gathered up your paying history and sell it to anyone that wants to pay them for it. So, when you go into the local TV store, the manager automatically pulls your credit. It costs him anywhere from $8.00 to $16.00. Of the millions of people in the US. How many credit reports are pulled daily? Mind boggling. Now, who are the agency customers? NOT YOU and NOT ME.
The customers of the agencies are the creditors. So, lets be logical, when anyone disputes an entry on their credit report, who do you think that the credit bureau will favor? Not you for sure. You are nothing to them but a statistic that makes them money. Okay, got the picture? Now lets really get "down and dirty". How about the hundreds of credit card companies that use the information from the credit bureaus? Do you think that it would be reasonable to assume that these companies are happy making 8% on loans? Come on, get real. These companies are geared to make over 24% on their money plus the extras that they charge for being late and over the limit.
Here is a new twist. Try and pay your monthly bill on the telephone and they will charge you an extra $5 - $10 bucks for that. I went ballistic with a clerk when she told me that I would have to pay $10 for the privilege of paying by phone. I said "why in the sam hell would I pay you for the privilege of paying you? Ludicrous, but they get away with it.
Now that you can see the "pigs cavorting around the trough" of extra costs and filling their plates, you begin to understand what this whole picture is about. There are NO CREDIT COPS out there to protect us. Sure, the FTC occasionally metes out a fine when it is politically proper and the public has screamed enough.
Now when the bottom feeders get 24% and more in interest, do you think for one minute they care about you or me? They only care about the bottom line. But, these "thieves" need a partner to guarantee that your credit stays in the pits. Who is that partner? Well it's Equifax, Experian and Transunion. You see, in today's real world there are more credit reports with errors than there are accurate credit reports.
Sure, we have laws that says "the bureaus MUST report 100% accuracy" or else? Or else, WHAT. NOTHING, NADA, ZILTCH. When they report erroneous information you play "hell" trying to get it straightened out. If you don't believe it, just go to this website and see how Transunion reported to Congress "how they handle disputes". Go ahead and read this article about the credit reporting agencies. It will "blow your mind". epic.org/privacy/preemption/lefebvre6.4.03.pdf epic.org/privacy/preemption/lefebvre6.4.03.pdf
I certainly do not want to write a book on this subject, but that could naturally follow. The truth of the matter is this. I guess we call it the "food chain" for profits.
Harry and Jane use their credit card and go over the limit. Not a big deal. But wait. Lets see how this "credit cancer" spreads. First of all, they are hit with an over the limit fee. Secondly their credit scores drop because of the fact that they are over the limit. Who knows this? You didn't but you do now. With this lower credit score, the other credit card companies have their "sniffers" working and they raise the interest rates on their credit cards, simply because you "might" have a problem. Is that justice? Not at all, but they get away with it.
So, Harry and Jane now see their interest rates climb on their credit cards, their payments increase and something has to give. You cannot get "blood out of a turnip". So, they miss a payment or are late because the paycheck was late or he missed a couple of days of work. Doesn't matter the reason, but their personal "pristine" credit is heading for the bottom of the pile.
Can they do something about it? Well, because they were over the limit is in itself not a crime. BUT, here is where the credit reporting agencies help the creditors.
When an account is placed for collection or charged off, the furnisher of information MUST provide the bureau with the commencement of the initial delinquency. BUT, they rarely do. On most credit reports over 90% have the same error. You cannot determine when the seven year period of reporting derogatory information begins. THIS IS WHAT KEEPS YOU IN CREDIT PRISON.
I will write a follow up article to this one as this is such a "bombshell" and an education for Joe Consumer.
Regis Sauger is a licensed Mortgage Broker in Florida, an author, lecturer on credit awareness. He haa conducted seminars for underwriters, attorneys, mortgage lenders, realtors and the general public. yurcredit.com yurcredit.com
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