New Year's Resolution – Get Your Credit in Good Shape!

Ever since the credit bureaus were mandated to provide one free credit report each year, I've made requesting and reviewing my credit report part of my New Year tradition. It's my opportunity (and responsibility!) to make sure that I haven't been the victim of identity theft and that the credit bureaus are reporting my credit history accurately.

I was especially motivated to do so this year because I recently discovered that one of the credit bureaus is reporting erroneous information – information that is causing my credit score to vary 50-75 points from the other two scores.

This year, make a resolution to get your credit and finances in good health. Remember, the ONLY place to get your credit report for free (per the federal Fair Credit Reporting Act) is https://www.annualcreditreport.com/... NOT freecreditreport.com.

You may also order your credit reports by calling toll-free to 877-322-8228, or by mail. To request your credit report by mail:

• Download the request form (You need an Adobe viewer to view the requested form. Download the free Adobe viewer)
• Print and complete the form
• Mail the completed form to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Here are some tips on ordering your credit report (courtesy of Bankrate.com):

Free is free: If you have to supply a credit card or checking account number, it means you're going to pay. You may get the initial credit report for free, but you may also be signing up for a continuing service at a price.

No junk mail: Don't respond to e-mail offers for free credit reports -- they're almost always spam.

Be secure: Always be sure you're on a secured Web site when entering your personal information.

Keep it secret: When phoning the toll free number (877-322-8228) for a free credit report, ask that only the last four digits of your Social Security number are displayed on the reports to be mailed to you.

Reduce solicitations: Don't give out your e-mail address to obtain a federally mandated free credit report -- it is not required.

Run from pop-ups: If you do choose to go online to https://www.AnnualCreditReport.com and see pop-up ads, or if the site is not secure, close your browser and start over. Secure sites will have a padlock logo in the corner, and the address will begin with https:// instead of just http://.

Check and uncheck: If you go online to https://www.AnnualCreditReport.com, be sure to look for any pre-checked marketing or newsletter offers. If you decide you do not want these offers, uncheck the box.

I Never Said You Could Pull My Credit!

Dear Credit Mama,

I got a copy of my credit reports and noticed what appears to be a list of companies that have pulled my credit… companies that I had contacted about their service but never actually did business with or authorized to pull my credit. Don't businesses have to get permission to run a credit report? And should I do anything about this?

-- Danielle


Dear Danielle,

Yes, you are correct – under the Fair Credit Reporting Act, businesses must have your permission or a "permissible purpose" to pull someone's credit. (Permissible purpose means they have a legitimate need for the information.)

Merely inquiring about a service does not give the company the right to run your credit report. Companies should tell that they are pulling your credit or ask for your permission first. Employers must get written permission from you in order to check your credit.

These types of inquiries – known as "hard" inquiries – can have a negative impact on your credit score and will typically remain on your credit report for a year, sometimes up to two years.

Although the impact may be relatively minimal -- five points or so per inquiry -- recent studies show that an increase of just 30 points in one's credit score can have significant financial benefits… which means every point in your favor is important.

Hard vs. Soft Inquiries

Hard inquiries include requests for new credit (credit card or loan, or increase in credit card limit), employment credit checks, and applications for certain services such as cell phones or utilities.

Soft inquiries occur when your creditor reviews your files, creditors extend you offers of credit, or when you pull your own credit.

Action Steps

When inquiring about services, be upfront and let them know that you do not want your credit pulled without your permission.

If you believe that the companies listed on your credit report did not have a legitimate reason to access your credit, you can contact the company and request that they correct the information. You also can contact the credit bureaus directly to correct your report.

If the company is in the wrong and refuses to correct the information, you can sue them for up to $1,000 in statutory damages for violations of the Fair Credit Reporting Act.

Senate Passes "Common Sense Legislation" Regarding Credit Card Receipts

The Credit and Debit Receipt Clarification Act – a bill that says a business that printed an expiration date on a receipt over the past 18 months cannot be found in violation of the Fair Credit Reporting Act as long as the merchant truncated the customer's credit card to no more than the last five digits (and complied with other FCRA requirements) – has passed in the U.S. Senate.

The bill was sponsored as H.R. 4008 in the House by Financial Services Committee member Representative Tim Mahoney, D-Fla., and as S. 2978 in the Senate by Banking, Housing and Urban Affairs Committee member Senator Charles Schumer, D-N.Y.

The decision was hailed by businesses and restaurants and is expected to nullify the more than 300 class action lawsuits that contended that FACTA required merchants to both truncate the credit card number and leave off the expiration date. The lawsuits sought fines as high as $1,000 for each non-compliant receipt and were so potentially damaging that a number of retailers threatened to file bankruptcy. Plaintiffs did not need to demonstrate any real or actual damage caused by the violation or even that the companies had willful intent to cause harm.

Merchants said their interpretation of the law was that they needed to do one or the other, but were not mandated to do both. Most reasoned (and some experts concurred) that the expiration date was of little value without a full credit card number.

According to a release issued by the National Retail Federation and the National Council of Chain Restaurants, the new legislation would protect merchants from lawsuits for expiration dates printed between the time the FACTA rule went into effect and the time the measure is signed into law. But merchants will still be required to both truncate card numbers and leave off expiration dates going forward.

“The continued proliferation of these lawsuits is an unnecessary drain on resources during a time of financial uncertainty in the nation’s economy,” NCCR Vice President Scott Vinson said. “Experts have said truncation of credit card numbers by itself is sufficient to prevent credit card fraud or identity theft regardless of whether the expiration date is printed on a receipt. Retailers and restaurant owners nationwide are delighted that Congress has passed this common sense legislation and look forward to seeing it signed into law as soon as possible.”

President Bush is expected to sign the measure shortly.

LendingTree.com: "When Banks Compete, Your Identity May Be at Risk…"

LendingTree, an online leads company that purports to help consumers shop around for the best mortgage deals, recently admitted in a letter to customers that some of their former employees helped unauthorized mortgage lenders hack into their databases. Customer information collected between 2006 and 2008 – including personal data often used to conduct identity theft, such as name, address, Social Security number, income and employment information – was stolen.

While they say the information was merely used to market mortgage loans, not to commit identity theft, the fact remains that LendingTree's lax security measures contributed to a significant data breach that may very well increase the likelihood that their customers will become identity theft victims.

According to the letter, LendingTree did not disable the passwords of their former employees, some of whom shared the confidential login information with unauthorized lenders who then tapped into the databases to "access LendingTree's customer loan request forms."

LendingTree's Response

LendingTree would not confirm the number of customers affected, and is not offering much in the way of compensation or solutions. They recommended that their customers use their "free annual credit report" benefit to check their credit report for any suspicious activity and monitor their credit reports for the next 24 months.

LendingTree also has filed lawsuits against three small home loan companies based in California in connection with the data breach.

Criticism of LendingTree Practices

Much criticism has been leveled against the leads company for the way it conducts business. Some customers claim that when they selected to have four lenders review their application, LendingTree actually sent it to 10… or more.

Other consumers reported that they started the application process, but changed their minds mid-way. Yet LendingTree sold their incomplete applications – and they started getting bombarded with calls.

"I have worked for 2 big mortgage companies and a broker," wrote one mortgage broker. "I've learned that LendingTree not only sells your information to 2 or 3 lenders, they sell it to other small lenders and broker shops. And then after a while, they resell your information again so they can have continuous profit. If you ever applied with LendingTree, make sure that you have read the Terms & Agreement. They sell it to anyone that can possibly help you."

Some complained that they had so many inquiries generated on their credit reports that their credit score dropped by 60-100 points. Hard inquiries are 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. Each of these types of credit checks count as a single inquiry. One exception occurs when you are "rate shopping". That's a smart thing to do, and your FICO score considers all inquiries within a 2 week period for an auto or mortgage as a single inquiry.

However, because LendingTree doesn't just sell information to a handful of lenders one time – they sell them repeatedly over a long period of time – this can, in fact, contribute to a decreased credit score.

Jackie Story – Are You Out There?

For four years, your Credit Mama has fielded phone calls from mortgage brokers and call centers all over the world looking for "Jackie Story." Apparently Jackie Story used to have my cell phone number. It didn't take long for me to figure out that she used LendingTree to apply for a mortgage or refinance. What did surprise me, though, was the sheer number of phone calls I received long after the first few rolled in.

At some point I finally started telling the callers that they had wasted their money by purchasing very old, very useless leads. I still wonder, though, if Jackie Story ever got that low interest rate she was looking for, and if her credit has been negatively impacted by all of the people who received her original application and tried to process it.

It's Not Just LendingTree

What many people don't know is that your information can also be purchased from the credit bureaus. "Trigger leads" – leads generated when you apply for a mortgage – plague mortgage brokers. When you apply for a mortgage, your phone number and address are sold by the credit bureaus to other mortgage companies. That's why many applicants begin receiving volumes of solicitations from companies they have never heard of.

Be wary of any lead company, such as LendingTree.com or LowerMyBills.com. And if you do not wish to receive pre-approved or pre-screened offers for credit or insurance, the Fair Credit Reporting Act allows you to "opt out" of receiving them. To opt-out, call toll free to 1-888-567-8688 or visit optoutprescreen.com.

Get a CLUE About Your Insurance Score

A reader e-mailed me to voice her distress over her auto insurance rates. Prior to her divorce, she and her husband had been able to obtain reasonable rates for their two cars. But the divorce was messy. Their house fell into foreclosure as it languished in the stagnant real estate market. Bills that were supposed to be paid by her (now ex-) husband went into collections. Her credit score began dive. She eventually filed for bankruptcy. As things went from bad to worse, she was stunned to learn that her application for new auto insurance coverage was denied.

"I've never filed a claim or gotten a ticket for anything!" she wailed. "My husband and I always paid our insurance on time, and my driving record is totally clean!"

One thing that may have impacted her ability to get insurance for her car is her credit history and public records information. Insurance rates for homes and cars are often linked to credit scores. Insurers justify increased rates by relying on statistical analyses that purportedly show a correlation between an insured's credit history and likelihood of filing a claim.

This means if your credit file shows a history of late payments, foreclosure, tax liens, garnishments, bankruptcies, lawsuits and judgments, you may be smacked with high insurance rates or even be denied coverage.

This data - plus any information on claims you have filed (and sometimes even inquiries about your coverage that do NOT result in a claim) - is entered into a little-known database called CLUE (Comprehensive Loss Underwriting Exchange) or its smaller competitor, A-Plus. These national databases are used by insurers to determine whether you get new insurance. Insurers may also look at your claims history and "insurance score" when deciding whether to renew your coverage or how much to charge for your premiums. Because it is a national database, other insurance companies can review your claims history for five years. This may include losses for a property before you even owned it.

Some home buyers learned this the hard way, with deals falling through because of inquiries - not necessarily claims - that cause the property to be "blacklisted." The previous owner may have inquired about coverage for water damage; even though the owner may never have filed a claim, the information is posted into the database, and insurers will assume that there is a problem.

Consumer advocates have been pushing hard for reforms. As a result, some states have passed legislation to prohibit the inclusion of inquiries that did not result in a paid claim. Other states have begun passing laws to limit or prohibit the use of credit scores as the sole determining factor in deciding insurability or rates (see if your state has such laws); however, many insurance companies still rely on them to some degree.

Given the fact that 79% of credit reports contain errors, it may be concluded that rates may be artificially inflated or insurance unfairly denied when determined - in whole or in part - by credit history.

The good news is that this specialty report is governed by FCRA. Under the FACT act, you have the right to obtain a copy of your CLUE or A-Plus report each year, and the right to dispute inaccurate or incomplete information on those reports. If you have been denied coverage, had your policy cancelled or your premiums have increased, the insurer must notify you in writing; in addition, you are entitled to a free copy of your report (in addition to the free report you are allowed each year).

To get a copy of your CLUE report, visit ChoicePoint's Web site or call toll free: 1-866-312-8076. To get a copy of your A-Plus report, call toll free: 800-627-3487.

You will not get your actual insurance "score" - just the history of claims. Because your credit score is factored into whether you are insurable and what your rate will be, you should also purchase your credit score as well in order to get a complete picture of what your insurance company is seeing.

Experian Sues LifeLock

Experian is really mad at Todd Davis.

You may not know Todd Davis, but you probably have seen his Social Security number plastered all over magazines, newspapers, television - even wrapped around public buses. (457-55-5462)

Davis is the CEO of LifeLock, a company that focuses on identity theft prevention. Their advertising has been hugely successful, with 700,000 customers each paying $10 per month for the service.

The service essentially consists of continuous fraud alerts being placed on your credit report, to be renewed automatically every 90 days. LifeLock's services also include stopping junk mail and the mailing of pre-approved credit card offers, and a copy of their credit report. The company offers a $1 million guarantee that it will help restore customers’ credit reports if they suffer an identity theft.

Experian says that LifeLock's practices are costing them "millions of dollars." Some of this is due to the thousands of calls funneling through various phone banks from LifeLock, resulting in "excessive phone charges." And, since the credit bureaus make a lot of money by selling consumer data to potential creditors, fraud alerts drastically limit their revenue capabilities.

The Lawsuit

Experian contends that the placing of continuous fraud alerts is illegal - that the Fair Credit Reporting Act only allows the consumer or a person acting on behalf of the consumer to place fraud alerts - and that LifeLock is intentionally deceiving the bureaus by posing as customers.

Experian also says that the fraud alerts can only be placed when the consumer believes that fraudulent activities are imminent, and not just for anyone who wants one.

Pot, Meet Kettle

Experian is bent out of shape that LifeLock would charge consumers a fee to do what they can do legally for free. For example:

• You can call any of the Big 3 credit bureaus to request an initial fraud alert if you suspect that you have been, or are about to be, a victim of identity theft. Once the alert is in place, potential creditors must use "reasonable policies and procedures" to verify your identity before issuing credit in your name. You do not need to call each of the three credit bureaus - they are required to report this to the other bureaus.
• In addition, when you place an initial fraud alert on your credit report, you can order one free credit report from each of the three nationwide consumer reporting agencies. You also can request that only the last four digits of your Social Security number appear on your credit report. You also can order a free credit report from annualcreditreport.com.
• You can stop junk mail and remove yourself from pre-screened offers by visiting http://www.optoutprescreen.com/ or call toll-free to 1-888-567-8688. You can choose to opt-out of offers for five years or permanently. (You also can add yourself back onto the list.)

Experian really has no room to talk, having been the target of criticism that it charges customers for a service that is free through its freecreditreport.com site. The FTC has expressed concern that the site could be confused with annualcreditreport.com, which is the only site mandated by federal law that permits consumers to obtain a credit report for free each year.

With credit monitoring as the centerpiece of Experian's freecreditreport.com service, it's easy to see why Experian is attacking its new competitor.

The Truth Is....

Experian, no stranger to misleading and deceptive advertising, also claims that LifeLock is engaging in misrepresenting the effectiveness of its service. In one ad, LifeLock says, "You’ll find out how to lock down your identity, making it virtually impossible for identity thieves to wreak havoc on your good name."

Fraud alerts, however, don't prevent fraud from happening. It simply makes it harder for identity thieves to open up credit in your name. If an identity thief already has your credit card or Social Security number, a fraud alert won't stop the misuse of those items. Even Davis admitted in an interview that if an undocumented worker is using your Social Security number to obtain employment (a very common form of identity theft), there isn't much that LifeLock can do to stop it.

Is Your Grocer A Crook?

Beyond the legal issues Experian is jawing about, the hot issue seems to be whether LifeLock is a scam for charging consumers to do things they can do themselves for free, or if they simply are providing a convenience at a low monthly cost. LifeLock customers appear to be happy with the service. Yes, you can do these things for free. LifeLock clearly states this on their Web site. But every day, we pay for convenience. After all, you could grow your own food - does this make your grocer a crook?

More and more, people are finding that dealing with the Big 3 is a time-wasting hassle. If you don't want to pay for the service, you've now got the tools to do it yourself. If you want someone else to do it for you, $10 a month is not unreasonable.

One thing to be aware of: Experian states in its lawsuit that LifeLock uses annualcreditreport.com to order the customer's credit report. Customers who are unaware of this practice may try to use their once-a-year benefit and get turned down because LifeLock has already tapped the free report for the year.

Did You Really Think Your Salary Was Confidential?

In every place I've worked, my paycheck was always delivered in packaging that defied wandering eyes... usually requiring the removal of three separate tear-off strips, a battle with a letter opener, and sometimes even a paper cut or two.

But like any other piece of identifying data that could be possibly be collected and sold for a profit, your salary information is a commodity. Each payday, The Work Number, a product of Equifax, collects, stores and re-sells salary data and job titles on 46 million Americans - one-third of the workforce.

If you've worked for Fortune 500 companies like American Airlines, Boeing, Cisco, Coca Cola, Fed Ex, Ford Motor, GE, Hewlett Packard, Intel, Kmart, Lockheed Martin, Marriott, Microsoft, Motorola, Nokia, Pepsi, Sony, Visa, Wal Mart, Westinghouse, or government employers like the Department of Defense, U.S. Department of Energy, The Coast Guard, State of California, State of Missouri, or the cities of Detroit, Fort Worth and Pasadena sometime during the last 10 years, you're in the database.

There are currently more than 1,700 employers contributing data. The Work Number has 165 million employment records for current and former employees on file. The data, which also includes Social Security numbers, is sold to lenders, employers, landlords, and government-sponsored social service programs (such as food stamps) that want to conduct background checks or verify incomes.

The Work Number claims that problems with the data are rare: just 150 disputes a month (compared with 1.1 million verifications) because the data is automatically updated by the employers each time a paycheck is issued.

If you have been denied a job or loan because of the data provided by this service, the company that bought the report is required by law to notify you. In order to be compliant with the federal Fair Credit Reporting Act (FCRA), consumers are allowed to review and dispute information in The Work Number's database.

With identity theft issues making headlines on a regular basis, some privacy experts view this collection of data as a troubling issue. According to Elizabeth De Armond, an expert on privacy law and assistant professor at Chicago-Kent College of Law, "Any collection of personally identifying information like that leads to the high potential for identity theft. It's sensitive data."

Your Credit Mama agrees... this is just one more reason to check your credit reports regularly!