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How to rebuild your credit after bankruptcy

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Demonstrating financially responsible behavior and secured debt can help you recover from bankruptcy. (iStock)

Declaring bankruptcy may feel like a severe move but it can be the best way to get back on solid financial footing if you’re in dire straits.

Bankruptcy allows troubled consumers to eliminate crushing debt or establish long-term repayment plans, depending on the circumstances and type of petition filed. It can stop collection calls and may protect debtors from foreclosure.

While bankruptcy will damage your credit rating – information about the filing stays on a credit report for up to 10 years, according to the Federal Trade Commission – it needn’t place a permanent cloud over your financial life.

You can start working to re-establish good credit right away. In fact, median credit scores for those who file for personal bankruptcy protection steadily increase each year afterward, according to a U.S. Consumer Financial Protection Bureau report.

“The bankruptcy will haunt a filer for a while but it gives breathing room to reassess what when wrong and how to rebuild,” said Scott Cole, CFP, founder and president at Cole Financial Planning and Wealth Management in Birmingham, Ala.

Here are several measures that can help someone rebuild creditworthiness after declaring bankruptcy.

Check your credit report

Monitor your credit report for errors on a regular basis, as mistakes are common, according to Greg Plechner, CFP, partner at Greenspring Advisors, a corporate retirement and wealth management firm in New Jersey.

HOW TO CHECK YOUR CREDIT SCORE FOR FREE WITHOUT PENALTY

Federal law permits you to obtain a free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com.

After your bankruptcy is finalized, Plechner said, confirm the bankruptcy filing date is correct and accounts discharged during the process are reported as discharged.

Explore credit card alternatives

Secured credit cards can help you build credit when you don’t qualify for a regular credit card. While you can make purchases with it as you would with a traditional card, you “secure” – or back the account – with a cash deposit.

“This helps protect the lender in the event you cannot make payments,” Plechner said.

FICO SCORE VS. CREDIT SCORE: WHAT’S THE DIFFERENCE?

Use the card reliably over time and you can re-establish your creditworthiness with the credit reporting agencies. A word of caution, however: fees and interest rates can be high on secured cards, Plechner said.

A credit-builder loan can help you both boost your credit score and build up cash as you make regular payments, including interest, to a locked savings account set up by the lender – often a credit union. The funds are yours once you’ve paid the loan over six to 24 months, according to the CFPB.

Retailer credit cards that you can use in your favorite stores offer another possible option if you don’t qualify for a regular unsecured credit card. The underwriting, or approval criteria, for store cards tend to be more liberal but the fees and interest rates can be high, Plechner said.

Get friend or family support

If you can’t get a loan or credit card on your own, a friend or family member with healthy credit might agree to co-sign for you, which can help your credit score. It can be a significant request, though.

“A co-signer is risking their credit to help you,” Plechner said.
“If it is problematic to ask someone to co-sign, you could instead ask to be an authorized user on a friend or family member’s personal credit card,” he added. “Be sure to verify that the credit card will report payment activity by authorized users to the credit bureaus.”

Practice good financial habits

Responsible financial behavior forms the building blocks for good credit.

“The secret to rebuilding your credit is basically the same as getting good credit in the first place. Pay your bills, on time, every time, all the time,” Cole said.
“That is the number one way. By doing this you are showing to creditors and potential lenders that you know that you have learned to handle the credit available to you.”DEBT SNOWBALL METHOD VS. DEBT AVALANCHE: WHAT’S THE DIFFERENCE?

That also means refraining from slipping into old bad habits and getting in over your head.

“Just stick with it. Don’t over-extend and make sure you can handle current obligations,” Cole said. “The longer and more consistent one is in doing that, the less risky you become to potential lenders and the higher one’s credit score will get.  Be consistent, don’t over-utilize the available credit and pay the bills in a timely fashion.”

Plechner recommended paying more than the minimum on credit cards when you can and to be aware of two financial “dont’s.”

HOW TO AVOID HAVING YOUR CREDIT CARDS CLOSED

He warned consumers to avoid credit repair agencies, as there’s nothing a credit repair agency can do that you can’t do yourself.

He also recommended against using payday loans. “The effective interest rate is almost always unconscionable,” he said.

Experian, one of the credit reporting agencies, notes that student debt typically isn’t discharged in bankruptcies, and recommends making monthly payments on time to help rebuild your credit score.

Experian, like many financial experts, suggest making a budget to get a handle on your spending and keep debt in check.

“Bankruptcy can be an important, financial lifeline,” Cole said. “Don’t waste it.”

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Landmark Point Predictive Fraud Study Details Record Year for Auto Loan Fraud in 2020

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SAN DIEGO–(BUSINESS WIRE)–Apr 15, 2021–

Point Predictive Inc., the San Diego-based artificial intelligence and data science company that helps lenders predict the trustworthiness of loan application information, published research detailing increased levels of attempted loan fraud in 2020, which the company believes could continue through 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210415005688/en/

US Auto Loan Fraud Reaches $7.3 Billion in 2020 (Graphic: Business Wire)

The company’s Auto Fraud Report is the auto finance industry’s most comprehensive annual assessment of application fraud risk. The 2020 edition includes unique insights about income and employment misrepresentation, identity fraud, and collateral fraud for US auto lenders, as well as the impacts of the pandemic on this important sector of the economy.

“2020 was a pivotal year for fraud risk, with auto loan fraud reaching $7.3 billion of originations,” said Frank McKenna, Chief Fraud Strategist for Point Predictive. “The pandemic heightened fear and anxiety and likely made consumers more vulnerable to scams and frauds. The ensuing economic turmoil caused an immediate and dramatic rise in unemployment, increasing some people’s willingness to engage in loan fraud. Furthermore, a flood of stimulus money and generous lender forbearance programs simultaneously increased the level of fraud while delaying lenders’ ability to recognize it.”

Many lenders have praised Point Predictive’s research due to the breadth, detail, and scope of the analysis. This year’s analysis drew from the Point Predictive anti-fraud Consortium dataset, a secure and private data science collaboration among dozens of US lenders. The Consortium now includes over 94 million loan applications containing 85 individual fields of data on each application. Every month, activity from 45,000 dealerships contributes to a view of vehicle financing that spans nearly all 157,000 US auto dealers. This data set tracks over $2.7 billion in known early payment default and the company’s machine learning techniques have generated more than 10 billion risk attributes, offering unparalleled insight into mostly hidden risk trends and the ability to predict more fraud than ever before.

“Consortium data is deeper and more predictive of risk than any credit bureau or public records source,” said McKenna. He continued, “This vast and deeply-specific data on each loan application gave us incredible clarity into fraud risk that lenders are exposed to. And one thing is for sure: the risk of fraud to auto lenders rose dramatically as the pandemic unfolded.”

One of the most significant trends addressed by the analysis was the marked uptick in income and employment misrepresentation. As the lockdowns began, Consortium members were suddenly impacted by a 100% year-over-year increase of falsified income and employment claims on auto loan applications, a level of risk which continued throughout the year. Detected among the trend was the use of over 300 new, but bogus employers each month, used by applicants to fraudulently convince lenders of steady sources of income.

Completing a complex risk picture for fraud managers, the report notes that scams like synthetic identity creation, credit washing, and even lawful impacts of credit repair efforts complicate efforts by lenders to guard against fraud in order to more quickly serve trustworthy borrowers.

“As a lender, you have to keep your guard up at all times. No assumptions can be made about any loan application until every single one clears a satisfactory fraud review,” said Steve Christensen, Executive Vice President of Elite Acceptance Corp. “The analysis and outlook from Point Predictive is essential reading in order to be prepared. For Elite Acceptance, the crucial trends to get ahead of are the dealer implications, such as a sale price inflation of over 10% on the top 10 models,” said Christensen. He concluded, “I credit Point Predictive for exposing the truth behind what is presented to lenders by dealers and borrowers.”

Additionally, the analysis of auto loan fraud in 2020 covers other concerning trends, including clusters of fraud in certain states and metropolitan statistical areas (MSAs), new tactics used by self-employed borrowers, patterns of suspicious and ambiguous naming conventions for fake employers, synthetic identity centers, Social Security number manipulation tactics, vehicles subjected to inflated pricing, and the systematic disputing of multiple negative tradelines on a credit report in order to make the borrower appear to be more creditworthy. Power booking is also on the rise, wherein dealers inflate sale prices and falsify down payments to increase the chances of loan approval.

The Auto Fraud Report concludes with recommendations from Point Predictive’s fraud experts for staying ahead of fraud in 2021. Tim Grace, Chairman and CEO of Point Predictive, encourages lenders to bolster fraud defenses and staff. “In times of crisis, there is often a need to reduce costs to stay profitable amidst decreasing volumes. But this is a mistake. The rate of fraud and risk will increase over the next 18 months, making fraud prevention and staffing one of the most important investments you can make in maintaining the health of your portfolio. Resist the urge to cut costs where it matters most.”

Auto, mortgage, and student lenders who are interested in receiving a copy of Point Predictive’s 2020 Annual Auto Fraud Report should contact [email protected].

About Point Predictive Inc.

Point Predictive enables lenders to fund more loans simply with a unique combination of Artificial and Natural Intelligence™ (Ai+Ni™) to power machine learning technology solutions. Point Predictive helps automotive, mortgage, retail and personal loan finance companies to identify the consumer applications with truthful and reliable information without the intense interrogation and verification of data caused by lower tech solutions currently in use. Highly regarded as the most trusted fraud and misrepresentation analytic solution providers, Point Predictive has transformed that trust to enable lenders to fund more loans to more consumers simply. Point Predictive uses big data powerfully orchestrated from millions of examples of true and falsified loan applications, billions of derived proprietary data elements, and scientifically selected third-party data sources to build powerful machine learning models with the added natural intelligence of human experience.

Located in San Diego, California, more information about Point Predictive can be found at www.PointPredictive.com.

View source version on businesswire.com:https://www.businesswire.com/news/home/20210415005688/en/

CONTACT: Dennis Behrman

VP of Marketing & Growth, Point Predictive

858-227-6644

[email protected]

KEYWORD: UNITED STATES NORTH AMERICA CALIFORNIA

INDUSTRY KEYWORD: TECHNOLOGY FINANCE AUTOMOTIVE GENERAL AUTOMOTIVE SECURITY BANKING PROFESSIONAL SERVICES SOFTWARE DATA MANAGEMENT

SOURCE: Point Predictive Inc.

Copyright Business Wire 2021.

PUB: 04/15/2021 10:57 AM/DISC: 04/15/2021 10:57 AM

http://www.businesswire.com/news/home/20210415005688/en



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TML announce launch of new residential Lumi products

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Steve Griffiths TML





A new, Lumi-branded, residential product has been launched by The Mortgage Lender, following a rise in demand from borrowers who have been financially impacted by the pandemic.

TML say that the range is available up to 75% loan to value, across four Lumi categories and caters for customers with defaults, CCJs, and mortgage arrears. It also offers enhanced credit criteria for unsecured arrears, bankruptcy and payday loans when compared to TML’s core range.

Lumi products are available for employed, self-employed and complex income applicants. The minimum loan is £25,001 and the maximum loan is £1m with rates starting at 4.98% for a two-year fix and 5.29% for a five-year fix at 70% loan to value.

Steve Griffiths, The Mortgage Lender sales and product director, said: “Now more than ever lenders need to have criteria that caters for a wide range of customer circumstances and recognise that the last 12 months has been financially difficult for many people.

“Our Lumi range, which is available through specialist distributors, takes a pragmatic approach to the real-world experience many of our broker partners are presented with when they are sourcing a mortgage for their clients.

“It offers fair rates combined with a flexible approach to underwriting that provides a stepping-stone for home-movers or those remortgaging and, in some cases, credit repair.”

Doug Hall, 3mc director, adds: “We are seeing increasing numbers of customers whose financial situation has been impacted by the Coronavirus pandemic who need products that are appropriate for their circumstances now.

“Through sharing our knowledge and challenges with lenders, like TML, the specialist lending sector is proving it can meet those needs in a responsible way. The launch of Lumi is great news for brokers and customers. It shows lenders are listening and able to respond to the market, improving customer choice and competition.”

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how to boost a bad credit rating

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HOLLAND, Mich. — Your credit score is just a number, but it can make a difference in your ability to get a loan, house, or even a job ,and after a tough year for finances, now is an important time to pay attention to your score.

“You need to have options, and you need to be able to have access, and all of that boils right back down to your credit score,” says Bree Austin-Roberts, a credit expert and founder of Lakeshore Credit Management and Repair Services in Holland. “I think it was a reality check for a lot of people to saying, ‘Hey, it’s time for me to start thinking about my financial situation.’”

Bree’s story is similar to so many of her clients. A few years ago, before she founded her credit repair business, she and her family were evicted from their apartment. Searching for a house and facing homelessness, Bree noticed a similar roadblock everywhere she looked.

“The credit became a problem,” she said. “It always boiled back down to the credit.”

Bree buckled down on payments and in no time had raised her credit score enough to move her family into a home and start up her business. Now helping others achieve the same success, Bree says a few simple adjustments can make a big difference. Her first call was to the three major credit bureaus to check the accuracy of her score.

“Like 80 percent of people in the United States have something that’s inaccurate on their credit report, but a lot of people don’t know because they don’t monitor their credit.”

So start by checking with TransUnion, Equifax and Experian on the accuracy of your score.

If you’re having a tough time making payments this year on bills or installment loans (which Bree says you should always have at least one of), try contacting your creditors to see if they can delay payments or work out some sort of payment plan that works for you.

“Directly related to the pandemic, a lot of lenders are being very lenient,” said Bree.

In addition to making all your monthly credit card payments on time when you can, Bree says it also matters how often you use your credit card, and on what. She says most repair experts will recommend you keep your card usage below 30 percent, but Bree recommends a lower limit for her clients.

“When you’re in the building process, you want to keep it 10 percent or below,” she said. “If you’re planning on making a major purchase in like 30 to 60 days, you probably want to keep your credit card balances between 1 and 3 percent.”

Other tips include becoming an authorized user on a loved one’s credit card. If they have good credit, spending responsibly on their account could help boost your score faster. Just have them ask their bank or credit union about adding you as an authorized user.

You can also open a secured card on your own. A secured credit card is essentially a prepaid card that ensures you don’t miss payments.

And remember: no credit doesn’t mean good credit. Lenders want to see you can responsibly handle debt.

“Having something to report is positive, but it’s the amount that reports that shows your credit worthiness,” said Bree.

What it boils down to, Bree says, is having good habits and sticking to them. Building or rebuilding credit is a marathon, not a sprint, and Bree says patience is key.

“I was never always a credit expert. It was trial and error,” she said. “I have been there before, and it doesn’t take much to end up right back there again if you’re not budgeting well–if you’re not being credit conscious.”

You can reach Bree at [email protected] or on her website or her Facebook and use the hashtags #lakeshoreCredit and #CreditQueen to join the conversation with her.

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