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Susan Tompor: Spot a big mistake on your credit report? Here’s how to fix it

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Equifax, TransUnion and Experian – the big three of credit reporting agencies – announced Tuesday that they’re going to continue allowing consumers to receive free weekly credit reports for one more year until April 20, 2022.

You must go through annualcreditreport.com to get those free weekly reports.

The news comes right after troubling headlines indicating that consumers are frustrated with how their credit is being handled by those very same agencies.

“Consumer complaints about financial grievances spiked during the pandemic year of 2020, eclipsing 2019, the previous record year,” according to a report released Monday by the U.S. PIRG Education Fund, a nonprofit consumer advocacy group.

The report reviewed the public database of complaints filed with the Consumer Financial Protection Bureau.

A positive, accurate credit report paves the way for low-cost loans

Your credit report is the blueprint for building your credit score. Companies like FICO and VantageScore use the information, such as late payments and credit use, on your credit reports to come up with your three-digit credit score.

The higher your score, the better your odds of receiving a low interest rate on a car loan, mortgage, credit card or other loan.

COVID-19 relief rolled out a variety of ways that financially strapped consumers could delay payments on credit cards, auto loans, mortgages and other major loans after losing a job or facing other hardships during the pandemic. Many times, consumers had to reach out to lenders for help.

Why some credit reports include errors

Increasingly, consumer watchdogs are spotting problems, though, including some missed payments that have wrongly showed up on credit reports during deferral periods.

I reported in June about a man in Flint Township, for example, who struggled for nearly a year to drive his credit score up from a grim 527 to pretty good 682. Then in a matter of days, his score unexpectedly tumbled by 91 points in May.

He apparently didn’t do anything wrong to drive that score back below 600. He simply was caught in a COVID-19-related glitch connected to some student loans.

Some mistakes found on credit reports can be attributed to banks mishandling the reporting of a variety of payment accommodations, consumers misunderstanding the exact changes offered and the credit reporting agencies themselves making mistakes.

“As soon as the pandemic hit, a large number of lenders began recognizing that their loan portfolios would be going into default and that isn’t good for anyone,” said Ian Lyngklip, an attorney at Lyngklip & Associates Consumer Law Center in Oak Park.

“A lot of disputes are happening because consumers don’t understand exactly the nature of what is being done,” Lyngklip said.

How to ask for help

Consumers who face financial troubles must ask a lender to send a letter or email to confirm the exact terms of any adjustments or changes in payment terms on a mortgage or other loan.

A wide range of accommodations were granted on a temporary, and often individual basis. And you want to make sure you know what the lender offered you.

“When you have a lot of customized work being done, you have a high probability of errors falling in,” Lyngklip said.

Many times, he said, consumers would call requesting a way to avoid making payments for a month or two on a bill. But they really didn’t get documentation of what was being offered by a lender and so they may not actually know the terms of the accommodation that the creditor provided.

“They really don’t understand the legal arrangement that has been made,” Lyngklip said. “Their concern is what do I have to pay and when do I have to pay it.”

Did the bank waive payments? Extend the loan? Offer a deferment? Or forbearance? These are the correct questions to ask a lender, he said, about what is being offered by way of loan accommodation.

Lyngklip’s website has a new tool for consumers to obtain an automated letter to order credit reports. The site also has fillable forms to request background check reports. The free tool does not collect any data from consumers. See: consumerlawyers.com/fillable-credit-report-request-letters for information.

Many consumers have had their requests for reports rejected because the bureaus claim that they cannot properly identify the consumers, and they may need to write a letter and include identification, Lyngklip said.

Also some consumers are using the online order requests located on the bureau websites, he said, but those sites may require the consumers to agree to the terms of the “pop-ups.”

The letters that his site generates should help the consumer get the correct report without having the request kicked back due to insufficient information.

Complaints about credit reports skyrocket

Last year, consumers were shocked by errors that appeared on their credit reports, as complaints about credit reporting skyrocketed to the top of the list at the Consumer Financial Protection Bureau.

Overall, there were 282,000 complaints about credit reporting issues in 2020 – more than double the 136,000 credit reporting complaints from 2019 in the federal consumer watchdog’s database. Credit reporting complaints accounted for 63% of all complaints submitted in 2020.

The three biggest reported problems: incorrect information on credit reports, problems with a credit bureau’s investigation into a problem on a credit report, and debt collection companies attempting to collect debt not owed.

Experian, TransUnion and Equifax – the big three credit reporting bureaus – ranked as the top three most complained about companies in the Consumer Financial Protection Bureau database.

Ed Mierzwinski, senior director of the federal consumer program for U.S. PIRG, blames the pandemic to a degree, noting the economic upheaval intensified the financial fears that many people already had been experiencing.

Consumer watchdogs pushed an unsuccessful attempt at banning negative credit reporting during the natural disasters and the pandemic, arguing that the COVID-19 emergency has led to job losses and meant that many people aren’t able to pay their bills.

What’s going on, they say, isn’t a real reflection of someone’s creditworthiness.

But Mierzwinski also is extremely critical of how many mistakes credit reporting agencies make even when there isn’t an emergency. He notes that consumer complaints were at record levels relating to credit reports in 2019 – before the pandemic hit – too.

The top complaint month was December 2020 when there were 48,558 complaints – more than double the number of complaints in December 2019.

The goal of credit reporting agencies, Mierzwinski said, is to provide lenders with information about consumers as quickly, and inexpensively, as possible.

“Consumers, they’re our product, not our customer,” Mierzwinski said.

The credit industry disagrees with the consumer watchdogs.

Francis Creighton, president and CEO of the Consumer Data Industry Association, offered this statement: “Getting credit reports right for consumers is one of our most important jobs and that’s reflected by a 97% accuracy rate. The industry’s internal data indicates there is no evidence that complaint activity reflects a problem with credit reporting.”

Instead, she blamed credit repair companies that “take advantage of consumers by promising they can take negative but accurate information off of credit reports for a fee. Additionally, these same companies are abusing the CFPB complaint portal with numerous and repeated frivolous disputes. “

While disputes are required to be resolved within 30 days, she said, the majority are resolved within two weeks. If the dispute extends beyond that time frame, the law requires that the disputed information must be removed from the credit report.

The best bet for consumers: Pay down debts so that your outstanding balances are less than 30% of your overall credit limits. Pay bills on time. Check your credit report before you shop for a loan. Dispute errors.Federal law allows you to request one free copy of your credit report every 12 months from each national credit bureau. After the COVID-19 pandemic hit, though, free weekly reports were offered but that has been extended one year now until April 20, 2022.

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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