Tag Archives: arrears

When You Get Told “You Need to Contact The Credit Bureau”

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Good morning George! I listen to you every Wednesday and I hope you can help! We returned from Arizona on March 15th and went into mandatory quarantine. We addressed a ton of mail after 4 months, during that time my RBC(Westjet)credit card had renewed and I had numerous letters from RBC concerning payment. Two weeks ago was the first opportunity to go into my bank to pay the full amount as I never had my RBC on my online banking.

I have always had a strong credit rating in the 800’s on my credit score. I was shocked to see my credit score now was dropped to 721 due to this one bill. I have spoken to numerous contacts within RBC and all they do is point me to the credit bureau. Due to their reduced hours/staff I have been unable to get thru to them. I feel under these circumstances it is really unfair and wondering if you can assist me in any way.    N.B.

Thanks for the email, N.B. While I understand your disappointment and frustration, reporting your missed payments to the credit bureau was factual and correct. Yes, there are always reasons, but you were past due.

It’s a common question, so let’s go through three things:

Read the chapter of the Money Tools book on credit reporting, the impact on your credit score and how to deal with it and/or fix it. A great credit score such as his, with one past due plummets it by about a hundred points – as N.B. pointed out. It’ll come back within a couple of years and it’s still good enough to not impact him that much. I call this a stupid fee: Almost a hundred bucks in late fees is a reasonably cheap lesson.

You need to make a minimum payment or 31 days later the lenders’ computer tells the credit bureau – period. It takes less than 10 seconds to set any bill up online. Whether it’s travel, missing statement, forgetting, or whatever – none of that matters. I have a small chart that I use every month with the bill and the due date. Mortgage 27th, tax 30th, utilities 8th, Amex 10th, etc. to make sure I never forget – ever.

Now to what the Royal is telling you, which is that you need to deal with the credit bureau on this. It’s a big fat lie that every lender from banks to credit card companies to GMAC, Ford Credit – literally everybody uses. It’s a quick way to shift blame. It’s a lie. Who told the credit bureau that you were late? Right – it was the Royal. So they’re telling you to go to the people who just note down the information and not the people who told them to do it!

In this case, the Royal Bank computer downloads every card holders information for the month: The credit limit, balance on your statement, last payment made or not made and the amount, and whether the account is up to date, a month, two months, etc. in arrears. The two credit bureaus take the information and file it on your account that other lenders can now access and see.

When the Royal told you to call the credit bureau they knew they were lying to you. But it worked – you went away and tried to contact the bureau. Bad news: The odds of reaching them are zero – most of their staff is in India and you’re dealing with companies that don’t care and can’t help you. They didn’t do the damage as I explained, and you’re not their customer: Their customers are lenders, landlords, bonding agencies, etc. who purchase their credit reports.

If there is factually incorrect information on your file, then it’s the credit bureau who needs to fix it. If you have a car loan on there and you don’t owe money on a car, if you have a collection showing up that isn’t yours, or stuff from an identity theft, that is the responsibility of the credit bureau to fix and/or remove by law. That’s the case for around 25% of files and the reason to check your report at least every couple of years.

It was accurately reported by the Royal. The only way to get them to have a heart and forgive and forget this one mistake is for the Royal to fix their computer. It can be done if you are a valued client with lots of business with them. Tell them it’s a one-time error and ask them to remove it or you’ll take your business elsewhere. In this case, N.B. only has the credit card with the Royal and isn’t likely to have a chance of getting it removed.

You’re Going to Get Ripped Off

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Recently, a new wave of ads for debt settlement companies has started. I can’t call them a scam, because they’re perfectly legal. But I can tell you that you’ll get ripped off. That’s the quote from the Clark Howard show which reaches millions of people.

First, here is some of the content from their commercials:
-Our attorneys will work with your lenders to settle your debts for up to 70% less.
-Within 10 minutes, an expert will be able to determine if you’re eligible. What do you have to lose but your debt? Call us.

Well, not so fast. Before you make the call, you have to understand the background, and what will happen:

The ad, of course, is targeting people who are in over their head in debts and who would love to believe that their solution is just a phone call away. They’re praying on the desperation of people in real serious financial trouble. At that point, they’re prepared to try anything to get some help out – from anyone.

As the ad says: What have you got to lose? Our experts will determine inside of 10 minutes if you’re eligible. Oh and you will be eligible. Because it’ll make someone believe that three quarters of their debt will get wiped out.

On the call, the first few minutes will be getting your name and contact information so they can keep calling you. Then they’ll get a list of your debt. What they’re looking for is the amount of unsecured debt. That is, debt without collateral such as you house, line of credit against your home, or your car. Unsecured debts are things like smaller credit lines, and 90% of it is your credit card debt.

Based on the total unsecured debt, they’ll then advise you that you’re eligible and that they’ll work with your creditors to get this total amount settled. But one more thing you need to do first: You’ll need to pay them a fee, up front, of somewhere between $1,000 and $3,000 depending on your total debt. That may sound outrageous, but you’d be amazed how many broke and desperate people will find a way to pay that fee for the hope of getting a huge reduction in their debt.

Once the fee is paid, they should start to get to work contacting your creditors. But first, you have to work. They’ll advise you that you now need to stop paying all these bills. It’ll soften up the creditors and then they’ll be able to arrange a settlement when the debt is old and unpaid for three months.

Yes, that’s the extent of their work. Get your money up front and tell you to stop paying. That advice I can give you for free right now. When lenders haven’t been paid for two months or so, they’ll repossess your vehicle, or start foreclosure on your home. Unsecured lenders don’t have collateral. At 90 days, and then again at 180 days behind, they have a big problem. But they’re much more likely to sue you, or pursue some pretty strong collections, as they are to settle with you.

At the end of the day, you’re out some huge up-front fees and your credit is destroyed for seven years. You’ve then got no chance of re-financing, consolidating, or even getting a lot of jobs that run your credit report. You’re right back where you started, but three months behind, the stress gets much more intense with these arrears, and you’ve added more debt to pay their fee. Don’t do it. Don’t make the call. They ask what you’ve got to lose? I’ve just described some of it.

The Downside of Low Interest Rates

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Boy, did we Canadians go on a debt binge last year. Our total consumer debt, excluding mortgages, reached $1.4 trillion at the end of 2009. We are now officially the most overextended country of the big 20 developed nations. For all the pain we see from US families, we now owe more than Americans, on a per capita basis, and even more than the average Greek family! Right now, we are in debt $1.44 for every dollar of income. If there were to be a setback in the economy again, we’d be in big trouble.

Or, as we talked about a month or so ago, when rates keep climbing, we’re in the same trouble. Don’t forget, consumer debt, other than probably our fixed-rate car loans, most everything else from lines of credit to credit cards are on variable rates. That means, rates go up, you’re paying that increase the following month.

Yesterday, the Bank of Canada raised interest rates another quarter of a percent for the second time. On each $100,000 of debt that is not on a fixed rate, these two rate increases will cost you $500 a year and rising.

Behind the scenes, the federal government is taking steps to clamp down on our debt loads. A few months ago, the Federal Finance Minister announced changes to the down payments for mortgages, and the total that can be refinanced on a home.

The next wave of pressure, and nobody has talked about this, yet, is your credit cards. Starting in a few months, your minimum payment will be going up. The good news: you’ll have it paid off faster. The bad news: It’ll hit your budget to pay more as a minimum payment.

Starting with MBNA, the largest issuer of MasterCards in Canada, August will see a new and higher minimum payment. They will be the first, but not the only ones, to change the way the payment is calculated.

Why? Remember that I always say what happens in the US will come here? Well, their new credit card regulations require a box on your statement to show how long it would take to pay off the balance when making minimum payments. That will happen in Canada this fall, too. So when they increase your payment, the staggering time it’ll take to pay it in full won’t look quite so ugly when you see it in a few months.

The third reason, and it’s a big one, is that our debt load has started to increase the arrears and write offs that card issuers are having. So if they increase your payment, they get paid back faster, and have less risk. But we can also start to look for limits to be cut back for a ton of people in the next wave of clam downs. In the US, $1.5 trillion has been cut from credit limits and they’re not done yet.

I Didn’t Know – But You Need To!

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I would bet that the two fastest changing industries are probably the medical field and the world of finance and credit. What was true one month gets changed, amended, legislated, or moved around, in one way or another.

Over the last couple of days I came across a number of things that are brand new, and that we all need to know:

-Scotiabank has changed their credit card agreement. That means others have, or will, follow soon. Starting in September, if you miss, or are late, on three payments in any 12 month period, your rate will go through the roof. The statement I saw jumps it by 7%.

-The two-tier interest rate charges started in the U.S. and is now here. Along with that, you will no longer receive credit limit increases automatically. You will now actually have to OK them. And that’s a good thing. Almost none of us NEED a bigger limit. The card issuers will send you the limit offer and you can accept or decline. Of course, you can still contact them to request one, if you need to.

-Scam phone calls are something that happens to millions of people. But you can no longer rely on call display for the accuracy of the number popping up. With internet calling, fraudsters can now spoof phone numbers being displayed to read almost anything they choose. You THINK you’re getting a call from your bank, because that’s what it reads on the call display, but it’s not. Always, always, get their name and department, hang up, and call the number on the back of your credit or debit card. It is the ONLY way you know you are actually reaching your bank.

Millions of us deal with Shaw, as do I. But I found out two days ago how nasty they get with one month past due. My company pays the bill, but there wasn’t a statement in April. May got paid, June got paid, July got paid, but it was always dragging by a month. My fault – no doubt. But they simply went in to disconnect my internet one morning.

All companies love you when you pay – and I’ve paid them close to $30,000 over the years, but don’t care when there’s a slight problem – no matter what the reason. Media relations chose not to respond to my inquiry, but their computers can only tell I’ve dealt with them since September 2008, instead of April 1995. Whether it’s Shaw, your bank, or your mortgage company – they’re ruthless on any past due amount, no matter what the reason, track record, etc. So, as the kids say: Don’t go there.