Lawsuit against Credit Score Company Illustrates Pitfalls - Bankruptcy Advice in Chicago Critical to Righting Your Financial Ship
Your credit score is a helpful number to know before borrowing money and could save you thousands of dollars. However, by the time a consumer decides to consider bankruptcy, late payments and other credit issues have typically made monitoring your credit score irrelevant.
A new lawsuit filed in a California federal court is going after Experian and its popular credit score monitoring services. The lawsuit says Experian does not give consumers their FICO score, instead providing them with a similar three-digit number that is unique to Experian and essentially useless, according to The Red Tape Chronicles.
Our Chicago bankruptcy lawyers would like to remind you that many important factors go into calculating your credit score and seeking your calculation from a reputable and trustworthy company is important when thinking about getting loan, buying a home or any other process that may require a credit score. This number takes bad debts, unpaid medical bills, credit cards and foreclosures into consideration with drawing up your credit score. By law, you are able to get a free score report from each of the agencies. While some services, like freecreditreport.com, may not be an awful service to use when trying to rehab your credit, it is not really necessary to pay for such information. And, in other cases, debt repayment agencies often scam those in debt and dealing with debt collectors. Speaking with an experienced attorney can provide you with sound advice about your options.
"It's a classic consumer fraud case," said David Woodward, one of the lawyers who filed the case. "The law is designed to prohibit exactly this kind of egregious advertising practice. ... The defendant is profiting from deception."
The FICO score, created by Fair Isaac Corp., is used by more than 90 percent of lenders, says John Ulzheimer, president of consumer education at SmartCredit.com.
The credit scores offered to consumers at Experian are not FICO scores, according to the lawsuit. Instead, consumers that are signing up for the $14.95 per month service at FreeCreditReport.com get access to Experian's PLUS Score model, a similar three-digit number developed by the company. These ratings are not used in determining credit worthiness.
The National Foundation for Credit Counseling offers these tips for those who feel credit counseling is a service they could use to help them through their financial troubles:
-Check out an agency's Board members. Make sure they're not being paid by the agency.
-How are the sessions handled? Do they counsel over the phone, via the internet or in person? Find a company with the style that is most appealing to you and most compatible with your lifestyle.
-See if the agency will work with your creditors. Some agencies will only work with those creditors who agree upon payment. A legitimate agency will take a holistic approach to solving your financial distress.
-Find out how your deposits will be protected. Ask that the agency for evidence that proves the agency is bonded or insured.
-Make sure that the counseling agency you choose to work with is affiliated with a national body such as the National Foundation for Credit Counseling that insists upon strict quality, financial and ethical standards for membership.
-Don't use a service that requires upfront payments.
Know, too, that debt settlement services will not protect your credit rating. Your credit score will take a hit, often comparable to that of filing bankruptcy, when you sign up for a debt or payment reduction service.