Opt Out / Credit Problems

Hey All-

I was meeting with a client last week, discussing some discrepancies we had found in his credit report. As we spoke, I came to realize that he was unaware of a few simple steps he could use to protect his credit and identity. Normally that in itself would not be enough to inspire me to a "Jerry Maguire" moment, feverishly writing family and friends. The problem is, as I help people buy and sell their homes, I'm seeing this type of thing more and more often. I am concerned that what I thought was common knowledge, is really largely unknown. If this is affecting my clients, there's a chance it's hurting others I care about too. My conclusion was to write a quick e-mail to everyone, and offer some information as well as a couple of websites.

I'm sure most of you are familiar with the three major credit-reporting agencies. They are Equifax, Experian, and TransUnion. Collectively they are called Consumer Reporting Agencies or the Consumer Credit Reporting Companies. What most people don't know is that under the Fair Credit Reporting Act, these companies and lenders are allowed to give/sell lists of consumers who have recently made credit inquiries, or what they call "firm offers". They sell these lists to other lenders, collection agencies, credit card companies, etc. They are allowed to do this under the guise of providing the consumer with options and choices.

Once these companies acquire lists, they start sending you "better offers" or offering junk you don't need. This includes those "preapproved" offers you get. (You must have the money to spend, right?) I have even heard of some credit card companies sending out offers that actually include the credit card. They only need to be activated.

The obvious danger in all this junk mail is, if it falls into the wrong hands it contains huge amounts of personal information. The more junk mail you receive, the higher the odds are that something will happen. In the case of the credit cards; someone activates it, maxes it out, and tosses it. Before you know what’s happened, you’re stuck with the damaged credit score and the bill. I even know of one case where the credit card company sent out one of these cards, the person ripped the envelope in half thinking it was junk mail, and threw it away. Almost a year later, they received a letter saying they were past due and their "privileges" were going to be revoked. They found they had been charged an annual fee. The annual fee had then incurred late payments. All while they never even knew they had the account. Even after they fought to get these charges reversed and the card canceled, the company never corrected it with the credit bureau.

Another danger is if one of these lists/reports falls into the hands of a collection agency, they can refresh a dormant collection account. Simply put, an account that has stopped hurting your credit will now start again.

The good news in all of this is that under the Fair Credit Reporting Act, there was also included a mandate to let people opt out of this. (Remember the ‘purpose’ of all this was to offer you options. If you don't want these options they can’t make you take them.) The Consumer Reporting Agencies were required to create a website to allow you to do this. That website is OptOutPrescreen.com. My wife Annie and I did this, and it cut our junk mail down to less than a quarter of what it was. It also helps stop some of the tele-offers you might get if you don't have your phone number blocked. It is extremely easy to do. It takes a little while to have an effect but is well worth it when it does.

Consumers are now also allowed to get free credit reports once a year. The best website to do this is AnnualCreditReport.com. It’s free, and it will help you catch discrepancies before they get out of hand. This way when you go to buy something like a house or car you are not surprised.

If you would like to monitor your credit report more often than that, there are also some great credit monitoring services. The one I recommend and use myself is FreeCreditReport.com. It's not perfect, but it's a good start. For $10/ month you can look at your credit report as many times as you want throughout the year, and they will alert you of any changes to your report via email as they happen. This includes any inquires, late payment infractions, address changes, etc.