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Important Credit Score Update

When ordering their credit scores online from myfico.com , consumers will now also receive mortgage, auto, and credit card score versions as well. FICO is ramping up to gain an edge in the increasingly competitive credit score industry. In the last few years consumers have become more aware of the varied credit scores offered online by credit score sites that are trying for a share of FICO’s market. There are now many sites offering free credit scores/credit monitoring, and FICO is losing a hefty chunk of business with their $60 pricing for 3-bureau FICO scores. Besides the increased competition, FICO has other reasons to offer more, including increased pressure from the Consumer Financial Protection Bureau, and many consumers realizing that the original FICO version offered to consumers is not the same as the version used by mortgage lenders. So what does this mean for consumers? Right now if consumers purchase a "FICO score 3-Report" it will come with up to ten other score versions. The ones we have focused on in this tip are the FICO 8 score (the score offered normally), the FICO mortgage score, auto loan FICO scores, as well as bankcard scores. To date, they are only offering Experian and Equifax FICO scores for the added models but FICO is working on getting the Trans Union scores into their system as well. For example, we pulled credit today and here were the variations in scores: ● FICO 8 = 850 ● FICO mortgage =805 ● FICO 8 auto = 888 ● FICO 8 bankcard = 887 Here are the ranges for these versions: ● Auto and bankcard versions= range from 250-900 ● FICO 8 consumer and mortgage scores= range from 300-850 Please contact us with any questions!

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Since Business Credit Is Highly Unregulated Most Companies and Business Owners Are Unaware of How Important It Is

Personal credit reports and scores are a hot topic these days and there is a wealth of information available online to help educate consumers on how they work, their significance, and regulations pertaining to them. When a bank rejects a consumer for a mortgage the law requires the bank give an explanation for the rejection and the credit score used in the decision making is supplied to the consumer. On the other hand, opposite rules apply for business lending and business credit information. When applying for a business loan a bank doesn’t need to divulge if it used a copy of your business credit reports, scores, and indexes to make a decision. If businesses actually knew how easily accessible a copy of their business credit was and how limited and poorly the scores might reflect on them, they would be running to get a copy of their Dun & Bradstreet or Experian business credit profile. Equifax is also a business credit bureau but is rarely used. However, building a well-balanced and positive business credit profile can be a great asset for a company. Unfortunately business owners & professionals believe if a company has credit it will automatically be listed on their credit profile and reflect on their score. Actually, this is the furthest from the truth. Many vendors, lenders, and creditors do not report to the bureaus and it is difficult for companies to figure out which ones do. Having a professional credit expert guide and build the right credit can give a company an edge in getting loan approvals and the best interest rates.

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Warning: Credit Scores Are Not Enough to Detect Identity Theft

Recently, the White House issued a press release praising banks who are giving away free FICO and VantageScore credit scores to customers. Of course, more access to credit scores is a good thing, and banks should be encouraged to do so. Unfortunately, in a release meant to help consumers, the White House also made a suggestion that could harm them greatly. In their praise of free credit scores, the White House suggested that they are "one of the best early indicators of identity theft", and this couldn’t be further from the truth. While consumers should be checking their scores frequently, it’s not something that can definitely detect ID theft or fraud before it occurs. Here are just some instances where ID theft/fraud won’t have a noticeable impact to credit scores: • A new fraudulent address being used. Criminals frequently apply for credit using a victim’s info under false addresses. While the new address would show up on a credit report, it would have zero impact on credit scores. • Fraudulent inquiries on a credit score not offered for free by banks. What banks don’t tell you about free credit scores is that they usually only give you scores from one of the three bureaus. If a criminal applies for credit in your name, there will be a hard inquiry by the lender, which should lower a credit score and raise some red flags. However, this inquiry could show up on Experian, while the bank could be providing you with an Equifax score (which wouldn’t change at all). • Even fraudulent inquiries on a free credit score being provided by the bank are hard to notice. Even if an inquiry occurs on a credit score your bank is giving away, or if you happen to have checked all three scores, the effect of a hard inquiry could be pretty negligible. Hard inquiries can lower scores differently for each unique credit profile. For some it could be many points and others it may not lower at all which may not point to identity theft. • Late payments due to fraudulent activity. When criminals start making fraudulent charges and don’t pay, this could actually do some serious damage to your scores. Unfortunately, it will already be too late when this damage shows up. At best, a creditor will report a late payment 60 days after the fraudulent account is opened. But typically, late payments will take months for you to notice and to show up on a score. So what should you do? While credit scores freely given aren’t a good indicator of identity theft, a good credit monitoring product will tell you when any of the above changes happen on all three credit reports and scores, along with others that could indicate criminal activity. Some even include credit blocking (which prevents any inquiries without approval) or fraud alerts (which require approval for any new credit being opened). Please see my post on credit monitoring for more info on its benefits: http://goo.gl/0HSTs9

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How Can Hard Inquiries Cost You Thousands or Even a Mortgage Approval?

Even though many, including FICO, claim that Hard Inquiries (HI’s) barely affect a credit score, they underestimate or don’t realize the damage HI’s can cause. Examining the FICO model shows how HI’s can be very costly. According to FICO, payment history equals 35% of a credit score, amounts owed equals 30%, types of credit equals 10%, new credit (includes inquiries) equals 10%, and length of credit is 15%. This is a very general statement and does not address the fact that FICO separates us into different groups of credit type and then assigns varied scorecards based on our group. This means we may not receive the same amount of points for each category and there is no one set amount of points that we can assume are used for all of us. For this example we will assume all of us are the same and use the percentages in the simplest of ways to make a point. Everyone who has open active credit in the past six months starts with a 300 score. What is added above that can equal at the most 550 points (for a max of 850). Breaking down the percentages for a score shows the maximum amount one can gain for each category: ●Payment History- 35% = 192.5 points can possibly be gained ●Balances/Amount owed - 30% = 165 ●Average Age of credit - 15% = 82.50 ●New Credit- 10% = 55 ●Variety of credit - 10% = 55 Example: John is 40 and he has had active credit since he was 20 but has opened many accounts about 2-3 years ago. He has one 30 day late payment on his credit that occurred about 2 1/2 years ago. This year he has increased his limit on 2 credit cards and shopped for a mortgage. This does not sound like a lot of third party HI's for a 12 month period. He had a pre-approval letter generated which gave him his first mortgage HI which occurred about 5 months ago. He applied for credit card limit increases with 2 creditor's about 6 months ago which caused 2 HI's. He also started shopping for a mortgage 50 days ago when he put an offer in for a property. This added up to 4 HI's within a 12 month period. Here is how John’s score breaks down above a 300: ●History- 140 ●Balances- 165 ●Average Age- 60 ●Variety - 35 ●New Credit- 37 His total score is a 737. If John had not applied for the limit increases in the last 12 months he might have had 45 points for the New Credit category, putting his scores at a 745. Now that may not seem like much of a difference, but there are many lenders that would offer John better pricing on his mortgage loan if he was above a 740. There are also mortgage products that John may not qualify for based on the amount of mortgage and his score threshold. So when FICO and others say inquiries have little or limited impact on scores this may be true but the impact on loan approval and pricing based on the difference of 3-5 points could be dramatic. Now those who are in a different scorecard group might gain less points for the other categories and wind up in a much lower score threshold than John. If the threshold needed is off by even a little bit it could cost individuals a loan approval or hundreds and thousands of dollars over the life of the loan.

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Some Factors Dun and Bradstreet (D&B) Uses to Rate a Business:

The D&B rating is a two-part rating based on a company’s size and creditworthiness. According to D&B’s Rating Interpretation Table: “The US 5A to HH ratings reflect company size based on net worth or equity as computed by D&B. These ratings are assigned to businesses that have supplied D&B with current financial information.” Here are the ratings compared with the company size: (Rating) (Net worth/equity in US$) 5A =$50,000,000 and over 3A = $1,000,000 to 9,999,999 2A = $750,000 to 999,999 1A = $500,000 to 749,999 BA = $300,000 to 499,999 BB = $200,000 to 299,999 CB = $125,000 to 199,999 CC = $75,000 to 124,999 DC = $50,000 to 74,999 DD = $35,000 to 49,999 EE = $20,000 to 34,999 FF =$10,000 to 19,999 GG =$5,000 to 9,999 HH = Up to $4,999 For smaller businesses: “The 1R and 2R ratings categories reflect company size based on the total number of employees for the business. They are assigned to business files that do not contain a current financial statement.” Here are the ratings compared with the number of employees: (Rating) (#of employees) 1R =10 employees and over 2R =1 to 9 employees The second half of the rating is the Composite Credit Appraisal, which is a number between 1 and 4 (with one being the best), and also described as “High” “Good” “Fair” and “Limited” . This “reflects an overall assessment of creditworthiness…based on both payments and financial stability.” Smaller businesses are rated differently: “In 1R and 2R Ratings, the 2, 3, or 4 creditworthiness indicator is based on analysis by D&B of public filings, trade payments, business age and other important factors. 2 is the highest Composite Credit Appraisal a company not supplying D&B with current financial information can receive.” For more information go to: http://www.dnb.com/company/our-data/risk-management-tools-dnb-ratings/rating-paydex-and-score-tables.html

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What Are Credit Inquiries & Do They Actually Affect a Credit Score and Pricing on a Mortgage?

There is always confusion about credit scores and inquiries among professionals in the banking industry, realtors, consumers, and even professionals in credit related industries. So what exactly are credit inquiries? Credit inquiries are simply when a credit report is viewed. There are two types of credit reviews. There are "Hard Inquiries" (third party credit reviews) and "Soft Inquiries" (when an individual views their own credit or when a third party extends a promotional offer). Only "Hard Inquiries" (HI’s) can drop scores. Even though inquiries may seem simple, there are misconceptions about how they impact credit scores & what that impact can have on a loan. A big source of the confusion is that FICO and other credit experts often state the minimal impact inquiries have on credit scores. What they do not address is how that minimal drop can impact qualification and pricing on a mortgage or other loans. To make matters worse, in the past FICO has stated that inquiries can drop scores 2-5 points each, then they changed it to up to 5 points, and now they have this explanation: “My FICO score will drop if I apply for new credit? If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.” Based on FICO’s definition, most people would assume that hard inquiries won’t cause much of an issue. However, they can be the source of higher pricing on a mortgage, or even complete denial of a mortgage approval. My next post will go into more detail about how inquiries can affect credit, so stay tuned!

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How Can a Firm’s Business Credit Work against Them?

A business credit report is used to view a current "objective picture of how a business manages its financial obligations" according to Experian. The information on business credit reports is either from or verified by a third party. Because of how business credit is described, most business owners assume the information is reliable and allows viewers an objective picture of their company's financial health. Unfortunately, this could be very far from the truth. Since business credit has little regulation, vendors, lenders, and accounts don't have to update information to the business credit bureaus. Because of this, a healthy successful company that has been in business for decades with many trade accounts may appear to have limited business credit and look inadequate to the viewer. Here is an example: A firm that has hundreds of vendors only shows 5 open accounts on their Dun & Bradstreet credit profile since the rest of the vendors didn't report to the bureaus. The vendor owed the highest balance ($2000) also has updated a 30 day late payment on the credit. This has significantly dropped the Paydex score and caused an increase in pricing on needed equipment. It is also impacting new business accounts and partnerships. If the company was not in the application process of leasing equipment they never would have known their Paydex score dropped to a high risk threshold. Since the company has many accounts with much higher debt that have never been updated to the credit profile they are suffering with poor scores. Delinquencies on the highest debt accounts impact scores more seriously. Most companies are not aware of how business credit works, so this example is far too common. They assume all vendors and creditors have updated accurate information without reviewing their credit continuously. They do not realize their business credit profile will likely be compared to competitors’ therefore putting themselves in a vulnerable position. All of this can cause a loss of future business and losses in the thousands due to higher pricing on loans, leases, and credit.

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Free Credit Scores are More Accessible than Ever, but is this a Good Thing?

These days there are hundreds of sites offering free ways to get your credit score, and it’s becoming more popular and easier every day. Credit Karma, one of the largest sites to offer free scores, announced that they now offer free Equifax reports. This is in addition to TransUnion reports, which they began offering in July. In addition to the 30+ million using Credit Karma, there is a wealth of other sites that consumers are using. While many of these sites may be legitimate, consumers have to be very careful. These sites are out to make a profit; they don’t offer free scores out of the goodness of their heart, and often the free scores are a loss-leader to sell other products, such as credit monitoring. This can come with a slew of problems, including adding charges on without consent. For example, a company called One Technologies LP and two others had to settle for $22 million with the FTC for billing customers for a monthly credit monitoring product they didn’t sign up for. This happened with over 50 other “free” credit score websites as well. In addition to charging for “free” scores, many of these sites also are rife with fraud. Most sites, including Credit Karma, require a social security number and other personal info to sign up, and therefore are a huge target for criminals. One common way this is done is through “phishing”. These sites will often send emails trying to sell new products or to notify consumers about credit, and scammers can easily impersonate the site to steal peoples’ info. For example, US News recently signed up for a free credit score, and then received 140 emails from scammers saying they had a “score change”, and were asked to give their info to the imposters. Furthermore, a lot of these sites are offering scores that are extremely varied. While most banks rely on FICO scores, these sites will often give you a score using their own calculation. While these can give a general view of financial health, they are not something to rely on for a mortgage. So what should consumers do? What many fail to realize is that per government regulations, the site annualcreditreport.com offers credit reports from all three bureaus for free annually, without any scams/fraud. Also, if consumers need to check their credit more than once a year, paying a small fee to buy the report is worth avoiding losses in the thousands and all the dangers of fraud.

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Why Is Business Credit So Valuable? Dun and Bradstreet Gives Some Insight:

According to Dun and Bradstreet, here are just some of the reasons why a healthy business credit profile is vital for a business: • Business financing: When business credit ratings are high, lenders and suppliers will give favorable terms to purchase on credit. Without a business credit rating, a supplier may require cash on delivery or ask for a personal guarantee. • Supplier contracts: If your company wants to do business with government agencies or Fortune 500 companies, there is an extremely high chance they will review your business credit reports. • Business separation: A business credit report enables a complete separation between the personal credit reports of the small business owner to the reports established by the company itself. • Credit protection: With favorable business credit ratings, a business can obtain financing from companies willing to grant credit without a personal credit check or guarantor. This allows a business to acquire products and services it needs on credit without putting the business owner’s personal credit at risk. • Business partners: Business credit reports are frequently being pulled by potential business partners so they can find out about a company’s credit history and decide if the business is capable of being a sound business partner. Unlike personal credit reports, business credit reports are available to the public.

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How Can Consumers Be Less Vulnerable to ID Theft When Shopping during the Holiday Season?

Even though the holidays are a wonderful time, consumers have to be extra careful about protecting their personal information. Unfortunately, with all the increased shopping going on during the holidays, there is also a huge rise in ID theft. There are many complex ID theft methods being used that most consumers are unaware of. For example, point of sale ID theft is one way hackers can steal consumers’ info through a store's network. This can easily happen when a retailer never changes the default password for their router. Many factories use a log in like "admin" and a password of "1234" that is easily guessable. Thieves often go after the easiest weakest prey and having a simple password is likened to having a door open with no lights on when you go away on vacation. This makes a very easy target and an invitation for a thief to go in and take what they want. Once the network is broken into criminals can download consumers’ personal information, allowing them to go on a spending spree. Similar theft can happen with consumers’ computers as well. However, with some simple steps consumers can prevent most fraud attempts. One step that’s vital for consumers is keeping their operating systems and browsers on the cutting edge of technology. Microsoft did a test and found that computers kept up-to-date were 70% less susceptible to malware. Having strong passwords is another tool to keep thieves away since they would rather take the easy route and steal from someone with an easily guessable password. Even though it may be a pain, it’s also a good idea to have a separate password for each site. In addition, spending a little money on an excellent antivirus and malware protection program as well as up to date routers could save a lot in time and expenses later on. One thing to note; even though they are becoming increasingly popular, the jury is still out on using password management programs. My feeling is if thieves know there is a network filled with thousands of consumers users and passwords wouldn't they target it? Why waste time trying to break into one consumer’s network when you can break into a network filled with hundreds and thousands of individuals’ identity and credit card info? If you are not writing and storing your passwords anywhere it is less likely someone will find that info. I also recommend a credit monitoring product on top of these methods. This can help either prevent or detect identity theft and credit card fraud in their early stages (please see my post here: http://goo.gl/voHefq for more info).

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What Should You Know About Getting Free Credit Scores?

The internet is rife with sites offering free credit scores. Although it may be enticing to get your score for free, it’s important to note that this score is not the same that lenders may see. Although it can be useful to look at these sites for a general view of your credit health, it’s not something you should rely on when making a major financial decision. Consumers who sign up for these sites will end up getting scores that are extremely varied. On the other hand, bankers mostly all rely on FICO scores. It would be a shame for someone to be relying on a free online score for a mortgage, only to get turned down for their dream home when they find out their actual credit score being used by the bank is much lower. That’s why I recommend going to a mortgage banker to find out what your FICO 4 scores are. You can buy your FICO scores at the myfico.com site but they are either FICO 8 or FICO 9 models which could vary dramatically from the FICO 4 model. In addition, it’s important to remember that you can get your credit reports from all three bureaus for free annually at AnnualCreditReport.com but the score sold there is not the FICO score.

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Free Credit Scores Could End Up Being Very Costly In The Long Run

These days there are hundreds of sites offering free ways to get your credit score, and it’s becoming more and more popular. Some of the largest sites that come to mind are creditkarma.com and creditsesame.com. Unfortunately, the rise in popularity of these sites has also given way to a rise in scamming. While many of the sites themselves (although I can’t speak for the legitimacy of all of them) will give you a credit score without any fraud attempts, they are also rife with outside scammers preying on people who use the sites. The most common way this is done is through a technique called “phishing “. This is where criminals will impersonate one of the legitimate credit sites through email, and direct you to a site they’ve made that collects your personal info. For example, I recently tested one of the sites and signed up to get a free credit score. Shortly after, I received an email from a scammer saying that my score had changed; redirecting me to check it at a completely different site that asked for my personal information. U.S. News recently did something similar, and received over 140 emails with the subject “score change” in them. Had I actually followed those instructions, some criminal would have valuable information allowing him/her to commit fraud and identity theft. What makes this problem even worse is that these free credit sites often use the free credit scores to entice people to the site as a “loss leader”, and offer other products (like credit monitoring) to make a profit. That means that the scam emails can be easily confused as legitimate offers from the sites. That is why (among other reasons) I recommend a credit monitoring product to help protect/minimize against fraud/ID theft and alert you if scammers get a hold of your information. In addition, these free scores are unfortunately not the same as the ones bankers will see. Please read my upcoming post for more information on why.

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What Are Chip-and-PIN Cards and how Can They Help Protect Your Identity?

This past year has been fraught with identity theft, especially with credit cards. Over 100 million Americans have been affected in 2014 by the major breaches of payment systems for retailers such as Home Depot, Kmart and Target. On Friday, Obama took a step towards combating this with an executive order to have secure chip-and-PIN technology embedded into government-issued credit and debit cards. Chip-and-PIN cards, which are already the standard in Europe, are much more secure than the standard magnetic stripe credit cards used in the US. Rather than having customers swipe their cards through readers and sign, a store that uses chip-and-pin technology has consumers insert a card embedded with a security chip into the reader and enter a PIN code, similar to an ATM code. The chip is much more secure and makes cloning the card much more difficult, and the cards also prevent fraud because potential thieves need to know your PIN as well. However, don’t think you’re in the clear for fraud yet. While this move is a good stepping stone, it only covers government-issued cards, and most banks still use the older cards. Hopefully it will inspire more banks and stores to get on board with new technology, but it has existed for years and hasn’t been adopted in the US yet. The White House claims that some major retailers like Wallmart will have the new readers available in the US by next year. In addition, the card isn’t foolproof. There have still been cases of thieves teaming up with storeowners to steal the data from cards and commit fraud. There are also many other forms of fraud that are still viable, and the internet is making it easier than ever. I still recommend using a credit monitoring product (read why here: goo.gl/HOhAkr) and being vigilant about protecting your identity.

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What Is Business Credit, and Why Is It Important?

Most people know how important personal credit scores are, but very few seem to know about business credit. Business credit scores are the business equivalents of personal FICO scores, and are just as important. As with consumer scores, business credit scores play a big part in determining whether financing of all types will be approved. In today’s economy, credit scores and indexes can be the difference between a company’s ability to fail or succeed. Business credit is an asset that should be cultivated, maintained, and used to bring more opportunity and growth to a company. Here are some of the benefits of a healthy business credit profile: ●The ability to grow a business and get new financing through equipment leasing, business loans, factoring, credit extensions, and more. ●Huge savings. Healthy scores allow for approvals and can also bring the best interest rates and fees on loans, leases, and credit extensions. Companies can use their new improved scores to refinance existing loans. ●A winning edge over the competition. Companies are often judged by their credit score, and a healthy one reflects a financially sound and successful business. This can make the difference when competing for a bid/contract or acquiring a new business-to-business customer. The most important score for a business is the Paydex score, which is from Dun & Bradstreet (D&B). The D&B Paydex Score ranges from 1 to 100, with higher scores indicating a lower risk business. Although D&B is the oldest and most popular business credit bureau there are two others. Experian and Equifax both provide business credit reports to vendors, lenders, creditors, and potential clients. These bureaus have their own ratings and although they are not as popular as D&B they are used by some banks and vendors. Unfortunately, one late payment on the wrong account or a collection account for a specific debt listed on a business’s report can drop a score by 40-plus points. This will immediately place a company into the high risk category, and can cost hundreds of thousands in lending fees as well as hinder new business. In addition, many vendors, lenders, and creditors do not report to the bureaus for business credit, so a business may have limited credit even if they have been making on-time payments with a variety of accounts. All businesses should be aware of their business credit scores, and should focus on building them as soon as possible. It’s also a good idea to speak with a credit specialist to see the best way to get healthy scores.

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How Can Credit Monitoring Help Protect Consumers against Identity Theft & Credit Card Fraud?

With the consistent hacking of personal information occurring in today’s technology-driven environment anyone with good credit must be alert to every change occurring on credit. There are many credit monitoring products available to purchase online, and although they cannot completely stop identity theft & credit card fraud they can be a great way to curb the degree of damage. Here are some good reasons to have a monitoring product: • Monitoring products offer alerts set up by the consumer that are generated when balances on credit cards increase over a certain percentage or amount. These alerts can be modified to fit the needs of each consumer. Since thieves might charge small amounts for a long period of time in order to go unnoticed, or make a few large purchases quickly, it is essential that consumers look at all transactions on credit cards when they get their statement. Although you may not notice the small amounts, if an alert is set up your monitoring product could inform you if your balance increases substantially within a day or two of the charge rather than waiting until a new statement is delivered. Thieves can also change the address where your credit card statement is sent, so a monitoring product could be the only way to know about increased balances. • Credit monitoring products can show consumers what third parties have been viewing their credit (“hard inquiries”). If an inquiry was made by a creditor that is not recognized it could be the early stages of identity theft. Thieves will try to open credit and make charges as long as possible before the creditor and victim realize a crime is being committed. When spotting these inquiries consumers can call the creditor to determine whether an application for credit was falsely made in their name. If it was a false application it may be stopped before the thieves get credit extended in your name or at least early in the process. I recommend you speak with a credit expert as well to get the right monitoring product or if you believe you have been the victim of identity theft.

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New Proposed Credit Law Changes Could Be Dangerous For Lenders

On Wednesday, Rep. Maxine Waters will introduce the proposed Fair Credit Reporting Improvement Act of 2014. The Fair Credit Reporting Act (FCRA) is a 44 year old consumer protection law that regulates consumer credit, and Waters has proposed many new changes of which some are quite preposterous. The last changes to this law were a decade ago, and the new changes were proposed after studies released by the Consumer Financial Protection Bureau (CFPB). A report issued in May questioned whether medical debt (which accounts for more than half of all unpaid debt in collection) should factor into credit scores. FICO recently released a new score that ignores medical debt in response to the CFPB’s studies but Fannie Mae & Freddie Mac as well as mortgage lenders will not use the new score model (read my article on the score here: goo.gl/jtHAf3). Waters felt the new score model wasn’t enough of a change and the FCRA act needed an overhaul. Some of the major changes proposed are: • Shortening the time periods that adverse information appears on credit reports from seven to four years. Removing any fully paid or settled debt from peoples’ credit reports (including medical debt). • Preventing companies from checking credit to screen potential employees. Although the bill might mean well, it could cause a lot more harm than good. These changes may actually completely undermine the credit reporting process by making risky borrowers appear to have good credit. Take for example the change that removes any adverse rating from a report within 45 days of it being paid or settled. Under the old rules, somebody with $100,000 in credit card debt would have it on their credit profile as long as it takes until it is paid which could be well over 7 years, and may appear to be a risky borrower. However, with the new law this borrower could settle their debt for $15,000 and have a clean credit report in 45 days. It’s a scary thought that this person could get a huge loan, line, or credit card debt, and appear to be a good risk when they are actually very reckless financially. It would also motivate people to default on loans, lines, and credit cards since they can settle for a discount with no consequences to their credit after it’s cleared in 45 days. Consumers would save money and have better credit so why bother paying creditors back in full? This change is not very well thought out and could have huge financial consequences. In regards to employer credit checks the credit report available to employers is different from what lenders see. Employer credit checks are called an 'employment screening' and the credit bureaus use a separate product for this purpose. They are similar to credit reports in some aspects but have some data omitted. For instance, they cannot see your credit score and if there was some negative information the job applicant should explain that during the interview process and most employers will take that into consideration if they are interested in the candidate. These screenings are done by a third party and unlike credit reports they also verify background info and education as well. As far as positions in the financing industry there may be stricter regulations when it comes to credit qualification. While some states have restrictions on an employer's ability to check credit some positions like law enforcement and government are exempt from any restriction on pulling credit for applicants. That brings up the question, if the government can pull credit on any job applicant then why should any employer have a restriction on pulling an applicant's credit? It is true that some government positions might give employees access to sensitive info that needs to be protected but how could someone's credit help to reveal a potential spy?