Confessions of a Subprime Lender or Your Credit Score

Confessions of a Subprime Lender: An Insider's Tale of Greed, Fraud, and Ignorance

Author: Richard Bitner

Real Estate

One insider's rollercoaster account of the subprime implosion
Richard Bitner founded his own subprime mortgage company just as the industry took off. In five years, he watched his company grow from a tiny operation to a booming business. But something wasn't right?
As housing prices skyrocketed, Bitner watched greed and fraud overtake the industry. Eventually, he became disenchanted after foreclosing on a subprime borrower who was given a legitimate, industry-standard mortgage—a loan Bitner realized never should have been made. Seeing the ugly writing on the wall, he sold his stake in the business before the industry imploded under a mountain of bad debt.
Confessions of a Subprime Lender pulls back the curtain on the players who created the subprime disaster, including brokers, lenders, Wall Street investment firms, and rating agencies who worked the system to their advantage. From his unique perspective as a subprime lender, Bitner reveals:

• Why nearly three out of every four mortgages were misleading or fraudulent
• How unscrupulous brokers tricked lenders and gullible borrowers
• How brokers and lenders turned unqualified applicants into "qualified borrowers"
• Why Wall Street and the rating agencies are largely to blame for the collapse

Interwoven with dramatic personal anecdotes, Confessions of a Subprime Lender explains how the subprime industry blew up and concludes with a comprehensive solution for rebuilding it by forcing changes on all the key players.
"Bitner's thorough review of the subprime lending industry provides a behind-the-scenes look at the mortgage mess. From thebroker on Main Street to the investor on Wall Street, it's an unabridged version of what went wrong and how it needs to be fixed."
—Bill Dallas, founder, First Franklin Mortgage, one of America's largest subprime lenders, before it collapsed
"This is an in-depth, eye-opening examination of the problems impacting the housing and mortgage markets."
—Matthew McIntyre, CEO, Puritan Financial Group, Inc.

Book review: The Home Owners Journal Fifth Edition or Project Management

Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future

Author: Liz Pulliam Weston

“A great credit score can help you finish rich! Liz Pulliam Weston gives solid, easy-to-understand advice about how to improve your credit fast. Read this book and prosper.”

–David Bach, bestselling author of The Automatic Millionaire and The Automatic Millionaire Homeowner

“Excellent book! Insightful, well written, and surprisingly interesting. Liz Pulliam Weston has done an outstanding job demystifying an often intimidating and frustrating topic for the benefit of all consumers.”

–Eric Tyson, syndicated columnist and bestselling author of

Personal Finance for Dummies

“No one makes complex financial information easy to understand like Liz Pulliam Weston. Her straight-talk and wise advice are invaluable to anyone with a credit card or check book–and that's just about all of us.”

–Lois P. Frankel, Ph.D., author of Nice Girls Don’t Get the Corner Office and Nice Girls Don’t Get Rich

“In a country where consumers increasingly pay more when they have bad credit, Liz Pulliam Weston’s book provides excellent tips and advice on ways to improve your credit history and raise your credit score. If you just apply one or two of her insightful suggestions, you’ll save many times the cost of this book.”

–Ilyce R. Glink, financial reporter, talk show host, and bestselling author of

100 Questions Every First-Time Home Buyer Should Ask

“Your creditscore can save you money or cost you money–sometimes a lot of money. Yet, most people don’t even know their scores, much less know how to make them better. Liz Pulliam Weston can help you fix that. In this easy-to-understand guide you’ll learn how to make sure your score helps you get the best deal on loans and insurance. You can’t afford not to read it.”

–Gerri Detweiler, consumer advocate and founder of UltimateCredit.com

Your credit score. It’s just three numbers. But it dictates whether you’ll get credit, and what you’ll pay. Insurers use it to set premiums. Landlords use it to make renting decisions. You need to understand it. In Your Credit Score, Second Edition, MSN Money personal finance journalist Liz Pulliam Weston gives you up-to-the-minute answers you can trust—and a proven action plan for building your credit, fixing it, and maintaining it, starting today!

Weston has updated this national bestseller with extensive new information, including an inside look at the new VantageScore credit scoring system, “Fast Fixes” that actually work, and powerful tips for first-time borrowers.

You’ll discover how your scores are affected by everything from applying for loans to closing accounts...how to cope with a credit crisis, and bounce back from bad credit or bankruptcy...how credit counseling really affects your score...why paying old debts can actually damage your score...how to reduce your exposure to identity theft, and much more!

Acknowledgments xvii

About the Author xix

Chapter 1: Why Your Credit Score Matters 1

Chapter 2: How Credit Scoring Works 13

Chapter 3: VantageScore–A Revolution or Just More of the Same? 29

Chapter 4: Improving Your Score–The Right Way 37

Chapter 5: Credit Scoring Myths 57

Chapter 6: Coping with a Credit Crisis 69

Chapter 7: Rebuilding Your Score After a Credit Disaster 89

Chapter 8: Identity Theft and Your Credit 111

Chapter 9: Emergency! Fixing Your Credit Score Fast 139

Chapter 10: Insurance and Your Credit Score 147

Chapter 11: Keeping Your Score Healthy 163

Index 179

Table of Contents:

Acknowledgments     xvii
About the Author     xix
Why Your Credit Score Matters     1
How Your Credit Score Affects You     1
What It Costs Long Term to Have a Poor or Mediocre Credit Score     3
How Credit Scoring Came into Being     6
How Credit Use Has Changed Over the Years     7
Consumer's Fight for Truth About Credit Scores     8
Credit Controversies     9
Credit Scoring's Vulnerability to Errors     9
Credit Scoring's Complexity     10
Credit Scoring's Use for Noncredit Decisions     11
Credit Scoring's Potential Unfairness     11
Conclusion     12
How Credit Scoring Works     13
What Is a Good Score?     16
Your Credit Report: The Building Blocks for Your Score     17
How Your Score Is Calculated     18
The Five Most Important Factors     19
Your Payment History     19
How Much You Owe     20
How Long You've Had Credit     21
Your Last Application for Credit     21
The Types of Credit You Use     22
Your Credit Scorecard     22
Your Results Might Differ     24
HowDo I Get My Score?     25
VantageScore-A Revolution or Just More of the Same?     29
The VantageScore Scale     30
How VantageScores Are Calculated     31
Comparing the Scoring Systems     32
Some Rules Remain the Same     33
VantageScore's Future     34
So Which is Better?     36
Improving Your Score-The Right Way     37
Start with Your Credit Report     37
Check the Identifying Information     38
Carefully Review the Credit Accounts     39
Parse Through Your Inquiries     40
Examine Your Collections and Public Records     41
Dispute the Errors     41
Pay Your Bills on Time     42
How to Make Sure Your Bills Get Paid on Time, All the Time     43
Pay Down Your Debt     47
You Need to Reduce What You Owe, Rather Than Just Moving Your Balances Around     47
You Might Need to Change Your Approach to Paying Off Debt     48
You Need to Pay Attention to How Much You Charge-Even If You Pay Your Balances Off in Full Every Month     48
How to Find Money to Pay Down Your Debt     50
Don't Close Credit Cards or Other Revolving Accounts     50
Apply for Credit Sparingly      51
How to Get a Credit Score If You Don't Have Credit     51
Credit Scores Without Credit     55
Credit Scoring Myths     57
Closing Credit Accounts Will Help Your Score     58
You Can Boost Your Score By Asking Your Credit Card Company to Lower Your Limits     59
You Can Hurt Your Score By Checking Your Own Credit Report     60
You Can Hurt Your Score By Shopping Around for the Best Rates     61
You Don't Have to Use Credit to Get a Good Credit Score     62
You Have to Pay Interest to Have a Good Credit Score     63
Adding a 100-Word Statement to Your File Can Help Your Score If You Have an Unresolved Dispute with a Lender     64
Your Closed Accounts Should Read "Closed By Consumer," Or They Will Hurt Your Score     65
Credit Counseling Is Worse Than Bankruptcy     65
Bankruptcy Hurts Your Score So Much That It's Impossible to Get Credit     66
Coping with a Credit Crisis     69
Figure Out How to Free Up Some Cash     72
Evaluating Your Options     75
Prioritize Your Bills     75
Match Your Resources to Your Bills and Debts     77
Figuring Out a Repayment Plan     78
The Real Scoop on Credit Counseling     80
Should You File for Bankruptcy?     84
The Effects of Bankruptcy Reform     85
The Type of Bankruptcy That You File Matters     86
Choose Your Path and Take Action     87
The Pay-Off Plan     88
Credit Counseling     88
Bankruptcy     88
Rebuilding Your Score After a Credit Disaster     89
Credit Report Repair     91
Scrutinize Your Report for Serious Errors     91
Know Your Rights     93
Organize Your Attack     94
What You Need to Know About Unpaid Debts and Collections     95
What You Need to Know About Statutes of Limitations     99
Should You Pay Old Debts?     102
"But You've Got the Wrong Guy!"     105
Adding Positive Information to Your File     106
Try to Get Positive Accounts Reported     106
Borrow Someone Else's History     106
Get Some Credit or Charge Cards If You Don't Have Any     107
Use Your Credit Well     108
Pay Bills on Time     108
Use the Credit You Have     108
Keep Your Balances Low     109
Pace Yourself     109
Don't Commit the Biggest Credit Repair Mistakes      109
Identity Theft and Your Credit     111
New Laws That Might Help     115
How to Reduce Your Exposure to Identity Theft     117
Buy a Shredder     117
Get a Locking Mailbox     117
Protect Your Outgoing Mail     117
Keep Track of Your Receipts     118
Keep Your Financial Documents Under Lock and Key     118
Get Stingy with Your Social Security Number     118
Know What's in Your Wallet     119
Ask About Shredding Policies     119
Don't Let Your Debit Card Out of Your Sight     120
Opt Out of Credit Card Solicitations, Junk Mail, and Telemarketing     120
Don't Use a Cell or Cordless Phone to Discuss Financial Matters     121
Be Wary of Telephone Solicitors and Emails Purporting to Be from Financial Institutions     121
Monitor Your Social Security Statements     122
Monitor Your Credit Reports     122
Consider a Credit Freeze     124
What to Do If You're Already a Victim     131
Keep Good Notes of Every Conversation You Have Regarding the ID Theft     131
Contact the Credit Bureaus by Phone and Then with a Follow-Up in Writing     132
Contact the Creditors by Phone and Then Follow Up in Writing      132
Contact the Police or Local Sheriff     132
Contact Bank and Checking Verification Companies     133
Contact the Collection Agencies     133
Get Legal Help     134
Don't Give Up     134
What to Do If the Credit Bureau Won't Budge     136
Emergency! Fixing Your Credit Score Fast     139
Repairing Your Credit in a Matter of Hours: Rapid Rescoring     140
Boosting Your Score in 30-60 Days     143
Pay Off Your Credit Cards and Lines of Credit     143
Use Your Credit Cards Extremely Lightly     144
Focus on Correcting the Big Mistakes on Your Credit Reports     144
Use the Bureaus' Online Dispute Process     144
See If You Can Get Your Creditors to Report or Update Positive Accounts     145
What Typically Doesn't Work     145
Disputing Everything in Sight     145
Creating a "New" Credit Identity     146
Closing Troublesome Accounts     146
Insurance and Your Credit Score     147
History of Using Credit Scores to Price Insurance Premiums     149
But What's the Connection?     151
What Goes into an Insurance Score     155
Keeping a Lid on Your Insurance Costs      156
Start Thinking Differently About Insurance     156
Raise Your Deductibles     157
Don't Make Certain Kinds of Claims     158
Be a Defensive Driver     160
Use the Right Liability Limits     160
Drop Collision and Comprehensive on Older Cars     161
Shop Around     161
Protect Your Score     162
Keeping Your Score Healthy     163
The Do's of Credit Health     164
Pay Off Your Credit Card Balances     164
Have an Emergency Fund     166
Have Adequate Insurance     168
The Don'ts of Credit Health     169
Don't Buy More House Than You Can Afford     169
Don't Overdose on Student Loan Debt     171
Don't Let Your Fixed Expenses Eat Up Your Income     171
Don't Raid Your Retirement or Your Home Equity to Pay Off Credit Cards     172
Credit and Divorce: How Your Ex Can Kill Your Score     173
Get Your Credit Reports     174
Take Action     174
Don't Be Late     175
Dealing with Mortgages, Car Loans, and Other Secured Debt     175
Consider a Fraud Alert or Credit Freeze     176
Look for Lenders Who Aren't FICO-Driven      176
In Conclusion: The Three-Year Solution     177
Index     179