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By Charles
Essmeier
Identity theft has been a hot topic in the news during the last few years.
Just a month or so ago, forty million credit card numbers were compromised
due to a computer attack on a credit card processor. Consumers are rightly
concerned, as it can take years to unravel the problems created when
someone’s identity is stolen. New legislation in Texas and California, also
proposed elsewhere, is designed to protect consumers by letting them put a
“freeze” on their credit reports. Those in the real estate industry are
worried, however, that doing so may make it difficult for some people to buy
homes.
The concept of freezing credit reports is a simple one. Every time someone
applies for credit, the lender contacts on of the three main credit bureaus
and requests a copy of his or her credit report, which contains the
applicant’s FICO score. The score, a number ranging from 300 to 850,
indicates how worthy the applicant is to qualify for the loan or credit. The
new laws allow consumers to “freeze” their credit reports, effectively
blocking any attempts by anyone to view his or her credit score. If the score
can’t be viewed, then credit can’t be issued, thus protecting the consumer
from fraudulent activity.
The process is a simple one, and can be initiated or canceled with a simple
transaction on the Internet. The problem, according to those in the real
estate industry, is that this simple security precaution may make it
difficult for a consumer who has blocked their credit to buy a home. In many
markets, homes put up for sale sell in a few hours or days, and the process
of unfreezing a credit report can take longer than that. If a home seller or
lender cannot assess a potential buyer’s credit rating, then the home sale
may be lost to another buyer. True, it is a simple process to unfreeze a
credit report, but some consumers may forget that they froze their reports in
the first place, or they may forget or misplace their username or password
for the Website that allows them to unfreeze their report.
On the surface, the new laws to protect consumers seem to be a good idea, and
those in the real estate industry who are concerned may find that their
worries are unjustified. This is a case where all parties would benefit from
taking the time to see if the laws are effective, and whether or not they
actually hurt the real estate industry. In the meantime, anyone considering
purchasing a home should be made aware of the ramifications of freezing their
credit, as doing so may make it more difficult to purchase the house of his
or her dreams.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including End-Your-Debt.
com, a Website devoted to debt consolidation and credit counseling (http://
www.end-your-debt.com/>debt) information and HomeEquityHelp.net, a site
devoted to information on mortgages and home equity loans. (http://www.
homeequityhelp.net/>)
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