Measuring the Real Costs of Credit Damage
See if this story rings any bells… you decided to apply for loan modification and it ended up turning your life upside down. The bank said not to make your payments, but soon months had gone by as your 700+ FICO credit score fell off a cliff. Before you knew it, your life was negatively impacted and there seemed to be nothing you could do about it.
Well, maybe there is something you can do… at least a way to determine whether the damage that was done to you adds up to enough that it makes sense to talk to a lawyer about going after it in court.
Assessing the real costs of credit damage…
It’s hard to overstate the impact that a low credit score has on our lives. I think most everyone would agree with that sentence, it’s certainly no secret. But, I also remember hearing about people who lost homes that shouldn’t have and how they couldn’t recover monetary damages because their homes were “underwater.”
The argument was that if you lost a home to foreclosure, but owed more than it was worth at the time, then you didn’t actually lose anything because there was no equity to lose. Remember that debate? I sure do. I hated it then, and I’d hate it even more were I to hear it going on today. To me it always seemed a bogus argument, but until very recently, I didn’t know there was a way to refute it…. because until very recently, I didn’t know Georg Finder.
Georg Finder is a recognized expert in credit damage assessment and when I call him an “expert,” I mean that he has testified as an expert in dozens of court cases that resulted in consumers being compensated for damage to their credit when their cause(s) of action otherwise prevailed. He’s been doing what he does for over 15 years… when he first started, he was among the first such experts out there. (Click HERE for a listing of court decisions in which his testimony was involved in the calculation of damages.)
As Georg explains, there are three types of credit damage that are most common in litigation today:
- Increased Out-of-Pocket Costs
- Loss of Credit Expectancy
- Loss of Credit Capacity
Increased Out-of-Pocket Costs is the most widely accepted type of credit damage, according to Georg, and it’s identified by an increase in interest charges for active accounts, like credit cards, or increased out-of-pocket costs due to denial of credit, which most often involves not being able to refinance a mortgage, or being forced to pay higher rates on a vehicle purchase or lease.
Georg also explains that the questions most juries ask when presented with such costs involve whether or not the costs genuinely represent an out-of-pocket loss that arose from the injury to the individual’s credit reputation, and whether or not it encompassed actual interest overpayments.
Like everything in law, it can get pretty sticky, but basically it’s the difference between the pre-injury cost of borrowing and that same cost after the injury occurred, and in some instances (that require legal advice for sure) punitive damages may apply. Just keep in mind that the damage can’t merely have been the result of a general change in interest rates, it has to be the result of damage to the individual’s creditworthiness.
Loss of Credit Expectancy is perhaps easiest to understand through examples. Let’s say that you had a mortgage with a balloon payment that you were expecting to be able to refinance at current rates, but due to the damage to your credit score, that became impossible and as a result, you were forced to pay unfavorable rates for perhaps seven years, which is how long negatives can remain on your credit report.
Then, because of you having to pay the higher mortgage payments, you became unable to make your credit card payments on time, and as a result, you ended up with credit cards charging 29 percent instead of much lower rates. Georg explains that you want to avoid areas that require speculation, but he says that can be done… if done right… and he says that again, punitive damages may come into play depending on the specific facts of the case.
Loss of Credit Capacity, the third most common form of credit damage for which consumers seek to be compensated, involves either a reduction in the amount of available credit and/or the increased rates for available credit, post-injury.
Maybe you suffered actual damages as a result of being denied credit, or maybe you were damaged by being required to pay higher rates than before your credit reputation was damaged. Either way, you may be able to recover damages by showing that your credit capacity was impaired and as a result you were deprived of the power to use credit in the manner you did before your credit reputation was damaged.
In some cases you can be compensated for the emotional distress and humiliation associated with being denied credit. Georg says that at least one court has ruled that limiting damages under the Equal Credit Opportunity Act (ECOA) would “undermineCongress’ intent to eliminate discriminatory credit denials.” For that reason, under the Fair Credit Reporting Act (FCRA), the term “actual damages” has been read to include damages for emotional distress and humiliation.
There are always plenty of legal nuances involved, so by all means, consult with your attorney before drawing specific conclusions, but it’s clear that in general, credit damage is acknowledged to be an important and measurable part of the overall damages picture.
The question is how you can determine whether the damage done to your credit reaches the degree that it makes sense to try to recover monetary damages as part of a lawsuit. It’s not only a good question, but it’s a question that Georg Finder hears… and answers… all the time.
And he’s developed a way to answer that question… he calls it his Credit Damage Assessment Tool and although he’s been offering it to lawyers for years, now he’s making it available to homeowners.
You can visit Georg Finder at www.creditdamageexpert.com... and you can access his Credit Damage Assessment Tool at www.creditdamagescorefinder.com. For a couple hundred bucks and in just a few minutes you can find out whether the damage that was done to your credit reputation reaches a level that’s worth going after in a lawsuit.
If your Credit Damage Score & Analysis comes in high enough, then you probably need to consult with an attorney… and you can take your lawyer a copy of your Credit Damage Score & Analysis to show him or her why you think of your damages the way you do.
So, if you’re suing your bank over your mortgage, and your credit reputation was damaged along the way, maybe there is hope after all… more and more the courts are recognizing credit damage in much the same way they have the many other types of monetary damages.
And it doesn’t matter whether you’re underwater or have equity coming out of your ears.
P.S. Lots more coming on this subject, so stay tuned.