Financial Peace University Lesson 5: Credit Sharks In Suits

Lesson 1

Lesson 2

Lesson 3

Lesson 4

This past Sunday’s lesson was titled Credit Sharks In Suits:  Understanding Credit Bureaus & Collection Practices.

Myth:  You need to take out a credit card for car loan to build up your credit score.

Truth:  The FICO score is an “I love debt” score and is not a measure of winning financially.  

With a 20% downpayment on a house, two or more years on the job, and two years of paying your landlord early, you will qualify for a mortgage.

Dave gave some good advice about credit reporting agencies, collection agencies, illegal methods in which collection agencies try to get your money and how to counter their illegal practices, as well as information about credit scams, credit clean up scams, and other scams.  This lesson has many included forms to help assist in straightening out this area of one’s life.

Information stays on our credit report for 7 years.  Chapter 7 bankruptcy is 10 years.

Credit clean up companies are scams.  The only way to remove information from a credit report is if it is inaccurate information.  This can be done by you.

79% of credit reports contain errors of some kind.

25% contain errors significant enough to deny you credit.

30% contain accounts listed as open even though the consumer had closed them.

22% listed the same mortgage or loan twice.

Dave gave a step by step procedure of what to do in case of identity theft including remember you are not responsible for fraudulent charges even when a company is trying to get their money.  You are not responsible for these charges.

Dave gave a list in order of the creditors which most likely are following the law down to the creditors who are most often violating the law.

  • Mortgage collectors.  They most often follow the law and are professional.  If they say they will foreclose.  They will.
  • Local Collection Agencies.  These are collections from local merchants.  Most of these people who are collecting may live in your neighborhood or in the same town as you.  Most of the time they follow the law.
  • Finance Companies.  Low scum.  Often violate the law.  Will say and threaten illegal things to try to collect money.  He told a story of a young lady who arrived home from work and had a collector sitting in her driveway blocking her entrance to her garage trying to collect on her.  This is illegal.
  • Credit Card Collectors.  Sears, JCPenneys, VISA, Mastercard, etc.  These collectors violate federal law all the time.

The problem is that people who are broke and can’t pay their debt can’t pay court fees to sue these companies.

Dave listed federal laws that the Federal Fair Debt Collection Practices Act requires these companies to follow.

  • Harrassment is illegal.  Collectors can only call between 8am-9pm YOUR time, not theirs.  
  • You can demand a collector cease calling you at work.
  • You can demand they cease all calling however Dave doesn’t recommend this because you do owe money and this demand will often trigger something in their database and send your account to the legal department to get on the ball to sue you.  All negotiations stop and any hope of a positive resolution is lost.  
  • No collector may garish wages without proper lengthy court proceedings except in the case of delinquent IRS or student loan debt.  

Dave gave a suggestion on how to pay debt off when you cannot even afford the minimum payment.   The method is basically taking all of your debt and figuring out what money you can put toward your total debt each month and then figuring out what percentage you owe each creditor and pay that percentage of the total money that you can put toward your debt.  He calls this is Pro Rata Debt Plan.  

He goes over lawsuits and how the law works when a creditor is suing you.  He knows.  He’s been there.  

Finally Dave goes over the 3 reputable companies to get your credit reports from and other proactive  ways to prevent credit card applications in your mailbox and the national do not call registry.

Helpful Resources

Pre-screen Opt Out:  (888) 567-8688

National Do Not Call Registry:  (888) 382-1222 or

Free Credit Report:




Print and Review Credit Report

Financial Peace Revisited Chapters 9 and 22

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