Credit Damage: Getting Compensated for Your Loss

Until recently lawyers for victims of credit damage had little possibility to collect for damages beyond medical treatment, lost wages and property loss. Insurance companies threw up their hands in sympathy, claiming victims can only be compensated for what can be measured - tangible goods and services. But, what happens when the victim has lost considerable time from work, the family bank is broke and monthly payments on mortgages, car loans and credit cards payments are missed? Regardless of the haggling between lawyers and insurance companies, it's the credit victim who ends up having to live with a bad credit rating.

Today, there are legally accepted means for measuring loss of credit through the procedure of Credit Damage Measurement (CDM). CDM is fast becoming a potent tool for recoverable credit damage awards when the damage is not self-inflicted. Previously, both judge and jury, and especially the insurance companies, refused to acknowledge CDM claiming it was speculative because they could not define it as tangible damage.

However, in case after case, victims of credit damage who use the CDM method are getting compensation for credit loss. Many factors are changing the old mindset including credit bureau technology improvements, the application of the Fair Credit Reporting Act (FCRA), risk scoring sophistication, and the development of CDM as an objective, repeatable method that measures out-of-pocket damage reliably.

Credit Ratings and Recovery

The impact of a bad credit rating is much more significant than most people think. Consider what poorly rated consumers face when they want to lease or buy vehicles, obtain credit cards, buy or lease or refinance their residence. In most cases, it's an easy decision for the creditor: the credit application is simply turned down or the borrower is charged a much higher down payment ? maybe thousands of dollars more with monthly payments that are typically several hundred dollars more.

"A person with bad credit is viewed with suspicion and is charged significantly more for future extension of credit because the lender feels the need to protect against a greater risk or default," says Tom Key, a civil litigator practicing in Tustin, CA.

"Over the years I have heard reports of financial damages from clients who have been wrongfully terminated, defrauded, injured in an accident or suffered losses from breach of contract," Key says. "These victims were especially distraught over the fact that their prime credit reputation, carefully nurtured for years, is destroyed overnight. It seemed to me that there must be a way to compensate victims for that type of loss."

Key has witnessed the reactions of many jurors who failed to award a victim of credit damage their rightful compensation simply because they could not quantify the damages. "Jurors want a specific loss that they can count, hold and see," says Key. "Their reasoning is that they need to know that it is genuine. They have a tough time awarding damages based on sympathy. In order for them to confirm authenticity of a claim, they want to see its quantification."

Measuring Loss of Creditworthiness

Assuring authenticity has been a sticky situation when it concerns measuring out-of-pocket loss for victims of credit damage - until now. Attorneys who represent victims of credit damage are now utilizing the Credit Damage Measurement method to recover out-of-pocket losses for their clients.

"CDM measures the actual out-of-pocket dollars reasonably expected from loss of creditworthiness, which includes higher down payments, higher points and costs on loans, higher interest rates, higher monthly payments, or outright denial of credit," says Key. "In addition, the CDM method also calculates the rates, costs and other terms applicable to the resulting credit rating by lenders and projects the results over the relevant number of years for the types of loans the client is likely to seek."

Key continues, "For example, if a client's credit was near perfect before a triggering event, and is subsequently damaged by the event, the CDM procedure can illustrate before and after analyses, calculating the cost of the same loans with the two different credit reports, Pre- injury credit compared to Post-injury credit." In many cases, CDM clients have already realized significant compensation. In one such case CDM was instrumental in recovering $56,000 for damaged credit reputation. "That calculation is the difference between what refinancing a $140,000 loan would have cost my client with their prior rating, and what it will cost them out-of-pocket with their damaged credit rating -measured over a seven-year period."

Isolated Compensation vs. Repeatable Compensation

The CDM method of measuring intangible credit loss is increasingly becoming the basis of recovery for victims of credit damage. It's changing the way judges and juries measure recoverable out-of-pocket loss, and then can compensate for loss of credit expectancy. Certainly there are still some skeptics, mostly defendants. Technically, credit damage measurement is intangible. However, CDM has proven an objective and practical procedure to calculate out-of-pocket damage for companies or families to compensate for their credit damage.

"To have this kind of measurement is an exciting complexity in our society," says Key. "CDM is very understandable and a rather simple way to come to a conclusion of loss for the victim. If you understand the math and are an expert at reading credit reports, the calculations and recovery are undeniable. It's a method of turning isolated compensation into repeatable compensation. It's changing the way jurors rule on these damaging cases. Because of this method, victims of credit damage can be more fairly and more completely compensated for out-of-pocket damage."

Georg Finder, president of CM Financial Services of Fullerton, California, wrote and presents the first State Bar accepted continuing legal education seminar on credit reports and credit damage. He can be reached at gfinder@creditdamage.com (714) 441-0900 or at http://www.creditdamage.com

---

How to Evaluate and Raise Your Credit Score

Why do some people get offers for pre-approved credit cards and others don't? What do car dealers know about your financial health that you don't know? The... Read More

Legislators Ponder New Credit Protection Laws

Legislators in Washington, D.C. are considering several credit-related consumer protections as outlined in The Fair and Accurate Credit Transaction Act of 2003 (H.R. 2622). If approved, consumers... Read More

Credit Card Security Advice

Which of the following is the biggest threat to your credit card security?a) Shopping online with a credit card b) Shopping in a real store with your... Read More

Always Avoid Payment Holidays

Once you've been paying off a credit card for a while, you might be offered a 'payment holiday'. You'll get a letter, saying that since the company... Read More

Credit Cards: Pros and Cons

Sure, there are a lot of problems with credit cards, but there are a lot of good things attached to them as well. For instance, if you... Read More

Tips For Getting Your First Credit Card

Most of us get a credit card on our name when we go to college or when we are in our senior years of high school and... Read More

Reward Credit Cards: Get the Best Rewards Card Incentive Program

A good credit reward card can contribute to your retirement account, offer gas rebates, score theme-park or vacation tickets or take thousands off the price of your... Read More

How To Avoid Becoming A Victim of Identity Theft

With identity theft statistics currently at an all time high, and climbing, it just makes sense that we should all be doing everything we can to protect... Read More

ChexSystems: Alternative Options for People Whove Been Checking Accounts

Individual banks elect to become members of ChexSystems, and to use their services.Those individual banks are the ones who decides what is sufficient cause to close your... Read More

The Ghost of Expected Surprises

Here, Cratchet, what do you think you're doing?Uh, er, leaving sir.Leaving? It's 5 minutes to the hour. Shall I dock your pay accordingly.Uh, er, no sir.No sir?... Read More

Credit Card Balance Transfers Can Help You Stop Putting Money Down The Drain

As you probably know, interest rates are at all time low right now and if you aren't getting the best deal from your credit card company then... Read More

Credit Cards - A Blessing or a Curse?

Owning a credit card can be quite an advantage. Whether making online purchases, booking an air ticket or a hotel room on the phone or simply being... Read More

How To Use Your Credit Cards Wisely

Are you one of the thousands pulling your hair out trying to figure out how you're going to pay your credit card bills? Using your credit cards... Read More

Credit Cards - The Basics

How Lenders Operate ? And How They'll Make a Tidy Fortune from the UnknowingCredit card companies might seem like immensely clever, money making enterprises that exploit every... Read More

Good Credit -- Essential for the Prospective Home Buyer

Credit is a funny thing. It can be a useful tool in the hands of an informed individual, or a weight of burden to the unsuspecting. One... Read More

Common Credit Score Myths

A lot of credit score myths about fico score ratings get spread around and some of them are just outdated information. Sometimes even lenders can give you... Read More

Bankruptcy Myths Busted

The average American knows very little about bankruptcy. Most people probably are aware of bankruptcy's ability to dissolve debt and give the debtor a fresh start. Some... Read More

The Top 5 Secrets to Managing Your Credit Cards?So They Won?t Manage You

You've probably never heard of Frank X. McNamara, but he revolutionized the way you shop on a daily basis.One evening in 1949, McNamara-head of the Hamilton Credit... Read More

Know Your Credit Card Rights

When you apply for a credit card, the application that you sign is also a legally binding contract laying out all the termsbetween you and the bank,... Read More

Maximizing Credit Card Rewards

We spend money every single day on many different types of products and services and the banks' newest offer is that of saving when spending if you... Read More

Credit Cards And Loans - So Many Options - So Little Time

Credit Cards and Loans sounds like just two things, but in actuality, it is dozens of things. Due to a combination of user preferences, lifestyles, and marketing... Read More

Credit Enhancements: Seven Tips For Enhancing Business Credit Transactions

What are the avenues available to businesses with weak credit profiles or to companies pursuing credit transactions that are perceived as too risky by credit providers? Many... Read More

Looking for that Low interest Credit Card?

If you have been shopping around for a Low Interest Credit Card you will notice that the UK market is awash with Credit Card companies offering low... Read More

Triple AAA in 30 Days

Have you ever wonder about how to get good credit with spending alot of money. Well here is a little secret I used to get my credit... Read More

How to Improve Your Credit Rating

So you got into debt, had problems but you got yourself back on your feet through hard work and sacrifice and how are you rewarded? A Bad... Read More

Credit Traps Snag Consumers

Nearly 20 years ago I worked for a small consumer advocacy organization in Washington, DC. Each week we received sacks full of mail from consumers across the... Read More