Credit Damage Blog

Special damages for credit injury can add great value to a case. Knowing that damages are available for loss of credit capacity and diminished credit expectancy might lead to inclusion of a claim for credit damages as a routine matter. Just as wage loss or reduced earning capacity are not routinely part of every legal action, credit damages must be alleged only when appropriate.

Let’s look at situations where it would be inappropriate to include a claim for credit damage. There are two important scenarios. The first instance is where credit damage is self-inflicted, not the result of the wrongful action of another. The second is where credit damage may exist, but it is too small to make a significant impact on the value of a case..

Self-inflicted credit damage is readily apparent in most cases. Credit damaged as the result of poor budgeting or poor planning is self-inflicted. Inability to meet credit obligations because of overextending is self-inflicted. It is true, the credit industry deluges us with sweet sounding offers for credit. It is not the fault of the industry that we accept those offers and then find ourselves in unsolvable debt.

The more complicated scenario occurs when the wrongful act of another causes injuries. An apparent example is the automobile accident where the injured person is unable to work and loses income. Credit damages appear certain on the face of it. It is important in this situation to ascertain credit history. If the history shows that prior to the injury credit obligations were not being timely met, credit damage could not be the fault of another. The credit damage was self-inflicted.

The second scenario where it may be unwise to seek credit damage is where the impact on credit is small. Georg Finder, the preeminent expert in the field, writes, “My policy is to accept any case only if I affect the value of fair compensation by at least $30,000.” The same automobile accident occurred. Physical injuries were sufficiently minimal that missed work and lost wages were relatively small. There was some difficulty meeting credit obligations, and agreements were made with creditors to temporarily make payments covering only interest. After returning to work, credit obligations were again made. In this case there would be little, if any, measurable credit damage.

Another scenario is that of the victim who has little credit history and credit damages are minimal. A judgement call has to be made to determine whether to pursue a claim. If it appears that the cost of the expert who will determine the value of the damages will be greater than the damages themselves it is probably prudent to forego the claim. Georg Finder will not accept a case if he cannot improve its value by $30,000. That alone is a consideration in determining whether to pursue a smaller credit damage claim.

The injured person need not have perfect credit in order to qualify for credit damages. If it can be documented that the person has credit, although less than perfect, and that credit is diminished as a result of the wrong of another, a case for credit damages can be made. The critical inquiry is whether the injured person’s credit status was changed detrimentally as the result of the wrongful act of another. An injured person might have substantial credit damages even without perfect credit at the time of injury.

A tool which is available to assist in determining the value of credit damages is the Case Qualifying Profile made available by Georg Finder. The Profile can be found at www.creditdamage.com/case_profile.html.

If you want to know more about whether to pursue a credit damage claim, please see www.creditdamage.com.

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Loss of credit expectancy is one of the four types of credit damage. Like loss of credit capacity, loss of expectancy concerns the ability to obtain and maintain credit after the wrongful act of another damages creditworthiness. Loss of expectancy differs from loss of capacity as it involves predictable and foreseeable future use of credit as distinct from credit capacity which involves the inability to continue to utilize credit as the injured person could before damage to credit.

Creditworthiness is determined by a creditor’s underwriting department which determines the probability that the credit applicant will meet debt obligations in a timely fashion. Someone who is deemed likely to satisfy debt obligations is creditworthy while someone who is more likely to default is a greater credit risk and not creditworthy.

Thus someone who is considered creditworthy prior to injury to credit by the wrongful act of another and not creditworthy after occurrence of the injury has suffered credit damage. Such damage will result in either diminished credit capacity, diminished credit expectancy, or both. Credit capacity concerns the decrease of available credit and the inability to use credit at the same interest rate, thus at a greater cost.

Credit expectancy is concerned with the performance based expectation of obtaining credit to maintain an attained lifestyle or to accomplish the life style to which one aspires. In other words, credit expectancy can be seen as a window of opportunity to advance goals. When credit is injured, that window of opportunity is slammed shut.

Expectancy is typical in human life. A college student expects to obtain future employment when a degree is attained. A medical student expects to become a doctor. Or a law student expects to be a lawyer. Similarly a person with a history of creditworthiness expects to be able to use credit in new and additional ways with increased credit availability and at a lower cost. This is credit expectancy.

When a pattern of credit use is interfered with that person’s expectation of continued credit or greater credit might be damaged. One illustration is the real estate investor who has a history of purchasing six properties per year for improvement and resale at a profit. Credit problems occur and the investor finds it impossible to obtain new credit to finance the purchases of property. The reasonable and foreseeable expectation of obtaining credit to finance a future enterprise has been dashed and the investor has been damaged accordingly. The window of opportunity has been broken. When the loss of credit occurs as the result of the wrongful act of another, credit damage has occurred in the form of loss of credit expectancy.

Other reasonable expectations which a person with a developing history of creditworthiness might envisage is the purchase of a first or new home, a new car, or credit cards with higher limits and lower interest rates. When creditworthiness is diminished and the window of opportunity is closed, those expectancies will be dashed and unattainable. That is the crux of damages for loss of credit expectancy.

It is likely that when credit damage for loss of expectancy is alleged the objection will be made that credit expectancy, something to occur in the future, is speculative. That issue can be met and overcome in the same manner that a similar objection to damages for diminished earning capacity is met with the testimony of the injured party and testimony of a qualified expert. The person whose credit has been damaged can testify about plans to utilize credit. Expert testimony concerning statistical evidence showing how credit is used by people similarly situated to the injured person is admissible.

To successfully recover credit damages for the loss of credit expectancy requires the services of a qualified expert to address the economic loss for damage to expectancy. Georg Finder is such an expert who has qualified as an expert witness in State and Federal courts. To learn about how Georg can assist you, please see http://www.creditdamage.com.

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Credit damage is the impairment of the ability to use credit as the result of the wrongful act of another. Credit damages can consist of different elements.

Those damages can be for (a) loss of credit capacity, (b) loss of credit expectancy, (c) cancellation of credit, and (d) increased cost of borrowing. In most cases one or two of the different types of credit damage will be involved. This entry will focus on loss of credit capacity.

Loss of credit capacity, refers to the decrease of available credit and/or an increase in the interest rate for available credit, thus an increase in the cost of credit

As a result of those increased costs debt service becomes more expensive. When debt service becomes more expensive, loss of credit capacity is suffered as the injured person loses the ability to continue to use credit in the way it could be used before the damage to credit occurred.

Three examples illustrate how credit capacity may be damaged.

The first example is the ubiquitous credit card limit. In this example the injured person had a credit card limit of $100,000. After the injury occurred, the credit limit was lowered to $20,000. Thus, the credit capacity of the injured person decreased by $80,000.

The second example involves the ability to borrow against the value of real property. In this example prior to injury the injured person could borrow up to 90% of the value of property. After the injury occurred, the amount available was reduced to 70% of the value. Thus, the amount of money which could be borrowed was reduced. Additionally, when credit is damaged, the interest rate increases as well, so not only was the amount of credit available reduced, but the cost of borrowing that amount increased, making it more expensive to borrow against the value of the real property. Thus, credit capacity was decreased by the 20% reduction plus the increased cost of borrowing.

The third example involves the purchase of a motor vehicle. In this example prior to injury a person with excellent credit can walk away with a new car paying nothing down. After injury and damage to credit, the same person might have to make a down payment of 15 or 20% of the value of the car and be subject to a higher interest rate on the balance due. Thus the amount of credit available decreases and the cost to manage the debt increases, a loss of credit capacity.

Additionally, in the unlikely event that new credit can be obtained after credit damage occurs, the amount will certainly be less than would have been the case before credit was damaged. On top of that, higher interest rates and monthly payments will be required. In other words credit won’t be as affordable as it was before the injury, a significant loss of credit capacity. All of the above examples reflect a loss of credit capacity. The amount of credit available will have decreased as a result of the damage to credit. The cost of that credit will have increased, making available credit more expensive as a result of the damage to credit.

Compensation for loss of credit capacity is available and should be sought in any case when the damage to credit is caused by the wrongful act of another. To obtain that compensation requires that a qualified expert be retained. The pioneer and leading expert in the field of compensation for credit damage is Georg Finder. To learn more about what Georg Finder can do to strengthen your case, see http://www.creditdamage.com.

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Credit damages can be a tremendously significant part of the damages, as much as $100,000 or more, in a law suit. Georg Finder writes, "It is my policy to decline cases where my service will not impact the valuation by at least $30,000. Typically my contribution improves a case by over $75,000."

Credit damages may result if a victim suffers any of the following: cancellation of credit, increased borrowing costs, loss of credit capacity, or loss of expectancy. Those adverse events will occur when a person is unable to meet credit obligations and creditors provide negative reports to credit agencies. Prospective creditors will utilize those negative remarks in deciding whether to grant credit at or, if they will grant credit, in what amount and at what interest rate.

A credit score is intended to rate the probability that a borrower will default on a loan. It is based on several factors including payment history, outstanding debt, length of time one has had credit, the number of inquiries on your report, and on the types of credit you currently have. The first two factors are by far the most heavily weighted in calculating a credit score. In Sandy’s case we can infer that, as Sandy becomes unable to meet credit obligations, the payment history will deteriorate and the outstanding debt will increase causing a decreasing credit score.

Over time Sandy’s credit report will contain more negative reports. Sandy can therefore expect that it will be more difficult to obtain credit (loss of credit expectancy), that when credit is available, it will be for less (loss of credit capacity), and the interest rate (cost of credit) will increase. Sandy may also lose credit cards or otherwise existing credit (cancellation of credit).

It almost becomes a matter of common sense that if one’s credit is damaged as the result of the wrongful act of another there should be compensation. The remaining question becomes how much compensation is appropriate. The answer can be determined by someone qualified to analyze a credit report and the negative reports found therein and who understands the implications of a credit score. These are not mere numbers which can be plugged into a calculator to elicit a dollar amount of damages. To reach that figure requires an expert. One expert is Georg Finder, a recognized authority in the field.

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For about a century courts have been all over the legal map in determining whether credit damage claims are speculative. Generally the determination has been based on the nature of the pleadings or the inability of counsel to provide a measurement of credit damage. The difficulty in proving such a claim was the lack of a method to prove the existence of the fact or to provide meaningful basis for monetization of such damage.

The successful objection that credit damages are speculative ended with the experts ability to prove the fact of credit damage. Among the elements found in credit reports is information provided by creditors concerning the failure of individuals to make timely payments on accounts. These facts are evidence of inflicted credit damage when the failure to make payments is the result of wrongdoing. These adverse remarks will be used by any future creditor in making a determination of creditworthiness or credit capacity. The adverse information found in credit reports will remain in the reports for seven years, a fact which an expert utilizes to calculate credit damages.

To illustrate this we will return to Sandy. Over time Sandy, who claims to have been wrongfully discharged from employment, has become unable to meet credit obligations. Credit card payments have become late. From time to time Sandy’s mortgage payment is not made on time. Car payments are late. All of these events are reported to the credit agencies and provide evidence of the damages resulting from the wrongful discharge. The information provided will make it more difficult for Sandy to qualify for credit when she applies for it, and when credit is provided, it will be for less money and at a higher interest rate. A qualified expert can utilize those facts to calculate damages to present to a judge and jury.

To give yourself the best opportunity to recover credit damages, you should utilize the services of an expert, such as Georg Finder. The expert you retain should be able to calculate credit damages and testify about the elements of a credit report, the significance of those element, how the information in a credit report is used by creditors, and why the existence of credit damage is not improbable. Credit damage therefore need no longer be relegated to the realm of speculative damages and now can be proven as an element of special damages.

To learn more about the kinds of cases where credit damage are available, see http://www.creditdamage.com.

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