Part 2: Debt Credit Repair
Learn The Different Ways
To Get Your Credit Over 750
You can download this .pdf ebook by just right clicking & saving on the link below. Or you can just keep reading this entire ebook on this website.
- Debt Credit Repair .pdf ebook
LEGAL NOTICE
The Publisher has strived to be as accurate and complete as possible in the creation of this report, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet.
While all attempts have been made to verify information provided in this publication, the Publisher assumes no responsibility for errors, omissions, or contrary interpretation of the subject matter herein. Any perceived slights of specific persons, peoples, or organizations are unintentional.
In practical advice books, like anything else in life, there are no guarantees of income made. Readers are cautioned to reply on their own judgment about their individual circumstances to act accordingly.
This book is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to seek services of competent professionals in legal, business, accounting, and finance field.
Chapter 7 - Credit Counselors and Debt Consolidators
These companies have started popping up everywhere. In fact, as I am writing this book, there is a commercial on television for yet another credit counseling company. It seems like they are everywhere. It also seems like they can really help you with your debt problems. But can they?
There are some credit counseling agencies and debt consolidators that can actually help get people out of debt. But there are also others who are simply trying to get money (that you don’t have) without helping you at all.
There is a difference between these two types of companies. Credit counselors will help you get out of debt and stay out of debt. That means that they will help you realize where you went wrong on the financial road and then help you get out of debt. After that, they will put you on a budget and offer services that can help you stay out of debt and live a financially stable life.
Debt consolidation companies are different, though not entirely. They also will help you get out of debt, but they do so by working with your creditors to help combine all of your debts into one large debt with one monthly payment. That usually entails getting some type of loan on your behalf that will pay off your creditors and you will pay the loan company instead.
Because of the services they provide, many people would rather go with a credit counseling service. That’s because they need someone to help them stay away from the mindset that got them into debt in the first place. There are many, many credit counseling companies out there.
What do you need to look for in a reputable credit counseling company? Here are a few suggestions:
They should be associated with the Better Business Bureau. The service's website should have a BBB logo and a link to their record on the Better Business Bureau website. Click through the link to check that there are no unresolved complaints against them.
Many people only think about the Better Business Bureau after they've been cheated, but by then there's not much you can do. Working with a credit counseling agency that is a member of the Better Business Bureau means that you can go to them to help mediate any dispute you might have with the service provider.
Reputable credit counseling services will be accredited by an independent nonprofit, just as many schools are. One such accreditation body is the National Institute for Financial Counseling Education.
A good credit counseling agency will charge a small, reasonable monthly fee, usually around $30. Some also charge a fee upfront, though this fee should be reasonable (around $50 tops). It may be possible to get a hardship waiver of these fees if you truly do not have the $30-50.
You will have to fill out an application when you decide to go with a credit counseling agency. The application must clearly say what the fees to be paid are, what the services to be provided are, and in what timeframe all of this will be provided.
Run far, far away from any organization that proposes to "wipe out" your debt for you, rather than simply helping you to repay the debt. Short of your creditors just deciding to forget about the debt (unlikely), there is no way to erase debt–even bankruptcy leaves a huge mark on your credit report for ten years.
True, your car may not go missing from your driveway if you stop paying unsecured debt (i.e., debt that is not "secured" with collateral, like most credit cards, unlike most auto loans). But you are still legally obligated to pay the debt, and the possibility of being taken to court will loom over you. You will likely be unable to get even "bad credit" financing if you still have debts in collections–good luck buying a car or house.
Now let’s look at how a reputable credit counseling service will work. First, they will negotiate with your creditors to establish a debt management plan (DMP) for you. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.
After joining a DMP, the creditors will close the customer’s accounts and restrict the accounts to future charges. The most common benefit of a DMP as advertised by most agencies is the consolidation of multiple monthly payments into just one monthly payment which is usually less than the sum of the individual payment previously paid by the customer.
This is because the credit card banks will usually accept a lower monthly payment from a customer in a DMP than if the customer were paying the account on their own. Some DMPs advertise that payments can be cut by 50 % although a reduction of 10 to 20 percent is more common.
The second feature of a DMP is a reduction in interest rates charged by creditors. A customer with a defaulted credit card account will often be paying an interest rate approaching 30 percent. Upon joining a DMP, credit card banks sometimes lower the annual percentage rates charged to 5 to 10 percent and a few will eliminate the interest altogether.
This reduction in interest allows the counseling agencies to advertise that their customers will be debt free in periods of three to six years rather than the twenty plus years that it would take to pay off a large amount of debt at high interest rates. That’s a very attractive advantage – especially for people who are in debt quite a bit.
A third benefit offered by credit counseling agencies is the process of bringing delinquent accounts current. This is often called “re-aging” or “curing” an account. This usually occurs after making a series of on-time payments through the DMP as a show of good faith and commitment to completion of the program.
For example, a client with an account that has a monthly payment of $50 but that monthly payment has not been paid in two months might be considered by the creditor to be 60 days past due. After joining the DMP and making three consecutive on-time monthly payments, the creditor could “re-age” the account to reflect a current status.
After that, the monthly payment due on the statements would be the monthly payment negotiated by the DMP and the account would be reported as current to the credit bureaus. Now this process does not eliminate the prior delinquencies from the credit reports.
What is does is merely give a fresh start and opportunity for the client to begin building a positive credit history. Like all negative credit information, only the passage of time will lessen the impact of the negative marks when credit scores are calculated.
So how do credit counseling companies make money? They do charge a fee to you for their services, and it is important for you to get all of that information in writing before you sign on the dotted line. However, this fee is not usually enough to make them a huge profit.
The credit counseling companies make most of their compensation from the creditors to whom the debt payments are distributed. This funding relationship has led many to believe that credit counseling agencies are merely a collections wing of the creditors.
This fee income, known as “Fair Share,” consists of contributions from the creditors that originally earned the agency 15% of the amount recovered. However, in recent years, Fair Share contributions have dwindled steadily, with contributions of 4-10% being the most common.
There is a lot of criticism, in fact, when it comes to credit counseling agencies and their effectiveness as well as legality. The Federal Trade Commission has filed lawsuits against several credit counseling agencies, and they continue to urge caution to consumers when it comes to choosing a credit counseling agency.
The FTC has received over 8,000 complaints from consumers about shady credit counselors. Many of those complaints concern high or hidden fees along with the inability to opt out of so-called “voluntary” contributions. The Better Business Bureau also reports high complaint levels about credit counseling.
Not surprisingly, the IRS has also weighed in on the subject of credit counseling and has denied non-profit, tax-exempt status to around thirty of the nation’s 1,000 credit counseling agencies. Those thirty agencies account for more than half of the industry’s revenue. Audits of non-profit credit counseling agencies by the IRS are ongoing.
The lobby against credit counselors arises from the belief by the collection industry that the not-for-profit status of the credit counselors gives them an unfair financial and market advantage over them. The IRS apparently agrees.
The tax exempt revocations seem to be centered on whether or not a tax exempt credit counselor actually performed their mandated mission by assisting the community at large as opposed to offering their whole attention to their own DMP customers in a “collection practice”. However, that has yet to be proven.
Congress has also investigated the credit counseling industry and has issued a report that says while some agencies are ethical, others charge excessive fees and provide poor service to consumers. The report also states that NFCC member guidelines, if applied to the entire industry, would go a long way toward eliminating the abuses they have uncovered in other parts of the industry.
When it comes to debt consolidation companies, you are talking about an entirely different concept. What a debt consolidation company does is negotiate with creditors to get a lower pay-off amount for your debts and then obtain a loan on your behalf to pay off those creditors allowing you to make just one payment instead of multiple ones.
The two types of companies are similar in nature, but with debt consolidation, the only thing they do is negotiate with credit lenders and then get you one payment instead of many. They do charge a fee for their services as well just as the credit counseling companies do.
The thing about debt consolidation companies is that they do what you can do yourself with just a little bit of work. You can call your creditors and negotiate a pay-off balance for your accounts and then obtain your own loan as a debt consolidation loan. Even if you have less than perfect credit, most banks and lending institutions will have debt consolidation loans available to almost everyone.
Really, the bottom line when considering either a debt consolidation company or a credit counselor is to weight the advantages and disadvantages first. Then check out the company you are considering to make sure they are reputable.
These types of companies can really and truly help people who are seriously in debt. But proceed with caution and choose wisely lest you get yourself involved in yet another problem besides your debt!
Now that we’ve addressed no credit, bad credit, and people who can help with credit problems, let’s focus on your credit report and your credit score. Often, there are mistakes that are on your credit report, and correcting them is essential.
Chapter 8 - Mistakes Can Be Made
As we’ve said before, your credit report is very important to you as well as your credit score. People are human and the information contained in your credit report is entered in by human hands. Sometimes those hands make mistakes.
Maybe you paid off a past due bill and it’s still showing on your credit report as delinquent. There are all sorts of things that can be reflected incorrectly on your credit report, so it’s important that you take steps to make corrections as soon as you can.
The first thing you need to do is check over your report and dispute any old negative reports you can find. Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as "not mine."
The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute. Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.
If there are significant errors on your credit report, you need to be sure and get them removed right away. However, there are also some mistakes that you can ignore and it won’t impact you negatively.
Your credit score is calculated based on the information in your credit report, so certain errors there can really cost you. But not everything that's reported in your file matters to your score.
Here's the stuff that's usually worth the effort of correcting with the bureaus:
Late payments, charge-offs, collections or other negative items that aren't yours.
Credit limits reported as lower than they actually are.
Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full.
Accounts that are still listed as unpaid that was included in a bankruptcy.
Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report.
You actually have to be a bit careful with this last one, because sometimes scores actually go down when bad items fall off your report. It's a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance.
Some of the stuff that you typically shouldn't worry about includes:
Various misspellings of your name.
Outdated or incorrect address information.
An old employer listed as current.
Most inquiries.
If the misspelled name or incorrect address is because of identity theft or because your file has been mixed with someone else's, that should be obvious when you look at your accounts. You'll see delinquencies or accounts that aren't yours and should report that immediately.
However, if it's just a goof by the credit bureau or one of the companies reporting to it, it's usually not much to sweat about. Two more items you don't need to correct:
- Accounts you closed listed as being open.
- Accounts you closed that don't say "closed by consumer."
Closing accounts can't help your score, and may hurt it. If your goal is boosting your score, leave these alone. Once an account has been closed, though, it doesn't matter to the scoring formulas that did it -- you or the lender. If you messed up the account, it will be obvious from the late payments and other derogatory information included in the file.
So say you’ve found some significant errors on your credit report and you need to correct them. There are certain steps you need to take in order to make sure that the error is corrected and ultimately removed from your report.
Make a copy of your credit report and circle every item you believe is incorrect.
Write a letter to the reporting agency (the address will be printed on the report). Explain each dispute and request an investigation to resolve the issues. If you have supporting paperwork, send it along, coding pages to match dispute paragraphs. Do not send your originals.
Send all materials by certified mail, return receipt requested, so that you can prove the packet was received.
Send a similar letter of dispute to the creditor whose reporting statements you disagree with. Refer to a billing statement to find the correct address for disputes, because it's usually different from the payment address.
If your dispute involves personal information, such as your current address, enclose a copy of your driver's license or a utility bill in your name to verify your residence.
The reporting agency will initiate an investigation, contacting your creditors to verify the accuracy of the information. If the creditor cannot verify that the entry is correct, it must be removed. When the investigation is complete, the agency must send you a free copy of your report if changes were made.
If the investigation uncovers an error, you have the right to ask that a corrected version of your credit report be sent to everyone who received the report during the past six months.
It’s a good idea to contact your creditor first, then allow a bit of lead time before you submit the dispute to the reporting agency. By the time the dispute is verified, the creditor will hopefully have corrected the error.
You can also make changes online directly with the credit reporting agency. When you are on their website, they will usually have links that allow you to click a button to dispute incorrect information.
You can initiate an investigation from many online credit reports by following the links provided and checking the disputed items as directed. There sometimes isn't a place for remarks--you'll simply check a multiple-choice reason for each dispute.
If the credit reporting agency says the original information is accurate, it must provide you with a written notice that includes the name, address, and phone number of the person who made the report. If you still disagree, initiate a second investigation.
Unfortunately, in the real world the reporting agencies often try to sidestep that requirement, giving you standard, computer-generated information rather than the facts you need to find the person or department who made the negative report. Keep plugging away until you have the answer you're looking for.
If your attempts to correct an entry are unsuccessful, you can ask the reporting agency to insert a 100-character explanation next to it that explains your side of the story.
Under the Fair Credit Reporting Act, the credit bureau is required to solve the problem in a reasonable amount of time, generally 30 days. If you feel that a credit bureau has not responded promptly and fairly to your situation, contact the attorney general of your state or the Federal Trade Commission in Washington at 202-FTC-HELP.
Chapter 9 - Identity Theft and Your Credit
Another great reason for keeping tabs on your credit report as much as possible is the possibility of identity theft. It happens all the time and often the only way you’ll know it has happened to you is to check your credit report.
Criminals know the way to steal your identity, and the worst part is that it’s not all that difficult. You know all those credit card applications you get in the mail? If you don’t shred them, they can use that to steal your identity.
It’s not above them to sift through garbage just to obtain a social security number or a driver’s license number. Once they have these vital bits of information, it’s easy for them to steal your identity.
What they will do is scary. They will apply for credit cards in your name and max them out within days. They will obtain loans in your name and never make a payment. Then the loan company comes after you for the money. It’s something that affects millions and millions of people each year and it can be a real mess when it comes to your credit report.
As many as 85 percent of all identity theft victims find out about the crime only when they are denied credit or employment, contacted by the police, or have to deal with collection agencies, credit cards, and bills.
A study on the aftermath of an identity theft by the nonprofit Identity Theft Resource Center found that victims spend 600 hours recovering from the crime because they must contact and work with credit cards, banks, credit bureaus, and law enforcement. The time can add up to as much as $16,000 in lost wages or income.
The number of reported cases of identity theft is increasing steadily. There is no one reason for this, but rather this is due to several ways in which our lives have changed in recent years, all of which make it easier for people to obtain our personal information.
In the United States, Social Security numbers are used more commonly as a means of identification. The Internet has made the transmission of personal information easy and, at times, less secure. Online retailers store our credit card information and contact information in databases we assume to be secured.
Marketing databases not only contain personal information, but they aggregate information on our spending habits as well as contact information. But potentially nefarious employees of these companies could have access to that information. They can then sell it online in chat rooms where criminals meet to swap information.
Even in the days of e-mail and instant messaging, the postal mail can also play a surprising role in identity theft. Checks can be stolen from the outgoing mail. Credit card companies bombard their customers and potential customers with pre-approved offers that need very little personal information to complete.
Credit card issuers also send what they call "courtesy checks" to customers who can use them to make charges on a card. Many experts consider them an invitation to identity theft.
One of the increasingly common ways that criminals try to obtain personal information is by using what is called a "phishing attack." If you have e-mail, the chances are good someone has tried to get you to bite.
Phishing combines a criminal attempt at obtaining personal information with another plague of the Internet age — spam. Potential victims receive an e-mail from what appears to a bank, an online payment company like PayPal, or a retailer like eBay or Amazon.com. The message is usually sent using HTML e-mail and, when opened, uses company logos and symbols to make it appear to be legitimate.
The e-mail asks the receiver for user names, passwords, account numbers, or some other type of personal information by saying they are updating records or something related to their account requires their attention. The e-mail usually links to a site that also appears to be legitimate using logos and other symbols of a real company, where visitors are asked to supply the information.
The first step to avoid becoming the victim of a phishing attack is to know what companies do business with you by e-mail and familiarizing yourself with the types information they request and how they request it.
What you will likely learn quickly is that, while online retailers you frequent and financial services firms you use online often send you e-mail to make you aware of new products or services, or even to alert you when your online bill is ready to be viewed, they rarely if ever ask for any information from you.
Banks and financial services firms will never ask you for any personal information via e-mail because e-mail can be notoriously insecure. So any e-mail asking you for personal or account information, such as passwords, Social Security numbers, PINs, credit or check card numbers, or other confidential information should be deemed suspicious.
Often the sender of a phishing e-mail may appear to be legitimate, but e-mail addresses are easily spoofed. Just look at the amount of spam you probably get that appears to be from friends, co-workers, or even yourself.
If a phishing e-mail directs you to a link using an HTML e-mail, the text of the link may appear to be legitimate, but following that link often brings you to a Web site where the URL (in your Web browser's location bar) is often an IP address (basically numbers separated by periods, like 128.0.0) or a site other than the institution you think sent you the e-mail.
Often a sense of urgency is conveyed in the e-mail, such as an alert saying your account will be closed if you don't provide information. Take a moment and don’t fall for this.
A close look at the body of the e-mail itself may reveal typos, misspellings, or horrendously poor grammar. One reason for this is that many phishing attacks are launched from overseas, and many are believed to be related to international organized crime.
Despite all the attention phishing has received of late, there remains precious little enforcement of the widespread problem and there are simply too many attacks to handle. It is an easy buck for online criminals.
We already covered many of the ways you can detect a phishing attack, but there are several simple steps you can take to keep your private information safe that bear discussion. Experts say that educating consumers not to follow links in e-mails is a good way to help them avoid phishing attacks. Rather than following a link in an e-mail, open a browser and go to the site of the retailer or bank in question.
When submitting personal information like credit card numbers, you can ensure you are using a secure connection by looking for "https://" in front of the site's location on your browser rather than "http://."
Speaking of your browser, make sure it is up to date with the latest security patches. If you use Microsoft's Internet Explorer, visit WindowsUpdate.com to see if you need any updates.
Here are some simple software tools you can use to help guard against online identity theft:
CoreStreet makes a free product called SpoofStick. It's a browser extension for both the Internet Explorer and FireFox Web browsers that helps users avoid spoofed Web sites. If you do follow a link in a suspicious e-mail, SpoofStick can tell you if the Web site you visit really is the Web site you think you are visiting.
The EarthLink toolbar, which is also free to Internet users, has a feature called ScamBlocker. EarthLink keeps a database of known phishers, and if you visit a page known to be operated by a phisher it will alert you right in your browser.
Unfortunately, correcting your credit report when you have become a victim of identity theft is no easy proposition. But with some patience and a lot of work, you can recover from identity theft and restore your credit report.
Identity theft can result in damage to your credit rating - damage that could take years to fix. Generally, victims of credit and banking fraud are liable for no more than the first $50 of the loss. In many cases, the victim will not be required to pay any part of the loss.
To reduce your risk of identity theft, protect personal information and do not carry your Social Security card with you. Shred items that contain your personal information and account numbers. Keep your mail safe and store your personal information in a safe place. Order your credit report at least once a year to make sure no one is using your identity to open accounts.
If you think your identity has been stolen, take the following steps:
Contact the three major credit bureaus. Contact the fraud departments of all of the three major credit departments to place a fraud alert on your credit file. The initial fraud alert is for 90 days. You can ask for an extended fraud alert if you file a police report.
Close accounts. Close the accounts that you know or believe have been tampered with or opened fraudulently.
File a police report. Get a copy of the report to submit to your creditors and others who require proof of the crime.
File your complaint with the Federal Trade Commission (FTC). The FTC maintains a database of identity theft cases, which is used by law enforcement agencies for investigations. Filing a complaint also helps us learn more about identity theft and the problems it causes victims.
Armed with your police report, FTC affidavit, and sample letters, you must contact your creditors to alert them to the situation. In addition to obvious creditors like your credit card issuers, don't forget utility companies, wireless phone provider, and your ISP.
Also remember any private label credit cards to department stores, for example. Don't forget about other personal documents. If your passport was stolen, for example, or if you have reason to believe someone is using a passport in your name, contact the State Department.
When you are trying to correct your credit report due to identity theft, you will have to provide information that proves you are you. That means digging out your birth certificate and making a lot of copies of your driver’s license and social security card. You’ll also have to try and prove that you didn’t make the purchases that the thief or thieves did.
When you have become a victim of identity theft through phishing, this becomes a real problem as these purchases can be made anywhere with a few strokes of the keyboard, so proving that the purchases were made by someone other than you can be a real headache.
Just try to be patient and point out to the company or companies who say you owe them money that you have filed a police report as well as a report with the FTC and that you have been a victim in other places as well.
As we’ve said, it will take time, but it can be done. Your credit rating and credit score is very important, so taking the time to do will pay off in the long run. Realize that in the long run, you’ll be able to enjoy good credit again.
Even if you are denied credit, you can appeal the decision by pointing out that you have been a victim of identity theft and are trying to correct it.
Now let’s take a look at ways you can raise your present credit score.
Chapter 10 - Raising Your Credit Score
Let’s say you want to buy a house but your credit score is somewhere around 675 instead of 720 which will get you the best rate on a home loan. If you want to raise your credit score quickly, there are some steps you can take that can guarantee a great home loan or any other credit line for that matter.
The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it. People who do that faithfully have very high scores. It usually means you're being conservative and cautious about credit. It's not a toy and it shouldn't be a hobby.
That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to the great rates? As we’ve said before, the first place to start is with your credit report. Check it over and find out what your credit score is right now.
You will want to concentrate mostly on correcting any errors by taking the steps we’ve outlined above. Look for errors such as accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer. Negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years.
After repairing errors, the fastest route to a better score is paying down balances on credit cards. There's really no silver bullet, but over 60 day’s time, it is possible to increase your score 20 points by paying down your credit lines.
Had a few late payments in your past? If you find yourself in some financial difficulties, you can protect your score by making sure your payments don't go 60 days past due. Some lenders don't report 30 days past due, but they all report 60 days past due.
Even if you've paid your bills late in the past, you can improve your credit score by paying every bill on time from now on. Forget about grace periods. If you want to have a really good record with the credit agencies, pay your debt before it's due and keep your balances low.
One thing you shouldn't do if you're just trying to boost your score is close unused accounts. If someone tells you to close unused accounts to improve your score, they're pulling your leg. It won't help you and it can actually hurt you.
Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit. You appear closer to maxing out your accounts. That's why your score can drop. It doesn't mean people shouldn't close them, but don't close them to improve your score.
If you do cut up cards, though, leave the oldest one open. The length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower.
Another strategy for bringing up your score is to transfer balances from a card that's close to being maxed out to other cards to even out your usage. You can also just spread out your charges between a few cards. Try to get the usage on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent. You're not spending less; you're just shifting it around to different cards.
Transferring the balance to a card with a lower utilization could help, but it's much better to actually pay down the debt if you have the cash kicking around.
If you're really into finessing the system, check your credit report to see what day of the month your creditors send updates on payments to the credit bureaus. They're rarely on the same cycle as your payment due date.
That's why you can pay off your card every month and your credit report will show you carrying a balance. Then, make your payments several days before the reporting date.
All of these strategies generally take at least 30 days because lenders don't report payments more than once a month.
If you're in the throes of qualifying for a mortgage and need a score boost in a hurry, you can speed the process along with rapid rescoring. If you've got legitimate negative information on your credit report, such as late payments or accounts in collections, you're out of luck. But the process of rapid rescoring can help increase your score within a few days by correcting errors or paying off account balances.
You can't do this one yourself; you'll need a lender who is a customer of a rapid rescoring service. Generally, the service will run roughly $50 for every account on your credit report that needs to be addressed, but it could save you thousands on your loan. If a consumer can find a lender who is a customer of a rapid rescoring service, new information can be posted within 72 hours.
There’s a lot of information that we’ve presented to you in previous section, so let’s do a little recap on the more important points.
Chapter 11 - To Review
The very first thing that you must do in order to raise your credit score is to order your free annual credit report and find out what your credit score is. Once you have obtained copies of your credit reports from all three credit reporting agencies: Experian, Equifax, and TransUnion, you must take the time to go over those reports to check for errors and inconsistencies.
It is imperative that you correct any mistakes or inconsistencies as soon as possible. This is the most pro-active step you can take for yourself to increase your credit score as mistakes can and do happen.
Look for accounts that were previously delinquent but which have since been paid off. Find any accounts that were closed or any accounts that aren’t yours. Then take steps to correct those errors by contacting the credit bureaus and beginning the process in writing to have these errors removed from the report.
This alone can raise your credit score.
Checking your credit report often can also indicate if you have become a victim of identity theft which is something that is happening over and over again with frightening frequency. It affects millions of people and can wreak havoc with your credit rating.
Correcting the problem of identity theft is a process that will take quite some time, but it can be done with patience and excellent documentation. You should definitely be contacting the FTC and filing a police report in this situation so that you credibility cannot be called into question.
In the above section, we discussed extensively the option of filing for bankruptcy. This should be done only as a last resort and if you are in dire financial straits that cannot be solved if you just don’t have the means to pay off your debts.
Filing for bankruptcy doesn’t have the stigma attached to it that it once did and is nothing to be ashamed of. While it’s true that the bankruptcy will remain on your credit report for up to ten years, lenders know that you will not be able to file for bankruptcy again within that time frame, so you may actually be able to obtain credit anyway after a bankruptcy.
Before you resort to a bankruptcy filing, you can first try getting the advice of a credit counselor to help get you back on track when it comes to your money problems. Find a reputable company that provides results and know that you will be paying a small fee for this service, but one that will probably be worth it in the end.
Credit counseling companies not only work with your creditors to secure lower repayment rates, but they provide financial planning advice for you to use in the future so you are not put in the same situation you were in before.
If you do have steady income, you may want to look into a debt consolidation loan. That way you can pay off your creditors and make one monthly payment to one company instead of several monthly payments to several companies.
There are also companies who can help with debt consolidation loans although you can certainly do it on your own. They can, however, secure loans for you with a lower interest rate and shop around to different companies to find you the best debt consolidation loan and help you get out of debt.
If you have bad credit, expect to take about a year or two to get it up to a better credit rating. How do you do this? Let’s review:
Pay your bills on time. This alone will show good faith to your creditors and have a positive effect on your credit rating
Don’t use credit at all if possible. That means cutting up your credit cards and paying cash for the things you need.
You may want to keep one credit card that you can use for emergencies – but remember that it is for emergencies only. Keep the oldest card you have as that shows you are not newly applying for credit.
A good idea for not using that one credit card is to freeze it in a block of ice. It won’t damage the card and it will require thawing before you can use it. That way, you will have to wait before making a purchase thus eliminating the lure of an impulse purchase.
Don’t apply for new lines of credit at all. The only time you should ever be applying for credit when you are financial straits is if you need to make a big purchase such as a vehicle or home.
Monitor your credit report faithfully and immediately correct any mistakes that you find.
If you find that you cannot make a payment on time, call your creditor and explain the circumstances. If you have been a good customer, they may be willing to accept a late payment and waive the late fees. Try not to do this too often as it can reflect poorly on your payment history.
If you have little to no credit, you can establish credit by obtaining a department store or gas credit card. Then you make a few purchases and pay the balance off immediately.
Be very careful when making purchases online. Make sure that when you are entering in your credit card number it is done on a web site that starts with https://. The “s” at the end of the http designation shows that it is a secure sight that will keep your information private.
Beware of “phishing” e-mails that direct you to a separate site where you are asked to provide personal information. This is how many identity thieves obtain your bank account or credit card numbers and they can run up horrendous bills in a few moments of time.
If you want to obtain a large loan as for a vehicle, you may want to try and get a co-signer who has good credit. Their good name and credit history can help you get the loan and build your credit at the same time.
Again, we want to iterate the most important thing about maintaining good credit and raising your credit score: MAKE YOUR PAYMENTS ON TIME! And use credit sparingly.
There are a lot of great tools available online to help you with credit and making credit decisions. Go to www.myfico.com and check out some of their calculators. Since FICO is the company who assigns you that magic little number that is your credit score, they are a great source of help for the consumer. At this site, you can find out:
Which loan is better
How much your mortgage payments will be
How much money you can afford to borrow
Whether or not you are better off refinancing a loan
How much refinancing costs will be
Whether or not you should consolidate your credit cards
How long it will take to pay off a credit card balance
How rate changes will affect your loan balance
And much, much more!
You can also find many other websites that can help guide you through not only the credit process but how to get and maintain a solid credit score and rating.
Last, but not least, don’t forget the three major credit card reporting agencies. These are the places you should start to obtain your credit report and get on your way toward better credit.
- Experian: www.experian.com
- TransUnion: www.transunion.com
- Equifax: www.equifax.com
Plus, you can also go to the following websites to obtain your annual free credit report that is available once a year to all consumers:
- www.annualcreditreport.com
- www.freecreditreport.com
Conclusion
Like we said at the beginning of this book, we are a country in debt. One person I know once told me that it was “The American Way” to buy things on credit and then owe people money. While that might not be the best way to think about it, when the price of things like vehicles and homes is well beyond what we would be able to pay cash for, we have to face the reality that credit is necessary.
In all actuality, the concept of credit has actually been around for a very long time. Anyone who is a fan of “Little House on the Prairie” knows that when the Ingalls would go to the General Store, they would always put their items “on account” which would be paid later – usually when the crops were in or Paw got paid from his various jobs.
Back then, credit reports and credit scores weren’t necessary. It was an unwritten rule that the accounts would eventually be paid. A man’s word was his name and their name meant everything back then. Collection agencies weren’t necessary and accounts always got paid even if took some time. The shop owners didn’t worry and were willing to wait. It was the law of the settlers albeit and unwritten one!
Then we continued to want more and more in our lives and “stuff” became almost necessary in our minds. As time passed, accounts weren’t being paid and businesses were asked to take hits from people who reneged on their agreements.
This brings us to where we are today: a nation in debt. Even the Federal Government is in debt. It only goes to follow that citizens would be in debt too.
That said, we know we need credit to obtain the things we need – and often those that we don’t. Credit card companies are preying on people at a younger and younger age. That puts young people alarmingly in debt before they even get to the legal drinking age.
That’s why it’s so important to know about credit and when it should be used as well as when it shouldn’t be used. Practice smart credit procedures and don’t overextend yourself. You can easily find yourself in trouble before you even know it.
Then the time comes to change your spending habits, make smart credit decisions and take steps to raise your credit score. No matter what situation you might find yourself in regarding your credit, you can not only get out of debt, but you can restore your credit and enjoy a high credit score.
It takes time and a little bit of effort, but it certainly can be done. You just need to be diligent about your spending habits and then monitor your credit reports so you know where you stand at any particular time.
Credit is an important part of our society, so cherish your credit history and your credit score. Make it just as important to you as your good name and keep it clean and pristine. It can mean so much to your future and your future is just as important as the present.
You know what they say: The past is the past, the future is the future, but today is a gift – that’s why they call it the present!
Good Luck!
If you really liked this book you are going to really like reading the next Free ebooks as well. Just click either of the links below to start reading.
Retail Shopping Secrets
Get The Best Price On Technology Based Retail Products.
Enter The: FORUM
More Books
You Can Read and/or
Download Completely
FREE.
Consumer Credit Card Articles.
