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Credit Repair Basics

Credit Basics - For free one on one advice, click here

Tip #1. Before You Get Started--Know These Terms

Credit Score--What is it?
Your credit score is now the most important factor that lenders use to evaluate your credit worthiness. Your credit score is a three-digit score calculated by the credit bureaus from your credit history. The score was invented by Fair Isaac, a company that created a way to predict your chances of credit failure using just your credit report. This system has gained more popularity in recent years and now each of the three main credit bureaus, Equifax, Experian, and TransUnion uses Fair Isaac's system to calculate their version of your score. Nowadays, people applying for home loans or car loan are nothing but a "number"--their credit score. For example, my credit scores at the time of this writing were: Equifax 650, Experian 637, and TransUnion 618.
What's Considered a Good Credit Score?
Your credit score can range from 200 to 850. Lenders will usually give you home loans or car loans with a credit score of 500 and up. However, the "golden" score is considered to be 720. This is the "magic" score for getting any type of credit including nothing-down home loans, loans with no income verification, home loans with an equity line included, etc. Want one of those car loans that has zero percent interest? Have a 720 credit rating. If you don't have a 720, try for a 660. A score of 660 means you can get a "no income verification" loan, which is really helpful for self-employed people. You can also get a 5% down loan when purchasing a home with a 660. If you don't have a 660, try for a 620. If your "middle score" is 620 or better, you can still get a non-income verification loan, a 10 percent down home loan, as well as other options. This leads us to the next question: What is a "middle score?"
What is a "Middle Score"?
Mortgage lenders pull credit reports from all three bureaus, Equifax, Experian, and TransUnion. They then look at the "middle score". For instance, when I was buying a four-plex last month I had a 622 with Equifax, a 634 with Experian, and a 580 with TransUnion. Thus my middle score was 622.
Credit Bureaus: Who are they?
There are three major credit bureaus: Equifax, Experian, and TransUnion. Traditionally, Experian (formerly called "TRW") had the most market share at about 70%. Equifax is now gaining more popularity while TransUnion is lagging behind. So if you're applying for a home loan or a car loan, these agencies act as "credit reporting agencies". Your lenders will subscribe to them and use them for "pulling" your credit report and checking out your history. These agencies are subject to the Fair Credit Reporting Act, which says that derogatory items can stay on your report for seven years. For example, if you had a phone bill go to collection, this information will show on your credit report for seven years. If you had a bankruptcy, lien, chargeoff, repossession or any type of derogatory credit item, this will also appear on your credit report for seven years. If you had a foreclosure (gave a house back to the lender for non-payment) this can stay on your report for ten years. The good news is that you can "dispute" these derogatory items with the credit bureaus online, on the phone, or by mail, and in many cases these incidences will eventually not appear on your record. This occurs for any of three reasons: either the items are false, the creditor in question loses interest in reporting your derogatory items, or you have backed them against a wall with the maneuverability available to you legally in such a way that they HAVE to remove the item!! This is what we will be teaching you in our 24-Hour Clean Credit Method.
What is a Dispute or Investigation? Why does it boost my credit score?
You may have heard that "disputing" or "investigating" derogatory items will help boost your credit rating. This is true. There are currently "credit consultants" who charge five hundred dollars or more to merely make use of the Fair Credit Reporting Act, the law that lets you dispute or investigate your derogatory credit items on your credit report. You can easily do this process yourself and save the fee. By law, you're able to contact each credit bureau for a credit report. At the time of this writing, you can buy a report for eight dollars each online, or by phone (the latter comes in the mail). An easy way to get all three of your credit reports for free is to apply for credit with a credit card or any other type of loan application. If you get rejected, which you probably will if you need to clean off your credit, you are entitled to a free copy of your credit report. Once you see your report, you are then able to get the "confirmation number" from each credit report and contact the credit bureaus to dispute any items that you feel are inaccurate or that you want removed from your record. From the time that you dispute any item on your credit report, the credit bureaus have 30 days to contact your creditors and verify that the items in fact belong to you and are accurate. However, since you don't have time to waste waiting around, this kit outlines several SPECIFIC tactics at your disposal that are guaranteed to erase bad debts in less than 24 hours!!!
What is a Deletion Letter? Why does it boost my score?
One of the best-kept secrets of credit repair is that the quickest way to boost your credit score is to remove any outstanding collections. Many people have small collection items on their credit report such as unpaid phone bills, medical bills, charge card balances and other small collection items that are showing as outstanding debt. Even an unpaid collection item of 25 dollars can hurt your credit score by 20 points and more. Because of this, the quickest way to repair your credit is to call up the collection agency that you owe money to and ask the golden question: "Do you delete?" Many people don't realize that collection agencies will voluntarily delete your derogatory item from your current report if you just ask them to and pay them the small balance that you owe. Almost all the time, the answer to the question "Do you delete?" is "Yes." What's even better is that you can ask for a "deletion letter" as proof that the creditor in question intends to delete the item from your credit bureau file. A deletion letter is important because many times you're looking to improve your score NOW as you're applying for a home loan or car loan and time is of the essence. The creditor or collection agency would normally take 30 to 90 days to update your credit report with the bureaus. If you obtain a deletion letter, you can fax it to the credit bureaus using the information in this kit to get the collection off your credit report in 24 hours.
What is a Payoff Letter?
If you've paid off a loan on a house or a car for instance, this is sometimes still showing as a debt on your credit report. For example, I recently sold a house in California and had to obtain a payoff letter from the holders of the first and second mortgages so I could show my new lender that I had paid those loans successfully. Loan payoffs look great on your credit report. You may notice that as soon as you've paid off a car loan or home loan that you start receiving advertising inviting you to sign up for more credit cards. When creditors see that you’ve paid off a loan, they get encouraged and want to give you more money.
Tip #2. Step-by-Step Game Plan
What you need to know to fix your credit in a hurry:
-You must know your three credit scores from the three credit bureaus. This will be explained below.
-You must get your credit report from all three bureaus with a "confirmation number" that allows you to follow up on your items by phone or fax. The quickest way to get your report is online.
-You must also know which score is your "middle score" if you're applying for a home loan. This is the score that has the middle value of all three scores. If you're applying for a car loan, it helps to know which credit bureau the car dealer likes to use.
Depending on the credit bureau, you can change your score in 24 hours using the following techniques:
-Start an immediate investigation by phone or online of any items you want to dispute.
-Start an internal investigation with your creditor. If they're a big creditor such as MBNA Visa card, the dispute will show a pending deletion on Experian right away. In other words, any bad item will be temporarily suspended pending investigation.
-Fax any proof of credit item deletions from your creditors as well as payoff letters to the credit bureau. Although they may take up to a week to change your report, you can talk nicely to someone and usually have it done in a day!!!



Tip #3. Know Your Credit Scores
It's possible that you already know your credit scores, but it still helps to know exactly what they represent. As mentioned in Step #1, about seven years ago a company called Fair Isaac developed a system to "predict" who might go into credit failure by analyzing the data on people's credit reports. This system has gained more popularity in recent years and now each of the three main credit bureaus licenses Fair Isaac's system for generating credit scores. Equifax calls the score based on this technology your FICO score. Experian calls it your BEACON score. Trans Union calls it your EMPIRICA score.
Why does this score matter? Because people applying for a mortgage or car loans are nothing but a "number" to the companies that loan them money. And even though you may be a fine upstanding citizen and pay just about every bill on time, the Fair Isaac algorithm for predicting credit failure may "mark" you as a poor risk using its predictive analysis. Even if you've paid your bills for many years and someone else has claimed bankruptcy in the past three years, the "bankrupt" person may be the one to get the credit! It is not fair, but to understand the system you must think like the "computer" thinks. Picture this--the person who has just claimed bankruptcy has no debt, and is forbidden from filing bankruptcy again for another seven years. Furthermore, they may be applying for a house or car which is a "secured debt"--meaning that the loan they're applying for is "secured" by some kind of property. This lender likes the security or collateral as they can take that house or car away and sell it, which is a secure situation for them. You on the other hand may have lots of "unsecured debt"--including credit cards that are not secured by any property. So, in short, you may be a great person and even a great credit risk, but if you have a poor credit score, you may not be able to get a loan.
How do you find out your credit score?
There are three credit bureaus: Trans Union, Experian, and Equifax. Trans Union will tell you the score over the phone for free. The other two bureaus will "sell" you a look at your score on the phone or online for approximately $6.95. You can also pay eight dollars for your full credit report from each of the three bureaus by mail, on the phone, or online--and each credit report will show your score. Finally, if you have recently been denied credit, you are entitled to a free copy of your credit report.
Tip #4. Why You Should Dispute Your Derogatory Items
There are some credit repair consultants that will charge you $700 to "fix" your credit. In fact, all they're doing is disputing derogatory items on your credit in order to get them removed from your record. Why does this work? It can work in two ways:
1) If the item is inaccurate. In other words, you in fact don't deserve to have this item on your report and it's inaccurate. For instance, let's suppose there is an open collection on your credit report for $150, but you really paid it two years ago. If you dispute this item with the credit bureaus as inaccurate, you're exercising your rights under the Fair Credit Reporting Act to get this item taken off. Your creditor is required by law to verify items and report back to the credit bureau within 30 days. If they find the item is old or inaccurate, they will tell the credit bureau and your item will be deleted. Sometimes you have to help prove to the creditor that the item is inaccurate, i.e. showing them a cancelled check for payment, but then the item will be deleted off your credit report.
2) The item is inaccurate but the item gets deleted anyway. This can happen for several reasons:
a) The creditor got paid and doesn't care to respond to the dispute from the credit bureau. They let the item get deleted by not responding. This happens mostly with small collections that were paid. But guess what! Each collection item deleted can be 20-25 points in your favor each. So in other words, you can get items deleted when you dispute and the creditor doesn't try and prove the item accurate. This often happens with collections and student loans that have been paid off. The percentage of the time that this happens is about 30%.
b) You can talk to your creditor directly and ask them, "Do you delete?" In a collection agency, about 50% of the time they will delete the item from the credit bureaus once you pay. Sometimes you have to pay a little deletion fee. But remember, every collection taken off your credit is worth about 20+ points! Ask your collector if they delete.
c) The item is inaccurate but your creditor doesn't “delete." By calling the creditor and explaining you're buying a house or car, sometimes they will temporarily delete the item from your credit (this lasts about 6 months). They do this because they don't want to be hassled or sued over the item. They know the purchase is important to you and don't want the hassle of you calling and writing and disputing again and again. About 30% of the time creditors will delete your item temporarily. I've had this happen with AT&T Visa (two 60 days late) and Bank of America mortgage (one 30 days late). If creditors know you're buying a house, they'll often play ball to avoid hassles and lawsuits. If they don't play ball? Fax them the same letter every week asking them to delete. Send it to the credit manager in charge. Also dispute every 30 days or so until the creditor grows weary and they delete.
Dispute and use persistence. That's what the professionals do. Now you can do it too.
Tip #5. Example of Boosting Your Score in 24 Hours
Let's suppose you have a loan application pending with little time to fix the disputed items. Let me share an anecdote of what happened with me: I was applying for a loan on a four-plex and went to a loan broker who told me my "middle score" was 622. (Mortgage lenders pull all three reports and look at the middle score. I had a 580 with Trans Union, a 622 with Equifax, and a 634 with Experian, thus my middle score was 622. Just to let you know, 620 and up is considered light to medium risk and you can get just about any loan including low or no income verification loans, just a at a higher rate than normal.) So what was the game plan here? To work on the Equifax score since it was the middle score, and thus the most important score. It just so happens that it is easy to boost your Equifax score: just start a credit item investigation online or by phone! I went online, paid $8 with my Visa at www.equifax.com (click on personal at the top), started disputing negative items online, and my Equifax score temporarily increased while the items were getting investigated. Also, sine I had an MBNA Visa card with two 30 day late payments on it in the past 18 months, I called MBNA, explained that I was in a dire situation and that my payment had been delayed a couple of times because of their pay by phone equipment, and they started an investigation internally and temporarily deleted my derogatory items. The result was a quick boost to my credit score. My Equifax score jumped up to 650, a 28 point increase.
Tip #6. Know How to ""Pull" Your Credit Report, and How Not To
If you pull your credit report yourself, there will be no negative consequences in the form of "inquiries" or a "mark" against your credit. However, if any car dealer, mortgage lender, credit card company, or any other type of creditor pulls your credit report, it counts against you as an inquiry. At present, these inquiries stay on your credit for two years, and are difficult to get removed. If you're applying for a mortgage refinance or new home loan, you can apply for up to six home loans in a thirty-day period before your score changes. Just to be safe, if you are curious about your credit reports always pull them yourself. You can contact the credit bureaus with these phone numbers or web addresses:
Experian: Phone (800) 583-4080 No Fax Website: http://www.experian.com/
Equifax: Phone (404) 885-8000 Fax (866) 838-1015 Website: http://www.myequifax.com/
Trans Union: Phone (800) 916-8800 Fax (610) 546-4605 Website: http://www.transunion.com/
Tip #7. Only the Past 18 Months Really Count
In today's lax credit lending environment, lenders are not looking at the past 7 years as before but are instead only looking at the past 18 months. This could be good or bad news. If most of your mistakes are in the past (previous to the 18 month cutoff) then it will be easy to qualify for credit. But if you've been a saint for the last seven years and in the last 18 months you've made a few mistakes, it's going to cost you dearly. It's important for you to know that the past 18 months are what count the most!! Even people with bankruptcies more than 18 months ago can apply for credit and often get it.

Tip #8. Pay Collections for the Quickest Results
It helps if you think the way the "computer" thinks. People who are about to default on their loans start by getting behind on their phone bills, credit cards, and other accounts. Any unpaid collection or 30+ day late on your revolving accounts can lead to 30 or more points deducted from your credit score. The good news: paying collections is one of the fastest ways to improve your credit score. The best way to do this is to call the collection company and ask the question, “Do you delete?” When you ask this question, you're talking in "collectors language", asking if the collection agency will completely remove the debt from the credit reports if you pay your debt. About 50 percent of them will. Sometimes a collection agency even has an up-to-date computer system that can remove your debt from the credit bureaus immediately, THUS CLEARING YOUR CREDIT RECORD IN 24 HOURS!!! If the collection agency doesn't "delete", pay them anyway. The "collection paid" status is much better than a collection owing on your credit report.
Tip #9. Keep Disputing All Items, Again and Again
It's important that you know the most powerful word in credit repair: dispute. Under the Fair Credit Reporting Act, you have several rights to amend your credit report. One is the right to "dispute" any items you think are inaccurate--for instance, a collection you think is not yours or a revolving account you think you're never late on, such as a credit card. You have the right to call, mail, or go online to dispute all items you think are inaccurate. Credit Repair Consultants that charge $500 or more will actually just dispute every derogatory item on your credit report until your creditors get tired of the disputes and they take the item off. Most creditors such as collection agencies or credit card companies know that customers who are disputing their credit items are vigorously looking to buy a home or car and they don't want to get in the way. Even if the derogatory item is correct, many times creditors will remove it temporarily so that you can apply for your loans. Many times derogatory items will pop back up on your credit report within six months or so, since computers automatically update information to the credit bureaus. However, disputing your derogatory items and being persistent is the most important credit repair strategy of all.

Tip #10. Dispute Items Online or Over the Phone for the Quickest Results
All three credit bureaus are available online. All you need is to have purchased your credit report and have your confirmation number handy from this online purchase. Also, you can call each credit bureau directly if you have time to be on hold for up to 10 minutes each, and you can dispute items on the phone for quick results as well.
Tip #11. Know Your "Middle" Score
More and more these days, mortgage lenders are using third party credit reporting agencies that can take all three of your credit reports and report the "middle score." For instance, if on TransUnion you have a 680, on Equifax a 720 and on Experian a 734, Equifax is your middle score. The mortgage lenders will look at the middle score and determine your credit risk based on this number. 620 is cut off for "good" credit risk, everything below is "bad." It's definitely preferable to have a 700 or above--especially for home loans.
Tip #12. Know How to "Rapid Rescore" Your Credit
If you're applying for a loan through a loan broker which many people are these days, the brokers have access to a service called Factual Data. For a charge of $15-$30 per "trade line" (or per derogatory item), you can apply for a "Rapid Rescore" if you know some of your credit items are old. For instance, I had a collection item from five years ago reappear on my Equifax credit report, and I had a new $100 collection appear the week before I was applying for a new home loan (Murphy's Law). I called the first collection agency and asked them to fax me a "deletion letter." I did the same with the other agency. Knowing that I had paid off the first and the second mortgage on a home I had just sold, I knew that the Rapid Rescore service from Factual Data could boost my credit score on all three bureaus within one week or less!!! The only disadvantage with Rapid Rescore is that you must ask your mortgage lender to start this process and if you change mortgage lenders you won't be able to see the new score on the new lender's reports.
Tip #13. High Balances on Unsecured Debt--Knock Them Down!!!
Remember that lenders can't tell you how much you earn from your credit report. But they can tell whether you're "maxed out" on your credit cards. Being maxed out is a sign that your spending may be exceeding your income. According to the credit scorers, this is a strong possible sign of future credit problems. You may have the best of intentions, but have a poor credit score because of your high credit card balances. Your credit card balances being near your credit limit may be the reason for as much as 35 percent of your low credit score. If you have high credit card balances in combination with late payments or collections, look out! This is seen as a dangerous combination. See the way to knock down your credit card balances in Tips #14, 15, and 16.
Tip #14. Dispute Your High Balances
Balance information is often 60 to 180 days old, especially on automobile debt. For instance, let's suppose you have been paying your car payment faithfully for two out of three years. Maybe your car cost $5,000 and you've paid your loan down to $2,000. However, the credit bureaus are reporting that your loan balance is still $4,000. Car companies often don't have up-to-date "software" that updates your credit information on time. Since the loan balance data at the credit bureaus could be as much as six months old, you may not be qualifying for the loans you deserve because of high balances. The remedy is to dispute with the three credit bureaus online or on the phone to update your loan balances on your credit reports. Even though the credit bureaus will tell you that this is a thirty-day process, many times things are updated in ten, two, or EVEN ONE DAY!!!
Tip #15. Call Your Creditors and Ask Them to Update Your Balance with the Credit Bureaus
Some of the more sophisticated creditors such as MBNA America Visa or American Express can quickly "update" your balances with the credit bureaus if you really need them to. They prefer to wait for the computer to update your balance every 30 days after your due date but if you call them and say you're applying for a home or car loan and need the better credit score they should be able to report an updated balance to the credit bureaus within 24-48 hours.
Tip #16. Apply for a Credit Watch Service
Although there are things you can do to improve your credit score in 24 hours, it's better to belong to a credit watch service that watches all three bureaus for you and reports any change in your score to your email. For a total of $24.95, this is a good value, as it can save you hundreds or thousands of dollars in loan fees, pre-payment penalties and interest that "bad risk" people have to pay for their loans. Apply for this service and have a better credit score, and better bottom line. For example, Experian has a site called www.creditexpert.com with a product called Experian Credit Manager that features daily monitoring of your credit report with alerts in your email. Equifax has a product called Credit Watch with daily alerts available regarding changes on your credit report. TransUnion has a site called www.truecredit.com that offers weekly alerts regarding changes on your report.
Tip #17. Get Deletion Letters from Your Collection Agencies
About 30-50% of all collection agencies will generate a "deletion letter" to show that your collection item has been removed from their system. The reason you need this deletion letter is because the credit bureau may continue to show the collection item for seven years even if your collector's system no longer shows it. Also, if one of the credit bureaus shows the collection and the other two don't, it’s possible that the other two will pick up the collection and report it. In other words, you want to mail or fax your deletion letter to all three credit bureaus to delete the item once and for all. Two of the three bureaus, TransUnion and Equifax will accept a faxed version of the deletion letter. Experian wants a faxed or original letter with letter-head and a signature sent to their mailing or Fedex address.
Mailing Address:
Experian
701 Experian Parkway
Allen, TX 75013

Tip #18. Get Payoff Letters for Your Paid Off Accounts and Fax Them for Quickest Results
Sometimes you have paid off an account but it still shows on the credit report. For instance, I sold my house in California recently and my first and second mortgage were still showing when I applied for a new home purchase loan. Because I already have three credit cards, it's best to show my mortgage loans as paid off to show as little debt as possible. I called the payoff departments for both my first and second mortgage (Indy Mac Bank and Beneficial respectively) and got payoff letters to prove those debts were paid. I then faxed these payoff letters to the credit bureaus that accept faxes, Trans Union and Equifax, and Fedexed the letters to Experian..
Tip #19. Watch out for Beneficial, Money Store, and Other "High Interest" Lenders That Hurt Your Score
I had a relationship with Beneficial Finance for many years as they financed a keyboard purchase for me in my 20's. However, I found out that having Beneficial on your credit reports hurts your score! Many consumers are unaware of this and may not realize they’re walking around with a lower credit score because of this. Beneficial charges high interest rates and they may be seen as a "lender of last resort" by the credit scoring gurus. Always think carefully before taking a loan that looks like a last resort.
Tip #20. Consolidate Your Debt on a Higher Limit Card
Remember, it's not how much credit card debt you have, but how much credit card debt you have in comparison to your card limit. It's good if your balance is 75% or less of your credit card limit. If you have credit cards maxed out at $5,000 each, and you get offered a $20,000 credit card, it might be better to transfer balances onto the $20,000 card. Just one thing: don't max this one out as well!


Tip #21. Have Three to Five Lines of Credit
If you have a mortgage, a car loan, and three credit cards you have five lines of credit. Three to five is seen as ideal. More than that may be seen as excessive.
Tip #22. Homeowners are Preferred
When you're filling out a loan application it's always seen as preferable if you're a homeowner. Homeowners are seen as more predictable since they move less often, and it's easy to find them because lenders know where they live. I rented out my house in California for a while but on loan applications when I was asked "Do you own your own home"? I would say, "Yes". Yes is always the better answer to the question "Do you own your own home"?
Tip #23. Find out Which Credit Bureau Your Car Dealer Uses
One trick is to know which of your credit scores is the highest. For instance, if your Experian score is 680 and the others are lower, call different car dealers or auto finance companies until you find the one that uses Experian. You then use that dealer and get approved for the loan!!
Tip #24. Pay Before the Grace Period on Your Credit Cards
This trick is worth money in the bank. If your credit card balance is over 50-75% of your credit card limits, your credit score will hurt to the tune of 50-80 points!! Having high credit card balances is a real killer. It makes sense to pay down your balances, especially before you apply for credit. However, picture this: on your credit card payment due date (mine is the 16th), your credit card company automatically sends the balance information to your credit bureaus via computer. That means if you pay down your balance after the due date, even if within the grace period, the balance doesn't show as lower for a whole month longer. Even if you "ride" the credit bureaus through your fax machine through the numbers provided, it might take a week or more to update the balance--up to as long as 30 days. Pay before your due date (before the grace period) and you will have a better credit score. Period.
Tip #25. Tough Creditor? Do a Credit Audit.
Under The Fair Credit Reporting Act you have the right to ask tough creditors for proof that you were late, didn't pay, etc. Write them a letter giving them 10 days to give you proof you were late, including all cancelled checks and backs of checks, etc. Tell them they must remove the derogatory item if they can't provide proof. If they do not provide proof, write them another letter telling them they must delete the item. Make sure you send all letters with a mailing receipt. Then send a copy of your letters to the credit bureaus saying the creditors were not able or willing to prove you were late. For some people this works like a charm!!
Tip #26. It's a Sue Happy Country. Sue!!
You can take an ornery creditor to small claims court, claiming monetary damages and injury for the item you believe is wrong. You take the creditor to court in your city, and if they haven’t provided proof of your lateness, or if you feel you have another claim, you can invite them to small claims court in front of someone "older and wiser" that can decide the issue for you. The company may see this as a nuisance suit and will usually just choose to delete the item!!

You can also hire a lawyer that specializes in the Fair Credit Reporting Act. There are some attorneys that will write letters and file suits for you. Since they tend to be picky about suits they want to take on, you might just take the creditor to court yourself in small claims. If the judge issues an order in your favor, make sure you ask for an injunction from reporting the negative item on your credit report in the future.








The Credit System
It's sad but true. A large percentage of Americans suffer from a blemish on their credit reports. A blemish that prevents them from obtaining new credit when they need it most. Bad credit is embarrassing, humiliating, and depressing because most credit ors believe a bad credit report dictates a persons worth and value as a responsible human being.
Most people with bad credit are not "deadbeats" nor are they unwilling to pay their obligations. In fact, if your like most people, you probably maintained a good credit profile until an unforeseen circumstance like a layoff, medical problem, or divorce prevented you from making a few payments in a timely manner.
The truth is that most people struggle long and hard to meet their obligations but the money coming in just doesn't meet the bills going out. If you find yourself in this type of situation, you must be very careful and selective about which bills get paid. If the circumstances become serious enough, you may even have to file for bankruptcy protection.
You are not alone. You're not the first person to decide to put food on the table or keep the electricity on rather than paying a credit card bill. You can be sure that most people would rather protect their family and their loved ones first, and then pay their creditors. Even the collection agents, the ones that call and harass other people about their obligations, would certainly protect themselves first if faced with the same tough decision.
Now, by knowing, understanding and utilizing your legal rights you can begin taking the steps of regain the good credit you once had and reward yourself with the confidence necessary to rebuild your financial independence and freedom. Of course you must protect your new credit report with honesty, integrity, and common sense.
So, as you begin your journey to establish a new credit report, I would first ask you to stop feeling guilty about your previous inability to pay your creditors. It may or may not have been your fault. That is and will remain in the past. Look forward to a new start, new credit report, and a new chance.
As publishers, we are not engaged in giving any legal or accounting advice. If you desire and want professional legal advice, please go to our Legal Services Page to get the legal representation you need at a price you can afford.
- John J. Hawk, Sr.
Introduction
Unfortunately today, we live in a society that determines our net worth and value as a human being by the type of credit file we have. If your credit report is good, chances are you will receive and partake of some of the better things in life. But the opposite couldn't be more true if your credit report is bad. There are very few creditors who will extend good credit to people with bad credit.
But what if it wasn't your fault? What if you had to make the simple choice between eating and making your car payment? What if a job lay-off, a medical emergency, or some other personal crisis prevented you from making a timely payment? Should you be forced to pay for this for the next seven to ten years?
The credit bureaus are judge and jury in relation to your credit file. But there is one difference. A judge will at least give you the chance to defend yourself in court before passing judgment. And in America we are SUPPOSED to have a chance to face our accusers BEFORE judgment is passed. This is entirely untrue when it comes to your credit file.
The truth is that your creditors and the credit bureaus have been swapping information about you behind your back for a long time. You are not asked or given any benefit of defense when this happens. It is in effect legal gossip!
The system, as it stands today, does not give you the opportunity to defend yourself before inscribing your credit file with negative information, even if it is not yours! You must prove to them that the negative information on your credit file is incorrect, invalid or otherwise erroneous before they will remove it. That means in their eyes, you are GUILTY until proven INNOCENT.
You might wonder how a system like this is allowed to operate in our DEMOCRACY, in a country where we've been brought up to believe that a person is innocent until proven guilty. Why aren't we extended some courtesy by the credit bureaus? Why don't they give us a chance to defend ourselves before placing negative information on our credit files?
Good questions, aren't they? You may not like the answer though... THEY DON'T HAVE TO! The credit bureaus are private companies and corporations. They are in business to make a profit. And that profit comes from one place and one place only: YOUR CREDITORS.
Your creditors pay to see your credit file information and believe it to be true and correct. They also reciprocate by exchanging your credit information with the credit bureaus. So... your creditors pay the credit bureaus and the credit bureaus are in business to make a profit. Where do you fit in? You don't.
Unfortunately you are just another number in the vast data bank of numbers. Your credit report and the information it contains are not important or of any consequence to anyone but you. That's why you are the only one that can do anything about it.
Well my friend, that's why I put this information together and developed this unique program. I have seen too many people destroyed by the credit reporting system. I have watched helplessly by the wayside as their credit files were corrupted and their self dignity was destroyed in the process.
So many people with poor credit have done their best to make timely payments but couldn't because of a personal problem or another. Should they pay for this both financially and emotionally for the next seven to ten years? I don't believe so. I believe everyone deserves a second chance. I believe that you deserve a second chance, no matter what the previous circumstances were. Put those problems behind you now. It's time to move on and re-establish a good credit file.
YOU CAN remove past negative information it will take time and tenacity. The process is simple but it's not easy. It will take some work on your part, but if you're serious about getting a second chance, you won't mind.
Congratulations! You are about to take the final steps necessary to begin a brand new life with good credit! Study the material, use the information and get a new start!
A Few Comments On Credit Repair Companies
Over the past fifteen years or so, many "Credit Repair Companies" or "Credit Clinics" have opened up across the nation. Their main purpose is to help the individual remove incorrect and negative items from their credit report. Unfortunately, some of these outfits are scams from the word "GO" and have given the whole industry a bad name. They take the consumer's money and then tell them it will take month s to get results, then disappear without a trace. With the information we have provided you with here, you have no need to take that chance. If, however, you decide to hire one of these companies, check them out!
First, if the sales person or company uses the word "Guarantee" or "Delete", Run and don't look back! There is no way to "Guarantee" that ANYTHING will be removed from the credit report! Think about it for a minute. Unless he or she is going to "hack" into the credit bureau's computer, how can he guarantee anything? The Clinic is NOT the one that "deletes" the information!
Ask to see their license, get a copy of it, and then contact your State's Secretary of State to make sure that the company has obtained and maintained the necessary license and/or bond. In the State of Nebraska all companies, organizations, or individuals that provide credit services MUST (with NO exceptions) obtain a "Credit Services Organization License". If they charge a fee BEFORE they provide the services they promise, they MUST also maintain a $100,000 Surety Bond for TWO YEARS after they cease doing business in the state. While you are on the phone with the Secretary of State's office, ask if there have been any unresolved complaints against the company. Find out how long they have had their license as well.
There have been a number of credit clinics that guarantee to remove any derogatory items from consumer's credit report.
Contact the Attorney General's office in your state as well, see if there have been any complaints and find out if they are under any kind of investigation. The Better Business Bureau is also another good organization to check. My company wasn't just LISTED with the BBB, we where actually members of the organization as well.
If the firm tells you that you can not take a day to think about it or that it is a 24 hour offer tell them to take a hike! They where trying to scam you! Tell them that you want a copy of the contract you will be signing and any disclosures so that your attorney can take a look at it. If they balk, again, good for you, you just flushed out another con-artist. Call the Attorney General to have them investigated so no one else will fall into their trap! To have unlimited contracts reviewed by an attorney, and tons of other legal services, please visit our Legal Services Page.
For five years I owned and operated a company here in Omaha that not only assisted individuals and families re-establish their credit reports and obtain new forms of credit; but we also helped establish a budgets, and save money. The last two items were more important than the first two! If nothing else, TIME will repair a damaged credit report. But without the proper savings and budgeting, the smallest disruption in an individual's cash flow will destroy the BEST credit report. In fact, the "better" the credit, the more potential for damage there is!
I will encourage you to go to your local book store and obtain a book on budgeting. Talk to a family member, friend, or clergyman to get help on setting up and sticking to a budget. One of the reasons people run into the credit situations they do is because when the emergencies hit, there is nothing to fall back on. Don't let it happen again! Protect your good credit and your good name!
Ten Greatest Myths About Your Credit
Credit Bureaus are empowered with some kind of governmental authority.
Credit bureaus have no legal authority at all, they are simply private companies who are in the business of selling credit information.
The credit bureaus are required by law to keep derogatory items on your credit report for 7 to 10 years.
There is no law that the credit bureaus report anything on you at all. Just the opposite is true! Credit bureaus are required by law to automatically remove all derogatory items older than 7 years or in the case of a bankruptcy, 10 years.
It is impossible to get a bankruptcy off.
Bankruptcies come off just like any other derogatory that is incorrectly reported, obsolete, erroneous, misleading, incomplete, or that cannot be verified. Remember, the nature of the item has nothing to do with its removal under the Fair Credit Reporting Act.
The information on your credit report cannot be changed.
The opposite is true under the Fair Credit Reporting Act; both the federal and various state laws REQUIRE that items be removed if they are not 100% accurate ore cannot be verified in a timely manner.
It is illegal or immoral to have the information on your credit report altered or removed.
Not only is it not illegal or immoral, but it is what the Fair Credit Reporting Act is all about. It was enacted by congress for the very purpose of protecting consumers from the intrusion of the credit bureaus into our lives.
Paying a past due debt removes it from your credit report.
Just because you pay an old debt does not change or erase the fact that at one time you were not paying on it as you agreed. Can this record be changed? Absolutely!
Inquiries are not derogatory and will not affect your credit standing.
Anything that erodes your financial credibility is damaging to your credit standing. In the case of inquiries, one or two is not too bad, but any more than that and they begin to tell a story of their own. Any prospective credit grantor will look at your credit report and think that you are desperate for credit.
If you get a derogatory item removed, it will just come back.
Not if it is removed legally. When it is removed with cause under the Fair Credit reporting Act it cannot legally be placed back on your credit report. The same law that required its removal prohibits it from being placed back on.
The past equals the future.
This is the biggest myth of all. The concept that once bad, always bad, or at least for 7 years is totally false. Anybody can run into hard times or an emergency situation now and then, but that doesn't automatically mean that they are a poor credit risk for a magical 7 years. The simple truth is, no credit report can predict the future.
I can't repair my credit report myself.
Yes, you can! And you will find all of the information you need to do it right here! The simple truth is you don't have to live with bad credit or pay thousands of dollars to have it corrected.
The History Of Consumer Credit
Before you establish your new credit identity, it is important to understand how the credit reporting system works, how it operates and how it affects you.
The roots of consumer credit goes as far back as man can remember. It starts with someone or some business having a product or service to sell. Either the price of the product is beyond the reach of the average person or payment for the product is not convenient at the time of sale and that's what gives birth to a consumer credit program.
Take, for example a moderately priced automobile at $13,500. The manufacturer, in order to make a profit, needs to sell many vehicles at this price. But how many of us can plop down $13,500 in one lump sum?
If the manufacturer only sold automobiles to people who could afford to pay in one lump sum, he would sell very few cars. Consequently, the price would skyrocket from $13,500 to let's say $113,500, due to the manufacturer's need to make an equitable profit. On the other hand, the manufacturer couldn't make any money if he sold the same automobile for $400.
So the manufacturer needs to sell the automobile at a price consistent with perceived value and quality, but still make it available to people who don't have the entire $13,500. That's why the automobile loan business is so big.
Let's take a look at another example. Actually, this next example is rooted deep in our history. When the payment for products or services is inconvenient at the time of sale, a merchant (or creditor) typically offers payment terms, usually within 30 days.
This type of consumer credit can be traced back to the General Store days when a patron would typically pick up a few things, charge them to an open account and agree to pay the entire account by the end of the month.
Those days are pretty much long gone, replaced by major credit cards and department store cards. But the principle is still the same. The only difference today is that theoretically you never have to completely pay off a charge account. As long as you pay the interest on the account or the minimum payment, you can continue to charge to this account, up to the credit limit, without ever paying off the original debt. This is how a lot of people get into serious trouble and consequently damage their credit files almost irreparably.
As an evolution of this process, it was natural that some kind of credit reporting system would emerge.
Creditors became concerned that they were doing business with a consumer who would repay their account in a timely fashion, and had proven timely repayment with other creditors as well.
So the credit bureaus were born and began to track credit information on individuals and businesses, selling that information to subscribers (creditors) and receiving information as well.
You should understand that the relationship between the credit bureau and the subscriber can (with your permission only) receive information about your current credit status. But, in exchange, the subscriber must provide payment history and account information to the credit bureau. This, however, transpires without your permission.
In other words, only you can authorize access to your credit file but once you have, your creditor has carte blanch to report any credit information on your file he chooses, even if the information is incorrect!
The Credit Bureau System
Note that the credit bureaus are private, not government credit reporting companies. All three companies are listed on the New York Stock Exchange. They are in business to make money just like any other business.
Their business is to store information reported by many creditors, and in turn, sell back credit bureau information to those same companies. The more credit data that the credit bureau can provide on any individual is to their advantage.
How Credit Bureaus Get Their Information
SUBSCRIBERS
Companies that subscribe to the credit bureaus' services send credit history to the credit bureau. Updates are sent by the creditor to the credit bureau periodically. It should be noted that since the creditors report at different times to each credit bureau, different amounts and dates can appear on each redit report. Many times this information is reported incorrectly and inaccurately.
Creditors that report to the credit bureau are most often banks, savings and loans, mortgage companies, large department stores, finance companies, VISA and MaterCard banks, oil companies and companies that are members of the credit bureau.
PUBLIC RECORDS
Credit bureaus also get their information from public records such as the local courthouse. This information may include judgments, bankruptcies, tax liens, wage attachments and notice of default on properties. It may be noted that the credit bureau may pick up from the public record a notice of default but later fail to record the correct information if the default was corrected.
MISSING INFORMATION
In reviewing your credit report you may notice that much information is missing or inaccurate. The reason for missing information is that not all creditors belong to the credit bureau. For example, if you are paying off a bill with a small store, and they are not a member of the credit bureau, your good payments will not be reported on your credit report. For a small fee, you are able to list this good credit on your credit report.
The Credit Bureaus
Across the Nation there are three major credit bureaus; TransUnion, Equifax, & Esperian (TRW). There are, however over 2,000 smaller credit bureaus located in every medium size city in the United States. Because each of these smaller credit bureaus may or may not be affiliated with one of the "Big Three", they will have different information in the consumer's credit file. When you apply for credit, a creditor might check only one credit file. If they find anything derogatory on your credit report, they probably will not check with the other credit bureaus.
If you are denied credit, the creditor, by law, has to let you know which credit bureau has the negative information. However, the other credit bureaus may also have the incorrect information. Therefore, when checking your credit you need to look at all of the credit reports.
The three major credit bureaus are:
TransUnion
P.O. Box 390
Springfield, PA 19064
(800) 851-2674
TRW/ Esperian
P.O. Box 949
Allen, TX 75013-0949
(800) 392-1122
Equifax
P.O. Box 105873
Atlanta, GA 30348
(800) 685-1111
ACCEPTABLE RATINGS
Ratings TO Accept
PAID IN FULL AS AGREED
CREDIT LINE CLOSED BY CUSTOMER
NOT RATED (TO NEW)
R1 RATING
DISPUTED (only if you feel that it is the best you can get)
DISPUTE AFTER RESOLUTION (same as above)
Ratings NOT TO Accept
BANKRUPTCY
DISCHARGED BY BANKRUPTCY
CONSUMER COUNSELING
DISPUTE AFTER RESOLUTION
DISMISSED
UNPAID
MAKING PAYMENTS
SKIP
WAGE EARNER BANKRUPTCY
Your Credit Report And Rights As A Consumer
Under the Federal Fair Credit Reporting Act, you:
May obtain a credit report from the credit bureau for a reasonable fee ($8 to $15).
May obtain a credit report from the credit bureau at no charge within 30 days of being rejected for credit. You must send a copy of the rejection letter to the credit bureau.
May be represented by anyone of your choice at the credit bureau.
May dispute any information on the credit report that you feel is listed incorrectly. The credit bureau must re-investigate the information and within a reasonable time, verify the information. A reasonable time has been construed to be 20 working days by some credit bureaus.
May have derogatory information such as late payments and judgments taken off the credit report within 7 years. Bankruptcies will come off in 10 years.
May place a 100-word consumer statement in your file to tell your side of any derogatory information.
May have the credit bureau notify those you name (at no cost to you) who have previously received incorrect or incomplete information on you and provide them with the corrected credit report.
May have your credit report withheld from anyone, who under the law, does not have a legitimate need for the report.
May sue the credit bureau if it willfully or negligently violates the law.
The above nine items just list a few of your consumer rights.
The Federal Trade Commission
The federal Trade Commission is responsible for correcting any credit report problem which a consumer has not been able to correct through the credit bureau.
FTC Headquarters
Federal Trade Commission
Pennsylvania Avenue & 6th Street, NW
Washington, D.C. 20580
(202) 523-3830
California : 450 Golden Gate Ave., San Francisco, CA 94102
California : 11000 Wilshire Blvd., Los Angeles, CA 90027
New York : 26 Federal Plz., New York, NY 10278
Texas : 8303 Elmbrook Dr., Dallas, TX 75274
Illinois : 55 E. Monroe St., Chicago, IL 60603
Ohio : 668 Euclid Ave., Cleveland, OH 44114
Washington : 915 Second Ave., Seattle, WA 98174
Colorado : 1405 Curtis St., Denver, CO 80201
Georgia : 1718 Peachtree St., Atlanta, GA 30367
Massachusetts : 150 Causeway St., Boston, MA 02114
If you feel there is a violation of your credit report, you may write to the nearest FTC office with a copy of it going to the FTC, Washington, D.C. office.
Don't expect the FTC to take an active interest in your case. They are there to monitor the credit bureau and only to take an active interest in the problem if there are many complaints about the same problem. If you have written the FTC, continue working to correct or restore your credit during this time.
Analyzing And Disputing - The Repair Process
Disputing information on your credit report...
This method is for direct correspondence with the credit bureau. If you find anything inaccurate, incomplete, incorrect, or obsolete, you have the right to dispute that item on your credit report.
The credit bureau then has a reasonable time to contact the creditor and have them verify the disputed item. A reasonable amount of time under the Federal Law has been construed to be 20 working days. However, you need to understand that with this type of transaction, it could take from four to eight weeks to receive your reply back. Technically, if the credit bureau does not respond back within 30 days, the incorrect or inaccurate item must be removed. If, after the credit bureau investigates the item and the information is found to be inaccurate or no longer can be verified, the credit bureau must delete the item in question.
It should be noted that when a negative item is more than two or three years old, many creditors will not respond to the credit bureau because of lack of records. Therefore, by law, the bureau should remove the item from your report. Since most creditors do not have the space to retain records for a long period of time, there may not be any documentation about your payment history.
Understand also that the creditor does not have to provide documentation to the bureau of the disputed item. They simply check various boxes on the statement as to whether you were late, paid on time, etc.
Steps to Dispute
Get your credit report.
Review your credit report.
Decide which items you want to dispute.
Write letters.
Always hand write your letters in your own handwriting.
Keep copies of all correspondence.
Keep separate file copies on each credit bureau.
Follow up if needed.
Obtain results.
Make sure that when you dispute items on your credit report you do not dispute more than three items at a time. Get those corrected before you dispute three more. Persistence and patience are what you need to get the job finished. Just remember that it usually takes years to get incorrect or inaccurate information ON your credit report. Therefore, your credit report will sometimes take many months to completely clean up.
It is important that you keep copies of all correspondence going to and from the credit bureaus. Also keep separate folders for each credit bureau. That will mean three folders if you are disputing information on each credit bureau. (Example: Type your label to say: Esperian (TRW) Correspondence; Equifax Correspondence, and TransUnion Correspondence.)
If you do not receive a letter back within 3 to 5 weeks, send a follow-up letter along with all previous information. Credit bureaus are required to send you the results along with an updated credit report.
Areas of Dispute
Account Paid as Agreed - After reviewing my credit report, I found where "Account name" and "Account Number" was paid in full and as agreed. Your rating is inaccurate. Please change this information immediately to reflect the current status.
Charge Offs - I paid "Acctount Name and Account Number" as agreed. You show this as a charge off, which cannot possibly be correct. Please correct the way you are reporting this. (Charge offs are an amount the department store has written off as a bad debt. It is then listed on the report as a charge off).
Not Mine - I do not recognize this account, nor have I ever been associated with them. "Account Name and Account Number" needs your complete attention. Please conduct your investigation and remove this from my file. Use this sparingly and only if all else fails. The creditor DOES NOT have to investigate furnther after locating your information (specific dates, ammounts, etc...) They simply have to find your SS#, DOB, Etc...)
Late Payments - I was never late paying "Account Name and Account Number". I have always paid this account as agreed and on time. Please update your information.
Collections - This cannot be accurate. I have never had any of my accounts go into collection. Please review and remove from my file.
Judgements - I have never had a judgment against me, and you show I have two of them Case # and Case #. Please review and remove from my file.
Tax Leins - This is not mine. I was not aware of this until I received a copy of my credit report. Please review and remove.
Bankruptcy - This is not my bankruptcy. I have never filed bankruptcy. Please review and remove. The bankruptcy listing is not correct. Please remove. (Note that the dollar amount or date may be incorrect. Make the credit bureau verify the amounts. They may or may not be able to verify the amounts or the date). I want all items that are included in may bankruptcy removed from my file, which I have marked. I have included a copy of the itemized list of creditors included in my bankruptcy for you to compare. Thank you.
The credit bureaus have been known to leave the item on the credit report, but to flag the items covered under the bankruptcy. An example would be: Sears $100.00 (BK). They also have been known to delete the item altogether. The bureaus have not been consistent with this method, however most credit bureaus will tell you that it will stay on the report with the (BK) notation.
Creditor Disputes
Disputing Information Directly With The Creditor
This method is somewhat like writing letters to the Credit Bureaus, however, the difference is that the dispute letters are sent directly to the creditor. One thing to remember is that the department stores, banks, etc. have the power to take anything off a credit report that they have placed on a credit report.
A number of things must be included in the creditor letter. Please give the store your account number. State exactly what the problem on your credit report is, and why it should be removed. Ask the creditor to verify the amounts. Demand that they correct or remove the incorrect item.
Unlike the dispute letter method, this type of letter can be typed out rather than written.
If you feel that you are correct and cannot seem to get anywhere, ask to talk to a higher supervisor. The higher the supervisor, the more in tune they are to profits; stores want to keep your account, and you as a customer.
At some point it may be beneficial for you to have your attorney write a letter to the creditor. Many times just the threat of a lawsuit will get the creditor to change the credit rating.
Remember, that if the creditor placed it on the credit report, they can take it off. Having an attorney write a letter may cost you somewhere between $75 and $100.
Many times stores will not keep records past 24 months and cannot find the information. Therefore there is a good chance it will be removed.
One more option when dealing with creditors is if you have not paid a bill in full with them. The fact that you owe them money can work to your advantage. Most, if not all, creditors would rather get some money instead of none at all. This is true from banks to oil companies. Be willing to negotiate with your creditor.
Approach the creditor with the idea that you would like to settle your account difference. Probably you do not have enough money to pay him in full or you would already have. For example, let's say you owe a department store $100. The department store may have already charged it off and reported it to the credit bureau. Offer to pay the store $50 to settle the account with the understanding that they will also remove the negative mark on your credit report.
The store can either say yes or no to this proposition. If they want a little more than $50, you will have to decide how high you can go and still stay within your payment schedule.
Subscribers have the ability to change your credit rating with the credit bureau. Many will tell you they cannot change the rating, but that is just not correct.
Please Note
We are not suggesting this method to discount bills that you already owe. We feel each and everyone should pay their bills on time and in full. However, there are times when you just cannot pay 100% of every bill. Another reason for settling could be you where dissatisfied with the merchandise or service.
If you were dissatisfied with the merchandise, credit card companies have been known to take the bill off your account and charge it back to the store. However, you must notify your credit card company within one month of the purchase date.
If you feel uncomfortable about approaching the creditor yourself, you should hire an accountant, financial consultant, or possibly an attorney to act as your representative. Please check with the professional on how much this will cost you.
If you are handling your own case, at some point you will probably reach a settlement. Percentages vary, however. I had a large chemical client that settled for 20 cents on the dollar. Don't expect to get that low in your negotiations. Settlements vary from 30 to 70 percent, with the majority being around 60 percent.
If you feel you can afford 60 percent, don't start out at 60 percent. If you do you will probably end up at 70 or 80 percent. You must start at around 40 percent if you expect to end up at 60. Remember that the collection department will start high to end up somewhere in the middle.
When you reach a verbal agreement with the collection department have them prepare a SETTLEMENT AGREEMENT and mail it or fax it to you for your review. DO NOT pay your bill prior to receiving this settlement agreement. Arrangements have been known to change from the time of initial phone contact to the receipt of the written settlement agreement. It would also be a good idea to have an attorney review the document for you.
Inquiries - What To Do?
Excessive inquiries on your credit report can short circuit your loan efforts with any lender.
The first thing you have to understand is how inquiries get on your credit report. Any time you apply for credit from any bank, department store or other creditors, they call up a credit report on you. This is called any inquiry, an d the name of the bank will be listed under inquiries for two years. In some cases you will find a bunch of letters and numbers with no names explaining who they are. You will need to ask your credit bureau to verify the names of these individuals.
Unfortunately it is now a common practice for car salesmen to run a credit report on you at 10 different finance companies. Before he spends time showing you dozens of cars, he wants to make sure that you will be approved for the one that you want to buy. If he can't get you approved for ANYTHING, he will move on to the next person. Leaving 10 different inquiries in his wake.
Naturally, if you have many inquiries listed, it looks like you are in financial trouble and are applying for loans all over the city. If four or more inquiries appear on a credit report within a two month period, a message of Trans- Alert is listed on the credit report. This alerts creditors that you have applied for credit an excessive number of times. Trans-Alert appears on the TransUnion statement. Sometimes banks screen your account to see if you will qualify for their credit card promotions and this just adds one problem upon another.
To correct this problem, I believe it is the easiest to deal with the creditor dispute method where you direct your correspondence to the company that listed the inquiry on your report.
In your letter you must ask them for proof that you authorized them to check your credit rating. If they cannot find that proof, they will have to get the inquiry taken off the credit report.
Many times, creditors do not have the time to go back into their records and verify your account, so automatically you win, and it will be deleted off your credit report.
You can also dispute directly with the credit bureau and ask what legitimate business reason they had to give your personal credit information out to "Company Name". If they can not provide this information, please remove the inquiry.
Do's And Don'ts
Do not type your letters, write them in your own hand writing and use your own words as much as possible. Typing makes the credit bureaus think you are using a credit repair service.
Do not send mail by "Certified Mail."
Do use your own paper or the dispute forms that come with your credit reports.
Do not use legal language.
Do not apply for credit during the dispute process, it could reverse any results you have attained.
Do not call the credit bureaus for any reason! Always correspond through the mail and make copies of your correspondence.
Do keep copies of everything the bureaus send you.
Do be patient but do not give up. Millions of people have had negative items removed from their credit report!
Do not threaten the credit bureaus or tell them that you will hire an attorney if they don't take the disputed items off of your credit report. They know they have to follow the law. Threats will get you no where.
Five Steps To Obtaining A1 Credit
Now that you understand the basics of what credit is, and why it is so important, you are ready to follow our plan to get you well on your way toward building a solvent and solid credit record. Follow our 5 step process and you will finish with 3 bank loans, a Visa and MasterCard credit cards, and at least 2 major department store credit cards. But that's not actually the end - it's just the beginning! You will then be in control of your financial destiny and will be better able to make the kinds of purchases embodied on the American Dream
As you follow each step, remember that lenders and retailers count on making loans or selling goods on credit. The system helps them as much as you. They want to extend credit to you. Through this plan, you make them do so gladly and legitimately.
Step One - Obtaining Bank Loans
Laying the Groundwork
The first objective after removing negative credit from your credit report is to add positives. This can be achieved by obtaining three bank loans to serve as credit references for future maneuvers. Have you ever noticed that most loan applications require three credit references? Follow this first step and you will have three impeccable references to use for various kinds of credit and loan needs.
This step requires some up-front capital to get you going. The results can be achieved using anywhere from $300 and up, although we recommend investing $1,000. Take heart - the money will not be spent, but is used as secure backing in a savings account until the plan is completed. If you need to raise the cash, you can do so through creative means such as a temporary, parttime job or a garage sale. You can also consider borrowing the money because, again, it will not be spent.
Just be careful not to start off with funds that you may be likely to need in the weeks to follow. Withdrawing this money before the plan is completed would jeopardize your credit and potentially leave you in greater debt.
LOCATING THE RIGHT LENDERS
Now you are ready to locate your three lending institutions, which can be banks, savings and loans, or credit unions. You can use the bank where you currently have your checking or savings account, although you will still be opening a new savings account. Use your local Yellow Pages to call area banks and ask these questions:
What is the minimum amount they will loan on a passbook savings account?
What is the percent you can borrow?
For these purposes, you are interested in opening only a regular passbook savings account, so don't get more details than you need about other types of special account and offers.
Choose a lender that offers high yeilds and allows you to borrow as much as possible against a secured account. We will now label the banks you have selected Bank A, Bank B, and Bank C.
DEPOSIT, BORROW, AND PROSPER!
Go to Bank A and open a savings account woth your $1,000 (or whatever amount you have allocated). This should be an interest-bearing account earning the highest rate you can find. Take your passbook home and wait three days.
Return to Bank A (dressed and poised for success) and ask to see a loan officer. Take your passbook woth you, and explain to the officer that you wish to take out a loan, for which you are willing to place your savings account as collateral. This is the easiest type of loan to obtain because it is completely secured with cash. Be prepared to name a reason for the loan, although it should be granted regardless of the purpose because it will be backed by your savings account. Make sure you obtain an installment loan, amortized over one year with monthly payments required. Remember, you are building credit, so a loan that is due all in one lump sum at the end of 180 or 365 days will not serve your purpose. While a credit check is not always make for this type of loan, be prepared to acknowledge any bad marks on your credit record and explain that you are trying to re-establish your credit. Assure him/her that you will faithfully make your loan payments.
Assume you get a loan for 90% - or $900 - of your savings account, with a 6% interest rate. On a $900 loan you would pay $29.52, owing the bank a total amount over one year of $929.52. Your monthly payments will be $77.46.
Once this loan is made, Bank A will freeze your $1,000 so your loan collateral cannot be withdrawn. However, each time you make a payment on your loan, an equal amount (less interest) will be unfrozen in your account and available for withdrawal.
Take your loan check for $900 to Bank B and open another savings account with this amount. Wait three days, and get your second loan - this time for $810 (90% of $900). Your monthly payments here will be $69.71. (Again, assuming 6% interest)
Now use your $810 and open an account at Bank C. Wait three days, and obtain a 90% loan for $729, with monthly payments due of $62.74.
EXAMPLE
Bank Savings Balance Loan Amount Payment Amount Total Interest Paid
Bank "A" $1,000.00 $900.00 $77.49 $29.52
Bank "B" $900.00 $810.00 $69.71 $29.57
Bank "C" $810.00 $729.00 $62.74 $23.91
DON'T PANIC!
By the time you obtain your third loan, about two weeks have passed. You now have three bank loans totaling $2,439 and $729 in cash (your loan from Bank C). How will you pay these loans back? It's easy. Use enough of your $729 to make your first payment on your Bank A loan ($77.46). Do the same at Bank B and Bank C. You should now have made payments that are ahead of their due dates by about one week at Bank A, two weeks at Bank B, and three weeks at Bank C. You have used about $200 of your $729, but you have also freed up frozen funds that can be withdrawn later.
Now wait about another two weeks and repeat the loan payment process described above, making another set of payments with your remaining cash. At this point, you should be approximately one full month ahead on all three loans. With the balance left from your cash loan, make your third set of payments on the second payments' due date. By now, your $729 should be almost depleted. Approach each bank and withdraw the funds that have been unfrozen to use towards your next set of payments.
Continue this process until at least six payments have been made on each loan. You can pay off your loan in full, if you wish, after that point. Do not pay them off before six months, because this is the time frame usually considered when a payment history is calculated as a possible credit reference.
WHAT DID THIS REALLY COST?
In our example, the interest rate charged on the loans was 6%. And, your savings accounts were drawing 2% interest, making your net interest only 4% (6%-2%). We will assume the loans where for one year (12 months) and that you did not pay them off early. Bank loan A for $900 charged $29.52 interest, from which we subtracted $20.18 - the 2% interest you gained from your $1,000 savings - for an actual annual cost of $9.34. If you paid off your loan in six month, it would have cost you even less! Overall, it costs pennies to re-establish your credit using this method!
That's a very small amount to pay for three fast and easy credit references that indicate your ability to acquire bank loans in varying sizes, make you payments ahead of schedule, and pay the loans off completely before due. These activities will all look very impressive on your new credit report! And, you should still have your original $1,000.
Now is a good time to contact your local credit bureau (ask your banks which one they report to) and have this new credit information added to your profile. The bureaus will send you a credit addition form to complete and mail back. There is usually a small fee for each item to be added. They should also send you an updated copy of your new credit report.
Step Two - Secured Credit Cards
How Secured Credit Cards Work:
Now it's time to use these bank references to obtain a credit card. Select on of the banks you particularly liked doing business with and use your initial $1,000 to make a deposit there. After about one week, pick up an application form for either a Visa or MasterCard and fill it out completely at home. Be certain that the card you are applying for allows for cash advances, and include your other two bank references on the application. Then meet with a loan officer at the bank and give him/her your completed form, saying that you are willing to have your $1,000 frozen to secure a credit card with a $1,000 line of credit.
This type of secured credit plan is very common and is available to new credit builders as well as credit builders with a bad history. Similar to your bank loan, your savings is used as collateral for any debts you may accrue using the card. The card will look like any other Visa or MasterCard, so only you and the bank know it is secured by your savings.
Shopping to Build Credit
Once you have your card, use it. It is important now to again demonstrate a good payment record. A credit card that never gets used can actually reflect negatively on your profile!
Go to your local shopping mall and find a store that carries a returnable item in the $500 to $800 range (remember; your credit limit is $1,000). You can select a piece of jewelry, a television, audio or video equipment, or other merchandise within this price range. Make sure you understand the store's return policy - you will need to be able to return the item later for a credit on your charge account, not just store credit. Purchase the single item with your new Visa or MasterCard, take it home, and safeguard against damage or theft. After several days, go back to the store and return the item, requesting a credit on your card.
When you receive your first monthly statement for your card, you will notice a column marked Payments/Credits. Your credit for the returned item will show up in this column, although it looks the same as of you had paid for the item in full. Anyone examining your credit record will see that you made a sizeable purchase and a very early payment.
Obtain a Cash Advance
There is one final step to establishing your good credit record with a credit card company. Stop by a different bank than the one that issued your credit card and ask for a cash advance. Visa and MasterCard allow any lending institution that honors their cards (almost all) to make cash advances for varied amounts up to your credit limit. Some allow only a 25% cahs advance, while others will loan your entire amount. Be advised that borrowing money in this manner usually costs more in interest than your card charges for merchandise, so it is not a good way of routinely obtain loans. But it is useful for our credit-building purposes under this plan. Since you will be charged interest on your cash advance from the day you receive it, you may want to time this transaction toward the end of your billing cycle.
Let's assume that you get a 50% cash advance on your $1,000 limit, or $500. Don't spend the money. Put it away and wait for your next monthly statement. Use the money to promptly pay back your cash advance charge on your bill. Now you have used a large amount of your credit limit on two occasions, and your record indicates both were paid back in full. Your credit history is looking better and better!
Step 3 - Un-Secured Credit Cards
Low Interest Pays Off
Before taking specific steps to obtain an unsecured credit card, it really pays to shop around for a bank issuing Visa or Mastercards at the lowest possible interest rate. The national average is presently at about 19 to 20 percent. At this rate, an average balance of $650 will cost you $123.50 annually in interest charges. The same $650 balance will only cost you $78 on a 12% card - a savings of $45.50 per year.
You also want to consider any annual fee charged for use of the card, which can range from $20 to $50 for premium cards such as MasterCard Gold and Visa Gold. While Gold cards traditionally require a higher annual fee, they typically offer higher credit limits. For the purposes of this plan, we do not recomend obtaining a Gold card. Take a look also at the grace period various banks allow between the time of purchase and when interest starts to accrue. If a bank offers no grace period, you will still be charged interest on your balance in full after each billing period. Again, to find out about rates, fees, and grace periods, you can pull out the Yellow Pages and call around locally. The business sections of major newspapers also often carry ads by local banks promoting the features of their credit cards.
However, you do not need to apply for an unsecured card from a local bank. Computer networking makes it easy to quickly access any bank, and most are eager to have new credit card customers, regardless of where they live. You can find a list of U.S. banks offering low interest rates for Visa and MasterCard in the Bank-lists booklet contained in this document.
Approaching the Bank
Once again, have the new information about your secured credit card included in your credit bureau file. Now go to a bank and apply for whichever credit card (Visa or MasterCard) you do not already have, using your bank loans and current credit card as references. When the bank refers to your credit file, they will find you have an impressive payment history and another credit card with no outstanding balance. They should be more than willing to give you a regular, unsecured bank card.
Freeing up Your $1,000
At last, you need to have your $1,000 savings account unfrozen and the credit card released from it's secured status. Go back to the bank where you began this process, and inform the loan officer you now have an unsecured Visa or MasterCard. Explain that you received this card based upon your excellent payment history you established with their bank card. Ask now to have the hold placed on your savings released. If he/she is hesitant, suggest that you will leave your money in the savings account, But no longer want it frozen. If the officer still seems reluctant, you can politely say that you will then have to return the credit card and close your account with them. In most cases, the bank will not want to loose you as a customer and will honor your request.
However, if these efforts fail, then go ahead and return your card and close your account. Go to the bank that gave you your unsecured credit card. Tell them that you like their services and rates better than where you previousely banked and want to shift your Visa or MasterCard (whichever one you do not already have there) to that bank. Your second unsecured credit card should arrive in the mail soon after!
Step 4 - Department Store Credit Cards
Instant Credit
With the first three steps completed, you should feel like a credit-building pro and be proud of your new credit profile. This next step is easy. Because you already have a Visa and MasterCard, the credit world is wide open and waiting for you to sign on.
Most major department stores offer a form of instant credit - providing you with their store credit card just because you possess a major credit card, so they can collect the interest instead of Visa or MasterCard! Best of all, department store cards are issued on an unsecured, deposit-free basis!
You usually will be asked to fill out a brief application form, show your I.D., present at least one major credit card - and you are accepted! This can sometimes be done right while you are making your purchase, or at a special customer relations desk. Many stores are even offering free gifts or special discounts to customers applying fir instant credit. Be cautious, however, to apply only for cards in stores that you normally shop at. A dormant credit card does not look good on your credit report.
While many stores of all sizes now offer their own credit cards, for our credit-building exercise it is best to obtain one from a major department store chain with locations around the country.
Department Stores Offering Instant Credit
Below is a partial list of U.S. department stores offering instant credit. Many may have store locations in your area. All stores listed here report to the credit bureaus.
Bacons
Lazarus
Neiman Marcus
Broadway
Lord & Taylor
Nordstrom
Castner Knott
Macy's
J.C. Penny
Dillards
Marshall Fields
Sears
Halls
May Company
Maas Brothers
Jordan
Marsh
Mervyns
Step 5 - Nurturing Your Credit
Congratulations! By now you have three bank loans, Visa, MasterCard, and perhaps several major department store credit cards. We have has planted all the seeds you need to cultivate a healthy credit profile. Now it's up to you to take care of your new credit record and allow it to grow with you as you build a more secure financial future.
Loan Scoring System
Loan Application Scoring System
Each bank has a credit scoring system that determines the acceptability of the borrower. This scoring system takes into account your income, length of employment and residence, etc.
The five major factors that all lenders give high importance to are:
1. A salary of at least $1,500 per month
2. At least 5 years at present address
3. Employed at present job for at least two years
4. A "paying on time" credit history
5. A telephone in your name
Credit Scoring System
(This is a sample of the system of a major bank.)
Factors_________ Score__________
1. Years at job:
a. Less than one year 0
b. One or two years 1
c. Two to four years 2
d. Four to ten years 3
e. Over ten years 4
2. Monthly income level
a. Less than $1,000 0
b. $1,000 to 1,500 1
c. $1,500 to 2,000 2
d. Over $2,000 3
3. Present obligations past due
a. Yes 0
b. No 2
4. Total monthly payments to income
after taxes comparison
a. 50% 0
b. 40 to 49% 1
c. 30 to 39% 2
d. Under 30% 3
5. Prior loans at any branch bank
a. No 0
b. Yes, but not closed 0
c. Yes, but closed with two or less
eleven-day notices per year 2
6. Checking account at this bank
a. None 0
b. Yes, with over five rejected items
over the past year 1
c. Yes, with no rejected items
In the past year 2
7. Length at present or previous address
a. Less than three years 0
b. Three years or more 1
8. Age of newest automobile
a. Over one year old 0
b. Less than one year old 1
9. Savings account
a. No 0
b. Yes 1
10. Own real estate
a. No 0
b. Yes 3
11. Telephone in own name
a. No 0
b. Yes 1



12. Credit references
a. No 0
b. Yes 1
When you apply for credit, your application is scored and the evaluated on the basis of criteria given by the bank's Credit Policy Committee. These criteria vary from bank to bank.
Below we have listed the scoring system.
90-100% of possible points
Loan Granted
75-89% of possible points
Loan granted unless negative items on credit report
50-74% of possible points
Risk
40-49% of possible points
Review with possible rejection
0-39% of possible points
Automatic rejection








The Secrets Of Credit Repair
A Consumer Guide to Real Credit Repair
Chapter One: The Secrets Of The Credit Bureaus
What is a Credit Report? What Kind of Information Appears on a Credit Report? How Long Will Negative Information Stay on my Credit Report? How does Bad Credit Affect a Mortgage? Can I See My Credit Report? How Much Bad Credit Does it Take for Me to be Denied Credit? Who Looks at My Credit Report? 10 Favorite Myths about Bad Credit What is a Credit Report?
Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with either TRW, Trans Union, or Equifax. These credit bureaus collect and maintain information on the majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations and they sell your personal information for money. They receive your personal information through the same lenders who grant you credit.
The credit bureaus have agreements with each of these credit grantors that require the credit grantor to inform the credit bureau of everything that occurs in your relationship with the credit grantor. If you make a late payment, the negative credit listing is quickly reported to at least one of the major credit bureaus and is added to your credit history. Credit reports are not just a record of how you are currently managing your credit accounts. Credit reports are histories of everything you are doing with your credit now, and everything you have done in the past.
The credit bureaus gather this information, list the information on your credit report, then sell it to other credit grantors whoosh to see your credit history before they decide to lend you money. The credit grantors who review your credit are especially interested in any negative credit. If you have shown any tendency to pay late, or to disregard your financial commitments in the past, the creditors' computers will immediately reject your application. Exactly like when you were in grade school, your credit report is your financial report card to the world.
What Kind of Information Appears on the Credit Report? Merchant Trade Lines These include all regular credit lines, such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in the bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors. Collection Accounts When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts.
Any type of collection account, whether paid or not, is considered very negative by all credit grantors. Court Records Court records include bankruptcies, judgments, liens, divorce, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered very negative by all credit grantors. Inquiries Every time a potential credit grantor looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the number of inquiries is very few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit grantors will become nervous and you will probably be denied.
How Long will Negative Information Stay on my Credit Report? The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for bankruptcy which can be reported up to ten years. These are the time limits for reporting negative credit. The creditor or credit bureau can choose to have the negative credit information whenever they please. Inquiries remain on the credit report for two years.
How Does Bad Credit Affect a Mortgage? Would you believe that it is usually much harder to qualify for a gas card than it is to qualify for a home loan? Like many, you may have already disqualified yourself from buying a home due to bad credit. Little do you know, you may be considered an "A" buyer by many brokers and lenders. Even if your bad or insufficient credit disqualifies you as an "A" buyer, a home loan at standard interest rates may still be within your reach.
Homes are very secure collateral. Because of this, the lenders feel more comfortable lending you money against the property. As opposed to unsecured credit lines, the lender will be primarily interested in your job security, debt to income ratio, and ability to pay a reasonable down payment. Your credit report will only represent minor role in your mortgage approval.
Can I See My Credit Report? Most credit grantors are not allowed by the credit bureaus to show you your own credit report. But, you can purchase your credit report from the credit bureaus for a fee. Once you receive your credit report, you may find that you cannot read it because the information is listed in an unfamiliar code. Trans Union and Equifax credit reports are very difficult to interpret and understand. TRW credit reports, however, are quite easy for most people to read.
How Much Bad Credit Does It Take for Me to be Denied Credit? As you may have already experienced, as little as one small late pay listing will bring credit denials at every turn. It is a myth that a large amount of positive credit can outweigh some negative credit. Any negative credit whatsoever will become a substantial credit obstacle in almost every case.
Who Looks at My Credit Report? With the passing of each year, your credit report is used more and more often as a yardstick to measure your character. Prospective collectors will always review at least one of your credit reports before granting you credit. Today, it is increasingly common for insurance companies to review your credit before extending auto or health insurance. Many employers now check credit before they consider you for a position. If you rent, you may have already been through a credit check to determine your worthiness as a renter.
10 Favorite Myths about Bad Credit
Myth #1 When I pay off a past-due account, such as charge off or collection account, it will show "paid" and will no longer be negative. It is practically impossible to restore your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt actually hurts your credit. Negative credit is allowed to stay on the credit report for a maximum of seven years, except for bankruptcy which may remain up to ten years. This seven year clock begins ticking on the "date of last activity," or, in other words, when the last action took place on the account. By paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off"-- which will stand out as a very negative listing. Furthermore, you will create a new date of last activity on the day you settle the account. The seven year clock will reset and begin all over again. When you have outstanding debt, it is almost always prudent to seek professional aid so that you may settle your debts without further damaging your credit (see Should I Use a Professional?)
Myth #2 If I succeed in deleting a negative item, it will just come right back on my credit report. The credit bureaus have very cleverly spread this myth through the news media and even government regulators. In truth, the credit bureaus will often temporarily delete a negative listing if they haven't heard back from the credit grantor after approximately thirty days. If the credit grantor reports in tardy, say after six weeks and verifies the negative listing, the credit bureau will often reinsert the negative listing on the credit report. This is often known as the "soft delete." Eventually, though, the creditor simply fails to respond to respond and the negative listing is permanently deleted. If the item is verified by the credit grantor, either before thirty days or after, the account may still be challenged again at some future time.
Myth #3 There are some types of negative listings, such as bankruptcies and foreclosures, that are impossible to remove from the credit report. There is no type of negative listing that hasn't been removed from a credit report a thousand times. Some types of negative listings, such as bankruptcy or unpaid debts, are certainly more difficult to remove from the credit report, but this has more to do with the operational systems of the credit bureaus than it has to do with the severity of the bad credit item. For example, judgments and tax liens are severely negative listings, yet are easier negative listings to remove.
Myth #4 Disputing the credit report is easy and any consumer can do it himself for the price of a few postage stamps. Disputing the credit report is easy. Getting results from the credit bureaus is amazingly difficult, complex, and infuriating. It isn't a coincidence that the Federal Trade Commission receives more complaints against credit bureaus than any other type of business. Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking mass numbers of lawsuits, the credit bureaus will do everything in their power to discourage consumers from making progress with their credit restoration. Restoring your own credit is like repairing your own transmission or representing yourself in court: it is possible, but you must decide if you are willing to take the time and assume the risks of doing it yourself.
Myth #5 If I declare bankruptcy, I can begin my credit report all over with a clean slate. Many bankruptcy attorneys do not adequately understand of explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to the credit rating what the nuclear bomb is to war. When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an "included in bankruptcy" account. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes very difficult to remove all trace of the bad credit. If at all possible, you should avoid bankruptcy.
Myth #6 If you are not satisfied with the results of your credit bureau challenge, you may file a "100 word statement" on your credit report explaining your side of the story. Creditors will read your statement and will take it into consideration. No creditor, that we know of, considers information given in a 100 word statement. The statement only serves to very some of the negative listings on the credit report.
Chapter Two: Creating Good Credit
Maybe you've recently finished restoring your credit or maybe you're young and haven't used credit yet. In either case, it's easy to build a positive credit history quickly and cheaply. Most times you can build a glowing credit report in just a couple of weeks. First, you must make sure that you're credit report is spotless. Most times, creditors will protect their liability by giving you several reasons for your credit denial. If you receive a denial letter that states, "Derogatory credit accounts & insufficient positive credit accounts," don't worry about the positive credit until you've repaired the bad credit. That creditor would've probably denied you regardless of your bad credit history.
If you have any bad credit on your credit report, see the Restore Bad Credit file in this web site. Now that your credit is perfect, you are ready to build a positive credit profile. Follow any or all of these techniques to stack your report with A-1 listings. But, beware, if you stack too many open accounts, or too many credit inquiries, you will be denied based on debt to income ratio and excessive credit inquiries. If you already have a problem with excessive credit inquiries, see the Erase Credit Inquiries file in this web site. Piggy-back on a Friend If you know someone (like a good friend or parent) who has good credit, you can "borrow" their good credit listings. This friend must have credit cards, and must trust you enough to allow you to become an "authorized user" on his credit cards. Just have your friend call his credit card company and request that you be placed on his card as an authorized user. A copy of the card will be sent and you may simply return it to your friend. Your credit file should soon show an open account with all of the positive history that your friend has created over the years with that credit card. A small footnote will show that you are an authorized user of that card.
Remember, though, when a new credit grantor goes to review your file, he may insist that the balance on the card appear on your debt to income ratio balance sheet. That shouldn't disqualify you for credit if your income is sufficient and you don't have a n excess of debt on your file. Get a Collateralized Credit Card Telephone the North American Consumer Alliance (NACA) at (801) 263-1373 and request their collateralized Visa card. You can get this card even if you have some bad credit still on your credit file. The Visa that NACA offers will allow you to utilize 150 % of the money which you place as collateral. So, if you put up $500.00 as collateral, you will be allowed to charge up to $750.00. Do the Credit "Waltz" Most banks will help you to build credit by allowing you to borrow against an amount placed in savings.
Here's how you can "waltz" $500.00 to $1000.00 into a good credit rating without tying the money for more than a few hours.
Step One. Deposit an amount over $500.00 in a bank savings account. Explain to your account representative that you would like to build good credit by taking out a loan against that amount. Make sure you understand the terms of the loan. You must make certain that at the bank will allow you to pay the note off within 90 days without an interest penalty.
Step Two. Take your new $500.00 loan to another bank and repeat Step One.
Step Three. Repeat Step Two until you are satisfied that you have enough accounts to constitute sufficient positive credit.
Step Four. After ninety days, return to each bank and ask that each loan be retired with the $500.00 being held as collateral. Seek Easy Credit Many stores extend credit without tremendous regard for the credit standing of the applicant. These stores usually can be found in industries with small products or traditionally high mark-ups.
Here are a list of creditors who will often extend credit to those without much credit history: Fingerhut Radio Shack Jewelers Furniture Stores Tire Stores Appliance Stores Easy credit Auto Dealerships
Chapter Three: Obtaining A Mortgage
Would you believe that it is usually much harder to qualify for a gas card than it is to qualify for a home loan? Like many, you may have already disqualified yourself from buying a home due to bad credit. Little do you know, you may be considered an "A" buyer by many brokers and lenders. Even if your bad or insufficient credit disqualifies you as an "A" buyer, a home loan at standard interest rates may still be within your reach. Homes are very secure collateral.
Because of this, the lenders feel more comfortable lending you money against the property. As opposed to unsecured credit lines, the lender will be primarily interested in your job security, debt to income ratio, and ability to pay a reasonable down payment. Your credit report will only represent minor role in your mortgage approval. On the other hand, much depends on the mortgage broker whom you choose. For example, you may walk into a bank, apply for a mortgage loan, and be turned down flat.
On the same day, you could step into the office of an independent mortgage broker, and he will pre-approve you for an "A" mortgage. Each mortgage broker uses one or more lenders to fund the home loans which come to him. The mortgage broker's job is to match you with the appropriate lender. For this service, you or the home seller will pay the mortgage broker "points". These points are equal to percentage points of the loan amount. If you are paying your broker "2 1/2 points" on a $120,000 home loan, that will come to a $3000 payment to the broker.
There is nothing wrong with making the mortgage broker (and your real estate agent) earn their fees. Almost invariably, there will be problems that arise with your mortgage. Your mortgage broker and real estate agent are responsible for coming up with creative solutions to those problems. Some mortgage brokers will look at your less-than-perfect credit and suggest that you accept a "B", "C", or "D" paper mortgage. This means that the loan will require a larger down payment, a higher interest rate, better debt to income ratio, and, of course, more points for the mortgage broker. These high-risk loans are not very good deals. Many times, with the right mortgage broker, you could've qualified for an "A" paper mortgage.
Remember, a very small difference in your interest rate will cost you tens or hundreds of thousands of dollars. Do everything in your power to qualify as an "A" paper lender. Even if your broker encourages you to go with the high-risk mortgage, don't cave in. You have other options. Certain negative credit items can kill a home mortgage. A bankruptcy that has taken place in the last one year usually represents a deal-killer. With some mortgage brokers bound by less permissive guidelines, even a two year bankruptcy will kill the deal. The good news is that the right lender wont care if you declared bankruptcy as long as it is at least one year old. Any unsatisfied court record, such as a tax lien or judgment, will become an obstacle to your loan.
Sometimes, if you can just show your broker that you have satisfied the lien or judgment, they will forgive one court record. Otherwise, you will need to restore your credit a little before you apply. Any kind of outstanding, delinquent debt will pose a major obstacle. Even if you have paid the debt within the last twelve months, it will probably still be a problem. Unpaid collections, charge-offs, deficiencies on a repossession, remaining balance on a foreclosure will all destroy your chances of "A" paper. If you go to pay the debt immediately before you go to get a home, the creditor who you are paying will not likely agree to remove the "Paid collection" listing on your file. In order to pay outstanding, delinquent debt such as this without jeopardizing a home loan, you will require the assistance of an attorney.
The best solution is to simply settle the debt a year before you intend to apply for a mortgage (see Eliminate existing debt. ) If you do this, the "Paid collection" notice will be one year old when you go to apply and the right mortgage broker will be able to get you into "A" paper. A foreclosure in your past is the ultimate black mark when you're applying for a home loan. If you have a foreclosure, you will need to delete that listing from the credit report before you can qualify for "A" paper (See Restore bad credit.) Any late pays that have happened within the last year will also present a problem.
You can usually explain one or maybe two thirty-day late pays, but if you have more, you will need help getting them removed. You can try to contact the creditors reporting the late pays and ask them to remove the listing. If you have a decent reason why the late pay is a mistake, then the creditor might delete the item for you. Do not bother to tell them why you were late. They will not care what happened to you. Your only salvation will be to convince the creditor that there was a mistake and that, by some logic, it was their fault that you were late. If you aren't making progress with your creditors, you will need the help of an attorney. You will be amazed at how easily a law firm can get your creditors to come around to your way of thinking. When a mortgage broker prepares your file for the underwriter (the lender), he will use a Standard Factual Report to check your credit.
The Standard Factual company can aid in the deletion of negative credit listings. If you get a creditor to agree tore move a derogatory listing, all you need is a letter or a phone call from the creditor to the Standard Factual company and the derogatory credit item will disappear from the Standard Factual report (not the credit report, though.) Most lenders will allow several negative items if you can adequately explain them. But, they only want to hear explanations that are medically related. If you can show the lender where an accident or illness caused a late pay or collection, they may let the derogatory listing slide. The good news is that any satisfied, derogatory credit listings that are over one year old (besides a foreclosure) can be overlooked by a lender. Any problematic derogatory listings can usually be overcome by you or a practiced law firm.
Don't accept high-risk paper until you have exhausted all of your options. Remember, you can save yourself tens of thousands of dollars by investing a little now to perfect your credit before you go into a new home. If you would like help, just telephone the Toll-Free Credit questions number: 1-800-653-9529.
Chapter Four: Erasing Credit Inquiries
Every time you apply for credit, and the credit grantor checks your credit report, a credit inquiry is placed on your file. Even if you receive a credit offer in the mail and you respond, your credit will almost certainly be checked and a credit inquiry will be added to your credit report. Credit inquiries are bad because too many of them can indicate to a creditor that you're "credit hungry" and may be in financial trouble.
Worse yet, the creditor has reason to believe that you received many of the credit lines that are showing as inquiries, and that many of those credit lines have not yet appeared on your credit report. Too many recent inquiries indicate to a potential credit grantor that your debt to income ratio may be much higher than you say. Most creditors disregard inquiries once they have been on your credit report for six months or more. This may not help your situation if you need credit right away or if applying to a creditor who looks at all of your inquiries. All credit inquiries should come off your credit report after two years.
If you're not willing to wait, you may take these steps:
Step One. First, you must find out which credit inquiries are getting in your way. Order all three of your credit reports following the instructions in the Order Your Credit Reports file on this web site. When your reports arrive, look toward the end of your credit report to find the inquiries. Some of the inquiries are only promotional and will not be shown to prospective credit grantors. You need not worry about those. Identify only the inquiries that are shown to credit grantors. You should recognize some of these as places where you applied for credit, but others may be a complete mystery to you.
Step Two. You must then find the addresses for each credit inquirer. Your TRW credit report will list addresses for each of the inquirers. Your Trans Union and Equifax reports will show no addresses for credit inquirers. Match your TRW with your Trans Union and Equifax reports; you should be able to use the same addresses on the inquirers that are listed on TRW and on one of the other credit reports. If some of the addresses don't show up on TRW but do show up on either Trans Union or Equifax, you will have to call the corresponding credit bureau to find the address. It is almost impossible to get a live body on the telephone at Trans Union, but Equifax has an 800 number listed at the top of their reports. If you have a inquirer on your Trans Union and you can't reach Trans Union by phone, then you might try calling the 800 directory (1-800-555-1212) and request the 800 number for the inquiring creditor. Once you have collected all of the addresses for each inquiring creditor on each credit report, you are ready for step two.
Step Three. Now you must prepare letters to each inquiring creditor asking them to remove their inquiry. The Fair Credit Reporting Act allows only authorized inquiries to appear on the consumer credit report. You must challenge whether the inquiring creditor had proper authorization before pulling your credit file. You may write the inquiring creditors a letter such as this:
Re: Unauthorized Credit Inquiry
Dear American Express,
Recently, I received a copy of my TRW credit report.
The credit report showed a credit inquiry by your company that I do not recall authorizing. I understand that you shouldn't be allowed to put an inquiry on my file unless I have authorized it.
Please have this inquiry removed from my credit file because it is making it very difficult for me to acquire credit. I have sent this letter certified mail because I need your prompt response to this issue.
Please be so kind as to forward me documentation that you have had the inquiry removed. If you find that I am remiss, and you did have my authorization to inquire into my credit report, then please send me proof likewise.
Thanking you in advance,
Jane Caveat-Debtor
Step Four. Some of your creditors may provide documentation that a credit inquiry was authorized by you. Read the authorization that you signed very carefully. If there is any ambiguity, you can write back and argue that the inquirer's authorization form was too complicated and not easily understood by the layman. You can threaten to contact the state banking commission and complain about a deceptive and unclear authorization form if they don't remove your inquiry. Some creditors will try to ignore your challenge. Be sure to send each letter Certified Mail Return Receipt Requested and keep close track of the time that you sent the letter. If the inquiring creditor doesn't respond within about thirty days, you will have ample grounds to call the inquiring creditor and demand some action.
At that point, it's almost irrelevant whether or not you authorized the inquiry. Then it becomes about the creditor's lack of response to a consumer dispute. Be sure to hold your ground and demand that the inquiry be immediately removed or you will complain to the state banking commission or similar authorities. Many of your inquiring creditors may simply agree to delete the inquiry as a courtesy or because they cannot or will not verify your authorization. That is the goal. Remember, it is not likely that you will need all of your credit inquiries removed - just enough to keep you from being denied credit.
Chapter Five: Settling Unpaid Debts
Many times we have been asked, "Can I just delete the negative listing without paying the debt?" In most cases, the question comes from someone attempting to dishonestly escape a legal obligation. While it is true that negative debt listings can be deleted from the credit report - even while the debt remains unpaid - it is also true that these listings stand a good chance of reappearing on the credit file sooner or later. There is a better alternative than attempting to escape the debt. You can create a true win-win situation by settling the debt with the creditor. It is our experience that the average consumer will settle a debt for about 75 cents on the dollar. It is also our experience that a professional negotiator will settle an average debt for about 60 cents on the dollar including their fee. There is rarely a good reason to attempt your own debt settlement. Creditors will not take you half as seriously as they will take your attorney.
Handled properly, you will save time and money by seeking a good attorney to negotiate with your creditors. If you need debt settlement assistance, call Lexington Law Firm at 800-653-9529 for very low cost debt settlement. You will be money ahead if you get the right help.
Understanding the True Risks and Realities of Overdue Debts
Most consumers overestimate the risk involved with overdue debts. They worry about possible repercussions such as wage garnishment and property seizure by their creditors. When the debt relates to a secured property, such as an automobile or a home, the possibility of repossession is quite serious, but unsecured debts, such as credit cards and deficiencies are much less pressing. In fact, very few creditors will push all the way to a garnishment on a relatively small unsecured debt. Garnishment and seizure are a creditor's most terrifying weapons used to collect past due debt, but they are expensive and time-consuming.
Even if the creditor went all the way to recover the debt, they probably wouldn't be able to recover enough to offset their collection costs. Therefore, there is very little risk of a creditor taking an unsecured debt past simple collections. It is important to remember, however, that the creditor would be in his rights to get a garnishment and seize property, even for a small debt. There is some risk of financial reprisals when a debt goes unpaid. Many consumers fold under the perceived strain of unpaid debts. Hundreds of bankruptcies take place in the United States each week for amounts under $5000.
These consumers are so intimidated by their creditors, that they flee to bankruptcy, even though bankruptcy can bring total financial devastation for at least the next ten years. If these same consumers had simply waited, and ignored the threatening letters and telephone calls, they would have realized that their creditors were all bark and no bite. Bankruptcy is the best option for some few consumers, but it is much overused. And, when a consumer files for bankruptcy, everyone loses - especially the creditors. The risks of judgments, garnishments, and property seizures must be properly balanced against the likelihood that such drastic collection measures will ever happen. The risk, and the decision to take that risk, are entirely yours if you're in such a position.
Which Debts Can Be Settled? An unsecured debt is a debt where their is no collateral. Unsecured debts include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. Most unsecured debts can be settled. But, utility companies generally wont settle for less than the full balance. There are some few creditors who will never compromise, but most will take a less-than-full payment as settlement in full to close a troublesome account. Secured, collateralized debts, such as a home or automobile, are another story.
If the creditor can simple repossess the property, why should he negotiate? You can often renegotiate a short payment relief with a secured debt, but don't attempt to settle the account while you still possess the property. Also, the creditor must have a good reason to want to settle. If the account is paid current, and there is no recent history of late payment, it will be difficult to convince the creditor that it is in their best interest to settle. This should not be read as are commendation that you stop paying your bills that are current. If you stop paying your current bills, you will almost certainly make your credit situation worse. Perhaps bad credit is not an issue for you at this point and you feel you musts top paying your bills in order to settle them and get back on top of your debt load. If this is the case, you make such a decision at your own risk.
Getting the Upper Hand As time passes, the creditors will likely stop calling and the debt will be filed away for future attention. The longer the debt remains uncollected, the better your chances will be of getting a good settlement. Eventually, the creditor will consider the bad debt a loss in order to receive a corporate tax write-off. This does not mean that you don't owe the debt. The corporation may then collect on the debt themselves, sell or assign the debt to a collection agency, press for a judgment and garnishment, or temporarily ignore the debt. The course of action chosen by the creditor will vary widely between corporations and debts. In our experience, the consumer rarely has sufficient funds to repay a debt in full when a creditor demands payment. In many cases, much of the debt represents interest and penalties accrued while the consumer was unable to pay. It will be in the best interests of both parties if a reasonable arrangement for settlement can be reached. However, you cannot expect to reach an affordable settlement if the creditor thinks he has the upper hand. If, for example, you tell a creditor that you really need to get this debt settled to get into your dream home, you can forget any kind of settlement.
The creditor will insist on the full balance. It will be in your best interest if the creditor believes that you have very little money and you are teetering on the edge of bankruptcy. The attorney who handles your settlements should approach each creditor as though this is their last chance to compromise, and get something out of your debt, before you declare bankruptcy and they get nothing. Also remember that time is on your side. Never look too eager to settle. Take plenty of time to reach an agreement. Don't accept the first, or even second, settlement offer. Make sure that they are the ones calling you to push the deal forward. You have the natural advantage in debt settlement, because you have something the creditor wants. You must hold out for your terms until the creditor gives you what you want. Once you've written that settlement check, your advantage disappears. So, get your term s in writing before you even open your checkbook.
Using Settlements to Restore Your Credit
The credit reporting system gives consumers very little reason to pay their debts. If the debt were ignored, the consumer would have a good chance at never hearing from the creditor again, and, after seven years from the date the debt was written off, the negative credit listing would disappear. If the consumer were to pay the debt, then that seven year period would begin all over again. A paid collection or charge off will trigger credit denial as quickly as an unpaid collection or charge off. It's like getting time added to your sentence for good behavior.
Fortunately, creditors make their profits by collecting from their customers, not reporting negative credit information. Because creditors can see this "catch-22" situation, they will often agree to delete any negative listing upon settlement of the debt. Collection agencies will always agree more readily to delete the negative listing than banks or credit cards. The only case where you should have a real problem with collection agencies is when they represent a larger, institutionalized creditor. Many creditors, though, have an agreement with the credit bureaus that they will not allow a negative listing to be deleted upon settlement.
Larger creditors, such as huge credit cards or banks will require more pressure before they will agree to delete a negative listing, but virtually every creditor will give in with the right amount of convincing. Every creditor who reports to the credit bureaus can also change the information they report. In most credit organizations, there are dozens of people with the authority to make changes on the credit report. Anything a creditor reports, a creditor can change.
You may take two approaches to having the negative information deleted upon settlement of a debt: pre-notification of terms and post-notification of terms. Pre-notification of terms: you tell the creditor up-front that you will require the deletion of the entire negative listing as a part of the payoff. The agreement to delete the listing and consider the debt settled is documented in writing and signed before the payoff takes place.
Advantage: Time will be saved and you wont be disappointed at the last moment. It is also less likely that you will have to fight the creditor later to actually delete the negative listing.
Disadvantage: When the creditor discovers that your credit is important to you, he will usually ask for a larger settlement amount - sometimes full balance - to meet your terms.
Post-notification of terms: once settlement negotiations are complete, the creditor receives the agreed payment with the requirement that the negative listing be deleted attached to the check. This approach requires use of a "conditional endorsement" document (drafted by your attorney) notifying the creditor of your terms.
Advantage: You will almost always get a better settlement amount. The creditor will often be tempted by the payoff when the terms arrive and will deposit the check without blinking at the new terms.
Disadvantage: The creditor often hangs up on the new term and might send the settlement check back. The creditor might still ask for more money, or reject on the deal altogether. If the creditor simply deposits the check without intending to follow through with your new term, you will have to fight the creditor later and force him to delete the negative listing. Never expect a creditor to meet an agreement that was made verbally.
Everything must be in writing and, even then, you will probably have to fight to make the creditor live up to his end of the bargain. You may find that some of your creditors are willing to hold out longer than you are willing to hold out before agreeing to delete the negative listing from your file. In other words, they will not agree to delete the negative listing under any circumstance. Once again, let it be said that every creditor will give you what you want if you speak to the right person long enough and you make the right offer.
But if you are on a time-line, and your attorney can't get them to agree to full deletion, you have a couple of other options: List the Account as "Paid" only. You may counter-offer that the creditor simply list the account as "Paid" rather than delete it altogether. This is a true indication of the status of the account and many creditors will concede and agree to this wording. A "Paid" status is still very negative for a collection account or an account that will show "Paid Charge-off" or "Paid repossession." You should only agree that the account show "Paid" if all other negative notations, such as "Charge-off," "Repossession," late notations, and "Collection," are deleted at the same time. A simple "Paid" notation on a regular trade line is neutral and should not hurt your credit. List the Account as "Settled" only. You may counter-offer that the creditor simply list the account as "Settled" rather than delete it altogether. "Settled" is an inherently negative listing but not as negative as "Paid charge-off." Don't agree to a "Settled" listing until you have exhausted all other possibilities. "Settled" will still trigger a credit denial. You should only agree that the account show "Settled" if all other negative notations, such as "Charge-off," "Repossession," late notations, and "Collection," are deleted at the same time. If you agree to a "Settled" notation, you must continue to work hard to delete the notation through the credit bureau dispute process. List the Account as "Paid Charge-off" or "Paid Collection" or "Paid was 30, 60, or 90 days late." This will be the creditor's first choice, and your last choice, of what to place on your credit report once you have paid. These notations are almost as damaging as showing the same debt unpaid. It is very common, though, for an account to be deleted (through credit bureau disputes) once it has been paid. The creditor now has no compelling reason to keep the negative listing on your report. For this reason, it is still usually a good idea to settle even if the creditor wont budge on deleting or positively modifying the negative listing.
Chapter Six: Restoring Bad Credit
What are the risks of doing it yourself? Ordering your credit reports. Organizing Yourself Analyzing your Credit Report Drafting your Disputes Sending your Disputes Getting a Response Seeing Results Fourth Quarter Strategies Settling your Debts Disputing the Information with the Source Submitting a 100 Word Statement with the Explanation What are the risks of doing it yourself? Most how-to credit restoration books include example form letters for the reader to use in disputing his negative credit.
But, employees of the credit bureaus are usually the first in line at the newsstand to buy the new how-to book. Therefore the credit bureaus immediately spot these standard forms. Once the bureau has zeroed in on the structure of the form, any such letter will immediately earn a "frivolous or irrelevant" response from the checker. Many times, the credit bureau will see this as a sign that the customer is "yanking their chain" and the checker will "red flag" the client's credit report for future reference.
These instructions will not provide for specific techniques or form letters, as the credit bureaus have proclaimed publicly that they can spot such forms. Rather, we provide general outlines and strategies that you may follow as you dispute your negative credit. However, it is important for you to understand that there are risks in restoring your own credit. These risks are greatly multiplied if you cannot dedicate sufficient time to the task, or if your organizational skills aren't top notch. Countless do-it-yourselfers make seemingly harmless mistakes in the process of disputing their credit, only to make their credit files worse - ultimately seeking professional help after too much damage has been done.
These risks include: - Red flagging the individual file as someone attempting credit repair.- Unwittingly self-verifying negative information.- Making statements that create a fraud indicator, hawk-alert, or trans-alert.- Adding statements to the negative listings which do nothing but substantiate them.- Doing anything to tip the credit bureau that you are systematically attempting to restore your credit. While restoring your own credit may save you money, if it is done improperly it can cost you thousands of dollars in lost time, hassle, and you may do more damage than good to your credit. Ordering your Credit Reports Before you begin the battle, you must study the battlefield. The struggle to restore your credit will be fought between the lines of your three credit reports.
These reports will cost $8.00 each, unless you live in Maine or South Dakota, where the reports will cost $2.00 each. As mentioned before, the credit bureaus change addresses regularly, so we will provide the current credit report ordering addresses, but you may wish to telephone the credit bureaus to confirm that these addresses are still correct (phone numbers available through www.bigyellow.com TRW PO Box 949-0949 Chats worth, CA 91313 Trans Union PO Box 390 Springfield, PA 19064 Equifax PO Box 105873 Atlanta, GA 30348 You may also obtain credit reports for free, but this method only works if you have recently been denied credit. If you have been denied credit in the last 60 days, you may write to the credit bureau listed on your denial letter and request a free copy of your credit report. It may take a little longer than if you simply purchased the report, but it will save you $8.00. If you telephone the credit bureau to order your credit reports or to confirm their mailing address, you will most likely reach their phone mail system.
However, if you do speak to a credit bureau representative about any issue, be careful. Say nothing that would indicate you are attempting to restore your credit. Don't try to submit your dispute over the telephone; it will be hard enough to get it right in writing, even with plenty of time to weigh your words. Be sure to send your request for a credit report via certified mail, return receipt requested. Your local post office will provide you with the necessary forms. Copy your letters and checks and file them according to the date they were sent. The credit bureaus will, very often, take your check and send you nothing. Don't despair, this is just another skirmish in a long battle. If you receive no credit report after you have followed these steps and waited about three weeks, then you must send a follow-up letter, again certified mail, return receipt requested, demanding that the credit bureau forward a credit report immediately. Include a copy of your check and your original letter. Remember, you have the right to purchase and see your credit report.
Organizing Yourself
As soon as you have ordered your credit reports and copied your order letters and checks, you must create a precise organizational system to track your correspondences with the credit bureaus and your creditors. Purchase a large, desk blotter-size calendar and a fine-point pen. On each date box, reserve the top portion of the box for correspondence deadlines, such as the date you expect to receive a credit report from a particular bureau, or when you expect a reinvestigation to be completed. Reserve the bottom portion of the date box for notations, including actions you have taken, such as when you ordered your credit report, or when you sent your dispute letter. Purchase a small file cabinet to keep your credit bureau and creditor files organized. You should open a file for each credit bureau, two files per credit bureau if you are working as a couple.
Every time you receive a credit report, credit bureau correspondence, or you send a correspondence, a copy of the document must be dated (by date sent or received by you) and filed in the appropriate file. Keep all the documents in chronological order in the file. Open another file for each creditor. You will also be communicating with the individual creditors. Follow the same rules for document filing as mentioned above for credit bureaus. Every time you have a telephone conversation with a creditor, you must document the contents of the conversation by writing the name of the person you spoke with, his or her position, the date and time of the conversation, what was said, and what you agreed to do. You should also get the name of the person's superior, and the superior's direct phone number as well. This documentation should be noted on a single sheet of paper and filed chronologically in the creditor's file.
Analyzing your credit report
When you first receive your Trans Union and Equifax credit reports, you will be totally lost. The information is coded in a way that is not immediately readable by the average consumer. Each credit report should arrive with a key that interprets the codes and indicators on the credit report. Sit down with the report and the key and study it until you understand what each number and code means. Don't write on your original credit report -- yet. Make all of your notes on a copy of the report. You will be sending your original report with your dispute letter, so you should make at least two copies of each new report. The original goes with the dispute, one copy is for notes, and the other copy is kept clean for your file. Gather a yellow and orange highlighter pen. Whenever you identify a negative listing, mark it in yellow on your scratch copy of the credit report. Often, it is difficult to tell if an item on the credit report is negative or positive.
The following table will help you identify every negative listing on your credit reports: Negative Credit Indicators If the listing contains one or more of these indicators, then the listing is negative. If the listing contains none of these indicators, then the listing is positive. TRW Credit Report any item marked with an asterisk any inquiry Trans Union Credit Report any item rated higher than I1, M1, or R1. any item listed as repossession, foreclosure, profit and loss write-off charge-off, paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy any collection amount, whether paid or not. any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment. any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right. any inquiry. Equifax Credit Report any item rated higher than I1, M1, or R1 (such as R2 or I9). any item proceeded by a ">>>" icon. any item listed as repossession, foreclosure, profit and loss write-off charge-off, paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy. Any collection amount, whether paid or not. any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment. any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right. any inquiry. Once you have marked all negative items on your credit report with a yellow highlighter, you may begin looking for inaccuracies and inconsistencies in your credit report. Whenever you identify an inconsistency or inaccuracy on your credit report, mark it with the orange highlighter. An inaccuracy is something you know is not true, such as a listing that doesn't belong to you or a listing showing the wrong balance. An inconsistency is when the same information on the credit report contradicts itself, such as a listing showing 12 thirty-day late notations when the listing only shows 4 months reviewed. Later, when you are constructing your dispute, you can use these inaccuracies and inconsistencies to lend credibility to your challenge.
Drafting your Disputes
Don't wait for all of your credit reports to arrive before you begin to analyze and dispute them. Remember, you will need to invest two things to restore your credit: money and time. Not only will you invest substantial time in analyzing your credit report, preparing your disputes, speaking with creditors, and tracking your results, but you will invest calendar time. You want every day to eat away at your bad credit. That can only happen if you never procrastinate any step of this process. If you procrastinate drafting your disputes, you will never finish the job. If you tend to procrastinate, seek professional help to restore your credit.
After you've analyzed your reports and marked every negative listing in yellow and every inaccuracy and inconsistency in orange, you may begin to develop your dispute letter. As previously mentioned, we will provide no form letters for disputes as they will quickly be spotted and rejected by the credit bureaus. Rather, we provide general strategies which have proven effective in forcing the credit bureaus to fulfill their responsibility and conduct an investigation into your disputed items.
Fundamentally, you must follow these rules: The Ten Commandments of Disputing Your Credit
Commandment One: Never lie in your disputes or on your credit applications. In many states, it could be a crime for you to lie when disputing your credit report. Therefore, you are cautioned that you must never lie or make misleading statements when disputing your credit report or completing a credit application. In most cases, it is a federal crime to lie on a credit application. Furthermore, it is unnecessary to lie when disputing your credit report. Remember, you have the right to dispute your credit report so long as you have reason to believe that is in unverifiable, inaccurate, or obsolete. In order to dispute information that is technically accurate, but should still be investigated and deleted on the basis of verifiability, you must invent other means of disputing the listing besides claiming that it is "not mine" or "was never late."
Commandment Two: Always indicate whether the disputed listing is being challenged as "not mine" or "not late." While you must never say that the account isn't yours or that you were never late unless you have reason to believe that statement is true, the credit bureau must know if you are disputing the existence of the listing or just the information within the listing. They cannot begin an investigation unless they know whether you believe the listing doesn't belong on your report at all, or if you believe the information on the listing should be changed. If you are unclear about the nature of your dispute, the credit bureau will promptly return your letter. If you dispute a listing on the basis that you were "not late," and if the credit bureau fails to verify the listing, then the listing will be perfected and appear as a positive listing. If you dispute a listing on the basis that it is "not mine," and if the credit bureau fails to verify the listing, then the listing will disappear from the credit report altogether. Since a positive listing is much better than no listing at all, you should dispute all simple late pay listings as a "not late" type of dispute. All others must be disputed on the basis that they may not belong to you.
Commandment Three: Always tell the credit bureau the desired outcome of the investigation. You must always include what you would like done with the listing. There are two options: delete the entire listing, or erase the late pay notation within the listing. Don't bother challenging the information within a collection listing, charge-off, court record, repossession, foreclosure, or settled account. As the basic nature of these listings is negative, changing the information within the listing will yield no improvement. Severely negative listings, such as these, must be disputed on the basis of complete deletion or not be disputed at all.
Commandment Four: Always provide a reason for your dispute. If you don't give some kind of explanation as to why you think the credit report is wrong, then the checker may return or ignore your dispute.
Commandment Five: Always include indicators of authenticity in your dispute. Don't forget that the job of the checker is to reject irrelevant disputes and to investigate the bona fide disputes. You may ensure that your disputes sound authentic by adding things that only a true, frustrated consumer would write, such as "my son's a banker, and he mentioned that I could write you and you would clear up these mistakes." Original indicators of authenticity cannot be listed here, or they would cease to be effective, but you must get creative and always include sentences or phrases that will convince the credit bureau that you're for real.
Commandment Six: Never sound like an expert. The credit bureaus receive over 10,000 disputes per day, and your dispute should look like any other. If you quote legal statute or you remind the credit bureaus of your rights under law, the checker will suspect that you read a book about credit repair or you are using a credit repair company. If the checker believes you are attempting to restore your credit, your dispute will be tossed in the "frivolous or irrelevant" bin.
Commandment Seven: Become more insistent and more threatening with each dispute. As you submit one dispute after another, it will become increasingly difficult to get the checker to initiate an investigation. Your first one or two disputes should be friendly and polite. Just like any other consumer, you can become frustrated and threatening as time passes. You may threaten to hire an attorney; you may threaten to complain to the FTC and your state's attorney general, etc.
Commandment Eight: Do not bombard the credit bureaus with disputes. Sending one dispute right after another is wasteful and counterproductive. You may send no more than one dispute every ninety days. If you dispute more often, the credit bureau will simply return the dispute as "frivolous or irrelevant."
Commandment Nine: Use inaccuracies and inconsistencies as examples of how the credit listings are wrong. Remember that it will do you no good to change minor information contained in a severely negative listing. Use inaccuracies and inconsistencies as a basis of dispute. You will do well to use the other two credit reports to establish inconsistencies by comparing the other credit report to the report you are disputing. Remember, though, that you can only use another credit report for comparison if that report doesn't confirm negative credit listings that you are attempting to dispute.
Commandment Ten: Create and utilize other techniques that help further the idea that the dispute letter is from a truly wronged and disadvantaged consumer. The checker is only interested in investigating disputes from consumers who have totally inaccurate credit reports due to credit bureau errors. In short, the checker only wants to help consumers who have a good case against the credit bureau and might likely sue them.
According to the Fair Credit Reporting Act, the credit bureaus should legally investigate all disputes that are not "frivolous or irrelevant." In practice, the checker will only do what he or she has to do in order to avoid a lawsuit. For this reason, it becomes necessary to contrive all manner of strategy to compel the checker into doing what the credit bureaus should be doing anyway -- which is to conduct an investigation into every reasonable dispute.
There are many other techniques used by credit restoration professionals, but you must figure those out on your own. It would render those techniques useless if they were published. As you may have noticed, only general strategies have been provided. If you earned a high Success Rating on the self-rating questionnaire Do you need the help of an Attorney , then you should be prepared and inclined to invent your own, effective techniques following the guidelines set forth in the Ten Commandments.
Your dispute will be taken more seriously if you print it from your computer. If you don't own a home computer, seek a professional, as writing your disputes by hand or on a typewriter will take up enormous amounts of time and may yield disappointing results. With each copy of your credit report, you should find a form supplied by the credit bureau for disputing credit listings. You should not use these forms for your dispute letters. The form may force you to lie about your credit situation and thereby possibly break the law. Also, the forms are not specific and they are not taken as seriously by the credit bureau checkers. Prepare your disputes on your personal computer, preferably on personal stationery. You should send an original copy of your credit report with the dispute letter. You may now mark the original report to make it easier for the checker to see any inconsistencies, inaccuracies, or notes. Remember not to verify any severely negative listings by correcting minor information on the listing. Make sure all your personal information is either on the credit report accompanying your dispute, or on the dispute letter itself. This important information includes: your full name, date of birth, current address, and social security number.
As you draft your dispute letters, remember that the checker is only interested in investigating disputes from consumers who have totally inaccurate credit reports due to credit bureau errors and that those consumers represent a threat to the credit bureau. Sending your Disputes When you mail your dispute, you should include the original copy of the credit report with your dispute letter. You will be amused to note that the credit bureaus take space in their literature to convince you that your credit cannot be "repaired." In TRW's words, "No one can have accurate, current, and verifiable information removed from your credit report." Take note that even TRW admits that accurate information can be removed if it is not verifiable. You must send your dispute letters via certified mail, return receipt requested. This means you must go to a post office to mail every dispute. Certified mail, return receipt requested, will cost more than a dollar extra, but it will demonstrate that you are serious about your correspondence. Without certified mail, return receipt requested, you would have no record of the credit bureau receiving your letter nor the date they received it. When you receive the return receipt in the mail, make sure to staple it to your copy of the original dispute in your file. Don't hold disputes until you have a full set of credit reports. Send each dispute as soon as it is ready, as long as it is 90 days after your last dispute to the credit bureau.
Getting a Response You will receive one of eight types of response to your dispute:
No response at all.
A stall letter asking for more information.
A rejection based on the timing of your dispute.
A rejection letter on the grounds that the dispute is "frivolous or irrelevant."
A rejection based on the grounds that the credit bureau believes you are manipulating the system.
A letter announcing that your investigation has begun.
A letter announcing that your dispute has been forwarded to the appropriate credit bureau.
A new credit report showing the results of an investigation.
Don't be discouraged if you receive multiple stalls or rejections. Remember, restoring your credit isn't easy. If you decided to restore your own credit, you knew from this text that you would encounter delays. Each case requires a different response. However, you should remember this rule of thumb: the credit bureau is a bureaucracy; you shouldn't expect the credit bureau to react as though it were an individual. There is no single person handling your case. If you type out a ferocious counter-letter in response to the credit bureau's rejection or stall, the credit bureau employee who receives it will have little idea why you are fuming.
Usually, it is better to simply write the dispute again. Here are some guidelines to reacting to the eight types of credit bureau responses:
1. No response at all: 52 days after you sent your dispute, if you haven't heard anything from the credit bureau, you may assume that your dispute was ignored. There is really little you can do except to document the lapse and draft another dispute. This dispute should mention the previous ignored dispute as well as certified mail number of that dispute. The new dispute should be more threatening than the first.
2. A stall letter asking for more information: Often, if your dispute alleged that someone else's file was merged with your own, the credit bureau will send this type of stall. A new dispute should be drafted basically repeating the first dispute (but doesn't allege that your file was merged) and includes all information requested by the credit bureau response. You may remind the bureau that this information was previously included in the credit report that accompanied the first dispute. This second letter should be more threatening than the first dispute.
3. A rejection based on the timing of the dispute: If you sent a dispute before 90 days after your last dispute, you will likely earn this response. Also, if the credit bureau sees that you have sent in many disputes, they may choose to brush you off with this rejection. You must respond by becoming more demanding. If they had finished the job properly with the first dispute, you wouldn't be forced to dispute the listings again! Send another dispute, much like the first, and insist on immediate action.
4. A rejection based on the grounds the dispute is "frivolous or irrelevant." This type of response would infuriate any consumer. Maybe the bureau thinks you are working with a credit repair company, or maybe they think that you will not stand up to an initial rejection, and they may even ask you to pay for their investigation. You must prove them wrong by becoming even more insistent and threatening in your disputes. Send the same dispute over again with some additional substantiation.
5. A rejection on the grounds that the credit bureau believes you are manipulating the system: The rejection letter may imply that you are working with a credit repair company, or that you are unduly barraging them with disputes. As a consumer who has been treated unfairly, these are not your problems. Insist, in another dispute, that the credit bureau is responsible for conducting the investigation and they are taking a very unwise risk in rejecting your dispute. All you want is your credit report properly corrected.
6. A letter announcing that an investigation has begun. Trans Union will usually send these letters as a clever way of extending their 30 day investigation period. You really have no choice but to accept their timetable. Just place the letter in the file and watch closely for the response to arrive on the date indicated in the letter. If no response comes, see item number one on the list.
7. A letter announcing that your dispute has been forwarded to the appropriate credit bureau. If there is a local credit bureau involved in your dispute, the main credit bureau will forward your dispute to that bureau for verification. Count on an additional two week delay when this occurs.
8. A new credit report showing the results of an investigation. This is the desired result. When you receive your new report, you should copy and carefully analyze the credit report for deletions or changes to perfect.
Seeing Results
The easiest way to analyze the results of a successful challenge is to compare the newly investigated report with the previous report. You may simply go down the list of negative items and note the absences of negative listings or listings that were negative, but have become positive. You may also determine improvements by comparing information within the same credit report. Equifax and Trans Union now usually provide a list of items challenged and whether or not the items were changed, deleted, or verified as accurate. TRW has a list of items challenged at the back of the credit report. You may compare this list with the negatives remaining on the credit report to determine what progress has been made.
As you receive the results of the credit bureau investigation, you will note that each disputed listing will have been handled in one of five different ways:
1. The disputed listing was not investigated. Perhaps your dispute was not sufficiently clear, or perhaps the credit bureau simply chose to ignore your dispute. In either case, you will need to dispute the item again in your next dispute letter.
2. The disputed item was investigated but verified as accurate. The creditor may have responded to the credit bureau's request for reverification, or the credit bureau may have simply faked the investigation to get you off their back. You have the right to dispute the listing again at a future time. In fact, the FTC has determined that the credit bureau may become responsible, in future disputes, to look deeper into the disputed item than simply asking the creditor to check their computer records.
3. The disputed listing was investigated as to the correctness of the information within the listing such as late pay notations, and the listing was found to be inaccurate or unverifiable. In this case, the negative listing will now show up as a positive listing. This is the best possible outcome because now you will enjoy good credit once your report is cleared.
4. The disputed listing was investigated as to whether or not the listings belong to you, and the listing was found to be inaccurate or unverifiable. In this case, the negative listing will disappear from the credit report altogether.
5. The disputed listing was deleted or improved to perfect, but the negative listing was later verified and re-listed on the credit report. If a listing is verified by the creditor after the thirty day investigation period, the credit bureau can replace the listing on the credit report. When this occurs, see item number two. Whatever your response, restoring your credit is a cycle. If you receive disappointing results, remember that it took you some time to create your bad credit, and it will take a little time to restore your good credit. Collect your results, mark your calendar, and wait for the next acceptable dispute date. Don't forget to allow at least sixty days between disputes.
Fourth Quarter Strategies
The more you dispute the negative listings on your file, the more difficult it becomes to get a new investigation started. As you find the frequency of investigations and deletions dwindling, you must consider these Fourth Quarter Strategies.
Threats
Remember, the checker must sense that you are a legal threat to the credit bureau; that you might sue them if they don't follow through with their obligations. There are several reasonable threats to the credit bureaus that may make them stand up and take notice of your dispute -- regardless of how many times they've previously looked into the negative listing.
1. "I have contacted a lawyer and am considering a lawsuit." Every day the credit bureaus are embroiled in consumer lawsuits, costing the credit bureaus hundreds of thousands of dollars in awards given to consumers. The credit bureaus pay even more to maintain the legal staff necessary to handle these cases. Technically, you may sue the credit bureaus every time they fail to comply with the Fair Credit Reporting Act. However, the most viable lawsuits are those from consumers with negative consumer information not belonging to them listed on the report. You must be careful about threatening to sue anyone. If you say, "I am going to sue you," you must really be intent on filing suit. You may, in any case, express your consideration of a lawsuit or steps you have taken to proceed with preliminary work, such as seeking counsel with an attorney. This threat shouldn't be overused, but don't forget that an average consumer being mistreated by the credit bureaus would almost always make such a threat. If you fail to mention the option of a lawsuit, your dispute will lack punch, especially after you have submitted numerous previous disputes.
2. "I am filing a complaint with the Federal Trade Commission." The Federal Trade Commission (FTC) regulates and monitors the activities of the credit bureaus. The credit bureaus won't be crushed by a single complaint, but they would rather limit the number of complaints received by the FTC each year. As it now stands, the credit bureaus are the number one source of consumer complaints to the FTC. In order to file a complaint with the FTC, you may write: Federal Trade Commission Pennsylvania Ave. and Sixth St., N.W. Washington, D.C. 20580 WWW: www.ftc.gov Make sure that your complaint is brief and to the point. You may wish to include a copy of the complaint in your dispute letter and threaten to mail the complaint if you don't receive satisfaction within thirty days.
3. "I am preparing letters to my state senators and representatives." Every year, the credit bureaus fight off new legislation which would further restrict their practices and place greater financial penalties on their mistakes. Presently, they enjoy only the constraint of a 25 year-old statute that is, advantageously for them, outdated. In Congress, when a new, tougher, Fair Credit Reporting Act reaches the floor, the credit bureaus are forced to labor to keep the new act from passing. So far, they have succeeded in preventing changes to the Fair Credit Reporting Act, but as time goes on, and more consumers complain to their congressmen, fewer congressmen are willing to listen to the credit bureaus. Letters to federal and state congressmen that express outrage over the conduct of the credit bureaus will eventually change credit reporting as we know it. The credit bureaus want to delay that change, and they will shrink at your decision to write your local statesman. Feel free to send copies of your complaint letters with your dispute.
Settling your Debts
If you haven't yet settled your outstanding, delinquent debts, you must seriously consider doing so. Many of your creditors will see the negative listing on your credit report as a collection tool, and they will do whatever it takes to keep that negative listing on the report, even if it requires verifying a thousand investigations. Even if you delete a negative unpaid listing, that negative listing may well reappear when the creditor or collector settles the account, seeks a judgment, or passes the amount to collections. Please see Settling Delinquent Debts for more information.
Disputing the Information with the Source Sooner or later in this process, you should dispute the credit information with the creditor who reported it. If you are in a hurry to restore your credit, you should be writing your creditors from day one. If you have worked with the credit bureaus for some time and the results are lagging, now would be a good time to take the fight directly to the source.
Submitting a 100 Word Statement of Explanation
Most do-it-yourself credit repair manuals recommend that you file a 100 word statement to be added to your credit report explaining the circumstances of the negative credit that remains. After all, the Fair Credit Reporting Act does give you that right. We have never seen a creditor who bothered to read or consider the 100 word statement. In fact, many creditors won't look much beyond the automatic credit bureau rating that appears with your credit report when you apply for credit. This instruction does not recommend that you file the 100 word statement. It would only serve to self-verify information that should come off through repeated disputation of the listing. If you have previously submitted any 100 word statements, they should be the first items you remove.