Take Control!
Don’t imagine that other people always play fair. Look out for yourself. Knowing your legal rights can make all the difference in the world. A nationally recognized credit repair expert explains some essential rights and remedies that can save you money and put you back where you belong - in control.
Credit Repair and FCRA Reporting Limits
The Fair Credit Reporting Act (FCRA) is the law that stipulates the amount of time derogatory information can remain on your credit report. Most people attempting credit repair are aware that most derogatory information can report for up to seven years. This is easy to calculate for a simple item like a late payment. If you were 30 days late on a credit card payment in January of 2001 the late payment can continue to report until January of 2008.
Credit Repair and Modified Reporting Limits
The FCRA offers a different approach to calculating the reporting period for charged off accounts and collections. If you are in a credit repair program and trying to calculate drop-off dates you need this information. Rather than limiting the reporting period to seven years for these two events, the FCRA instructs the credit bureaus to count seven years plus 180 days from the original default date. And there are good reasons...
Charge Off Reporting Limits
A charged off account is unique inasmuch as it is not an isolated event but rather the outcome of an earlier default. The seven year plus 180 day rule creates a measurable start date for reporting period calculations. So, if you were 30 days late on a credit card payment in January of 2001 and never made another payment, the last date derogatory information can show on your credit report is June of 2008. This is the case regardless of when the creditor charged off the account.
Collection Reporting Limits
Reporting periods for collections are counted in the same way, but for different reasons. Collectors live in a world of their own, buying and selling collection accounts with a surprising frequency. There are many reasons for this behavior; the chief reason being that as soon as a collector determines a debt is uncollectable the only value it has is as a salable commodity. Because collections change hands so often people attempting credit repair are often confused about reporting period limits.
Reporting Periods Cannot be Reset
The reporting period for a collection begins with the original default date on the original debt and ends 180 days plus seven years later. And nothing can reset it. The FCRA is clear that nothing can reset the reporting period including the sale of debt, payments made to a collector during the life of the debt, or any disputes about the account made to creditor, collector, or credit bureau. But don’t confuse the reporting period limits with Statute of Limitations on collectability…
Reporting Period Vs Statue of Limitation
Understanding SOL rules will allow you to exercise several powerful credit repair possibilities. The Statue of Limitation (SOL) on a debt is the length of time it can be collected through the courts, and varies from state to state. You can easily find your state SOL on the internet. Of interest to anyone in a credit repair program, the expiration of an SOL will not stop collectors from attempting to collect. Collectors are well aware that most people have no concept of SOL and are happy to take advantage.
Don’t Ignore a Summons
Aside from basic collection efforts like phone calls and letters, collectors will often attempt to obtain a judgment after the expiration of the SOL. You may be surprised to hear that they often succeed. If you get sued by a collector beyond the SOL you must file a response with the court within the time allowed in the summons. If you do not respond the collector will prevail in spite of the expired SOL. You must positively affirm your SOL defense! Credit repair requires action.
Collections beyond the Statute of Limitation
If you get a collection letter check the SOL. If the debt is beyond the SOL you have several fantastic options. If you want the collector to leave you alone, just send a Cease Communication Letter demanding they stop all attempts to contact you. Once they get the letter there is nothing further they can do. Here’s a great credit repair tip. If you want to pay the debt you have a major edge in negotiating a payoff. Just make it clear to the collector that you are aware of the SOL and they should be happy to settle. Try calling the last week of the month. You may even be able to negotiate to have the collection removed altogether from your credit report. That’s credit repair gold.
Credit Repair and Cease Communication Vs Debt Validation
Be careful about using a Cease Communication Letter on debt that is within the SOL. You might push them into legal action. If you get a collection letter on a debt that is still within the SOL send a Debt Validation Letter instead. It’s a great credit repair tool; the Fair Debt Collection Practices Act requires collectors to provide proof of their legal right to collect as well as an accounting from the original creditor of the amount claimed. You have 30 days exercise your rights. If they respond you will have peace of mind knowing they own the debt and the amount is correct. But there is a fair possibility that the collector will not be able to furnish the proof you have requested. If that is the case you will not hear from them again and they will have to stop reporting. Not a bad outcome either!
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Thursday, May 29, 2008
Monday, May 26, 2008
The Seven Deadly Credit Repair Sins
The Devil in the Details
Have you had credit issues in the past? Are you ready for better times? Credit repair can produce awesome results if done properly. But a wrong turn can leave you worse off than before. A nationally recognized credit repair and restoration expert discusses seven deadly credit repair sins you need to avoid.
Credit Repair Sin #1: Sticking Your Head in the Sand
Have you been through a period of financial stress? Is your credit a mess? It can be difficult to look at the damage, but ignoring your credit report is the number-one worse thing you can do. Did you know that late payments, charge-offs, and collections are almost guaranteed to generate errors that will depress your credit scores even further? It’s ironic that shortcomings in the credit reporting system create a bias against the very consumers who can afford it the least. Fortunately there is good news. It is never too late to stand up for your rights. Take a deep breath and start your credit repair effort today.
Credit Repair Sin #2: Canceling Your Cards
So you decided to start a credit repair program, cut up your credit cards, and make everything right. Right? Sorry. Wrong. As righteous as the plan sounds, there is a flaw. The FICO scoring model puts so much weight on open accounts that even as you remove erroneous items from your credit report your score will go nowhere; it may even fall. If you have open credit cards, don’t close them. Switch gears and get into management mode. Get the balances down, make your payments on time and watch your scores go up.
Credit Repair Sin #3: Failing to Rebuild
It’s common to emerge from a time of financial stress with no open accounts. Many people in this situation begin a credit repair effort and decide to postpone applying for new credit until their report looks better. Who wants to be denied? Why not just wait? Well, there is a reason. As mentioned above, without open accounts your credit repair effort is likely to do little for your credit scores, and you will be no closer to being lender-ready than you were before. You need to rebuild! Just get a couple of secured credit cards. You won’t be denied and you will be on your way to building truly usable credit.
Credit Repair Sin #4: Maxing Out Revolving Balances
You are doing everything right; you cleaned up your credit, you opened new accounts, and you are paying your bills on time. So, why isn’t your credit score cooperating? You may blame an old paid collection or some old public record for keeping your score in purgatory. But you are wrong! It’s just your darn credit card balances. The newest version of the FICO credit score model adjusts your score dramatically depending on the ratio between your balance and your credit limit. If you want to optimize your score keep the balance under 20% of the limit. Just try it and watch the credit repair magic happen!
Credit Repair Sin #5: Ignoring Collection Letters
Got a collection letter? It is tempting to throw it away. But throwing it away won’t make it go away. And if you throw it away you will have missed a golden opportunity to exercise a powerful legal right that exists for just 30 days from the time the collector sends the letter. For those 30 days the Fair Debt Collection Practices Act requires collectors to comply with your request to provide proof of their right to collect and an accounting from the original creditor proving the dollar amount is correct. If they cannot do this they must cease all collection efforts and not report the collection to the credit bureaus.
Credit Repair Sin #6: Not Knowing Your SOL
Statutes of limitation (SOL) limit the time a debt may be collected through the court system. The SOL is different for each state and may be found easily on the Internet. The SOL may be as little as two years for some debt types in some states. If a collector cannot get a judgment they cannot enforce collection. They can ask nicely, or they can threaten, but the threats have no substance. Did you know the Fair Debt Collection Practices Act gives you the right to send a letter to a collector asking them to cease all communication? This is a handy credit repair tool. After all who needs the stress? If you are harassed by a collector beyond the SOL you can send a Cease Communication Letter and they will go away.
Credit Repair Sin #7: Flying Solo
One of the big mistakes people make with credit repair is going it alone. Credit repair is a lot like fixing an automobile. If you need an oil change you can do it yourself and probably don’t need a repair manual or a mechanic. But if you really need a tune-up you better know what you are doing. You wouldn’t just pop the hood and start taking the engine apart. Would you? Credit repair can produce awesome results if done properly, so please do the right thing for yourself and buy a book or consult a credit repair professional.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Have you had credit issues in the past? Are you ready for better times? Credit repair can produce awesome results if done properly. But a wrong turn can leave you worse off than before. A nationally recognized credit repair and restoration expert discusses seven deadly credit repair sins you need to avoid.
Credit Repair Sin #1: Sticking Your Head in the Sand
Have you been through a period of financial stress? Is your credit a mess? It can be difficult to look at the damage, but ignoring your credit report is the number-one worse thing you can do. Did you know that late payments, charge-offs, and collections are almost guaranteed to generate errors that will depress your credit scores even further? It’s ironic that shortcomings in the credit reporting system create a bias against the very consumers who can afford it the least. Fortunately there is good news. It is never too late to stand up for your rights. Take a deep breath and start your credit repair effort today.
Credit Repair Sin #2: Canceling Your Cards
So you decided to start a credit repair program, cut up your credit cards, and make everything right. Right? Sorry. Wrong. As righteous as the plan sounds, there is a flaw. The FICO scoring model puts so much weight on open accounts that even as you remove erroneous items from your credit report your score will go nowhere; it may even fall. If you have open credit cards, don’t close them. Switch gears and get into management mode. Get the balances down, make your payments on time and watch your scores go up.
Credit Repair Sin #3: Failing to Rebuild
It’s common to emerge from a time of financial stress with no open accounts. Many people in this situation begin a credit repair effort and decide to postpone applying for new credit until their report looks better. Who wants to be denied? Why not just wait? Well, there is a reason. As mentioned above, without open accounts your credit repair effort is likely to do little for your credit scores, and you will be no closer to being lender-ready than you were before. You need to rebuild! Just get a couple of secured credit cards. You won’t be denied and you will be on your way to building truly usable credit.
Credit Repair Sin #4: Maxing Out Revolving Balances
You are doing everything right; you cleaned up your credit, you opened new accounts, and you are paying your bills on time. So, why isn’t your credit score cooperating? You may blame an old paid collection or some old public record for keeping your score in purgatory. But you are wrong! It’s just your darn credit card balances. The newest version of the FICO credit score model adjusts your score dramatically depending on the ratio between your balance and your credit limit. If you want to optimize your score keep the balance under 20% of the limit. Just try it and watch the credit repair magic happen!
Credit Repair Sin #5: Ignoring Collection Letters
Got a collection letter? It is tempting to throw it away. But throwing it away won’t make it go away. And if you throw it away you will have missed a golden opportunity to exercise a powerful legal right that exists for just 30 days from the time the collector sends the letter. For those 30 days the Fair Debt Collection Practices Act requires collectors to comply with your request to provide proof of their right to collect and an accounting from the original creditor proving the dollar amount is correct. If they cannot do this they must cease all collection efforts and not report the collection to the credit bureaus.
Credit Repair Sin #6: Not Knowing Your SOL
Statutes of limitation (SOL) limit the time a debt may be collected through the court system. The SOL is different for each state and may be found easily on the Internet. The SOL may be as little as two years for some debt types in some states. If a collector cannot get a judgment they cannot enforce collection. They can ask nicely, or they can threaten, but the threats have no substance. Did you know the Fair Debt Collection Practices Act gives you the right to send a letter to a collector asking them to cease all communication? This is a handy credit repair tool. After all who needs the stress? If you are harassed by a collector beyond the SOL you can send a Cease Communication Letter and they will go away.
Credit Repair Sin #7: Flying Solo
One of the big mistakes people make with credit repair is going it alone. Credit repair is a lot like fixing an automobile. If you need an oil change you can do it yourself and probably don’t need a repair manual or a mechanic. But if you really need a tune-up you better know what you are doing. You wouldn’t just pop the hood and start taking the engine apart. Would you? Credit repair can produce awesome results if done properly, so please do the right thing for yourself and buy a book or consult a credit repair professional.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Saturday, May 24, 2008
Credit Repair: Credit Score Secrets
FICO - More Than Meets the Eye
Fair Isaac and Company is the developer of the FICO score, the credit score used by most lenders today. The exact formula is not published, but Fair Isaac offers a breakdown of the categories of influence, and the relative importance of each. The breakdown is a helpful starting point for anyone in credit repair mode who wishes to optimize his or her scores, but it is only a starting point…
Credit Repair and the Logic of FICO
If you are in a credit repair program and aspire to optimize your credit scores it is handy to understand the logic behind the scenes. Fair Isaac is in the business of providing lenders with a measure of the risk they will incur in lending you money. Fair Isaac has spent years analyzing the implications of every measurable behavior and developed a formula to communicate risk with a single number. Here is a breakdown of the components of the FICO score along with some powerful tips you can apply to your own credit repair efforts.
Pay History
Your pay history makes up 35% of your score. Clear enough, but let’s take a moment to understand the implications. A late payment is an indication of financial stress. Financial stress translates into risk of default, and FICO communicates this risk to lenders by reducing your credit score. A lower credit score says, “don’t lend to this person.” But there is more involved. FICO weighs recent late payments more heavily than older late payments. A brand new late payment can send your credit score to a level that no lender will consider. On the other hand, anyone in credit repair mode should be happy to hear that the impact of a late payment fades quickly as time goes by.
Balances - Installment
Your account balances make up 30% of your score. Both installment and revolving accounts are considered. Let’s take a quick look at installment debt before discussing the far more important category of revolving debt. When installment debt, such as a car loan, appears on your credit report FICO sees it as an unknown and drops your score to warn lenders of the new risk. After a few months FICO acknowledges your ability to manage the payments and adjusts your score accordingly. Not a big credit repair concern.
Balances - Revolving
Revolving balances are tricky and may hinder or help your credit repair efforts more than you think. You can clean up your credit report, pay your bills on time, and still end up with a miserable credit score. FICO puts a huge emphasis on the relationship between your balance and your high credit limit. The latest FICO model acknowledges six balance-to-limit ratios: 20%, 40%, 60%, 80%, 100%, and the deadly over-100% category. The two lower tiers will increase your scores, the middle tier is neutral, 80% is bad, 100% is awful, and as for the deadly over-100% category – I think you get the message.
Credit Repair and Your Balances
People often get a credit card, and quickly use it to the limit. Sounds like fun! Unfortunately, a new account with a high balance is credit repair suicide. The new account warns FICO about unknown stress on your budget, and the high balance says that you are out of control. This may not be the case, but big brother is watching and he doesn’t like what he sees. But there is some good news too. If you take that same new account and keep the balance below 20% of your high credit limit for 6 months FICO will think you are fantastic and reward you accordingly. This is solid credit repair gold.
The Age of Accounts
This category makes up 15% of your score. There are a few credit repair angles here. There is nothing you can do about the age of installment debt; when it’s paid, it’s done. But revolving accounts are a different story. FICO loves old accounts as much as it worries about new ones. Many people start a credit repair effort and cut up their credit cards; a strategic error. Generally you would be advised to keep your accounts open. There are exceptions. If you have lots of established credit cards you should close the inactive ones. There is a bit of a balancing act; too many cards work against your score.
New Credit & Inquiries
This category weighs in at 10% of your score. If you are planning to apply for a mortgage or a car loan soon, or are in a credit repair program and watching your scores, you should minimize your credit activity. New accounts will reduce your score, and an inquiry is interpreted as the intent to open a new account, so FICO will downgrade you to warn prospective lenders that there may be trouble ahead.
Type and Mix of Credit
This is the final 10% of the calculation, and not much of a credit repair concern. FICO does not publish their idea of the optimal mix of credit, but if you really want to know what the perfect 850 credit score looks like, here you go! One mortgage over 5 years old, two car loans more than halfway through their life span, and five credit cards over five years old with balances under 20% of the high credit limit will take you to the summit!
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Fair Isaac and Company is the developer of the FICO score, the credit score used by most lenders today. The exact formula is not published, but Fair Isaac offers a breakdown of the categories of influence, and the relative importance of each. The breakdown is a helpful starting point for anyone in credit repair mode who wishes to optimize his or her scores, but it is only a starting point…
Credit Repair and the Logic of FICO
If you are in a credit repair program and aspire to optimize your credit scores it is handy to understand the logic behind the scenes. Fair Isaac is in the business of providing lenders with a measure of the risk they will incur in lending you money. Fair Isaac has spent years analyzing the implications of every measurable behavior and developed a formula to communicate risk with a single number. Here is a breakdown of the components of the FICO score along with some powerful tips you can apply to your own credit repair efforts.
Pay History
Your pay history makes up 35% of your score. Clear enough, but let’s take a moment to understand the implications. A late payment is an indication of financial stress. Financial stress translates into risk of default, and FICO communicates this risk to lenders by reducing your credit score. A lower credit score says, “don’t lend to this person.” But there is more involved. FICO weighs recent late payments more heavily than older late payments. A brand new late payment can send your credit score to a level that no lender will consider. On the other hand, anyone in credit repair mode should be happy to hear that the impact of a late payment fades quickly as time goes by.
Balances - Installment
Your account balances make up 30% of your score. Both installment and revolving accounts are considered. Let’s take a quick look at installment debt before discussing the far more important category of revolving debt. When installment debt, such as a car loan, appears on your credit report FICO sees it as an unknown and drops your score to warn lenders of the new risk. After a few months FICO acknowledges your ability to manage the payments and adjusts your score accordingly. Not a big credit repair concern.
Balances - Revolving
Revolving balances are tricky and may hinder or help your credit repair efforts more than you think. You can clean up your credit report, pay your bills on time, and still end up with a miserable credit score. FICO puts a huge emphasis on the relationship between your balance and your high credit limit. The latest FICO model acknowledges six balance-to-limit ratios: 20%, 40%, 60%, 80%, 100%, and the deadly over-100% category. The two lower tiers will increase your scores, the middle tier is neutral, 80% is bad, 100% is awful, and as for the deadly over-100% category – I think you get the message.
Credit Repair and Your Balances
People often get a credit card, and quickly use it to the limit. Sounds like fun! Unfortunately, a new account with a high balance is credit repair suicide. The new account warns FICO about unknown stress on your budget, and the high balance says that you are out of control. This may not be the case, but big brother is watching and he doesn’t like what he sees. But there is some good news too. If you take that same new account and keep the balance below 20% of your high credit limit for 6 months FICO will think you are fantastic and reward you accordingly. This is solid credit repair gold.
The Age of Accounts
This category makes up 15% of your score. There are a few credit repair angles here. There is nothing you can do about the age of installment debt; when it’s paid, it’s done. But revolving accounts are a different story. FICO loves old accounts as much as it worries about new ones. Many people start a credit repair effort and cut up their credit cards; a strategic error. Generally you would be advised to keep your accounts open. There are exceptions. If you have lots of established credit cards you should close the inactive ones. There is a bit of a balancing act; too many cards work against your score.
New Credit & Inquiries
This category weighs in at 10% of your score. If you are planning to apply for a mortgage or a car loan soon, or are in a credit repair program and watching your scores, you should minimize your credit activity. New accounts will reduce your score, and an inquiry is interpreted as the intent to open a new account, so FICO will downgrade you to warn prospective lenders that there may be trouble ahead.
Type and Mix of Credit
This is the final 10% of the calculation, and not much of a credit repair concern. FICO does not publish their idea of the optimal mix of credit, but if you really want to know what the perfect 850 credit score looks like, here you go! One mortgage over 5 years old, two car loans more than halfway through their life span, and five credit cards over five years old with balances under 20% of the high credit limit will take you to the summit!
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Monday, May 19, 2008
Credit Repair - A Few Steps to Perfection
A Realistic Start
Effective credit repair is a multi-dimensional process. Your credit report is just the final outcome. If you want to repair your credit you need to start with your finances. You must develop a budget. A budget is a powerful personal financial tool, and you can’t succeed without it. Get a pen and paper. Get serious. List every expense you have, from essential to entertainment. You should examine your checkbook and your credit card statements. Whatever you spend money on should be included.
You Must Plan to Save
Compare your income with your expenses. This can be a wake-up call for people starting a credit repair program. If you are spending more than you earn, credit problems are guaranteed. But this exercise is not about getting your expenses to match your income – there is a bit more to it; you must organize your budget to allow 10% of your income to be deposited into a savings account. If this seems difficult you should reevaluate your priorities. Life brings surprises, and without a cushion the first unexpected expense can undo your credit repair efforts. If you want to succeed you need to save.
The Details of Credit Repair
It’s time to roll up your sleeves. Get all three of your reports and examine them individually; treat each credit bureau report as an individual project. This is not just about identifying obvious derogatory information. There are many factors that affect your credit scores, and you can’t afford to miss anything. Some of the most important and often neglected issues include duplicate accounts listings, understated high credit limits, erroneous open dates, multiple collections for the same account, and derogatory information reporting beyond the seven year limit.
Consider a Credit Repair Service – Or Read a Book!
The majority of problems that depress credit scores are FCRA compliance violations like those listed above. If you feel lost hire a competent credit repair service, or take the time to read a good book on the subject. One of the great misunderstandings about credit repair is that you only need to identify unfamiliar data and send dispute letters to the credit bureaus. This is of little use and may leave you worse off than before. But this is not to say you can’t repair your own credit. Just take the time to learn to do it right. One of my favorite books on the subject starts with a very valid warning to “do nothing until you have read this whole book”.
Credit Repair Clean Up Time
Once you have identified every item that is not in compliance with the FCRA it’s time to clean up the mess. If you hire a credit repair service this will be handled for you, but if you are doing it yourself there are a few things you should know. The credit bureaus are not in the business of cleaning up errors on your report. There are over 200 million Americans with credit files at each of the credit bureaus, and billions of transactions reported to each bureau every week. The credit reporting system is not perfect. In fact over 75% of all credit reports include errors.
Understanding Disputes
Without FCRA enforcement, the credit bureaus would do nothing to rectify this problem. Correcting errors is inconvenient for the credit bureaus, and they have made a science out of minimizing dispute related costs. The FCRA is designed primarily to protect consumers from life altering errors that are generated by the credit reporting system, but it also very even-handed and crafted in such a way as to insure that regulation does not overly disrupt the credit bureaus ability to operate profitably. Fair enough.
The Credit Bureaus Have Rights Too
The credit bureaus will process your disputes, but they will also exercise every right they have to ignore your request. A competent credit repair service will manage your disputes in a way designed to produce optimal results; the factors that influence the willingness of the bureaus to process a request include the clarity of the request, the number of items disputed, and the timing of repeated disputes. If you are repairing your own credit and want to succeed you need to understand the legal rights of the credit bureaus and to manage your disputes accordingly.
Rebuilding For Credit Repair Success
There is a lot of satisfaction in cleaning up your credit report. But the credit repair process is not complete until your credit scores qualify you for the best possible financing. Remember that credit is a means to an end; it must be usable. If your credit repair efforts have left you with little or no open credit, it’s time to rebuild. The easiest way to build new credit is with secured credit cards. Secured cards can be very powerful tools, but it is crucial that you keep your balances down. The ideal is to keep the balance below 20% of your high credit limit. Many people let their balance approach the limit and wonder why their credit scores are so low. If you do it right you will be amazed at the results.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Effective credit repair is a multi-dimensional process. Your credit report is just the final outcome. If you want to repair your credit you need to start with your finances. You must develop a budget. A budget is a powerful personal financial tool, and you can’t succeed without it. Get a pen and paper. Get serious. List every expense you have, from essential to entertainment. You should examine your checkbook and your credit card statements. Whatever you spend money on should be included.
You Must Plan to Save
Compare your income with your expenses. This can be a wake-up call for people starting a credit repair program. If you are spending more than you earn, credit problems are guaranteed. But this exercise is not about getting your expenses to match your income – there is a bit more to it; you must organize your budget to allow 10% of your income to be deposited into a savings account. If this seems difficult you should reevaluate your priorities. Life brings surprises, and without a cushion the first unexpected expense can undo your credit repair efforts. If you want to succeed you need to save.
The Details of Credit Repair
It’s time to roll up your sleeves. Get all three of your reports and examine them individually; treat each credit bureau report as an individual project. This is not just about identifying obvious derogatory information. There are many factors that affect your credit scores, and you can’t afford to miss anything. Some of the most important and often neglected issues include duplicate accounts listings, understated high credit limits, erroneous open dates, multiple collections for the same account, and derogatory information reporting beyond the seven year limit.
Consider a Credit Repair Service – Or Read a Book!
The majority of problems that depress credit scores are FCRA compliance violations like those listed above. If you feel lost hire a competent credit repair service, or take the time to read a good book on the subject. One of the great misunderstandings about credit repair is that you only need to identify unfamiliar data and send dispute letters to the credit bureaus. This is of little use and may leave you worse off than before. But this is not to say you can’t repair your own credit. Just take the time to learn to do it right. One of my favorite books on the subject starts with a very valid warning to “do nothing until you have read this whole book”.
Credit Repair Clean Up Time
Once you have identified every item that is not in compliance with the FCRA it’s time to clean up the mess. If you hire a credit repair service this will be handled for you, but if you are doing it yourself there are a few things you should know. The credit bureaus are not in the business of cleaning up errors on your report. There are over 200 million Americans with credit files at each of the credit bureaus, and billions of transactions reported to each bureau every week. The credit reporting system is not perfect. In fact over 75% of all credit reports include errors.
Understanding Disputes
Without FCRA enforcement, the credit bureaus would do nothing to rectify this problem. Correcting errors is inconvenient for the credit bureaus, and they have made a science out of minimizing dispute related costs. The FCRA is designed primarily to protect consumers from life altering errors that are generated by the credit reporting system, but it also very even-handed and crafted in such a way as to insure that regulation does not overly disrupt the credit bureaus ability to operate profitably. Fair enough.
The Credit Bureaus Have Rights Too
The credit bureaus will process your disputes, but they will also exercise every right they have to ignore your request. A competent credit repair service will manage your disputes in a way designed to produce optimal results; the factors that influence the willingness of the bureaus to process a request include the clarity of the request, the number of items disputed, and the timing of repeated disputes. If you are repairing your own credit and want to succeed you need to understand the legal rights of the credit bureaus and to manage your disputes accordingly.
Rebuilding For Credit Repair Success
There is a lot of satisfaction in cleaning up your credit report. But the credit repair process is not complete until your credit scores qualify you for the best possible financing. Remember that credit is a means to an end; it must be usable. If your credit repair efforts have left you with little or no open credit, it’s time to rebuild. The easiest way to build new credit is with secured credit cards. Secured cards can be very powerful tools, but it is crucial that you keep your balances down. The ideal is to keep the balance below 20% of your high credit limit. Many people let their balance approach the limit and wonder why their credit scores are so low. If you do it right you will be amazed at the results.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Monday, May 12, 2008
Credit Repair and the Power of Secured Credit Cards
The Big Credit Repair Mistake
One of the big mistakes people make as they begin a credit repair program is to neglect the credit rebuilding part of the credit repair process. Removing derogatory information, as important as it is, will only get you halfway to your goal. If you clean up your credit without opening new accounts your credit scores may go nowhere; in fact, your credit scores may fall leaving you no better off than you were before.
It’s About the Score
People neglect to rebuild their credit for many reasons. Some people are under the impression they would be better off waiting until the derogatory information has be removed from their credit report before applying for new credit. This makes sense in a way. Unfortunately, the all-important FICO credit-scoring model will not cooperate with this logic.
Don’t Be Left Out
In most cases the dispute process will result in the deletion of some of your tradeline history. This reshaping of your credit profile will be beneficial in the long run, but if you have limited credit the removal of any information can leave the FICO scoring model with a lack of useable data. And as a result your credit score will fall.
Credit Repair Common Sense
FICO is an acronym for Fair Isaac and Company, the creator of the credit scoring model that generates the scores lenders use in making lending decisions. Fair Isaac does not make the exact formula public, but there is so much common sense involved that if you take time to consider the purpose of the FICO score, you will understand how your activities are interpreted and extrapolated into this powerful number.
Big Brother is Watching You
Think of Fair Isaac as an impartial observer of your financial activities who is perpetually judging your ability to repay your debt. Fair Isaac looks at everything you are doing today and have done in the past. Fortunately for anyone in a credit repair program, recent activity is more important than past history. Every day is a new opportunity to prove your willingness and ability to repay your debt. And if you really want your credit score to improve you should become proactive about managing your credit starting right now.
The Magic of Secured Cards
Secured cards provide the perfect solution for anyone with little or no open credit. Unlike regular credit cards, you don’t have to worry about your application being denied. Some people in a credit repair program may have acceptable credit scores and be able to get a regular non-secured credit card, but if you are not in that category secured credit cards are the perfect credit repair tool.
An Easy Path
A secured credit card will require a small savings deposit with the lending institution. Typically, you will be offered a line of credit equal to the amount of your deposit. In most cases once you have successfully managed your account for a period of time the saving deposit will be released and your card converted into a regular unsecured account. Most secured cards require a minimum deposit of either two hundred and three hundred dollars.
The Power is In Your Hands
You must manage your secured cards very carefully. Remember that you are communicating your financial responsibility with every purchase and payment decision you make. Making your payments on time is critical, but even more important is the way you manage your balance. These new cards are very powerful; a wrong decision can make your credit scores plummet even as you meticulously make your payments right on time.
Solid Credit Repair Gold
If you run your balance up to the limit you will communicate several things to Fair Isaac, and none of them are good. New credit is untested credit. Credit adds stress to your monthly budget, and without a track record Fair Isaac has no choice but to place you in a high-risk category, which means a lower score. But there is another side to this situation, and here is where you will strike solid credit repair gold. If you send the right message you will be quickly rewarded with higher scores.
Keeping Your Balance
The current FICO scoring model recognizes six different balance levels relative to your high credit limit, and you will be rewarded, or punished, accordingly. The balance-to-limit ratios recognized are 20, 40, 60, 80, 100, and finally - the deadly over 100% category. If you are in a credit repair program and eager to optimize your credit scores you should keep your balance below 20% of your high credit limit. You will be thrilled with the results.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
One of the big mistakes people make as they begin a credit repair program is to neglect the credit rebuilding part of the credit repair process. Removing derogatory information, as important as it is, will only get you halfway to your goal. If you clean up your credit without opening new accounts your credit scores may go nowhere; in fact, your credit scores may fall leaving you no better off than you were before.
It’s About the Score
People neglect to rebuild their credit for many reasons. Some people are under the impression they would be better off waiting until the derogatory information has be removed from their credit report before applying for new credit. This makes sense in a way. Unfortunately, the all-important FICO credit-scoring model will not cooperate with this logic.
Don’t Be Left Out
In most cases the dispute process will result in the deletion of some of your tradeline history. This reshaping of your credit profile will be beneficial in the long run, but if you have limited credit the removal of any information can leave the FICO scoring model with a lack of useable data. And as a result your credit score will fall.
Credit Repair Common Sense
FICO is an acronym for Fair Isaac and Company, the creator of the credit scoring model that generates the scores lenders use in making lending decisions. Fair Isaac does not make the exact formula public, but there is so much common sense involved that if you take time to consider the purpose of the FICO score, you will understand how your activities are interpreted and extrapolated into this powerful number.
Big Brother is Watching You
Think of Fair Isaac as an impartial observer of your financial activities who is perpetually judging your ability to repay your debt. Fair Isaac looks at everything you are doing today and have done in the past. Fortunately for anyone in a credit repair program, recent activity is more important than past history. Every day is a new opportunity to prove your willingness and ability to repay your debt. And if you really want your credit score to improve you should become proactive about managing your credit starting right now.
The Magic of Secured Cards
Secured cards provide the perfect solution for anyone with little or no open credit. Unlike regular credit cards, you don’t have to worry about your application being denied. Some people in a credit repair program may have acceptable credit scores and be able to get a regular non-secured credit card, but if you are not in that category secured credit cards are the perfect credit repair tool.
An Easy Path
A secured credit card will require a small savings deposit with the lending institution. Typically, you will be offered a line of credit equal to the amount of your deposit. In most cases once you have successfully managed your account for a period of time the saving deposit will be released and your card converted into a regular unsecured account. Most secured cards require a minimum deposit of either two hundred and three hundred dollars.
The Power is In Your Hands
You must manage your secured cards very carefully. Remember that you are communicating your financial responsibility with every purchase and payment decision you make. Making your payments on time is critical, but even more important is the way you manage your balance. These new cards are very powerful; a wrong decision can make your credit scores plummet even as you meticulously make your payments right on time.
Solid Credit Repair Gold
If you run your balance up to the limit you will communicate several things to Fair Isaac, and none of them are good. New credit is untested credit. Credit adds stress to your monthly budget, and without a track record Fair Isaac has no choice but to place you in a high-risk category, which means a lower score. But there is another side to this situation, and here is where you will strike solid credit repair gold. If you send the right message you will be quickly rewarded with higher scores.
Keeping Your Balance
The current FICO scoring model recognizes six different balance levels relative to your high credit limit, and you will be rewarded, or punished, accordingly. The balance-to-limit ratios recognized are 20, 40, 60, 80, 100, and finally - the deadly over 100% category. If you are in a credit repair program and eager to optimize your credit scores you should keep your balance below 20% of your high credit limit. You will be thrilled with the results.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Monday, May 5, 2008
Credit Repair and Bankruptcy
Choices and Solutions
A period of financial hardship may leave you with unmanageable debt. If you find yourself unable to meet your monthly obligations you may be forced to consider bankruptcy. Here is a discussion of the new bankruptcy laws along with some powerful credit repair strategies designed to minimize the impact of bankruptcy on your credit.
A Changing World
Bankruptcy is not as an attractive as it once was. Many people attempting to discharge debts in a Chapter 7 bankruptcy are now forced into a Chapter 13 repayment plan. Many more are discovering that do not qualify at all. Let’s take a look at the new bankruptcy laws as well as some credit repair strategies that will help you minimize the damage to your credit report.
2005 Changes
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 set up a gamut of barriers designed to disqualify applicants from discharging debt in a Chapter 7 bankruptcy. Those that no longer qualify for a Chapter 7 bankruptcy may be forced into a Chapter 13 repayment plan. Prior to 2005 individual cases were examined and judged on a rather subjective basis; post-BAPCPA applicants are subject to more restrictive guidelines, the first of which is a means test.
Chapter 7 Means Test
If your income is below the median income in your state you automatically qualify for Chapter 7. If your income is above the median you must calculate your disposable monthly income (DMI) to determine whether you a capable of making payments on your debts sufficient to qualify for Chapter 13. Your DMI is calculated by subtracting certain allowable expenses from your monthly income. If the DMI is less than $100 per month, you are permitted to file under Chapter 7. If the DMI is above $100, you must instead file under Chapter 13. Please note that there are exceptions to these rules, so please consult an attorney before making a decision.
Additional Requirements for Filers
There are a number of additional requirements that make the process of bankruptcy more difficult including mandatory credit counseling from an approved credit counseling agency prior to filing, as well as a course in personal financial management after filing the bankruptcy. If you end up in a Chapter 13 plan the new law increases the amount of debt that you will repay, and the old "super discharge" provision, which allowed the discharge of some debt under Chapter 13, has been significantly cut. Another major restriction is a new $150,000 cap on the amount of equity in your home that you can exempt from creditors claims.
Credit Repair Solutions
If you do qualify, and subsequently file bankruptcy, there is quite a bit you can do to mitigate the damage to your credit report. First, let’s take a look at the Fair Credit Reporting Act (FCRA) and then discuss the credit repair strategies that will help you repair your credit after your discharge.
Bankruptcy, Credit Repair, and the FCRA
The only reference to bankruptcy in the FCRA is as follows: § 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c] (a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information: (1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
Bankruptcy and the Credit Bureaus
Fortunately, the story does not end there. A critical distinction that many people miss as they consider their credit repair options is that the accounts included in bankruptcy are subject to all of the FCRA stipulations about accuracy quite separate from the issue of the reference to bankruptcy as a public record. In addition, the credit bureaus have their own internal policies about the reporting of accounts after discharge. And here is where your opportunity for credit repair really shines.
Credit Repair Strategy
The credit bureaus operate with an implicit understanding that once an account is discharged in bankruptcy it enters a new phase which nullifies its status prior to discharge; a discharged account, by definition, cannot be in collection, or with a past due balance. Discharge modifies the condition of the account as well as the legal relationship between creditor and debtor forever. The approach adopted by the credit bureaus for all items discharged in a bankruptcy is to remove all defunct derogatory information and to insert a single information line stating that the account was included in bankruptcy. But credit repair will not happen without your participation.
The Credit Repair Plot Thickens
It is crucial to know that you must initiate the restatement of discharged items on your report. The credit bureaus will not correct your report without receiving specific instructions from you. Too many people make the mistake of believing that these things will take care of themselves without attention. There is no reason that you should suffer from bad credit for years after a bankruptcy. An intelligent credit repair effort can eliminate the majority of score damaging information and get you back on your feet before you know it.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
A period of financial hardship may leave you with unmanageable debt. If you find yourself unable to meet your monthly obligations you may be forced to consider bankruptcy. Here is a discussion of the new bankruptcy laws along with some powerful credit repair strategies designed to minimize the impact of bankruptcy on your credit.
A Changing World
Bankruptcy is not as an attractive as it once was. Many people attempting to discharge debts in a Chapter 7 bankruptcy are now forced into a Chapter 13 repayment plan. Many more are discovering that do not qualify at all. Let’s take a look at the new bankruptcy laws as well as some credit repair strategies that will help you minimize the damage to your credit report.
2005 Changes
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 set up a gamut of barriers designed to disqualify applicants from discharging debt in a Chapter 7 bankruptcy. Those that no longer qualify for a Chapter 7 bankruptcy may be forced into a Chapter 13 repayment plan. Prior to 2005 individual cases were examined and judged on a rather subjective basis; post-BAPCPA applicants are subject to more restrictive guidelines, the first of which is a means test.
Chapter 7 Means Test
If your income is below the median income in your state you automatically qualify for Chapter 7. If your income is above the median you must calculate your disposable monthly income (DMI) to determine whether you a capable of making payments on your debts sufficient to qualify for Chapter 13. Your DMI is calculated by subtracting certain allowable expenses from your monthly income. If the DMI is less than $100 per month, you are permitted to file under Chapter 7. If the DMI is above $100, you must instead file under Chapter 13. Please note that there are exceptions to these rules, so please consult an attorney before making a decision.
Additional Requirements for Filers
There are a number of additional requirements that make the process of bankruptcy more difficult including mandatory credit counseling from an approved credit counseling agency prior to filing, as well as a course in personal financial management after filing the bankruptcy. If you end up in a Chapter 13 plan the new law increases the amount of debt that you will repay, and the old "super discharge" provision, which allowed the discharge of some debt under Chapter 13, has been significantly cut. Another major restriction is a new $150,000 cap on the amount of equity in your home that you can exempt from creditors claims.
Credit Repair Solutions
If you do qualify, and subsequently file bankruptcy, there is quite a bit you can do to mitigate the damage to your credit report. First, let’s take a look at the Fair Credit Reporting Act (FCRA) and then discuss the credit repair strategies that will help you repair your credit after your discharge.
Bankruptcy, Credit Repair, and the FCRA
The only reference to bankruptcy in the FCRA is as follows: § 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c] (a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information: (1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
Bankruptcy and the Credit Bureaus
Fortunately, the story does not end there. A critical distinction that many people miss as they consider their credit repair options is that the accounts included in bankruptcy are subject to all of the FCRA stipulations about accuracy quite separate from the issue of the reference to bankruptcy as a public record. In addition, the credit bureaus have their own internal policies about the reporting of accounts after discharge. And here is where your opportunity for credit repair really shines.
Credit Repair Strategy
The credit bureaus operate with an implicit understanding that once an account is discharged in bankruptcy it enters a new phase which nullifies its status prior to discharge; a discharged account, by definition, cannot be in collection, or with a past due balance. Discharge modifies the condition of the account as well as the legal relationship between creditor and debtor forever. The approach adopted by the credit bureaus for all items discharged in a bankruptcy is to remove all defunct derogatory information and to insert a single information line stating that the account was included in bankruptcy. But credit repair will not happen without your participation.
The Credit Repair Plot Thickens
It is crucial to know that you must initiate the restatement of discharged items on your report. The credit bureaus will not correct your report without receiving specific instructions from you. Too many people make the mistake of believing that these things will take care of themselves without attention. There is no reason that you should suffer from bad credit for years after a bankruptcy. An intelligent credit repair effort can eliminate the majority of score damaging information and get you back on your feet before you know it.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
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