Posts Tagged ‘mistake’

Tips for a better credit report and score

October 20th, 2008

To get a good credit score the first tip is to pay your bills on time. It does not matter how bad your credit history is you must pay all your bills on time. This will help build a positive payment history on your credit report. This is the second most important factor when calculating your credit score.

It also matters how much time has passed between derogatory items on your credit report and when your score is calculated. After an amount of time, allegedly four years, negative items on your credit are not weighed as heavily. Thus it is very important for you to build a positive payment history.

The next tip is to remove any inaccurate information. Unfortunately our credit reporting system has many flaws. Often a divorce will result in bad credit. The divorce judge will divide the debts between both parties. Then if one of the parties defaults on a loan, even though they were court ordered to pay, it will be reported on both parties credit.

You can also have bad credit due to a lender mistake. It happens all the time, where the amount due changes and due to a mistake on the lenders side you are never notified and keep making your regular payments. Yet the whole time your credit is being ruined with derogatory marks.

You can also have a negative mark due to stolen identity, or just a credit reporting error. These are very common, where someone somewhere makes a mistake but your credit pays the price.

These are all inaccurate marks on your credit report. You should dispute and remove all of these marks.

Congress passed legislation to protect people just like you that find themselves in this situation. The Fair Credit Reporting Act says that inaccurate information must be removed.

To dispute an inaccurate mark you can hire a credit repair service. They will draft a dispute letter and send it to each credit bureau that is reporting the inaccurate listing. Or you can do this compose a letter yourself, however you should know that credit bureaus often do not conduct investigations based on one dispute letter.

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Credit repair website shut down by FTC

September 12th, 2008

FTC Obtains Court Order Against Husband-Wife Credit Repair Team

Here’s a perfect example of why you should never believe when someone tells you that they can guarantee you to remove anything and charge advanced fees for removal of negative items.

The Federal Trade Commission charged two credit repair marketers with violating federal law by collecting advance payment for credit repair services and falsely promising to remove derogatory information from consumers’ credit reports – even if the information is accurate and not obsolete. At the Commission’s request, a federal court halted the defendants’ allegedly unlawful business practices and froze their assets pending further litigation. The FTC seeks to bar the defendants from further violations and make them forfeit their ill-gotten gains.

According to the FTC’s complaint, the defendants marketed their “services” to consumers throughout the nation via an Internet Web site, www.lhcreditrepair.com, classified ads in USA Today, Thrifty Nickel, Common Cents, and www.americanclassifieds.com, and online listings such as www.kellysearch.com and www.aboutus.org. Statements on their Web site include, “Have you had a bankruptcy? We will repair your credit so that this past event does not haunt your future.” Consumers who called the defendants in response to their ads were told, “Anything that hurts you, we’re going to get it off of [your credit report].”

The complaint states that the defendants often led consumers to believe that accurate information on their credit reports might somehow be considered inaccurate and subject to removal. Even when consumers told them that the information was accurate, the defendants led consumers to believe that it could be removed. The defendants allegedly claimed they had special knowledge and expertise that enabled them to permanently remove negative information, including late payments, charge-offs, Collections, tax liens, repossessions, foreclosures, bankruptcies, and judgments, even when the information was accurate and not outdated.

According to the complaint, the defendants offer four levels of service ranging from $250 to $1,150 per person. They require an advance fee they call a deposit, which varies in amount, depending upon the program selected. On their Web site’s home page they claim, without qualification, that “[a]fter we have cleared your files we will stay with you for life, at no additional charge, to catch any other bad files that might show up.” Subsequent Web pages indicate, however, that only one of the four service levels includes the “for life” feature.

The defendants are Rudolph Joseph Strobel, a/k/a Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration (LHCR), all located in Naples, Texas. They are charged with violating the credit repair Organizations Act (CROA) and the FTC Act by falsely representing that they can improve consumers’ credit reports by permanently removing negative information, even when the information is accurate and not obsolete. The defendants are also charged with violating the CROA by requiring advance payment for credit repair services; and by failing to provide, before contracts are signed, the written “Consumer Credit File Rights Under State and Federal Law.” In addition, they are charged with violating the CROA by failing to include in their consumer contract a full and detailed description of the services to be performed, including all guarantees of performance and an estimate of the date by which the services will be performed; and failing to include a conspicuous statement about the consumer’s right to cancel the contract without penalty or obligation within three business days after the contract is signed.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Texas, Marshall Division.

Additional credit repair information is available in “Credit Repair: Self-Help May Be Best,” at www.ftc.gov/bcp/conline/pubs/credit/repair.shtm. The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected – free of charge. Federal law requires that the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been
or is being violated, and it appears to the Commission that a proceeding is in the public interest.
The complaint is not a finding or ruling that the defendant has actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Frank Dorman,
Office of Public Affairs
202-326-2674
STAFF CONTACT:
Anne D. Lejeune
FTC’s Southwest Region
214-979-9371
(Lee Harrison Credit Restoration)
(FTC File No. 0823141)

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Do it yourself credit repair including debt settlements

August 28th, 2008

Credit repair can be a very dirty word. Especially on the credit industry front. Credit repair companies are under siege for marketing and targeting people in serious trouble and for good reason. There are so many credit repair companies on line that claim to be able to increase your credit score or guarantee you perfect results.

It’s simply not true. You cannot guarantee what you cant control and thats the credit bureaus and collection agencies. You cannot promise a consumer that you can work magic on their credit, collect the money up front and then not deliver. That’s fraud.

What you can do is do the work yourself to bring your credit up to the best possible status. No one has better interest in your credit reports than you do.

There are good credit repair companies but I honestly only trust Lexington if you prefer to hire someone. I’ve already told you before, its the only credit repair company we promote and for good reason. They are lawyers who really do focus on nothing but credit repair and debt settlement. Their entire firm focus is credit repair so they do nothing but credit repair all the time. When you do something that much, you get really good at it.

If the do it yourself method is for you then I urge you to educate yourself with the process before you delve in. You can avoid costly mistakes by learning how the system works and how to use it to your benefit. By just taking  little time to educate yourself about the topic, you can make great headway.

First, order your credit reports and review each one. Once you identify the negative items then start a strategy to target the items. Determine if you plan on disputing an old paid off debt thats negative or plan to attack one that still has a balance due. Both have very different strategies.

If the debt is negative but paid then you can start by sending your investigation to the credit bureaus and wait for their reply. The bureaus have 30 days to complete your investigation and send you the results. If the bureau is unable to confirm the items accuracy, the item will be removed. If they confirm it as accurate then you move on to the furnisher of information and ask that they provide you with the proof they provided the credit bureaus. They must be able to show you proof or the item will be removed.

If the debt still has a balance then understand that disputing it to the credit bureaus may wake sleeping dogs. The bureau will send the dispute onto the furnisher of information who will realize you are out there. that may cause them to start pursuing you very aggressively. But if you know the debt is not accurate or has been sold several times to collection agencies then you may stand a very good chance of having the item removed. Finding those records will not be so easy.

This is a solid strategy against debts that have gone to third party debt collectors and you should always try to remove anything thats being reporting from  a collection agency because the rating is always negative. A paid collection account still looks bad so your purpose should be to question negative paid off collection accounts and collection accounts that still have a balance. The difference is you will move onto the collection agency reporting the item if the bureau verifies it as accurate. 

More often than not the item will have some inconsistencies in it that will result in a deletion. If by chance the item is 100% verifiable then consider debt settlements to pay the agency in exchange for total removal. They do it all the time and its actually quite simple.  Be sure they provide the agreement to delete IN WRITING!! If you don’t, kiss your money goodbye and your credit rating.

for more tips on deleting items from your credit reports visit our credit library.

Hot tip

debt snowball method, you put as much cash as you can toward eliminating your smallest debt, while paying the minimum on all other debts. When the first debt is paid off, you roll the amount of that payment to the next smallest debt, creating a “snowball” of increasingly larger payments on a decreasing number of bills. The reward? A feeling of accomplishment that many practitioners say helps them stay on track to pay off all their debt.

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Credit scoring: what you need to know

August 3rd, 2008

What is a credit score?

A credit score is a number that reflects your credit risk level, typically with a higher number indicating lower risk. It is generated through statistical models using elements from your credit report; however, your score is not physically stored as part of your credit history on the credit file. Rather, it is typically generated at the time a lender requests your credit report, and is then included as part of the report. Your credit score is a fluid number, and it changes as the elements in your credit report change. For example, payment updates or a new account could cause your score to fluctuate. There are many different credit scores used in the financial service industry. Your score may be different from lender to lender (or from car loan to mortgage loan), depending on the type of credit scoring model that was used.

Why are credit scores used?

Before credit scores, lenders physically looked over each applicant’s credit report to determine whether to grant credit. A lender might deny credit based on a subjective judgment that a consumer already held too much debt, or had too many recent late payments. Not only was this time consuming, but human judgment was prone to mistakes and bias. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant’s ability to repay debt. Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

Who uses credit scores and how are they used?

Banks, credit card companies, auto dealers, retail stores, and most other lenders use scores to quickly summarize a consumer’s credit history, saving the need to manually review an applicant’s credit report and provide a better, faster risk decision. Although many additional factors are used in determining risk, such as an applicant’s income vs. the size of the loan, a credit score is a leading indicator of one’s basic creditworthiness.

What information impacts my credit score?

The information that impacts a credit score varies depending on the score being used. Generally, credit scores are affected by elements in your credit report, such as:

  •  Number and severity of late payments
  •  Type, number and age of accounts
  •  Total debt
  •  Recent inquiries

Credit bureau-based scores, like those generated by Experian, cannot use demographics prohibited under the Equal Credit Opportunity Act, such as race, color, religion, national origin, gender, age, marital status, receipt of public assistance or exercise of rights under Consumer Credit Protection Act. Scores used by individual lenders may use such elements as income, occupation, and type of residence in determining their own custom credit score.

Credit scoring 101

History of credit scores

Credit scores became widely used in the 1980′s. Long before credit scores, human judgment was the sole factor in deciding who received credit. Lenders used their past experience at observing consumer credit behavior as the basis for judging new consumers. Not only was this a slow process, but it was also unreliable because of human error. Lenders eventually began to standardize how they made credit decisions by using a point system that scored the different variables on a consumer’s credit report. This point system helped to eliminate much of the bias that previously existed; however, it was still tied to intuitive measures of credit worthiness and was not based on actual consumer behavior. Credit granting took a huge leap forward when statistical models were built that considered numerous variables and combinations of variables. These models were built using payment information from thousands of actual consumers, which made scores highly effective in predicting consumer credit behavior. When combined with computer applications, scoring models have made the credit granting process extremely fast, efficient and objective, facilitating commerce and helping consumers quickly get the credit they need.

The credit modeling process

Designers of credit scoring models review a set of consumers – often over a million – who opened loans at the same time, and determine who paid their loan and who did not. The credit profiles of the consumers who defaulted on the loans are examined to identify common variables they exhibited at the time they applied for the loan. The designers then build statistical models that assign weights to each variable, and these variables are combined to create a credit score. Models for specific types of loans, such as auto or home, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer’s past credit history that most effectively predict future credit behavior.

Risk categories

In determining credit scores, lenders place you in a risk category that compares you to a large number of consumers with similar credit histories. This allows lenders to compare “apples to apples,” ensuring that your credit behavior is judged in a context that is relevant and fair. For example, consumers with brief credit histories and only a few accounts are not compared to consumers with long-established credit histories. Rather, these consumers will be compared to other consumers who also have brief credit histories. Keep in mind that the attributes of your risk category (i.e. number of accounts, total debt, etc.) may not have the same impact to a credit score for consumers in another risk category.

What are score factors?

Score factors are the elements from your credit report that drive your credit score. For example, such elements as your total debt, types of accounts, number of late payments and age of accounts are what determine the outcome of your credit score. Score factors can have a positive or negative affect on your credit score. Lenders must provide consumers with the most significant score factors when they are declined credit.

Your credit score

How can I see my credit score?

Lenders, especially mortgage lenders, often make credit scores available to consumers during the loan process, although they are under no obligation to do so. However, there is a good possibility that consumers will soon have the benefit of new disclosure laws concerning credit scores. For example, the state of California recently passed a law that will obligate mortgage lenders to reveal credit scores to loan applicants beginning in July 2001. Industry analysts expect other states to follow suit. To get access to your PLUS score, credit report and other membership benefits right now, sign up for Experian Credit Manager.

Why don’t I have a credit score? Credit scoring models cannot generate a score without sufficient credit information. If you have little or no credit history, you will probably not have a credit score available.

How often does my credit score change?

Your credit score is a fluid number that changes as your credit report changes. Therefore, any change to your credit report could impact your score.

How do my spouse or other family members affect my credit?

If you hold a joint credit account, have co-signed a loan or have authorized use of another person’s credit, these items could affect your score if they appear on your credit report. It’s important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder. A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.

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Credit counseling versus debt consolidation

July 31st, 2008

Credit counseling and debt consolidation are often confused. People who are in debt but don’t necessarily understand debt usually end up thinking they want to consolidate their debt if they cant pay their bills. Or people who believe the can pay their debt but want a smaller payment think they need credit counseling or debt management.

Lets break down the difference so you can make a wise choice and avoid some dangerous money and credit pitfalls.

Credit counseling
First off, you must be employed or have a steady income to enter a debt management plan. No sense in setting up new monthly payments if you cant pay.

Credit counseling also referred to as Debt management is a program that is used to help people avoid financial devastation and a probable bankruptcy. When your debt exceeds what your income is (debt ratio), you can quickly spin into free fall and become upside down. Once that happens, its next to impossible to swim up to the top. Credit counseling is easily offered by a non profit debt counseling company such as CareOne.

These types of programs will take your existing debts and restructure your payments and interest by setting up a payback program with your creditors. The positive to this type of program is that you can avoid lawsuits and going into collections because the debt counseling company will work directly with your creditors for you.

The debt management or credit counseling plan will take into consideration all your debts and your monthly income and create a new affordable budget for you. You then pay a set amount each month to the debt management company and they disburse funds to all of your creditors.

Do I pay the credit counseling company?
No. If it’s a good solid non profit plan such as CareOne, you are never asked to pay them. They receive contributions from the creditors. The reason a creditor will pay these contributions is because the debt counseling program is helping the creditor to avoid a total loss, so its good business for creditors to contribute to these types of plans. If it weren’t for them, you’d probably go screeching straight to a bankruptcy attorney and the creditor would get zip!

How long does it take?
That depends on how much you can afford. Since the program is based on your current income and expenses, that amount can change if your income decreases or increases or once you begin owing less debt. The debt management plan is flexible and can be structured according to your personal budget and bills.

Usually, you can be in a debt management plan for 12-36 months and break out of the debt and start fresh. The other great thing about debt management is that they educate you along the way so that you don’t repeat this mistake again.

What debts can I include?
Debt counseling also know as credit counseling easily covers unsecured debts. Things like credit cards, medical bills, cell phone debts, lines of credit. Anything that is unsecured. Secured debt like a car, house or boat cannot be included because they must be paid according to their equity and if you were to stretch the payments out by paying less, then the equity would eventually lose all its value.

What does happen however, is that the new structured debt on the unsecured bills you owe, will begin to free up other funds in your budget so that you can pay those secured bills.

What about my credit?
You have to consider this. If you are considering a credit counseling program then obviously you cant pay all your bills. Most likely, you’ve already began falling behind in your payments and that is being reported to your credit reports. When you start a debt management plan, the counselor will work with your credit to either freeze or reduce the interest and lower the payments. This new contract will be approved and the creditor will begin accepting these new payments as “current and accepted”. All the prior late payments will still be on your credit but once you are out of debt and able to be free of the massive debt load, then you can begin to work on restoring your credit. It’s really a matter of worrying about your credit later, if you are already in serious debt trouble. The existing bills and a plan to tackle those takes precedent. A bankruptcy would kill your credit as would charge offs, repossessions and judgments so this is a good alternative.

Debt Consolidation
Many people confuse these terms and in actuality it can mean two different things. What you need to look for is the program terms. Are you looking to reduce your monthly payments because in you’re in financial trouble or are you looking to lower your overall debt and have one payment, one rate.

Debt consolidation can either be, consolidating all your debt into a debt management plan such as described above or consolidating all of your debt into a new LOAN. That’s the key here. A new loan means you probably still have good credit but you realize you are paying way too much when you add all your loans up, especially considering their separate interest rates.

In this case, a new loan may be the type of program perfect for you. You may want to consolidate 5-6 credit card payments into one with one payment, one rate. It simplifies everything and can save you a ton of cash!

Some debt management programs also call their debt relief plans, consolidation because you are consolidating your bills into a new plan so be sure you know which type of consolidation you are talking about.

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Writing to a collection agency? Use caution

June 29th, 2008

I’ve spent many years writing a lot of letters. Not love letters unfortunately but letters to deal with credit issues. Letters to creditors, collection agencies and credit bureaus.

You’d be surprised just how many people do not how to write a letter, not because they’re uneducated but because these letters are tricky in nature. Anything you put in writing to a creditor or collection agency can come back to haunt you in a big way.

When a consumer uncovers a negative entry on their credit reports, their first instinct is to contact the source and try to improve it or remove it. But if your dealing with a collection account that is a big mistake unless you know what you’re doing.

The collection agency can easily get you to admit the debt is yours or worse, pay it before you’ve even had a chance to determine if its truly accurate. I don’t think you’d pay someone else’s bills so why pay an invalidated debt?

People do though, all the time. The truth is, you should never simply pay a collection item on your credit reports without first asking to have the debt validated. Validation of debts is where you ask the collection agency to provide proof to you that the debt is valid such as, balance, date of last activity, charges and supporting documentation.

Once you have clearly investigated the debt then you would be wise to send the agency a letter. Phone calls don’t preserve your rights so make sure everything is in writing. Remember, a collection agency isn’t your creditor. They are hired simply to collect debts.

Whether you decide to pay it or dispute it, you need to be careful how you word your letter because it will become ammunition for the debt collector to come after you.

If you decide to pay it, because you’ve determined it is accurate and you owe the money, draw up a letter advising the collection agency that you will pay the debt if they agree to remove the item from your credit reports. You really don’t want a “paid collection account” on your credit because it still looks bad. You want it gone.

Some may say, well isn’t that illegal? Absolutely not. A collection agency owns the right to the debt and just as they reported it, they can remove it. Most of the time the agency only places it on your credit anyway as a collection tool. To get you to contact them. It’s a bargaining chip. It is not the same as a creditor who must report your credit history during the time you do business with them.

I’ve deleted tons of negative entries on credit reports back in the day before I began offering financial advice simply because I asked. You cannot underestimate how bad the agency wants to collect the debt and they will bargain with you.

On the other hand, if you feel the validation process proved the debt isn’t yours or is in some way inaccurate, then you need to proceed with great caution in your letter because anything you say WILL be used against you.

I recommend you first check the SOL (Statute of Limitations) on the debt. Debts expire and if yours has, legally you cannot be sued. Yep, it’s true and everyday thousands of consumers pay old expired debts.

In your letter to the collection agency be sure to list your complaint, I.e, my debt is past the statute of limitations, the debt is not mine, the time allowed to place it on my credit reports has passed and so on.

Be specific and mention nothing about promising a payment if you dispute the debt. Doing so can renew the SOL on the debt all over again.

Do some research before you write any letters and be careful to review and research what you put in those letters to protect yourself. There’s a lot of information online about writing sample letters, researching expired debts and dealing with collection agencies.

Do research until you’re satisfied that you are handling the issue correctly.

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Affordable credit repair solutions

June 16th, 2008

Consumers are often overwhelmed by credit repair. The words alone send some consumers into denial. Most are afraid they’ll make their credit worse or they assume hiring someone to do it for them costs too much money.

That’s not always the case. With the advent of technology, streamlining credit repair is getting faster and better for consumers. About 10 years ago, it was a tedious process getting your credit reports to a credit repair agency and waiting for results.

Nowadays, it can be as easy as signing up online and sitting back waiting for the results. Don’t get me wrong, I think a lot of people have what it takes to do the task themselves but if you’re one of millions who find it overwhelming or simply don’t understand or have the time to fix your credit, then hiring a pro can be beneficial.

As always, as with any service, know who you are hiring. When seeking a credit repair company always look to their policy of refunds or guarantees. Make sure the company has a clean and clear BBB record (Better Business Bureau) and make a list of questions to ask before you sign up.

Once you’ve decided who you’ll hire then you can get on the road to better credit. Critics often say that credit repair is impossible. I don’t buy that at all. I’ve repaired many many credit reports. It’s possible and fortunately for us consumers, the bureaus and creditors make lots of mistakes.

I say make your credit the absolute best you can. Once you get there, keep it pristine.

A good source of FAQ about credit repair is DSI. Click here to read their FAQ on credit repair procedures, guarantees and more.

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