Understanding Credit Score
To err on the side of caution, let’s take a quick moment and explain exactly what credit is and what it means to you. Credit is the lending of money based on the understanding of reimbursement over time usually with an accompanying interest finance charge. It’s money you use now and pay back later.
For this section, when we refer to credit, we’re talking about your credit score or credit rating. This is a numeric representation of your trustworthiness for those institutions that would lend you money. It is a reflection of your financial history including paying bills promptly, keeping out of serious financial trouble such as liens and bankruptcies, not having an excessive amount of card credit lines open and the like.
When you go to borrow money, from car loans to mortgages, your credit score directly affects your likelihood of qualifying for the loan and the interest rate you will have for the money borrowed. Thus it is crucial to understand what your credit score is and how to make it work for you.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
About Credit Score
First, let's define what a credit score is. Fair-Isaacs, the company that developed the credit score model, defines it as "a snapshot of an individual's credit at any given time" with the credit score changing as new information is added or deleted from the individual's credit score file at the repository. This being said, not every repository has the same information. Thus, your credit score can vary significantly from one repository to another. This could be good or bad, depending upon which repository your lender actually bases their lending decision on.
Credit Score Models
The industry started to become aware of "credit score models", as they are called, as early as 1994. The use of credit score models in the mortgage industry came about as the major secondary market players, known as Fannie Mae and Freddie Mac, started to develop automated underwriting systems. They had been in use for a long time for auto lenders and credit card issuers.
The early creators of the automated underwriting systems felt that if someone could go to a Mercedes dealership at 10 am and drive off the showroom floor an hour later with a $100,000 car, they ought to be able to obtain a mortgage the same way. The logic in this should be obvious... after all, cars are rolling stock, so they can disappear, they depreciate and usually people don't live in them. Houses are attached to a foundation, they usually appreciate and people usually live in them. Using that logic, the industry should be able to make the mortgage process easier for everyone.
This theory sounds good, but it is only in the last year or so that we have seen some relief from the mountains of paper that go into mortgage files because the credit score models have become more refined. Still, there is progress yet to be made and the industry is grinding slowly in that direction. Credit score models figure prominently in the future of how people obtain home mortgages.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
Credit Report Agencies
Most people know that most creditors use credit report agencies for obtaining information on a person when they have applied for any type of financing. However, there are actually two levels of credit report agencies. There are three major repositories of credit and background information. They are Equifax, Experian and TransUnion. When someone obtains a credit card, the credit card company reports the payment history to these repositories. This is usually done monthly but may be done on an irregular basis. These repositories simply accept the information as it comes in electronically and they DO NOT check the accuracy of the information.
The credit repositories and other agencies also maintain other background information on every person in the country who has a Social Security number or other identifying information. The other agencies may include the Department of Motor Vehicles, the Medical Information Board, the FBI, local law enforcement agencies, the county recorders for each county (public records repositories), etc. Even the mortgage industry has a central repository for borrowers and lenders who may have been involved in fraudulent activities in the making of mortgage loans.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
Credit Score and the Mortgage Company
When you apply for a loan, your mortgage company will request a credit report from a credit report company. This is usually a local or regional company. This company pulls together a credit report electronically. It usually comes from one or more of the major repositories, but it can come from several sources.
Along with the information, the local credit reporting company receives a numerical credit score. The credit score represents a composite of your credit history, employment, ability to save, and so on. The most famous of these scores is known as the FICO credit score, which was a model developed by the Fair-Isaacs Company years ago. It is believed that the Beacon and TransUnion scores are really scoring information provided by the Fair-Isaacs Company, but have been tweaked somewhat by the other bureaus. That is partly true, but what most people don't know is that, with information streaming into their credit file almost everyday, the credit score can change daily. That is why someone can apply for a mortgage with one mortgage company today and have a FICO score of, say, 717, and apply with another mortgage company a week later and that credit score can be higher or lower, depending on the information received at the repositories in the interim.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
The FICO Score Mystery
The truth is that the Fair-Isaacs Company and the major credit repositories do not divulge how the credit score model works. Due to the level of erroneous reporting to peoples' credit file, there has been pressure on Congress lately to make the credit repositories more accountable for the accuracy of the information they report AND to divulge what goes into the credit score models, so that people can know what to do to improve their credit score.
Why is this important? The lending industry is moving toward "risk-based" pricing. In plain English, this means that the higher one's credit score, the less paper they will have to provide to prove that they are creditworthy AND the interest rate and/or fees a borrower pays will be based on the level of their credit score.
This system, while perhaps unfair to some, will be great for those who maintain an impeccable credit score. It's one way that good credit risks can be rewarded. In the past year, mortgage company have already seen a dramatic reduction in paperwork requirements and "risk-based" pricing (interest rates and fees) has become commonplace.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
Bad Credit
If you have recently obtained your credit report and you are not happy with what was reported, you can take steps to correct the erroneous information on it. There are also proactive things you can do to improve your credit score if you are anticipating applying for a mortgage anytime soon.
While we intend to go into the details of correcting erroneous credit report information, we can give you a few hints now on how to be proactive in improving your credit scores from where you are today.
The first is the most obvious. Pay all your bills on time. The second is, don't apply for a new credit card unnecessarily. Every time you sign and return a new credit card offering, or open that second credit card account at a department store because you get a 15% discount, an inquiry will be generated and that will reduce your credit score. The third is that if you must maintain credit card balances, try to keep them at a level that is 35% - 40% of the maximum credit limit. In other words, if the credit card limit is $1,000, try to keep your running balance below $400. Believe it or not, consolidating all your credit cards onto one can hurt you, if the balance is at the credit card limit. The fourth is, if you get into a dispute with the phone company and it isn't a huge amount, pay it and move on. Having one or more collections, even if they are small amounts, can really hurt your credit score. A mortgage company can recognize which type of credit card information is negatively impacting the credit score by referring to the reason or factor codes that issued along with the scores in the report.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
Fixing Your Credit
Dealing with Credit Bureaus
It is essential to understand that Credit Bureaus are nothing more than record keepers.
Simply put, they keep a record of who has given you credit, when they gave you credit, how much credit you are given and whether or not you paid it back on time. When you want to obtain credit cards, a mortgage, financing for a car, leases, apartments and sometimes even employment, the lender or bank will check your credit report to see your financial history.
The people who request your credit report pay Credit Bureaus.
Credit Bureaus have no legal power over you. No bank or government agency runs them; so don't be intimidated. They are the Credit Bureaus because they own large computer systems capable of storing credit information on everyone in the United States. However, because of the tremendous amounts of information on their computers, their method of storing information is very basic and ridden with many errors. Since the bureaus have made so many errors in the past, all Federal Laws regarding credit information are very much in your favor.
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
24. The Major Credit Bureaus Contact Info page:
Experian
P.O. Box 2002
Allen, TX 75013
(888) 397-3742
Experian.com
Trans Union Corporation
P.O. Box 1000
Chester, PA 19022
(800) 888-4213
transunion.com
Equifax, Inc.
P.O. Box 740241
Atlanta, GA 30374
(800) 685-1111
Equifax.com
To find out more about your credit score, click one of the topics or click below to speak to a credit specialist.
Getting Your Credit Report
The Fair and Accurate Credit Transactions Act (FACT Act) was signed into law in December 2003. The FACT Act, a revision of the Fair Credit Reporting Act, allows consumers to get one free comprehensive disclosure of all of the information in their credit file from each of the three national credit-reporting companies once every 12 months through a Central Source.
The FACT Act required that the national credit reporting companies establish a Central Source through which you would request the statutory free annual credit file disclosures. You may contact the Central Source by visiting www.AnnualCreditReport.com or calling (877) FACTACT. Once your region qualifies to request a free annual disclosure, you may make a request online, by telephone, or in writing.
The FACT Act entitles consumers to get one free statutory credit file disclosure from each of the three national credit-reporting companies once per year. Because of state law, residents of Georgia can receive two free credit reports per year.
We advise against having anyone you know get your credit report for you because this creates an "Inquiry" on your credit report, and makes it appear as if you are trying to borrow money from somewhere.
If you are in a hurry and cannot wait 5 to 10 days to receive your credit report, simply look in your local Yellow Pages under Credit Bureaus. If the Credit Bureaus have a local office or affiliates in your area, you may go there directly and obtain your credit file without delay.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Things to remember when requesting your credit report
NEVER give credit bureaus more information than they need!
The only thing you legally need to supply the credit bureaus for a copy of your credit report is your name, your social security number and a legal mailing address (P.O. Box is a legal address). If you don't want to chance harassment by creditors at this time, it may benefit you to acquire a P.O. Box. Did you know that many of the collection agencies are owned by the credit bureaus?
The bureaus also have a right to request a copy of your social security card, but only give a copy of the front. They also may request a copy of something showing your address if it is different than what is showing on the report. Send them a billing statement that has your address. Do not send them a copy of your driver's license as they request. Remember these bureaus are information-gathering companies who sell your information, not only for credit reports, but also for promotional reasons.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
What the Credit Bureaus Don’t Tell You
1. Each item on your credit report must be proven or it cannot remain in the credit report. If the credit bureau cannot verify the item when investigated, it must be removed from your credit report whether or not it's true.
2. Every negative entry on your credit report can be denied or challenged at any time. The bureau must reinvestigate and if that item cannot be verified within a "reasonable amount of time", it must be removed from the file.
3. Challenged items can be mistakenly erased. Consumers say they often experience computer operator mistakes.
4. Many times the creditor does not re-verify in time or the credit bureau is busy and does not handle your dispute properly. It must then be deleted.
5. The older an item, the more difficult re-verification is. It is possible it cannot be verified because records may no longer exist after 1 or 2 years. |
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
The Fair Credit Reporting Act
All Federal Laws are in the consumer's favor. This means you have the advantage. The specific law used here is the Federal Fair Credit Reporting Act.
One part of this law states that when you dispute any information contained on your credit report, the Credit Bureau must verify the accuracy of the information with the creditor who reported the information within 30 days. If they are unable to verify the information within 30 days, it must be removed.
Congress passed The Fair Credit Reporting Act (FCRA) because they felt we all deserve a second chance. This act gives you the right to correct, update, amend and tell your side of what happened to the credit community. These laws do not work though unless you initiate and use them.
The Fair Credit Reporting Act sets certain guidelines which credit bureaus and your creditors must follow when reporting your credit report, as well as giving the consumer certain rights.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Your Six Basic Rights under The Fair Credit Reporting Act
1. You, the consumer, have the right to challenge the accuracy of your credit report any time.
2. The credit bureaus must reinvestigate anything you challenge without a charge.
3. The credit bureaus must reinvestigate within a reasonable amount of time. 30 days constitutes a "reasonable amount of time" unless the bureau notifies you otherwise (so keep accurate records).
4. If the credit bureau finds an error in the challenged item, they must delete or correct that information in your files immediately.
5. If the credit bureaus cannot or do not confirm the challenged item within 30 days, they must delete that information from your files immediately.
6. You have the right to submit a Consumer Statement of your view of the problem. If you, as a credit consumer, dispute the accuracy of certain information in your credit report and it is verified by the creditor as correct, then the credit bureau is required to include your explanation of your dispute, if you request, in your credit report. Limit your explanation to no more than 100 words.
|
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Intro to Credit Repair
All of this brings us to the fascinating task of working on your credit report. Begin by getting defensive about your credit report. Remember that these credit reporting bureaus are just private companies selling information about you and are not your friends. You never authorized your creditors to sell this information and you are not sharing in the profits they and the credit bureaus are making.
The following techniques will help correct your credit and should be done with all Credit Bureaus.
In the following pages, you will learn the ways of removing negative items from your credit file. These methods are sometimes referred to as "Credit Repair". These are the exact same methods credit repair clinics and attorneys charge up to $3,500 to perform. Since they do not always do it correctly, consumers have been taken for millions of dollars over the past years. We will also show you all the jealously guarded secrets on how to outsmart creditors who are damaging your credit!
To find out more about your credit, click one of the topics or speak to a Millennia Mortgage credit specialist.
Reading your Credit Report
When you get the credit report, there will be an information page telling you how to read your credit report. All three agencies use different formats. The first step is to find all the derogatory items.
Look for collection accounts. Equifax lists them at the end of the report; Trans Union mixes them throughout the report. Experian gives a brief paragraph explanation of all accounts. The collections may have a collector's name or account number you do not recognize.
If you don't recognize the account as being one of yours, don't assume that it is!
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Steps to Repair Your Credit Report
The following techniques will help correct your credit report and should be done with all Credit Bureaus.
In this section you will learn the ways of removing negative items from your credit file. These methods are sometimes referred to as "Credit Repair". These are the exact same methods credit repair clinics and attorneys charge up to $3,500 to perform. Since they do not always do it correctly, consumers have been taken for millions of dollars over the past years. We will also show you all the jealously guarded secrets on how to outsmart creditors who are damaging your credit report!
1. Obtain your three credit reports.
2. Review the credit reports and locate the negative items.
3. Dispute the negative items with the credit bureaus.
4. Disputed items are removed or corrected. Items that were not re-verified are removed.
5. Negotiate with creditors and collection companies.
6. After negotiating and making payment, creditors delete the negative accounts or change them to a positive rating.
7. State the item you are disputing, but do not use dispute forms or file numbers provided by the bureau. This will cause fewer delays by the credit bureau asking for clarification.
8. Do not confirm the account if any information about the item is wrong.
9. Do not use letterhead (you don't want to raise any Red Flags).
10. Do not photocopy a fill in the blanks form letter - make each one a personalized original (another Red Flag).
11. Send disputes during busy times of the year. For Example: The first to middle of November can cause a delay in verification because of Thanksgiving. Christmas rush for the creditor and the bureau can catch them before they can thoroughly investigate within a reasonable time.
|
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Sending Dispute Letters
The main weapon you will use in the battle to repair your credit report is the dispute letter. These typed letters will be the avenue of correspondence between yourself and the three major credit bureaus. The actual letters you send should be personalized to avoid sending up red flags regarding your requests.
Consumers working on their credit report say many times their letters are ignored by the credit bureaus. It is believed the credit bureaus try to discourage consumers from working on the credit reports by making it difficult. Consumer's say even with proof an item is not theirs, its removal from their report can take three or four challenge letters. When the credit bureaus say they have verified or confirmed an item, it seems all they have done is verified it is in their computers. THIS IS NOT ENOUGH PROOF!!! They need to provide greater proof, so read on.
Sending your dispute letter by CERTIFIED RETURN RECEIPT MAIL greatly increases your chance of a response. This should not be done with the first attempt. Keep a record of when you sent the dispute letters and what date you should expect a response. If you have received no answer to your dispute after 30 to 37 days, attack the credit bureau with a certified return receipt letter for an updated credit report demanding the disputed items be deleted. If the bureaus do not reply within the 30 days, it must be that the information was either inaccurate, or it could not be verified. In either case, according to the Fair Credit Reporting Act, the items must be immediately deleted.
Consumers have found it possible to eliminate negative marks on credit report simply by going through this process of disputing items over and over again. Since many creditors won't take the time to defend the negative item, eventually you can "repair" your credit report through default by your creditor not responding to the credit bureaus request to verify the item. The creditors do not always have time to deal with a bothersome piece of paperwork and that is your advantage. We'll go into this more later.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Credit Report Repair is a Process
It is important to understand that the process outlined in this website is not a quick fix. The removal of bad credit items from your credit report doesn’t always happen right out of the gate. You have to be patient, tenacious, and think long term.
That being said, after you’ve contested your first batch of bad credit report items, it is important to order another credit report to ensure that requested removals took place and that no new items have sprung up in their place. When you get the updated credit report, carefully review it to see if you have lost the negative items and to see if anything else has changed. Consumers working on their credit report have found while disputing one negative item, for no apparent reason, another negative item or two disappeared. Usually some progress is made each time you challenge, but do not get discouraged if you don't get results each time. Remember, the credit bureau would like you to quit bothering them because if you aren't disputing the report, they can legally continue selling it as profitable information.
After you have received your response, repeat the process all over again. Consumers who have successfully cleaned their credit report say that they have denied a bankruptcy or judgment and have received verification from the credit bureau that it was in public record. They denied a second time and some even a third time, and finally the credit bureau deleted the bankruptcy from the report. Do not get discouraged; patience and persistence are important keys to incredible success in repairing a damaged credit report.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Easy vs. Hard Items to Remove from your Credit Report
The creditors who reported the items to the bureaus must be the ones to provide information to verify the dispute. These creditors do not always have the staff and proper records to verify all disputes within 30 days to keep the item from being removed. So you can see how possible it is to remove negative information from your credit report. How well is this going to work for you? The only way is to try. However, our research has shown that certain items are easier to remove than others.
Easier Items To Dispute And Have Removed from your Credit Report
* Items older than 2 years
* Discharged bankruptcies
* Charge-offs
* Inquiries
* Repossessions
* Late payments
* Accounts that were late but are now paid off
|
The reason these items are easier to remove is simple; when you dispute an older account or an item that is now charged off, the creditor is not too concerned with the account any more. They may not even be able to find the necessary information to verify the dispute. Even if the account was once seriously past due, but now is paid off, they usually will not take the time to verify the dispute since they have already been paid.
More Difficult Items To Dispute And Have Removed from your Credit Report
* Accounts that are currently past due
* Recent Bankruptcies
* Judgments
* IRS or State Tax Liens
* Current collection accounts
|
These are more difficult because creditors keep these types of accounts in their current files and they are expecting you to pay them. That is why it will be much easier for them to verify the information and keep the item on your credit report. However, it is always worth a try.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
36. Scrubbing Your Credit Report Step 1
It is completely legal for you to dispute items on your credit report even if you know they are correct. You are simply testing to see if your creditors have maintained the proper records to verify the dispute. You have a very bad memory and forgot that the negative accounts on your credit file are really yours.
Federal Laws require that the Credit Bureaus verify all disputes. If they are unable to verify your dispute, the law says it must be removed from your file.
To dispute a negative item on your credit report you need to first identify the negative items that you want removed.
Once you know which items to dispute, DO NOT complete the Dispute Forms that the Credit Bureaus included with copies of your credit report that they sent you. It's much more effective to draft your own letters.
Be sure to include a copy of your credit report and keep the original for your records. Highlight or underline the items you are disputing. Mail the dispute letters to the address listed on each credit report.
To dispute an inquiry, simply write that you never applied for a credit card with that company.
Make a photocopy of your dispute letter for your records and be sure to send it by Certified and Return Receipt Mail from your local Post Office. Mail your dispute form to the address provided with your credit report. Repeat the above process for each item that you want removed or changed.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Scrubbing your Credit Report Step 2
After reviewing your updated credit report and finding that most or all the negative items have been removed, you may now focus on building a positive credit report. Positive information will always outweigh a few negative items that may remain on your credit report.
This auditing technique is usually only practiced by attorneys. It would be very expensive to hire attorneys to do this for you. However, by following the instructions, you'll get similar results as any attorney (you just won't have to pay).
If the Credit Bureaus were able to verify any disputed information as correct, it would remain on your credit report. So you'll need to contact the creditor who is reporting the information. The creditor who reported the item is listed on the left or bottom of your credit file. If their phone number is not provided, call directory assistance in their city and ask for the creditor's telephone number. Call and ask them to mail you written proof and documentation that this is actually your account, since you do not believe the account belongs to you.
Almost all creditors and collection agencies use computers to store information about debtors and they throw out original, signed contracts along with other original documents. This makes it easy for creditors to store and organize information BUT makes it impossible to actually prove the account is really yours and not just another mistake.
Federal Law requires that, upon your request, all creditors must show you written proof that the account in question is in fact yours. Written proof is a copy of the contract you signed with the original creditor. As we explained before, you are stored on the creditor's computer and chances are excellent that they have thrown out all the proof that this is your account.
The only creditors that may have proof are the courts (Recent Bankruptcies, Unpaid Tax Liens, Unpaid Judgments & Unpaid Child Support).
Important: Always remember that if the dispute is sent in from anyone other than you, the Credit Bureau will suspect that you have paid someone to repair your credit report. This raises all sorts of Red Flags. Since they make so many mistakes it is imperative that they believe you are working alone and trying to fix a real, legitimate mistake.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Scrubbing your Credit Report Step 3
If there is a negative item that you want removed from your credit report, such as a bankruptcy, charge off or collection account, you may want to write that this is NOT your account and you want it removed immediately.
If the account is now paid off, but was seriously past due at one time, DO NOT write that it's not your account. Instead, write that it is your account but was NEVER past due and you need it updated to say that everything has always been current. Only allow a creditor 7 days to get the proof into your mailbox (3 days to find it and 4 days for the mail). If it takes any longer they probably do not have proof. If the creditor does supply you with all the written proof that the account belongs to you within this time, go to Step 5.
Again, all Federal Laws are in your favor. If you say an account is not yours and the creditor does not have written proof that the account belongs to you, they must remove the account from your credit file and cease all collection activity. If they don't have written proof that the account is yours, there are two ways to get the item removed.
Scrubbing your Credit Report Step 4
If the creditor is able to supply the written proof you request, offer to settle the debt for 10 cents on the dollar provided that you have the money. If you don't have the money go to Step 5. If you owe $1,000, offer the creditor $100. If they refuse, tell them that you will file Bankruptcy and they will get nothing. This will certainly open them up to negotiating with you. Whatever you agree to pay them, it should be a lot less than you originally owed them. Do not agree to pay interest charges or penalties on past due or collection accounts.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Scrubbing your Credit Report Step 5
If you don't have the money to make payment arrangements, start back at Step 1. Remember that the laws are in your favor and you are legally allowed by Federal Law to dispute the negative items on your credit file every 30 days. You are allowed to repeat this process as many times as you wish until the Credit Bureaus cannot verify the item and must remove it. As you already know, the creditors do not have the staff to handle all the disputes they receive, so if you persist, eventually the items may be removed.
The Credit Bureaus may sometimes reply by telling you that they already verified the information as correct. If this happens, write back telling them that it's a Federal Law that they must verify your disputes and that you'll sue them for $5,000 for each dispute that they do not handle properly. Once they know that you are aware of your rights, they'll become very cooperative.
Extremely Important: If you agree to make payment arrangements with any creditor, do so only under one condition: before you pay any money, the creditor must mail you a written agreement that they will report the account to the Credit Bureaus as current, paid off and never late! Otherwise, it may still remain on your credit file and may not be worth paying.
To find out more about your credit report, click one of the topics or click below to speak to a credit specialist.
Get the Edge on your Creditors page:
A. Contact the Attorney Generals Office in the city of the creditor who is damaging your credit report. Get the phone number through directory assistance. Tell them that you have a creditor who is damaging your credit report by reporting an account that is not yours. You have requested proof that the account belongs to you and they do not have it. They will contact the creditor and have the account removed from your credit file. This is a free legal service and almost guarantees they will get the item removed.
B. If you want to make some money off of the creditor then take them to Small Claims Court. To do this, you will need to call your county courthouse and ask about the proper procedure to follow to get a court date. It's very easy and you can do it all yourself. You'll be asked to fill out one or two simple forms stating your complaint. You may want to write that you wish to remove the item from your credit report since it is not yours and the creditor has no proof that it is your account. After you receive a court date, mark it in your calendar and make sure to attend at the proper time, place and date. Bring in the receipts from the registered mail you used for your disputes along with your phone bill and sue the creditor for your expenses and emotional stress.
|
|