Feb
2
2010
Millions of people across this country struggle with the effects of having a poor credit score. Some are turned down for credit cards or car loans, others find out their applications for mortgage refinancing have been rejected. If you’re experiencing the limitations that get imposed on people with poor credit, you may already know your credit reports are in need of repair. Today, getting information about how to fix your credit score doesn’t have to be frustrating or stressful, thanks the wealth of credit information and resources available to consumers.
Tips to Improve Your Credit
Based on the information in your credit reports, credit scores are a tool used by businesses and lenders to determine the likelihood a consumer will repay their loan. Fortunately for those with lower credit scores, this rating is not set in stone. Although it can take time, there are many things you may be able to do to increase your credit score.
* Pay your bills on time – Payment history accounts for 35 percent of your credit score. A period of not making timely payments can cause your credit score to drop but since the impact of a late payment diminishes over time, being careful to make all payments on time going forward will move your credit score in the right direction.
* Get current on missed payments – If payments are already past due, their impact on your credit rating will become increasingly more profound the more time they remain unpaid. A couple of 30 day lates are defendable, but a single 90 day late payment can cause your credit score to plunge.
* Contact your creditors if you are having a hard time making payments – If you foresee that you will be unable to keep current on loan or credit card payments, you may be able to make arrangements with your creditors such as extending the loan period that will help you get back on top of things. You could end up paying more in the long run, but if it keeps you from falling further behind, it will be worth it for your long term finances and for your credit score.
* Try to maintain low balances on your credit cards – Outstanding debt makes up 30 percent of your credit score. The closer you are to maxing out credit cards, the less stable your finances will look to be. Keeping credit card balances below 30 percent of the available limit will make your credit utilization ratio look better which is a good thing in the credit scoring model.
* Avoid rotating your debt on numerous credit cards – Transferring debts to a lower interest rate card is a good strategy when trying to whittle down debt, but constantly transferring balances between cards looks like you are robbing Peter to pay Paul in lieu of of making your monthly payments.
* Carefully study credit applications before accepting – Some loans, including department store lines of credit, are loaded with fine print and other strings attached that can end up causing big problems down the road. For example, some no payment, no interest financing programs offered by retailers include interest rates that can skyrocket if you are late on a single payment and clauses where you may still be responsible for interest accrued during the “no interest” period.
* Look into credit repair services people who need additional assistance addressing their bad credit, an excellent resource for consumers are professional credit repair services. Professionals can lend their valuable expertise on important matters like legally disputing the questionable negative listings on your credit report and specific steps you can take to make the most of your credit score.
Feb
1
2010
According to a recent survey by VISA, 4 in 5 American consumers don’t realize that bad credit can hurt their chances of being hired for a job. What many people don’t appreciate until they see it firsthand is that employers have the right to reject job applicants because of the information saved in their credit reports.
Companies who reference your credit record as a part of the employment process contend that your credit history is a good predictor of your character, judgment and reliability as an employee. Some consumer advocates disagree with this and claim the practice is an unjust method of discriminating against job applicants. Regardless of which side of the story you agree with, the fact remains that the data recorded by the credit bureaus could have bearing on your being hired for a new job.
Good Morning America featured an article titled How Bad Credit Can Affect Job Prospects in which there are a handful of helpful tips to think of when applying for a new job. First among these is seeing if the employer will be requesting a copy of your credit reports. Prospective employers have to get your approval before performing a credit check so read through the small print of application. Is it usually in the fine print where you lend your consent upon signing the application.
If you have great credit, you probably won’t have anything to worry about. If, however, your credit reports show difficulties making timely payments or other credit issues, it is advised that you take steps to minimize their impact. Of course, if you haven’t seen your credit reports in a while and don’t know what’s on them, make sure you order a copy before starting out on the job search. You can order your reports free of charge at AnnualCreditReport.com.
If your score is lower than you’d like it to be because of credit reporting errors or other questionable negative items saved in your credit reports, work to get this information corrected or removed. If you don’t have time to take care of these issues before applying for a job, there are many other benefits to correcting these issues so it is still advisable that you do so. But for now, you will have the added challenge of helping a prospective employer see past your poor credit score.
If you know an employer wants to perform a credit check, consider preemptively addressing the issue instead of having to perform damage control after the fact. Many people with bad credit have perfectly reasonable circumstances such as unexpected unemployment, fallout from a divorce, or medical issues that can wreck havoc their credit rating. After confidently and truthfully explaining your situation, you may find employers will be sympathetic to your troubles.
Jan
28
2010
The credit repair industry has become a crowded place. The credit crisis has led to increased lending restrictions that resulted in making a high credit rating much more important than in years. Finding themselves no longer being considered good candidates for loans because their credit score isn’t as good as it now needs to be, thousands are turning to credit repair services for help. Eager to capitalize on the trend, new credit repair services are popping up seemingly every day claiming to be experts at repairing credit reports.
With so many new and inexperienced credit repair providers coming onto the scene, many of which are simply turnkey credit repair businesses using third party software as the backbone of their product, it becomes a challenge to know who you can trust with your credit. To help separate the quality credit repair companies from the amateurs trying to make a quick buck, here are some tips for spotting a reputable credit repair service:
1) Check for experience – Setting up a credit repair company is surprisingly simple. All a person needs is a web site and a little money in the bank to pay for a credit repair software package. Staying in the business and generating good results is more difficult. The leading credit repair services typically have an established history of helping people which is not only indicative of a stable business, but it is also a sign that the company operates within the confines of the law.
A company’s BBB report will list how long the company has been in business, although not necessarily how long they have been providing credit repair services. If the companydoesn’t have a BBB report, it may be a red flag since the company may be very new or flying under the radar. When you are unable to determine how long a company has been around, you can try performing a WHOIS lookup of their website’s domain name to see how long it has been since the domain was registered, but if it takes that much work to track down the information, you’re probably better served looking elsewhere.
2) Look for a “brick and mortar” presence – The Internet is a great vehicle for commerce, but the process of repairing your credit is more effective when performed offline. Trustworthy credit repair companies usually have a physical location that you can use as an indication of how solid the company is. Satellite imagery services like Mapquest are great tools for checking out the company’s headquarters. Get the company’s address, load a map and see if the company has their own building, is headquartered in an office complex, rents out a space in a strip mall, or has the mailing address of a personal residence.
3) Look at pricing and payment options – Drafted in the mid nineties, the Credit Repair Organizations Act CROA sets guidelines credit repair companies must abide by. One of these is to only accept payment for services after they have been performed. This was put in place to protect people from fraudulent companies who would charge large upfront fees and never provide the expected services.
As a result of this, you should steer clear of credit repair providers who require an upfront payment.
In addition to finding out when and how much you will be expected to pay, make note of the payment options. Most reputable companies will provide at a minimum the option to pay via credit card on their website or over the phone. Additional payment methods may also be accepted.
Be wary of companies who require checks or money orders as you do not have the same level of protection in case you need to recover your money if something goes wrong. Also watch out for companies who employ third party payment processing on their website such as Paypal as this can be indicative of a fly by night credit repair service. Finally when providing payment information online, make sure the webpage is secured. Before entering your credit card or Social Security number on a webpage, make sure the address of the page starts with “https” and your browser (Internet Explorer, Firefox, Safari, etc.) displays a padlock or similar icon indicating the connection is secure.
Jan
26
2010
There is an institution in today’s society that impacts everything from your ability to purchase a home, get approved for automobile insurance, and gain employment with certain organizations. It is an element that affects almost every person in the United States but it is something rarely covered during formal education and is not well understood by a huge percentage of those it impacts.
What we’re talking about here is the credit system. This is the system where credit bureaus receive, organize and store financial information about consumers provided by a variety of sources that is then sold to lenders, employers, and others. This information is used to make decisions about whether or not you are a dependable, credit worthy person.
After a short time dealing with the financial community, most people learn the rudimentary basics of the credit system. They know their credit files contain information about them and they know it is beneficial to have a high credit rating. They also learn through a constant bombardment from credit bureau advertisements that people can order copies of their credit reports. But from there, their knowledge of the credit system drops off and many of the things people believe to be true are in actuality incorrect or flawed interpretations of the facts.
Many people do not know how their credit score is derived, what steps they can take to maximize their credit score, the myriad of resources they have for disputing questionable credit listings, and how the law protects their right to receive fair treatment from credit reporting agencies, creditors, collectors, and credit repair firms.
Whether by accident or through design, much like how the pigs exerted control in Animal Farm, this lack of knowledge leaves people at the mercy of the companies whose revenues are tied to consumer credit. When left unchecked, even the most upstanding companies will err on the side of making more money. As a result there are people are paying excessive interest rates that pad the pockets of lenders because these people are not knowledgeable enough about credit to fight back. They are permitting themselves to be victimized by companies who, intentionally or not, are taking more of their money than is fair.
The more people learn about the credit system, the more empowered they become. Credit scoring is a powerful and necessary tool in today’s society, but as with all sources of power, it must be kept in check. Those people who understand how it works are the ones who will be able to enforce their right to a fair and accurate credit score.
Lexington Law, the trusted leaders in credit correction, believes learning about your credit is the first step in improving it. To assist consumers, Lexington Law has provided credit education resources including videos, lawyer interviews, expert articles and more.
Jan
20
2010
The Fair Credit Reporting Act’s inability to create a credit system where the “accuracy, relevancy, and proper utilization” of your information is protected has resulted in a credit reporting system that is not “fair and equitable” to consumers. But in defense of Congress, the Fair Credit Reporting Act has been strongly influenced by industry lobbyists. Their influence was so great that when the FCRA was made into law in 1971, Senator William Proxmire, one of the bill’s primary sponsors, felt defeated at what had become of his good intentions.
Since that time, the Fair Credit Reporting Act has been amended to become more and more consumer focused, but there is still a long way to go and as was the case in 1971, those in the financing industry are still interested in keeping things weighted in their favor.
While the credit bureaus are no longer able to record information about you such as your race or religion, they also are not required to collect other information that is relevant to your credit worthiness. If you are a responsible consumer who has been emplyed by the same company for 10 years, has no criminal record and makes more than enough money to cover all your expenses , it is obvious that you are more creditworthy than a career criminal who is a continual burden on the system. But none of this information is recorded by the credit reporting agencies or used when calculating your credit score. If you and the career criminal have the same types of accounts recorded on your credit reports, your credit ratings will be identical.
Also, while amendments to the Fair Credit Reporting Act give you the right to see what information is contained within your credit reports, you do not have the ability to learn any more than the broad stroke concepts of how this information is used to generate your score. What impact will paying past due debt have on your credit score? Which of a handfulof credit cards should be paid down first? What effect will shopping for a new loan have on your credit score? We have unclear, observation based answers for each of these questions, but the exact formula is unknown and is subject to revision at any time.
Finally, you have the right to dispute the inaccurate and misleading items in your credit reports, but it is not always the case that this process is easy or effective. Depending on your unique situation, cleaning your credit can be as easy as submitting an online form or as cumbersome as hunting down creditors, fighting with collections agencies, and maybe even involving legal intervention.
The same entities who profit most from inaccurate credit reporting are the ones who played such a big role in watering down the Fair Credit Reporting Act and continue to resist consumer efforts to add equity to the credit reporting system. It is these entities you have to deal with when working to enforce your right to a fair and accurate credit report.
Jan
19
2010
Fortunately for today’s consumer, half a century ago Congress recognized that the system of credit reporting needed revision. The practices of the credit reporting agencies and the agencies using the credit reports they provided were abhorrent. American consumers were being abused by a system they had no way of influencing and no way of keeping in check.
To counter this, Congress passed the Fair Credit Reporting Act which with its subsequent revisions has become the keystone for constructing your consumer credit rights. It is because of the Fair Credit Reporting Act that you have the right to see what is being reported on your credit reports and to dispute any inaccurate negative items they contain.
In addition to the Fair Credit Reporting Act, there are a few other consumer protection acts that give consumers certain rights when it comes to working with creditors or collections companies who report to the credit bureaus. By making use of their rights under each of these consumer protection laws, consumers have been able to successfully repair their credit score.
Fair Credit Reporting Act
The Fair Credit Reporting Act is what got credit repair started. Because of this act, you have the right to see your credit file and to dispute inaccurate credit listings directly with the credit bureaus.
Fair Debt Collection Practices Act
Along with protecting your against abusive behavior from collectors such as contacting you in the middle of the night, screaming at you, cursing, misrepresenting their identity, or threatening physical violence while trying to collect a debt, the Fair Debt Collections Practices Act (FDCPA) gives you powerful debt validation tools that give you the right to challenge any debt.
Fair Credit Billing Act
Similar to how the Fair Debt Collection Practices Act governs collections agencies, the Fair Credit Billing Act (FCBA) affords you the right to dispute questionable negative credit directly with your original creditors in order to modify how they are reporting your accounts to the credit bureaus.
Credit Repair Organizations Act
With all the laws surrounding credit repair, it can be overwhelming for a newcomer considering repairing their credit rating. Fortunately, there are legal credit correction organizations who help consumers work towards a fair and accurate credit score. These credit repair organizations are regulated by the Credit Repair Organizations Act which helps prevent consumers from becoming a victim of a credit repair scam.
Jan
18
2010
Creditors want to have confidence that you will repay your debts and a charge off on your credit reports is an indication that you cannot be counted on to do so. For this reason, a charge off will significantly lower your credit score and can be cause for you to be denied credit.
It is because of the severity of a charge off, just about everyone would prefer to have this damaging listing erased, but few realize there is anything they can do about it. What they are not aware of is that there are steps you can take in an effort to delete charged off accounts from your credit reports. In fact, Lexington Law, a consumer advocacy law firm with 18 years of experience helping over 1/2 million Americans work to improve their credit, reports that their clients had over 100,000 charge offs removed from their credit reports in 2008.
You have a number of options when it comes to fixing your credit. Under the Fair Credit Reporting Act (FCRA), you can dispute with the credit bureaus any items in your credit reports you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear (known as “questionable” items). Essentially, as the name of the act implies, you are able to to question any items in your credit reports you feel give lenders, insurance providers, and others an unfair impression of your credit worthiness; including charge offs.
If a credit bureau dispute doesn’t result in a removal or if the reported charge off does not qualify as a questionable negative item, there are still options available to you. Your creditors and collections agencies have the ability to remove the items they have added to your credit reports. On occasion, simply as a result of you asking nicely, they will agree to stop reporting a negative item. If this fails to produce results, there are a number of more confrontational tactics you can employ based on your rights under consumer protection statutes such as the Fair Credit Billing Act and the Fair Debt Collection Practices Act.
It isn’t necessarily easy, but with time, effort, and proper knowledge, you may be able to remove a charge off from your credit reports. Of course, if you do not have the time or the desire to attempt repairing your own credit, there are a number of reputable credit repair companies who will use their knowledge and experience to aid you in working towards your credit goals.
Jan
15
2010
The credit repair world can be a frightening place. With the number of news articles, television segments, and opinion pieces cautioning against fraudulent credit repair services that get published by well regarded media outlets, it can appear as if the best option is to steer clear of credit repair companies altogether – something the news outlets seem to support.
There are dozens of articles talking about how to keep yourself from becoming the victim of a credit repair scam. Most itemize a list of warning signs such as companies that charge large upfront fees, claim to help you create a clean credit identity, don’t keep you informed of your right to repair you credit yourself, and otherwise make misleading or inaccurate statements. At this point, however, a very small percentage of articles mention that there are credit repair services like Lexington Law who do not participate in the practices that are common to a credit repair scam. In fact, many articles from established news agencies such as CNN close by suggesting people “get legitimate help” from consumer credit counseling services.
Not only is this advice incomplete, but it is also completely useless to people who are in need of credit repair. Credit counseling may be able to assist people who are unable to pay off their debts, but it will do nothing to improve your credit score. Some credit counseling programs even have the potential to make your credit look worse.
Unlike consumer credit counseling services that aim to bring your finances under control, credit repair services are designed to help you increase your credit score. They are not mutually exclusive services and in many cases, a person who has used a credit counseling service to help overcome their debt issues becomes a good candidate for credit repair once they have completed the program.
Legal credit repair services serve a purpose and it is a disservice to say otherwise. Hopefully as consumers and news columnists alike become more familiar with credit repair and the services credit repair organizations provide, we will start seeing more of a balance between news stories warning of credit repair scams and news stories listing the qualities to look for in a reputable credit repair organization.
Jan
14
2010
Negative items on your credit reports can have a huge impact on your credit score. A handful of delinquent payments can be the difference between getting a good interest rate on a loan and having to make a large down payment in order to even qualify for financing. Major derogatory items like charged off accounts, repossessions, and bankruptcies have the potential to drop your credit score so much that you will have difficulty getting approved for credit at all.
So what is a person to do if there are damaging listings on a credit report that should not be there? Errors do happen and damaging listings are incorrectly added to peoples’ credit reports very frequently. And what about negative listings that do describe actual events but there was a legitimate reason behind them? Is it fair to have to live with a low credit score for up to a decade or more when the blemishes in your credit history were essentially outside your control?
The Fair Credit Reporting Act (FCRA) provides consumers with a few options when dealing with bad credit, and enforcing their right to a fair and accurate credit score. This includes the right to order free copies of your credit reports as well as the right to request verification of any items on your credit reports that you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear.
Another antiquated option you have as a result of the Fair Credit Reporting Act is the right to add a one hundred word statement to your credit reports explaining to creditors the circumstances behind negative items on your credit reports. The idea is that when looking at your credit reports, lenders will be able to consider the justification behind these negative listings when considering your loan application.
What makes this statement antiquated is that these days, lenders rarely consider the individual listings in your credit reports. In fact, they may never see your reports at all so your meticulously penned 100-one hundred word statements would never even be read.
On top of that, lenders are primarily interested in your credit score, which does not take the 100 word statement into account. No matter how good your justification is for having negative items on your credit reports, your credit score will remain unchanged.
The only way to prevent negative items from lowering your credit score is to have them removed from your credit report. One option people have for attempting to do this is the credit bureau dispute described in the Fair Credit Reporting Act. Additional credit repair options are made available through a number of other consumer protection acts targeted towards creditors and collections agencies.
Jan
13
2010
As is often times the case, even situations as dire as today’s credit crisis have a silver lining. In the case of the credit crisis, the silver lining is that the cost of big ticket items are dropping. Plummeting interest rates with already lower asking prices combine to make now one of the premier times in decades to buy a home or a new car.
There is, however, a catch.
Not everybody can benefit from this opportunity. Credit today is more difficult to come by, hence the term “credit crunch”. After years of reckless lending and a record number of defaulted loans, repossessions, and foreclosures, lenders have had to become much more conservative in their lending practices. They are only willing to lend to the least risky consumers.
Lenders largely determine credit risk by looking at your credit score. A poor credit score tells them that you cannot be relied on to repay your debts on time. As a result lenders will deny credit to people they feel are too high risk, and charge higher interest rates to those who are an average credit risk to ensure they can still make their money back an then some even if a small percentage of those people are not able to repay the loan.
Today, lenders tolerance for credit risk is much lower than in previous years. A credit score over 750 is now required by many lenders to get approved for loans with the lowest interest rate and the best terms. A credit score lower than 750, and you have to pay extra. Too far below, and you run the risk of being denied for credit altogether.
But what happens if your credit rating says you are a high credit risk, even when you aren’t?
Credit reporting errors, flawed scoring models, and irrelevant negative credit listings all work together to give many people a credit score that is not indicative of their actual credit risk. They are responsible consumers who can be counted on to pay their bills, but their credit scores tell a different tale. For people in this situation, fixing their credit score may be the best option for getting the credit score they deserve.
If your credit is holding you back, don’t just wait for things to improve. You have the right to a fair and accurate credit score and there are things you can do to fix your credit. Take action today and you may even be able to benefit from the credit crisis.
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