Entries Tagged 'Credit Repair' ↓

Many wonder if it’s unethical to attempt to remove valid bad credit.

The credit-ranking system has been unfair to American consumers. “Credit repair” is a term that has gained a negative reputation, and has been connected with fraud. As a result, we’re often put in the position of having to defend our efforts to help others repair the credit.

What can feel like credit prison does have alternatives to the problems contaminating the credit report. A credit report should not be viewed as proof of bad credit, simply as an allegation; consumers rarely challenge the allegation. Our clients that we assist with this basically are entering a plea of not guilty when they sign on to use our preferred attorney network for their defense.

Our society has its roots in capitalism and the credit bureaus use consumer information to their advantage. Our legal system takes an oath to truth, equity and the common good; credit bureaus do not take this oath. Why should any citizen be obliged to support any company, let alone massive public corporations, when doing so could ruin his credit and financial standing? The credit bureaus would cling to every bit of credit data, true or false, forever if federal didn’t force them to delete many items after seven years’ time. If it weren’t for this law, credit bureaus would not have to remove most items from your report after seven years. If you can remove credit accounts in good standing after a short period time, then why can’t you remove them before the seven-year limitation?

You cannot always judge someone’s credit worthiness from their credit history. It damages everyone to have good people tagged as deadbeats. Many policies and approaches used by credit bureaus seem to be abusive to the customer. Due to this, we strongly oppose the current system of credit reporting. The debtor is punished unjustly with seven years credit bondage (10 years for bankruptcy and some court decisions). Credit bureaus have never performed a study determining that seven years is the time it takes to restore good credit. This seven-year mark is completely random. As a matter of fact, according to Dr.Bonnie Guttion, consumer affairs advisor to President Bush, computer models that predict credit information find that “most information that is more than two years old is nonessential”; in addition, our clients feel that seven years is much too long. Within a couple of years, most consumers are able to recover fully from a financial crisis. Despite this, they are often forced to live a reduced life-style and pay high interest on loans while being denied credit based on reports.

Although credit bureaus claim an error rate of less than 1%, that isn’t necessarily true. However, studies not performed by the bureaus show that mistakes occur at a rate much closer to 79%.

The law agencies strongly resist the correction of these errors. It is very costly for them, taking up time and money. Bottom line, credit bureaus make their money selling your credit information. A pool of information this large is not culled by anyone but them. No one respecting privacy can win. Mistakes on credit reports can have disastrous results, including the loss of jobs and reputations.

There has recently been a large number of the worst type of file errors, mis-merges. These show the need for a large-scale update of the US credit reporting system. A mis-merge adds another person’s information to the wrong file.

Consumer credit reporting systems are not exclusive to America, as they are used in other countries. Most countries base their credit on current credit status. For example, in England, Equifax and Experian are not allowed to keep credit information for more than five years. The American credit reporting system needs revision. It’s not unpatriotic to want to ensure your credit report is accurate. It is NOT wrong or without any values.

Bad credit costs a person thousands of dollars and forces many into a vicious cycle where it’s difficult to escape this punishment. Most people restore their credit to refinance, or to buy “twice the home value” at nearly the same payment. For those who have credit problems paying off someone else’s mortgage is hard for them to do. Many renters have paid off someone else’s mortgage, but still cannot own their own home because of credit problems.

It is very important to understand that the term “credit Repair” is often abused and misunderstood. Don’t be fooled or ripped off by companies that make promises to remove negative credit from your report. You cannot remove accurately reported information. You can, and should, make sure that what is reported is correct. If it is not correct you can get it corrected by simply communicating with the repositories by mail, phone, or online. And then, you can improve your credit and credit score by following a few simple steps.

The first thing you should do is order your credit report from each repository (credit reporting agency). Make sure you only order reports that include your score. Your score is very important and you must know what it is. The three major companies are Equifax, TransUnion, and Experian. These are the three companies that major lenders use. They have very informative sites that will explain how credit scores are developed and what they mean. Each also has online communication so you can dispute any errors that may show up. You should start the correction process as soon as possible because it can take several months to get them fixed.

Now lets focus on raising your score

Unpaid Collections Charge Offs or Judgments:
This is really trickey, should you pay these off or leave them alone? If they are more than three years old you might not want to pay them off because the “date of last activity” impacts your credit score. And, the type of loan you are getting may not require it. If the lender does require payment perhaps it can be done at closing through escrow. These items will stay on your report for 7 years from the date of the last activity.

Sometimes the creditor you owe will accept a lesser amount and settle the account showing it paid. If you do this, make sure you get it in writing. When you pay them do it with a cashier’s check and keep a copy of it with your written agreement. It will still be on your report but it will show being paid.

Late Payments:
If they are correct you can’t really fix them but you can increase your score if you start paying on time, consistently!

Major Credit Cards:
Too many credit cards even if they show a zero balance will lower your score and increase your debt ratios. Close some of them out, but keep in mind that the older accounts improve your score as far as capacity and age of the account. Never allow your balance to go over 30% of your available limit. You should never consolidate debt to one or two cards for this reason.

Department Stores:
I knew a lady that had over 15 department store accounts. They all had very small balances. Even though she paid on time her score was low because she had so many. Close some of them out, but keep in mind that the older accounts improve your score as far as capacity and age of the account.

New Accounts:
If you already have established credit and credit depth, don’t open any new accounts. Every time you apply for credit an inquiry is placed in your file. Too many will lower your score. Be aware that when you finance an auto through the car dealer they broadcast your application to MANY lenders who each pull your credit. I recommend you get a car loan pre-approved at your bank before you go shopping for a car.

No Credit:
Unfortunately this is as bad as poor credit. Start off slow with a credit card. Never miss a payment. Maybe a well-known department store. Then a car loan. Make sure your debt to income ratio stays below 36% (including your rent). If you don’t have rent or a mortgage keep your ratio below 10%.