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Credit Repair Tips To Improve Credit Scores

Credit Repair Tips To Improve Credit Scores

Credit Repair is something every consumer can do on their own, however; the consumer needs to do it right and take their time and ensure they understand the process.  There are many people who attempt the repair and make their situation worse because they dive in and don’t learn what items should be disputed and what items should be left alone.  Do thorough research.  There is also a new site that I am, anxiously, awaiting it’s launch and sounds like it will be an incredible one stop, step by step learning site on credit repair. You can sign up to be notified of their launch here. This is their blog but the sign up form is listed there and you will be notified when they launch.

Learn the steps and you can improve your credit scores within a very short amount of time.

Don’t Wait To Start To Rebuild Your Credit

No matter how bad your credit is or how many negative items are currently reporting, you need to start getting positive information added to start to Improve and Rebuild Credit. Even if your situation is so bad that you may not raise your score, you will still be minimizing the damage to your score.

Credit cards are a very powerful weapon you can use to start to rebuild.  If your credit score is less than 580 and/or if you have current negative items, you are very unlikely to get any lender to give you an unsecured credit card. This means you will be limited to a secured credit card.  You can read more about a secured credit card on this post and also see 3 options for them that do not have annual fees.

Now you may be tempted to wait until some negative items are older or until things seem a bit better but I encourage you to think about this differently.

1-Whenever you open a new account, it has a negative effect on your credit score. That negative effect will last about 6 months and then you get a decent score improvement and will continue to add positive points to your credit score from that point on.

2-The older the account gets, the more value.

So waiting does absolutely nothing to help you.  By starting now, you are actually helping your score much more in the long run.

Now What Do I Do?

Now that you have moved forward and got a secured credit card, you need to handle it in a certain way to have the most positive impact on your credit score.

Keep your balance under 30% of your credit limit.  If you open a $300 dollar secured card, you should never have more than $90 on it at any given time.

There is a little wiggle room here.  If you ever need to use your entire balance, it is true your credit score will take a hit but the good news is that it isn’t long lasting.  When you pay it down, your  credit score will bounce right back up.  If you have maxed out your cards and are at a point where you need your score to boost up, make sure you pay it down 60 days before you need to see the score increased.  The reason is because not all lenders report every month, some report every other month so you need to allow time for it to reflect the new balance on your credit report.

It will also be hard for you to judge the impact of a maxed out card vrs a low balance but in some cases that can affect your credit score by 150pts!

Maybe you have no intention of actually using the card but you really need to use it periodically. Even if you use it and send off a check the same day.. use it regularly.

How Many Credit Lines?

For the best credit score you should ultimately have:

• 2-3 credit cards
• Car loan
• Mortgage

I realize a car and a mortgage may be way down the line but everyone has to start somewhere.  Get your credit cards, use them wisely, give it some time to show you can handle the debt and get your credit score above 600 and you are more likely to then add a car loan.  Pay on that and your score will go up even more and you can now move on to your mortgage.

Statutes of Limitations Can Change The Entire Ballgame

First read this post which will explain the Statute of Limitation and its importance.

Briefly the Statutes of Limitations (SOL)  limit how long a debt is considered legally collectible. In most cases, all debt is out of SOL long before it is due to fall off your credit report. The time limit varies by your state and the above link will show you the SOL for each state.

If I Pay My Collections Will I Improve My Credit Score?

Not once single ounce.  Once an account goes to collection the damage is done.  It doesn’t matter if you pay it or not. The exception to this is if you are in the market for a mortgage. When you are approved for a mortgage you can not have outstanding debt. There is usually an exception for medical bills. Your mortgage lender will tell you what you need to take care of.

Also note the Statute of Limitations again.  If your type of debt is out of SOL, it is considered legally uncollectible.

Read this for more information on paying off collections.

This post does not cover the dispute process that can improve your credit score. You can read more about disputes here and here..

Credit repair is doable but again, be careful and do your research on all steps to make sure you do it correctly. There is a lot of bad information floating around the internet.

Statute of Limitations on Debts

Statute of Limitations on Debts

Before reading it is important to note that you should always check with your state to verify this information.  I believe it is correct but always double check.

The Statute of Limitations is how long a debt is considered collectible by law and a time line for when creditors can sue you.  You should know that every single day people pay on debts that they are not required to by law. The do so because they think it is still valid. They may see it on their credit report and assume “It is my debt and I need to pay it”.  While the moral side of you may believe the debt should be paid, by law once out of statute of limitations you co not need to pay this and can not be ordered to pay it.  Now the previous sentence is a bit tricky. A creditor or collection agency can take you to court and can get a judgment IF you do not show up and defend yourself.  It is as simple as bringing paperwork that shows the Statute of Limitations over.

For many people, having this knowledge is a great burden taken off their shoulders and they can move forward.  The SOL runs from either the day of your last payment or the date payment was demanded from you.

If you are contacted by a collection agency after the loan is out of Statue of Limitations, you can simply write them and tell them your account is outside of the SOL and to please cease any contact.  They may write you one more time to say they will cease contact but that is it.

Remember.. if you are sued you NEED to show up in court and defend your self by presenting the SOL’s for your state or they will get a default judgment against you and you can’t fix that later.

The chart below shows the State Statutes of Limitations for various kinds of loan agreements and is for all states.

What Defines An Oral Contract: A verbal agreement is one that is considered a legal and binding agreement.  However it is not easy to prove it in court.  This is when you make a verbal agreement to borrow some money and repay the money.

What Is A Written Contract: This is a written document that both  you and the lender both sign.  This can be a very formal document or a crude one you just wrote on a napkin.

What Is A Promissory Note: This is where you agree to pay a loan as listed in a written contract. In a promissory note, the payments and interest and spelled out in detail.  A mortgage is an example of a promissory note.

What Is An Open-ended Accounts: These are account with revolving lines of credit. Meaning you have a certain limit that you can charge up or pay down and charge again.  A credit card is always considered an open account.

What Is A Secured Credit Card?

What Is A Secured Credit Card?

I am often asked “What is a secured credit card and should I get one?”  Secured credit cards have their place.  They are not the best thing as we all know but there are times when you have to start somewhere and secured cards are a great place to start to rebuild your credit.

Even if you wish to live without credit cards, you need to realize that there are times when you need to have a credit card such as renting a car, buying anything online etc.  Having a credit card that is used correctly will also help you raise your credit score and therefore help when the time comes to buy a home or a car.

If you have poor credit, no credit or are recovering from a previous bankruptcy, a secured credit card might be your only option.

When you get a secured credit card, you will be required to deposit money as collateral.  The amount of money you deposit will be your credit line.  If you deposit $300, you will have a $300 credit line. You can always add more money to increase your credit line.  Usually between 9-12 months the bank will review your account and if you have paid your payments on time and are in good standing, the bank will convert your account to a regular credit card and refund your deposit.  They will also usually increase your limit. If you feel a secured card is for you, you may have a few questions:

• Where Do I Get A Secured Credit Card? If you are a member of a credit union, call them and ask if they offer a secured card. Roughly ½ of all credit unions will offer a secured card.  If not, you can try one of the places shown at the end of this email.
• What Are The Charges?
  Every secured card is different and this is something you should look at.  If you look at my list below, the top 2 do not have any fees associated with the account while the bottom two do have fees.  You should also view the terms and conditions when you go to their site and evaluate them closely.  You don’t want to get a secured card that has so many fees it takes your entire deposit.
• Do I Have To Deposit Money?
  Yes you do. That is the whole concept here. They give you a credit card and report to the CRA’s. This will build your credit. Remember when your credit is bad, you have no credit or are recovering from bankruptcy many places will not give you a chance until you prove you can handle a credit card.  This is the purpose of the secured cards.  You will pay into it what you want your limit to be. Some secured cards do have a minimum such as $300.
• Do All Banks and Credit Unions Offer Secured Cards.
  No they do not. About ½ of all credit unions will offer them but the industry is changing.  Some credit card issuers are offering some subprime cards with a low limit such as $250 but then charging interest rates as high as 79%. The $250 credit limit comes with fees and an incredibly high interest.  Secured cards are a good choice if you can put the deposit in because you will get that money back when the account converts to a unsecured card rather than the fees being added to the card and being lost money.  In many cases, the secured card is the only option.
• Are there any problems to watch out for?
  There always is.  Do your homework and evaluate fees.  Some cards will give you credit but then say you have to buy an insurance policy worth x amount of dollars.
• Do They All Report To The 3 Credit Bureaus?
  No they do not, although most will.  This is important because the whole purpose of these cards are to rebuild credit.  If they don’t report, you aren’t gaining anything.  The cards I have at the bottom of this post all report to the CRA’s.
• When Will It Be An Unsecured Card?
  The average time is one year.  I have been hearing complaints from those who have Bank of America secured card that they are not getting approved for the unsecured card even with regular payments and being on time for the entire year as they still look at your past credit history in their evaluation.
• Now What Other Things Do I Need To Do?
  Never charge your card higher than 30% of your available balance.  30% of your credit score is based on your credit utilization and staying under 30% will give you the optimal benefit to your credit score.

Secured credit cards are not the best and no one wants to have to use these to get going but they are often the only choice you have to begin to rebuild your credit. Go into with an open mind that this is a necessary step and something you need to do for a year.  It isn’t that bad and can’t be worse than how things have already been for you.

Before you know it, you’ll be on the road to good credit and happy that you took this first step.

These are all 3 secured cards that do report to the 3 credit bureaus. Double check before you apply that they do not have annual fees.  As of the time of this post, none of them have annual fees.  Also notice the Platinum Zero card carries a 0% interest.. not just an intro interest rate but lifetime.  Even the other one only has 11% interest which is great for a secured card.  These are very good options.

Good Credit is Important

Having good credit is something that is essential.

Not only do you need a good credit score to get a credit card, buy a car or house, you will pay a much higher interest on these purchases if your credit is poor.  It is becoming increasingly popular for employers to even check credit as part of the application process.

Here are some ways you can ensure you have a good credit score.

• You need to establish credit.  It is better to have both revolving and installment credit.  Revolving credit is like a credit card and installment would be a mortgage or car. You may have heard horror stories of people who racked up thousands of dollars in debt in credit cards and then couldn’t pay them and now you want to avoid that trap. The truth is that it is about how you manage your credit cards. You don’t need several credit cards, you don’t need an enormous credit limit, you simple need one or two that you use sparingly to show you can handle the credit.

• Pay On Time – This is vital. 35% of your credit score is based on your payment history.

• Don’t Charge Over 30% on Your Cards – 30% of your credit score is based on your credit utilization.  To have the best positive impact on your score, you really need to keep your balance under 25-30% of your available credit.

• Keep Checking Your Credit Reports – Your credit needs to be protected and you are the only one who knows what should be on the report and what should not.  Almost 30 million people have been affected by theft identity over the past 5 years.  And more than 70% of credit reports contain errors. You don’t need to obsess over it but you should check your reports annually.

The Credit Dispute Process and Rebuilding Your Credit

What Happens In The Credit Dispute Process When Rebuilding Your Credit

When you start your journey of rebuilding your credit, one of your first steps is your credit dispute.  You will write a letter that lists, in detail, all items you find that you need to dispute. You will briefly explain why the items doesn’t show on your credit report.  The FCRA requires the Credit Reporting Agencies (CRA’s) to investigate your dispute and if the lender can not verify the accuracy of the account within 30 days, the CRA must delete the account from your credit report.

Here is the credit dispute process step by step:

• Mail your letter certified mail, return receipt requested. (make sure you keep a copy of everything you send them
• The credit bureau receives your letter with your credit dispute. They must sign for this and now you have proof of when the 30 day time limit is reached.
• The CRA starts your dispute file. They are required to keep documentation of their efforts and all of the documentation you may have sent them.
• The CRA forwards your dispute information to the lender.  You may think the CRA spends a lot of time determining how to handle your dispute but reality is your disputes are handled so quickly and pushed through the system.
• The lender is now given 30 days to respond to the dispute and to verify the information they are reporting.
• If the lender verifies the information is correct, you will get a response from the CRA saying the tradeline is verified.  If the lender fails to respond within the 30 days, the CRA must remove the entire tradeline from your credit report.  The lender may also update information that is incorrect.
• The CRA will send you a notification of items that are verified, updated and deleted.

Now, here is the point where you will need to evaluate your next step. The lender may not have provided proof to the CRA and you may need to be more diligent and file the dispute again.

Remember the CRA’s receive thousands of disputes per day. They do not have the time to carefully evaluate each dispute and the process is largely automated. It is unreasonable to expect the process will be handled accurately and completely the first time so don’t be taken aback when something you know is incorrect is verified.  Just start again and move forward.

The process of rebuilding your credit takes time but can happen with persistence. If you need to file a credit dispute more than once, this is very common so don’t feel you are ‘unlucky’.  Just move forward and you will see things drop off or get corrected.

Credit Problems? Why Have A Clean Credit Report?

Credit Problems? Time For A Clean Credit Report!

It is so easy for people to judge others who have Credit Problems. They may have a Clean Credit Report and have never faced a life circumstance that turned your financial world upside down.  But you can’t think about that nor worry about it. Whether you used your credit cards with reckless abandon or you faced a horrible situation such as being laid off, divorced or a medical problem-it is ok.  There is a chance to fix your credit in the near future.  If only these individuals would learn not to spend money that they do not have then their finances would never reach a state of ruin. It is too easy to be on the outside looking in and offering these simplistic explanations. There is so much more to the story.

Why should you repair your Credit Problems?

There are several reasons why you really need to be proactive and start to begin the process of getting a Clean Credit Report.

1-Saving money on interest – When you have a low credit score, you will pay more in interest on all loans you have. This can add up to thousands and thousands of dollars in even one year.

2-Lower Insurance Rates – Do you realize that when you have a low credit score, you pay more for even auto and home insurance?  Part of the underwriting process is to check credit and it is an automatic higher premium.  Even if you have a perfect driving record, you will pay more!

3-Higher Security Deposits – Cell phone companies, utility companies, internet companies etc will check credit to determine a deposit.  The worse your credit is, the higher a deposit you will have to pay.  Usually after 12 months of on time payment, you will get your deposit back.

4-Paying Cash – There is nothing wrong with paying cash for everything and this is a goal to shoot for but what happens when the car breaks down or you have an emergent need and do not have the cash available?  With a low credit score, you will be unable to qualify for credit. You should always have an emergency back up and this is a huge reason to correc those Credit Problems and shoot for a Clean Credit Report.

5– Purchase Power – Lets face it.  Having bad credit either makes it impossible to purchase a car or house.  It can even make it impossible to rent an apartment! Why continue to deal with that vrs just starting the credit repair process?

6- Positive Factor – Think of how much better you will feel when you have great credit and don’t have to always worry about what may happen next.  This is huge.

Well Then Where Do I Begin?

Read the posts here on Improve Credit and this one on Credit Disputes.  It will help guide you in the right direction to start on the path to having a Clean Credit Report and ending your Credit Problems.