Before you pay for "Credit Repair", you need to know what is FACT and what is FICTION!

Beware of claims from so-called Credit Repair Companies like:

• We will remove negative items, bankruptcies, judgments, liens from your credit report!
• Improve your credit score by 50 to 100 points!
• Erase all bad credit...guaranteed!
• Create a new identity!

Sound a little too good to be true? 

No one can LEGALLY remove correct or accurate information that is reported on your credit report.

After all, a credit report is a recorded history of how you have used credit.  There are many factors that go intor formulating a CREDIT SCORE. 

There are three major three Credit Reporting Agencies:

• Experian
• TransUnion
• Equifax

Although each uses a slightly different set of criteria for determining and assigning a credit score, they are basically the same.

Although you cannot remove accurate information from your credit report, YOU CAN HAVE INACCURATE INFORMATION REMOVED!

We are all entitled to receive a FREE CREDIT REPORT annually. I believe it is a very good practice to request your credit report each year to make sure there are no mistakes or inaccurate information being reported!

You are also entitled to receive a copy of your credit report used by a company that denied your application for:

• Credit
• Insurance
• Employment

You have to request it within 60 days of receiving notice of denial, so don't wait too long!

If you find errors or inaccurate information on your credit report, you can dispute it with the credit reporting agencies (yes, you may have to contact all three is the same information appears on each credit report).

You can either write a letter or go to the credit reporting agencie's website.  I believe going on line is the most efficient way to dispute items.

You will need to have:

A copy of the errors on your credit report.  You don't have to send or include the entire credit report.  Just circle the items you are disputing.

Next, you must explain or prove why your are filing the dispute. 

For example:

Let's say that you had a credit card that was completed paid off a few months ago and the credit report is still showing a balance.

You will need a canceled check or bank statement showing the payments or series of payments to the credit card company.  You may be able to get a copy of a letter or statement from your credit card company by calling or going to the credit card company's website.

Make a copy (.pdf if filing on line) and include with a brief statement of why this item should be corrected. 

For example:

I am opening a dispute about the account I have circled on a copy of my credit report with your company. 

As you can see from the attached (or enclosed) statements, canceled check(s) and/or bank statements, this account has been paid in full.

Please make this correction as soon as possible.

Thank you,

(your name)

• Not only does the credit reporting agency have to correct the error, IF YOU REQUEST, they must send a copy of the corrected report to anyone who got your report over the last 6 months!
• If the error caused you to not get the job you applied for, again, IF YOU REQUEST, the credit reporting agency must send a corrected copy to anyone who got a copy for employment purposes over the last 2 years.

By law, the credit reporting agency must investigate your dispute within 30 days.

• They must send the information you provide in your dispute to the company reporting the inaccurate information. 
• After they company investigates and reviews the proofs you included about the disputed item, it must report back to the credit reporting agency as well as all other credit reporting agencies.
• Once the investigation is complete, the credit reporting agency must provide you with the results and a free copy of your correct credit report.

What about negative information on your credit report?

Unfortunately, negative items on your credit report cannot "magically disappear", regardless of the claims of some credit repair companies!

But over time, these items will be removed.

• 7 years for most negative items
• 10 years for bankruptcies
• 7 years (in most states) for judgments

But what about those so-called "credit repair companies" that claim to be able to remove negative information?

Well, it's just not true.  In fact, you should read an article from the Federal Trade Commission's website about one credit repair company's penalties, etc.

Many credit repair companies use the VALIDATION LETTER technique.  While it is certainly legal and ethical to challenge inaccurate information on your credit report (as we discuss above), there are some (too many in my opinion) credit repair companies that ABUSE this  technique.

The rationalization is that the credit reporting agencies are some overwhelmed with disputes that often they will just correct and/or remove the disputed item without doing a thorough investigation.  After all, the credit reporting agencies are in business to make a profit.

So yes, maybe in some cases they will remove an item without much investigation, but the creditor reporting that information can (and most likely will) put the disputed information back on your report.

This type of CREDIT REPAIR FRAUD has caused many credit repair companies to be heavily fined or forced out of business over the last few years. 

And yet, for those who feel they cannot make disputes themselves or would be willing to pay for legitimate credit repair services, there are many solid, credible companies. Check with your state attorney general's office for a list of registered credit repair companies and also with the Better Business Bureau for complaints.

Photo Credit:  https://www.flickr.com/photos/brook_lands/

If you have ever tried to check and/or improve your credit score, you know it can be pretty confusing.  Here are some tips on how you can improve your credit score.

You've probably seen an ad or had a "pop-up" appear on your computer by a so-called "Credit Repair" company offering to increase your credit scores almost "over night"!

My advice...RUN!  You've heard the old saying:

"If it sounds too good to be true, it probably isn't true."

Although there are many legitimate companies that will help you improve your credit over time by correcting errors and helping you maintain a disciplined approach to using your credit, there is just no "quick fix" when it comes to improving a bad credit history and therefore a poor credit score.

I have been have been helping people settle and manage outstanding credit debt for over ten years now and I believe that one of the most helpful sites you can use can be found at:

www.MyFico.com

While you cannot improve your score quickly,  YOU CAN IMPROVE YOUR CREDIT SCORE over time, by following the following tips:

If you haven't done so already, get a FREE copy of your Credit Report.

We all can get a free copy once a year, so take advantage of this by annually checking your credit report...and it's FREE!

According to Fair Issac or FICO, there are 5 areas that affect your credit score the most:

Paying your bills on time is one of the most important things you can do to maintain a good credit score.  Being just a few days late will hurt you score.

If you have had accounts go to a collection agency, then that obviously will hurt you score.  By-the-way, if you pay off or settle an account with a collection agency, it will remain on your credit report for up to seven years, but the fact that you paid the debt will ultimately help  your credit score.

Using a Debt Management Company to help you get control of your debt can be very helpful.

No, your credit score will not be affected by using or not using a Debt Management Company, but in the long run, the professional help and guidance will help reduce or pay off all of your debt and therefore, improve you credit score.

Next, notice that at least 30% of your credit score is determined by the AMOUNT OF DEBT you owe.

A lot of people think that just because they have never been late on a payment they should always have a great score.  But, if they have a very large amount of debt in relation to their income and total available debt, they will be disappointed with their score.

Here's basically why:

Let's say that you are a credit card company and are considering offering or issuing credit to these two prospects:

Prospect #1 has a good job and employment history.  She in never late on making her payments for her mortgage, car and all of her credit accounts.  But, even though she is earning a "better-than-average" income, she has accumulated over $30,000 of unsecured debt in addition to her mortgage and auto payments!

She would need to be making minimum payments of $750-$850 per month on her unsecured debts (credit cards, store cards, etc.) and that equates to about 25% of her net monthly take-home income just for these unsecured debts.  When you add in a $1200 mortgage and a $400 car payment, that's about $2,400 per month going out to service her DEBT!

Even with her "better-than-average" job and income at say, $75,000 annually, when you take out 30% for taxes and other deductions, that gives her a net monthly income of about $4,375.  With $2400 going out to just meet the minimum payments on all of her debt, that equates to almost 55% of her net income!

One "hick-up" such as long illness, loss of job, or any other hardship would make it almost impossible for her to meet your debt payment obligations.  If you were a credit card company, would you loan her more money?  Hence her credit score is not as high as she though it would be.

How about Prospect # 2:

He had a good job and earns about $4,000 per month.  Not that much really, but he is doing OK.  He isn't buying a home and so is paying about $800 per month in rent.

His old truck (not too old...maybe 8-10 years) is paid for.  Although it doesn't get great gas mileage, at least he doesn't have a big payment each month.

He has a good credit history and although maybe late a couple of times in the past, he has maintained a steady, on-time history for several years now.

He has about $10,000 on 3 credit cards which demands that he makes at least a minimum payment of $215 each month, which he does and sometimes adds a little more than the minimum.

Another VERY IMPORTANT PART OF DETERMINING YOUR CREDIT "WORTHINESS":

The ratio of credit being used to the availability of credit to you.

He has paid off several accounts in the past and actually has about $40,000 of available credit (credit limits on all of his accounts) that he could use if need be.

He is only using $10,000 of the available $40,000 or only 25%.  This is considered a good use of available credit and so he would be viewed as a better credit risk.

Are you starting to get the idea?  It's not just about paying your accounts on time (although that is certainly important), but more about USING AND MAINTAINING YOUR CREDIT WISELY!

You will notice that the LENGTH OF CREDIT HISTORY makes up at least 10% of your credit score.  If you are just starting out and have not established much of a credit history, DO NOT MAKE THE MISTAKE OF OPEINING A LOT OF ACCOUNTS IN A SHORT PERIOD OF TIME!

Opening too many accounts too fast doesn't look good to the credit bureaus.  In fact, it could do more harm than good!  Just open an account or two, make some small charges and pay them off promptly.

How long will this take?  It depends on some and/or all of the other factors we've been talking about.  The point is that establishing good credit doesn't happen quickly.

One more thing...

Closing accounts doesn't help improve your score!  In fact, it will probably hurt your score.

Why?

Again, you want to show that you are a responsible user of credit over a long period of time.  If you close too many accounts (assuming a $0 balance on them), you are reducing your "credit-use-ratio" as we discussed before.

Pay off and/or settle old accounts the best you can.  Sometimes it makes sense to seek the help of a professional Debt Management Company to settle old debts that have been around for a long time.

Sometimes these can be removed (using the proper procedure) from you credit report if they have gone past your state's statute of limitations.

Debt Settlement can help if you are in over your head!

To summarize, the best way to improve your credit is too:

• Manage your credit wisely...not too much...too fast!
• Make your payments on time.  Being a day late hurts more than you know.  Try using "auto-payments".
• Check that Credit Report for errors!  All three credit bureaus will let you go on line to dispute errors.  You don't have to pay someone else if you will take a little initiative.
• Finally, although I don't suggest closing credit card accounts, I do believe that you should only use one card for emergencies only!  Pay cash or don't buy! Saw this sign in the parking lot of a major retailer the other day and it really says it all:

The best way to improve your credit score????  Use credit wisely.

Photo credit:  http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

Is there anything you can do about credit report errors?

YES!  If you find errors, you can contact the three main credit reporting agencies:

• Equifax

• Transunion

• Experian

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Experian (714) 830-7000

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What do you need to dispute a Credit Report Error?

• A statement or settlement letter from the creditor showing that the account balance was paid or settled-as-agreed
• A copy of the canceled check proving payment was received

Follow up in about 2 weeks if you do not receive any confirmation that the error has been corrected.

BEWARE OF COMPANIES THAT CLAIM TO BE ABLE TO CORRECT ERRORS AND IMPROVE YOUR CREDIT SCORE! ! !

The Federal Trade commission (FTC) has good information on how to correct credit report errors.  CLICK HERE

For a FREE Credit Report, go to www.annualcreditreport.com.

If you need professional help, we have been helping clients for almost 10 years to settle debts for much less than they owe!

For mor information on fixing Credit Report Errors or to get help eliminating your debt, Give us a call!

1-877-492-4109

or Click on the link below