Archives for "Quick Fixes"
How to Win the Credit Repair Game
Right Where You Belong!
The credit bureaus are not the enemy. And the folks that created the FICO credit score model are not out to get you. In fact, if you take time to learn the rules you will find out how fun the game can be. Here are a few moves that will boost your credit scores and put you right where you belong, in control.
Your Credit Repair Lifeline
No matter how bad your credit might be there is a quick way to get your credit scores moving in the right direction. The FICO scoring model places considerable weight on your ability to manage your debt; and credit cards offer the perfect way to demonstrate your responsibility and influence your credit scores quickly.
Get Back in the Action Right Now
If the events of life have left you without credit cards, now is the time to get back in the action. It does not matter what your credit report looks like. Forget the past. Credit repair is about the present. Forget your fear of denial. You can do this now. Secured credit cards are the perfect credit repair option.
Secured Cards Done Right
Open two new secured credit cards today. Secured cards require a small savings deposit that will secure a modest line of credit. Once you have your cards it is time to work the system. It’s credit repair magic. Just maintain your balances under 20% of your credit limit. Don’t pay them off, and don’t let them go above 20% of the limit. Do it right and watch your scores improve.
Pay Down Your Balances
If you have plenty of credit, secured cards are not for you. But here are some facts that should aid your credit repair efforts. The FICO credit-scoring model is very sensitive to the relationship between your current balance and your high credit limit. FICO acknowledges six different balance-to-limit ratios: 20%, 40%, 60%, 80%, 100%, and over 100%. The first two are positive, 60% is neutral, and 80% and 100% are increasingly bad. To go over the limit is credit repair suicide.
Up Your Limits
Pay down your credit card balances and your scores will improve on the next reporting cycle. The affect can be dramatic. But there is another way. While you work on paying your balances down you should try this easy credit repair strategy. Call the credit card issuers and ask them to increase your limit. The affect on your credit score will be the same as if you paid your balance down. Can’t hurt to ask!
Give Uncle Bob a Call
Additional card member accounts still work! For those unfamiliar with the concept, here is an overview. Let’s say old uncle Bob has fantastic credit. If he is willing to make you an additional card member on one of his well-managed credit cards you will miraculously inherit the credit history of the card as if it were yours. It’s a real credit repair boost. So if you are on good terms with uncle Bob, give him a call.
A Caution About Additional Card Member Accounts
There is a downside to the additional card member strategy. Fair Isaac and Company, the creators of the FICO scoring model, are well aware of the loophole and have already blocked the benefit in the latest release of the software. The credit bureaus always take time to adopt a new release; you just might have another year to use this credit repair trick. If you take this route, you should also open two new secured cards and start building real credit of your own.
Pay off an Old Judgment
Here is an interesting credit repair trick. Unpaid judgments can report for seven years or the state statute of limitation, which ever is longer. Statutes of limitation on judgments are usually longer than seven years, and they can be re-filed in most states. Paid judgments are a different story altogether. Paid judgments are removed by the credit bureaus seven years from the original filing date. So if you have a judgment that is seven years old, payment will cause it to be removed from your credit report.
Negotiate That Collection Away
If you have a collection account on your credit report chances are that there is a collector that would love to hear from you. Collectors play hard, but they also know that something is better than nothing. And if you hang up without making a deal, they get nothing. You can always try to negotiate with a collector, but there is one circumstance where you are virtually guaranteed to succeed…
Credit Repair and the Statute of Limitation
Collections can only be enforced through the courts for a limited time. Once the statute of limitation expires a collector may talk big, but they have no way to force payment. They can’t get a judgment, and if you send them a cease communication letter they can’t call you again. The collection, on the other hand will linger on your credit report until the seven years are up. Are you past the statute of limitation? Want to get rid of the collection for ten to twenty-five cents on the dollar? Call your collector, and make them an offer. Your credit repair efforts will pay off.
Copyright © 2007 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Repair: Credit Score Secrets
FICO – More Than Meets the Eye
Fair Isaac and Company is the developer of the FICO score, the credit score used by most lenders today. The exact formula is not published, but Fair Isaac offers a breakdown of the categories of influence, and the relative importance of each. The breakdown is a helpful starting point for anyone in credit repair mode who wishes to optimize his or her scores, but it is only a starting point…
Credit Repair and the Logic of FICO
If you are in a credit repair program and aspire to optimize your credit scores it is handy to understand the logic behind the scenes. Fair Isaac is in the business of providing lenders with a measure of the risk they will incur in lending you money. Fair Isaac has spent years analyzing the implications of every measurable behavior and developed a formula to communicate risk with a single number. Here is a breakdown of the components of the FICO score along with some powerful tips you can apply to your own credit repair efforts.
Pay History
Your pay history makes up 35% of your score. Clear enough, but let’s take a moment to understand the implications. A late payment is an indication of financial stress. Financial stress translates into risk of default, and FICO communicates this risk to lenders by reducing your credit score. A lower credit score says, “don’t lend to this person.” But there is more involved. FICO weighs recent late payments more heavily than older late payments. A brand new late payment can send your credit score to a level that no lender will consider. On the other hand, anyone in credit repair mode should be happy to hear that the impact of a late payment fades quickly as time goes by.
Balances – Installment
Your account balances make up 30% of your score. Both installment and revolving accounts are considered. Let’s take a quick look at installment debt before discussing the far more important category of revolving debt. When installment debt, such as a car loan, appears on your credit report FICO sees it as an unknown and drops your score to warn lenders of the new risk. After a few months FICO acknowledges your ability to manage the payments and adjusts your score accordingly. Not a big credit repair concern.
Balances – Revolving
Revolving balances are tricky and may hinder or help your credit repair efforts more than you think. You can clean up your credit report, pay your bills on time, and still end up with a miserable credit score. FICO puts a huge emphasis on the relationship between your balance and your high credit limit. The latest FICO model acknowledges six balance-to-limit ratios: 20%, 40%, 60%, 80%, 100%, and the deadly over-100% category. The two lower tiers will increase your scores, the middle tier is neutral, 80% is bad, 100% is awful, and as for the deadly over-100% category – I think you get the message.
Credit Repair and Your Balances
People often get a credit card, and quickly use it to the limit. Sounds like fun! Unfortunately, a new account with a high balance is credit repair suicide. The new account warns FICO about unknown stress on your budget, and the high balance says that you are out of control. This may not be the case, but big brother is watching and he doesn’t like what he sees. But there is some good news too. If you take that same new account and keep the balance below 20% of your high credit limit for 6 months FICO will think you are fantastic and reward you accordingly. This is solid credit repair gold.
The Age of Accounts
This category makes up 15% of your score. There are a few credit repair angles here. There is nothing you can do about the age of installment debt; when it’s paid, it’s done. But revolving accounts are a different story. FICO loves old accounts as much as it worries about new ones. Many people start a credit repair effort and cut up their credit cards; a strategic error. Generally you would be advised to keep your accounts open. There are exceptions. If you have lots of established credit cards you should close the inactive ones. There is a bit of a balancing act; too many cards work against your score.
New Credit & Inquiries
This category weighs in at 10% of your score. If you are planning to apply for a mortgage or a car loan soon, or are in a credit repair program and watching your scores, you should minimize your credit activity. New accounts will reduce your score, and an inquiry is interpreted as the intent to open a new account, so FICO will downgrade you to warn prospective lenders that there may be trouble ahead.
Type and Mix of Credit
This is the final 10% of the calculation, and not much of a credit repair concern. FICO does not publish their idea of the optimal mix of credit, but if you really want to know what the perfect 850 credit score looks like, here you go! One mortgage over 5 years old, two car loans more than halfway through their life span, and five credit cards over five years old with balances under 20% of the high credit limit will take you to the summit!
Copyright © 2007 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Repair Essential Guidelines
Let’s Get to Work!
We speak with people all day long about their credit reports. Here is a review of the most common questions that we encounter about reporting periods for derogatory information, as well as guidance on resolving the related issues. These details, if properly understood and acted on, can make a significant difference in your credit score.
A Point of Caution
The following information involves the reporting periods for derogatory information on your credit report. In all cases, creditors are responsible for recording the commencement date of the reporting period. This date is coded in the credit file that is furnished to the credit bureaus, and eventually will tell the credit bureaus when to cease reporting. This commencement date is supposed to be inherited by subsequent collectors as well. In actual practice, neither creditors nor collectors are completely diligent in reporting or maintaining these important dates, hence the need for credit repair. Consumers are well advised to monitor old derogatory information to insure that it ceases reporting on schedule.
Chapter 7 Bankruptcy
A discharged Chapter 7 bankruptcy will show in the Public Records section of your credit report for 10 years from the initial filing date – please note that the filing date is different from, and prior to, your discharge date.
Debts that are discharged in a bankruptcy can continue to report for seven years. Handy credit repair tip! Once a debt is discharged it should not report with a past due balance, or as a charge off, or in a collection status; this derogatory information should be removed.
Dismissed Chapter 7 bankruptcies will report for ten years. A dismissed bankruptcy is a bankruptcy which was filed and thereafter canceled or disallowed.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy which has been completed will continue to report for seven years from the initial filing date, rather than the discharge date.
A Chapter 13 bankruptcy which was not completed will continue to report for seven years from the initial filing date.
Bankruptcy and the Fair Credit Reporting Act – A Legal Note
It may be of interest to note that the only reference to bankruptcy in the Fair Credit Reporting Act is a blanket rule that limits the reporting time to 10 years following the filing date. See § 605. [15 U.S.C. §1681c] (a). The credit bureaus, however, voluntarily make exceptions for Chapter 13 bankruptcies as noted above.
Collections – Overview
Collections are unique for the reason that they typically change hands, often several times during their lifetime. Important credit repair tip! Please note that only one collector at a time can legally report the debt; and only the collector that owns the debt can legally report it. All duplicate collection accounts for the same debt should be deleted from your credit report.
Collections can report for seven years plus 180 days from the original default date. The original default date is defined as the first time that you missed a scheduled payment prior to entering into a collection or charge off status. The original default date always begins with the original creditor and cannot be reset, nor can the reporting period ever be extended by subsequent collectors.
Charged Off Credit Cards – A Tip
Once a creditor has passed a charged off account to a collector they cannot report a past due balance. The balance should report as zero; the charged off amount may report on a separate line.
Unpaid Judgments
Unpaid judgments can continue to report for seven years or until the governing state statute of limitation has expired, whichever is longer. You need to check your state statute of limitations to know for sure. State statute of limitations for judgments range from 4 years (PA) to 21 years (OH), and in some cases may be renewed one or more times.
Paid Judgments
Paid judgments can report for seven years from the initial filing date. This is handy to know if you are in a credit repair program; you may quickly remove a judgment from your report if you are willing to pay it, as long as the original filing date is seven years old. For legal support see FTC Official Staff Commentary § 605(a)(2): “Paid judgments cannot be reported for more than seven years after the judgment was entered, because payment of the judgment eliminates any “governing statute of limitations” under this subsection that might otherwise lengthen the period.”
Tax Liens
Paid tax liens may not report more than seven years beyond the date of payment. Unpaid tax liens may report as long as they are in effect. If you are in doubt consult a CPA or tax attorney.
Student Loans
Late payments on your student loans will cease reporting after seven years. Defaulted student loans are another story…
A 1991 amendment to the Higher U.S. Department of Education Act lifted all time limits for collection of student loans. The reporting of defaulted student loans on your credit report can now go on forever. In addition, a 1998 change in federal law made it virtually impossible to discharge a student loan in bankruptcy.
If you are in default on a student loan you are well advised to address the issue, sooner rather than later. Fortunately, there are excellent rehabilitation and consolidation programs now available to everyone. These programs offer affordable repayment options and can even erase the default status from your credit report! This can prove to be a painless and powerful step for anyone in a credit repair program. Explore your options today with the Student Loan Ombudsman Office at (877) 557-2575.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.
Credit Repair and Your Life in 2008
Now is the Time!
Good credit has never been so important. The entire credit landscape has changed over the last year. And 2008 brings new and unprecedented challenges. How did this happen? What can you do to adapt and even thrive in this new environment? Here is some insight!
A Little History
In the late 1990s real estate values begin to increase at an unexpected pace. In response to the healthy market, lenders eased their credit guidelines. Mortgage money was plentiful. Default rates on mortgages were minimal. Home values continued to rise and lenders perceived little or no risk to their collateral. Borrowers with adjustable rate mortgages could easily refinance if faced with an interest rate adjustment. As the party continued, new lenders entered the market to capitalize on the opportunity. And as competition among lenders increased, credit guidelines eased even more…
The First Signs of Change
In mid-2005 the real estate market was peaking. A record number of Americans owned homes, and millions were supplementing their income by speculating in the real estate market. The shift began slowly at first. Alan Greenspan, expressing concern about the U.S. Housing market said that, “at a minimum, there’s a little froth in the housing market, and it’s hard not to see that there are a lot of local bubbles.” The media picked up on the phrase, and before long we were all hearing about the real estate bubble. Could the meteoric rise in home prices last? Would real estate values slowly stabilize? Or would the bubble burst?
The Big Shift
Behind the scenes lenders were becoming concerned. The balance in the real estate market was changing. Homes were no longer selling in a matter of days and inventory levels were increasing. Soon, credit guidelines were tightening. As lenders began to withdraw from the market the real estate market slowed further. And as the real estate market slowed further, lenders tightened more, many shutting their doors and withdrawing entirely.
A Whole New World
As 2008 gets underway, signs of stability are showing. The credit market has fully reinvented itself. The days of creative financing are past, and ripples from the mortgage market have spread throughout the entire financial world. Credit issues, once easy to work around, must now be addressed and overcome. Now is the time to become pro-active. Now is the time to insure that your credit is as good as it can possibly be. Now is the time to begin your credit repair effort!
Getting Started
What are the facts? Where are you now? Get copies of all three of your credit reports. It is essential to identify every item on your credit that may be having a negative impact on your credit scores. Knowledge is power. Successful credit repair is all about the details. I strongly suggest that you set aside enough time to take a close look at your reports. The investment of your time in this project will pay dividends beyond your imagination.
Give Yourself the Benefit of the Doubt
Credit reports are full of errors. You should examine your report with a critical eye. If you see anything at all that you do not recognize it is important that you question it. It is not enough that an item look familiar. Don’t speed-read your credit report; credit repair requires patience. Do you see late payments? If you are not 100% certain that the information is correct, you should question it. Are their collections? Unless you are in communication with the collector and you have received full and satisfactory proof that they have the legal right to collect the debt, question it! Does it look like derogatory accounts are reporting more than one time? Question them!
A Great Collection Tip
When an account is charged-off, the debt is normally sold to a collector, and just as often, re-sold again. If a collector does not currently own the debt, they have no legal right to report the collection. Most collectors do not bother to cease reporting when they should. When it comes to your credit report, you should not always believe what you see. Remove these obsolete collections and watch your credit scores go up.
Check Those High Credit Limits
Most people know that the relationship between their credit card balances and their high credit limits can have a major effect on their credit score. Did you know that many credit card issuers fail to report the high credit limit properly? Track down any underreported high credit limits and correct them. This type of reporting error may not be as easy to spot as obvious derogatory items, but your patient credit repair effort will pay off.
Charge-off Pointer
The statute of limitation for reporting a charged-off account is seven years plus 180 days from the date of your original default. The date of your default is the date of the first missed payment that led to the charge-off. Collectors cannot restart the clock. Collectors often illegally re-set the clock, and collection accounts may linger for years. If you see a collection on your report for an account that went into default more than seven years plus 180 days ago, question it! It will be removed.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.
Credit Repair and the Power of Debt Validation
Debt Validation – A Powerful Tool
Have you received a collection letter? The law provides consumers with a powerful tool for dealing with collectors. Here is our explanation of the power of debt validation and how to use it to your benefit.
The Letter of the Law
The correct way to respond to a collection letter is with a written request for debt validation. This is your right under the Fair Debt Collection Practices Act (FDCPA), and if done in a timely and correct manner can produce fantastic results. Let’s start with the law: FDCPA § 809. Validation of debts [15 USC 1692g (b) “If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”
Timing is Everything
Please note that there is only a 30 day window of opportunity to request your debt validation. Collectors must abide by the laws spelled out in the FDCPA, but these laws only mandate a response for the 30 days following the date of the initial collection letter. Beyond the 30 day window collectors have no obligation to provide the documents that you request and you have lost the opportunity to force compliance. Don’t procrastinate. Your credit is too important.
Why Validate the Debt?
Why request validation of a debt? There are two good reasons that you should request debt validation on every collection letter you receive, even if it looks legitimate. First, how do you know that the collector has the legal right to collect? You don’t! Debt is regularly sold, and just as often re-sold. You may have incurred an obligation with the original creditor, but you don’t know anything about the party that is currently demanding payment. So exercise your rights and ask them to prove that they own the debt. Secondly, how do you know that the amount of the debt is correct? Is the interest calculated properly? Are there other fees added? You deserve to know. As with any other credit repair tool, it’s about exercising your rights!
The Debt Validation Letter
Let’s get to work. Write a letter to the collector. Make it neat. Reference the debt using the identification they provided in the collection letter, such as collector account number, creditor account number, creditor name, etc. Clearly state that you dispute the collection and that according to the FDCPA you demand that the collector provide proof that they own the debt and have the right to collect, as well as proof of the amount owed by providing a copy of your signed credit agreement with the original creditor and a complete accounting of the amount in question. Attach a copy of the collection letter, and send it certified mail. If you are not comfortable doing this yourself contact a reputable credit repair company. Most legitimate credit repair businesses offer debt validation as part of their arsenal and will be happy to do this for you.
The Response
What happens next? Once you have sent a debt validation letter to a collector they must satisfy your request with adequate documentation. Ownership of debt may be proven with a contract or purchase agreement transferring the debt to them. The amount owed may be documented with account statements from the original creditor, or a copy of the original signed loan agreement and an accounting of the total. It is never sufficient for the collector to provide their own internal itemization of the debt. In all cases, the documentation should be clear and provide definitive proof of the collectors claim.
Say Goodbye to the Collector
What happens if the collector cannot (or does not wish to) provide the documentation that you request? If they can’t comply …they can’t collect, they can’t contact you, and they can’t report the collection to the credit bureaus. It’s that simple. And it is likely that you will never hear from them again.
An Important Note
Our credit repair clients occasionally express concern that if the collector is pushed too hard they will send a summons and attempt to get a judgment. It is not legal for a collector to take any additional steps to collect, including getting a judgment, until they have satisfied their obligation under the FDCPA. If you receive a summons after challenging a collector with a debt validation letter you will need to appear in court with proof that you requested validation. Going to court is not an attractive option, but if you kept proper records and appear with your certified mail receipt you will prevail.
Copyright © 2007 Sky Blue Credit. All Content. All Rights Reserved.