Ten Common Credit Repair Mistakes

Sunday, November 30th, 2008 at 10:55 am  
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“The Ten Most Dangerous Mistakes YOU Probably Make With Your Credit Scores And What To Do About It…”

   After coaching hundreds of students and clients, I have noticed that many people make the same mistakes over and over when it comes to dealing with credit, credit scores, and the credit bureaus.

   Since you are a subscriber to this blog, you will learn what these common credit repair myths are and how to never fall victim to them again. My friends in Austin, San Antonio,  Dallas, and Houston will have the benefit of me presenting these tips and more live to the different real estate investing groups in your city.

   I will discuss texas credit repair and how it relates to the current real estate investing marketplace.

   Here are the Top Ten Reasons Why Most People Fail To Repair Their Credit Properly And How To Make Sure YOU Avoid Every One Of These Deadly Common Mistakes

 

MISTAKE #1: Not Disputing Accuracy of Accounts That Have Late Payments Listed

   A recent 30 day late payment is much worse than an old Chapter 7 Bankruptcy. To dispute late payments you need to write a letter that states three things:

   First, the name of the creditor and number of the account you are disputing

   Second, the reason for the dispute

   Third, what you want the credit bureau to do

That’s It – How Simple Can It Be??

   Have you ever noticed that the most, if not all of the credit repair advice out there tells you to just dispute the account as “Not Mine”?  Of course you have. Just like most of the population, I’m sure you think that this is good advice.

   According to the “experts” the credit bureaus only have 30 days to verify the account or they have to delete the negative information. Ok, so is anyone surprised to know that the Credit Bureaus will ignore this type of consumer dispute ALL DAY LONG!

   What’s going on here? It’s actually very simple…The Credit Bureaus don’t delete negative account  information when you dispute like this. Why? Because these types of disputes are the easiest to verify! 

   If they can match four pieces of information (which you supply by the way when you dispute something with the credit bureaus) such as your date of birth, Social Security number, address and name, then the account is yours and they will not re-investigate.

   And guess what?

   Most everyone is still teaching this same worthless tactic. The better way is for you to force the credit bureau to confirm data in your credit report and in the account itself. Dispute the current balance, date of late payment, or date the account was opened. 

   The credit bureaus probably won’t do this correctly within the 30 day period required by law and then you can demand removal. Quit quoting the FCRA act and trying to sound like a lawyer. If you get the bureaus to try and verify account details instead of correct reporting you will never get these items deleted.

   I realize that this doesn’t make a lot of logical sense, and it’s hard to ACCEPT… but GET OVER IT.

   Until you accept this FACT and begin to act on it, you’ll NEVER have the success with repairing your credit like most of my students.

 

MISTAKE #2: Not Disputing Bankruptcies and Other Public Records From Your Credit Report  

   What do most people believe to be true about having a bankruptcy or public record listed in their credit report? Right! They believe that those items stay in your credit report for 10 years or something, maybe even forever!

   Well, I have news for you… YOU CAN REMOVE ANY NEGATIVE INFORMATION IN YOUR CREDIT REPORT THAT IS OUTDATED OR INACCURATE. NOT ONLY CAN YOU, IT IS YOUR RIGHT

   To remove these items from a credit report, many people write letters to the credit bureaus disputing specific information on the record that is displayed in their report. 

   Why is this strategy successful? Because there is a question of who is the “source” of the verification. Courthouses do NOT report to the credit bureaus. The bureaus get their information from third parties or they have people on their payroll go down and get the information.

   That is a CLEAR violation of law.

 

MISTAKE #3: Not Reducing Credit Card Balances to the Correct Percentage the FICO Scoring Algorithm prefers.

   In our quest to manage credit and keep some sort of balance on our credit cards as the “experts” tell us to do, we utilize too much of our available credit on our credit cards

   Another HORRIBLE idea.

   There are many schools of thought on how much debt you should carry on your revolving credit card balances. Some experts say to keep your balance to 50% of your available credit limit. Others recommend a 40% or 30% ratio. While it is always good to keep your credit card  balances low, you also want to utilize your credit cards since the issuing banks make money when you use their cards

   Remember though, the FICO Credit Scoring Model lowers your score when you use too much of your credit limit. When you use 40% of the credit limit on a card you lose points with the credit bureaus. As you use more of your available credit limit…50%, 60%, 80%, 100% your credit score goes down. 

   Speaking from personal experience and the experience of my students and clients, the “magic percentage” that will yield you the biggest bump in your FICO credit scores is 5% to 7% of available credit limit. 

   Always try and keep the balance around 5%. 

 

MISTAKE #4: Not Having Credit Accounts From Major Lending Institutions

   You want to have major institutions like Bank Of America,Chase, Wachovia, etc on your credit reports. Companies like Capital One, CitiFinancial, Providian – those that you see advertised on late night TV and those that have teaser rates will suppress your credit score. 

Why? 

   Because the Credit Bureaus know that people with these accounts are more risky. These banks are not premium tiered lending institutions. They aren’t sub-prime, but pretty close.

   If these types of accounts are on your credit report, your credit score will suffer and you’ll pay higher interest rates for everything. Only get accounts with big, well known, and reputable financial institutions. Make sure to pay them in full every month, on time and only use about 5% to 30% of the credit limit. That’s a great way to increase your credit score. 

 

MISTAKE #5: Not Suing Creditors Who Report Incorrect or Negative Information

   Creditors generally have the same responsibility under the law to maintain accurate information….and just like the Credit Bureaus, they often fail to do just that. So first, go ahead and dispute the negative line items on your credit score with the Credit Bureaus. Just because they send you a letter saying that the credit report account is accurate, doesn’t mean that the creditor has actually provided proof of this to the Credit Bureau.

   By law the Creditor and Credit Bureau can only prove the account is accurate with a signed written contract by you or other original documentation. If the Creditor has not followed the law ….you may be able to file a legal Action against them. 

   Many people simply sue in Small Claims Court which costs between $35 and $100 depending where you live.  Don’t worry, it’s easy. 

   Provide proof to the court – including the letters you sent – how the creditors have not proved or removed the account. Write about how their actions have hurt you financially and created mental anguish and hardship.  You don’t even have to ask for money unless this is required and then ask for $1,000. 

   Just make sure you ask for complete deletion of the negative account on your credit report with all Credit Bureaus. 

   Do you think they’ll want to send the President of their company to your county to appear in court. 

Nope. If they just ignore you and don’t show up in court that’s ok too. Either way, you win-and the account gets deleted-permanently. 

 

MISTAKE #6: Not Adding Good Credit Accounts To Your Credit File

   Get added as an “authorized user” on an account of someone like your husband or wife who has a great credit history with a company. (Note that the Credit Bureaus often mix up negative information from other people on your account.) Often, that account will be reported to the Bureaus as yours too! 

   Now, the Credit Bureaus claim they are cracking down to prevent people from improving their scores this way. However, remember that Credit Scores are created “on the fly” by the credit bureaus and what your credit score is – depends on the scoring model used. 

   So, this positive history from someone else is probably only NOT counted when you are applying for a mortgage if your lender is using the FICO NextGen Model.

   Make sure your lender is using the FICO Classic scoring model. More than 80% of lenders DO use the FICO Classic so you’ll probably be in luck! 

 

MISTAKE #7: Not Disputing, Correcting, Removing ”Aliases” or “AKA’s” from your Credit Report

   Many different names tend to make you look like a higher credit risk and will lower your FICO credit scores. If you have too many names in your credit file, it will also make it more likely that someone else’s name will match a few letters of your name and their negative info may accidentally be reported in your credit report.

   A simple letter stating that these are NOT your names and requesting deletion should do just fine. Make sure to include your full name, address, and social security number in the letter so the credit bureaucan identify you properly. 

 

MISTAKE #8: Not Disputing, Correcting, or Removing Old Addresses From Your Credit Report

   Different addresses indicate less stability and lower your score. If you have too many different addresses in your credit file, the FICO Credit Scoring algorithm will lower your scores. 

   Why you ask? Well, for a couple of reasons:

   One, too many different addresses indicates less stability and a higher credit risk. 

   Two, if the profile of people in your neighborhood have lower scores or economic profiles, your score will 

be lowered as well. That’s especially bad news for people in low income areas and who live in Senior citizen communities. Isn’t that discriminatory? Do you think that is fair? What if you are in the Military? 

   What if you’re a salesman or get promoted a lot and have to move around the country? You can challenge the addresses on your report as not accurate…for lots of different reasons. 

 

MISTAKE #9: Using A P.O. Box or Mail Box Service When Applying For Credit  

   Using PO Boxes and Mail Drop boxes indicate higher credit risk. You look less stable and will have a lower credit score with the credit bureaus if you have a PO box rather than a physical street address. 

   Of course, people who are NOT credit risks have PO Boxes and Mail Drop boxes for legitimate reasons like protecting their privacy and themselves from identity theft…but the credit bureaus don’t care. 

   If you think getting a box at Mail Boxes Etc which has a physical address…can get around this, you’d be wrong.

   The Bureaus have a list of almost every single Mail box drop location in the country. They will flag you as more credit risky and your credit score will be lower on all three credit reports from the major credit bureaus! 

 

MISTAKE #10: Identifying Yourself As “CEO” or Owner Of Your Business

   If you own a Business and/or have CEO or Owner in your title, the Credit Bureaus view you as a more credit risky entrepreneur. Making yourself CEO or President is a perk of owning your own company, but you should change your title to General Manager or Chief Financial Officer and report this to the credit bureaus. 

   Salaried positions are viewed more favorably. So to improve your credit score, change your job title and dispute the accuracy of any title or employment position that isn’t yours. 

   When people find issues with their credit and try to act to make repairs, they can often make the situation worse by not understanding what variables go into their credit score.

   Here is a bonus tip for you – DON’T CANCEL OLD CREDIT CARDS OR LINES OF CREDIT!

  This one seem counter productive, but keep those older cards and lines of credit open after you have paid the balance down to zero.  15% of your credit score comes from the length of your credit history. Canceling your oldest credit card can impact this portion of your credit score.

   Also, if you have balances on other cards, cancelling an old credit card can also worsen your debt ratio, which makes up 30% of your score. If you don’t have other sources of credit that are older than seven years, you should not cancel your oldest credit card.  Also, 30% of your score comes from the ratio of your credit card debt and your credit limits.

   Thus, if all of your cards are maxed out, your credit score is suffering even if you’re keeping up with the payments. Focus on paying down the cards with extra payments.  To sum this one up, keep your older lines of credit open even if they are paid off.  This will help you both in your length of credit history and on your debit ratio.

Stay Tuned!

 

Your Credit Score Insider,

 

Mark

Credit Repair – 7 Steps To A Lifetime Of Great Credit Scores

Friday, October 17th, 2008 at 3:52 pm  
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   With all of the chaos that is happening in our economy and with our lending institutions, I thought I would share some wisdom that I have learned on my 7 year journey of credit repair.

   For the foreseeable future, having excellent credit and high FICO credit scores is quickly becoming crucial to your financial life.  The mortgage meltdown and the credit crunch have resulted in lenders being much more cautious than they ever were about extending credit and making loans, particularly to borrowers with a less-than-excellent credit rating.

   Improving your bad credit not only means raising your credit scores, but also conditioning your credit reports so that you score as high as you can within the FICO Scoring Algorithm. I cover this topic in much greater detail in my book Crushing The Credit Bureaus, but I wanted to share with you 7 principles that you can use to improve your credit scores at little or no cost.

 

Principle #1:  Purchase A Copy Of All Of Your Credit Reports.  You can’t fix what you don’t know.  Find out what your potential creditors already know about your credit history by requesting a copy of your reports from the three major credit bureaus.  There is also a fourth credit bureau that almost no one ever talks about, yet more and more lenders are using this “Secret Credit Bureau”  all the time. Find out about it on page 22 of my book.  I recommend to all of my students and clients to purchase their credit reports online from the Fair Isaac Corporation’s website directly.  

I recommend a certain section of their website only because you get the exact reasons why your credit score is what it is. That web address is www.myfico.com/12. That is not an affiliate link or anything, it is just a little known insider tip that you have learned by subscribing and reading my blog. When you go there, you will receive in order the reasons (good or bad) of why your score is what it is. This will help you create your game plan for increasing your scores. Yes, there is a cost for these, but you are seeing exactly what lenders see when making a decision on whether or not to lend to you and at what rate based upon your scores.

 
Principle #2:  Review, Update, and Remove.  Carefully read your credit reports, keeping an eye out for any outdated, not reported, erroneous, or inaccurate information.  It is your right to get any incorrect data removed from your credit reports.  You can also request that negative information be deleted, but you will have to substantiate your claims.

 
Principle #3:  Keep Your Credit Card Balance Low.  High outstanding debt will negatively impact your credit scores.  Utilizing your full credit limit is dangerous, and quite frankly DUMB! I don’t mean to sound harsh, but if you really took a look at what that money is costing you in interest alone, you would never use a credit card again. I realize that in today’s society we absolutely need credit cards for some basic functions in the financial world, but please just view them for what they are…a convenience tool, not a habitual method of paying for things.

Going forward, lenders will now favor heavily those customers who carry a manageable amount of debt on their cards.  Here’s a  tip:  Don’t pay off your entire balance every month.  Believe it or not, that may hurt your credit score.  After all, lenders make their money by charging interest on the balance; if you’re not paying at least a little interest each month, you’re not profitable to the lender.  And more importantly you are not playing the “game” of credit.

 
Principle #4:  Increase Your Credit Limits Consistently.  Each of your lenders typically assign you a credit limit-an amount which you cannot exceed. Have you noticed though, that these same credit card companies will often let you exceed your credit limit, then charge you an “over limit” fee! Yikes…is it any wonder that the credit card companies make millions of extra dollars from us consumers from these fees alone?

If you add up all your lines of credit you have your “high credit limit.”  An equally important number is your debt-to-credit ratio.  Lenders would like you to carry a reasonable amount of debt for your high credit limit.  Unfortunately, many Americans have a debt-to-credit ratio that is way too high.  For example, if you have $10,000 in unsecured revolving accounts and you owe $8,500, your debt-to-credit ratio is 85%.  That is bad news for your credit score. Typically that will cost you anywhere from 30-85 points on your FICO Scores.

 

Principle #5:  Pay All Of Your Creditors That Report To The 3 Major Bureaus On Time, Every Time.

Notice I specifically mentioned the creditors that report to the bureaus. Listen, I am not trying to tell you how to manage your monthly budget, but I will suggest that you protect your credit rating at all costs. If you have to make the choice between paying a credit card account or your cable bill…pay the credit card first! You can always work out a payment plan with the cable company, but just one 30 day late pay can affect your credit scores 12-55 points! That’s no joke, and I have seen even bigger drops on credit scores from some of my students in the past.

 

Principle #6: Monitor Your Credit Scores Like A New Mother Monitors Her Newborn Baby.

I teach and preach to all of my students and clients that our credit scores are constantly moving and fluctuating with every passing credit transaction we complete. They are not static, when you charge on your credit card, that transaction is recalculated against your credit limit. When you make a payment that is late, your score is affected. When someone makes an inquiry, your score is affected. My point to all of this is to not simply pay attention to your scores for a short time until they improve and then forget to watch over them. For all of my fellow parents out there, this is the one area of your life where being an “overbearing, overprotective nag” is perfectly acceptable! 

 

Principle #7: Constantly Educate Yourself About The Credit Scoring Game

I truly appreciate and am humbled by the fact that you are a subscriber or a potential student of mine. I am trying to share with you my knowledge and experience of what I went through with my credit nightmare. I would welcome the chance to earn your business, but if we never do business together, please make sure that you are keeping yourself up to date and educated on the subject of credit, credit scores, and credit repair. Find yourself reputable sources of information and more importantly put that information into action to help you achieve the credit scores you desire.

 
Get access to insider tips, tactics, and techniques to increase your credit scores by clicking here: www.CrushingTheCreditBureaus.com

 

Your Credit Score Insider

 

Mark

Could It Really Be Possible To Repair Bad Credit With One Letter?

Wednesday, October 1st, 2008 at 8:24 pm  
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You will be surprised how easy and uncomplicated credit repair can be when you just apply yourself and follow the golden rule…”treat others the way you wish to be treated”

 

Having bad credit and low FICO credit scores is serious business, and fixing that problem should be done in a business-like manner. Picking up the phone and yelling at the lender’s customer support representative is not going to help repair your credit; in fact, it may make it worse.  Think about the person on the other end of the phone. Oftentimes they are simple, hard working people who take a lot of crap everyday on the phone. Not to mention they probably don’t get paid very much and work in a small cubicle in some windowless call center.

I discuss in other postings how to handle these type of folks when you make a phone call to them, however for now I want to discuss what to do when you send out a letter to a creditor.

When you write a letter to anyone other than the credit bureaus (more on them later), make sure that your words are simple, concise, and professional. 

A simple credit repair letter can help you in a variety of ways:

 
1. Reduce your debt by negotiating repayment plans with your lenders, in writing. Especially in the current meltdown of banks, Wall Street, and the general market, this is probably the BEST time to be negotiating with your creditors. Debt negotiation letters can settle your debts, and erase bad credit, for a fraction of what you currently owe.  Your lenders will always want to recoup some of their losses, as opposed to having to write all of off your bad debt.  A simple letter can be very powerful in reducing the amount of money you owe, and perhaps avoid bankruptcy for you.

2. A well-crafted letter can also stop collection agencies and attorney debt collectors from harassing you.  It is your right to not be called in the middle of the night or while you are at work.  These companies sometimes “buy” your debt from the original lender, for a percent of the value.   Get these annoying parasites out of your life by putting it in writing.

3. Stop identity theft with a fraud alert letter.  If you suspect that an ID thief is using your personal identifying information to open a new credit account for their personal gain, place an “initial fraud alert” on all three of your credit reports (TransUnion, EquiFax, and Experian).  

This can only be done if you feel your personal information has been compromised.  The initial fraud alert letter requires that lending institutions call you at the phone number listed on your credit report to confirm any new transactions, effectively stopping any new ID theft, at least for the next 90 days.

4. Raise your credit score by removing inaccurate or negative information from your credit report.  Write to the credit bureau that is distributing the bad information, and spell out exactly why the data should be deleted from your report.  Perhaps you have paid off a loan that your report shows as outstanding.  Always include any copies of proof you may have, such as cancelled checks showing timely payments.  It never hurts to include the consequences that have resulted from the credit bureau including the inaccurate information as well.

Be sure to make a copy of all credit repair letters and any attachments for your own files.  It is all good evidence that you are working to establish a good line of communication with your creditors.

The impact of your credit repair letters will not be instantaneous.  But in a month or so you will likely find that your credit report will reflect the requested changes, that the identification theft has stopped, or that your lenders are negotiating in good faith with you in good faith to reduce your debt.  Keep in mind that you are repairing not only your credit, but also your good name and reputation.  

The pen is mightier than the sword.

 

 

*******

There are many strategies, tips, and techniques available on the Internet on how to repair your bad credit. Unfortunately most of them are old, outdated and ineffective!

 

Having great credit scores is THE most effective way to improve your finances and financial independence. When you build and maintain excellent credit, you control your future.

 

Discover how to repair bad credit and improve credit scores.

 

Sign-Up right now for Mark Garcia’s FREE online newsletter to find out how to do exactly that

Go here:  http://www.CrushingTheCreditBureaus.com