Credit repair...made easy!
Dec 12 '04 (Updated Oct 13 '05)
The Bottom Line -
Everything you wanted to know about your credit report - AND HOW TO REPAIR IT!
Hmmm, So they actually keep track of all of this stuff?
Yeah, sadly they do. All those little transgressions you thought were buried in the past are ready to come back and bite you in the butt. Have you had some problems in the past? Whether or not it was 'your fault' is irrelevant. If your credit is screwed up then you need to do something about it. Why not do it today?
A word on perspectives
This category already has a fine piece explaining what a credit report is with some bonus info. The piece is well written and well intentioned but in my opinion has some technical inaccuracies. I'm writing this to augment that. In additional to satisfying the categories main objective I will also offer some tips on how to repair your own credit. I bring to the table fourteen years experience in mortgages, real estate and credit repair. I live for this stuff. It's the best high there is. Any advice I give is intended for hypothetical knowledge only. I'm not promoting or advising anyone to remove information from their credit report which is accurately represented.
In a nutshell
There are many Consumer Reporting Agencies (CRA's) or Credit Bureaus in the U.S. (which is what this epinion is limited to). Of all the CRA's only three matter. These three companies are used by every financial institution which is deciding on whether or not to extend credit to you. They are; Equifax, Experian (used to be called TRW) and Trans Union. All three maintain a file on YOU in which all of the following is tracked and organized:
Name
Address
Date of Birth
Social Security Number
Employer
Credit Inquiries (for the last 180 days)
Public Records (judgments, liens, lis pendens, etc)
All open and closed trade accounts (revolving, amortizing or monthly - AMEX)
Credit Score
Some of these are self explanatory, some are not. I'll go into detail on the ones I think may require explanation.
Credit Inquiries
Every time you apply for that 'pre-approved' platinum card your credit is checked and the company checking on you is entered onto your report under 'Inquiries'. These fall off after six months. This is one of those things you must be mindful of though. I'm sure everyone knows that the most important part of your credit report is that all too mysterious 'credit score'. Many inquiries in a short amount of time will lower your score. I don't mean one or two applications. But if you're shopping for a mortgage and go to twenty different brokers and they all run your credit your score will be lower the next day. Inquiries that don't result in new trade lines being opened lower your score even more. It ain't fair but it's life. Deal with it and stop applying for those gold cards if you know you won't be approved anyway.
Public Records..you mean everyone knows about that!?!
If you have any public records they will also appear on your credit report - and contribute to your credit score. Public records include, but are not limited to, Judgments (lose in court and didn't pay up? It's on there), Charge Offs (just because Sears stopped trying to collect, it doesn't mean it went away - they charged it off, took the tax write off, but the debt remains and looks even worse now), Liens (IRS, mechanics (against your home), parking tickets, etc), Lis Pendens (foreclosure action), Bankruptcy, etc.
Trade Accounts
This one covers a broad spectrum. Mortgages and car payments are by far the most heavily weighed in every underwriters eyes. After that there are credit cards, student loans, etc. For each open (or closed) account the following info is provided: The name and address of the lender. An abridged account number (enough to verify but not enough for fraud), history of payments - number of times 30, 60, 90 days late, etc. Initial and current balance. Credit high, payment amount and schedule if applicable, etc. There are many different shorthand notations used on credit reports and depending on which company you contract to abstract and merge the three CRA's, chances are your credit report would not be decipherable by underwriters if they were forced to look at your report from a source they weren't familiar with. Reports are not ordered directly from the CRA's, there is an industry of middlemen who sell your info to those who rely on it in order to make a decision about you. But in the end the same info is given - no matter the structure.
Credit Score...so what's in a number?
Ok this one's gonna irritate you a little bit. Ultimately I can't give you a complete answer here because there isn't one. You've heard of these scores before. Beacon or maybe FICO sound familiar to you? These scores are the sum of a complex calculation that spits out an arbitrary number known as your credit score. Values are given to obvious variables such as your actual payment histories, length of established credit, length of current employment, length at current address, number of inquiries, number of trade lines, recent pattern - ie atypical behavior (if out of the blue you just applied for ten new credit cards your score will suffer - even if all ten gave you a card as a result of the inquiry). There are certainly more variables but nobody knows for sure what they are. Why, you ask. Because it's a secret more closely guarded than the Colonel's blend of eleven herbs and spices. Nobody knows for sure and the CRA's ain't talking. They don't have to, they are above the law. In the sixties the consumers' distrust in the CRA methodology prompted the Fed to pass the Fair Credit Reporting Act of 1970. This was indicative of the times - they were a changing. Basically the unspoken truth was that women and minorities (read Blacks) were obviously being handicapped by the CRA's - and not in a good way. The FCRA is now the legislation that governs the CRA's (enforced by the FCC). It's about as valuable as a good roll of toilet paper. Actually less so, toilet paper wouldn't leave paper cuts. The CRA's stated that if they were forced to reveal the secret recipe then everyone would 'game' the system. Indeed! People paying their bills on time to improve their credit rating. The horror of it all.
So anyways, the Fed allowed for the secrecy to remain. It has also allowed the discrimination to remain - although now it has a nicer face on it. Age is a factor because a man (I mean person. I mean person of any gender or race) in their prime working years is a better credit risk. Stick that in your AARP pipe and smoke it. Next we move on to neighborhood characteristics. Would it surprise you to know that your zip code is one of the weighted variables in determining your score? I live in a great neighborhood. Mostly white collar - in more than one way. My zip code is a positive attribute on my credit report. To be blunt, if I move to a more 'urban' zip code my scores would go down. Not by much - this isn't overt. It's just a subtle bitch slap.
And then there's the theory of relativity. Well not really, but it's a great segue. Your scores fluctuate daily by a few points even if there is no activity at all on your report. Why? Because it's all relative. The final factor (which truly is random) is that your credit is rated against every other credit report pulled on the same day that yours was pulled. That's a bit of a weird one but at least it's a level one.
What's a good score?
Again no good answer here. I'll offer some rules of thumb:
Under 600 - You're in deep doo-doo
Above 620 - You're qualified for most Government backed mortgages (Fannie Mae, etc)
Above 700 - You are among the elite, congratulations
Above 800 - It took more than the right zip code to get here. You can walk into any bank and write your own terms. You are the proverbial shiznit.
So there you have it
That is what a credit report is and it's usage is self evident. You apply for credit and this is what is checked. You apply to rent an apartment and this is what is checked. But what if people just keep saying "no" after seeing your credit report?
How to repair your own credit for free - well almost free
Step one is you need to order your own credit report from all three CRA's. In some states it's free (by law) and in states where a charge is permitted it won't be higher than nine or ten bucks - for each. There's no point in only repairing one of the three. If you're gonna do it, do it right. Read these reports and determine which information must be deleted - I must again stress that it is only legal to remove information which is incorrect. I don't advise removing legitimate information.
Keep a copy of the report and send the original back (an address will be provided for challenges) with the information highlighted which you are challenging. Footnote everything ie *Chase Mortgage shows a sixty day delinquency when in fact I was never delinquent, etc. Request that a new credit report be sent to you (free of charge) after the info is removed.
Wait thirty days and then send a follow up letter if no response is received. In this follow up letter you may want to mention that Section 168II of 15 USC (The Fair Credit Reporting Act of 1970) provides that a challenge must be disproved within thirty days or the item removed from the report unchallenged. This is one of the few benefits of the FCRA. It states that a challenged item must be proven correct or removed within thirty days - no exceptions. This has spawned an entire industry...
Step right up and let me fix yer credit for only $2000
The credit repair industry popped up the minute a bright eyed, bushy tailed entrepreneur spotted that loop hole and exploited it. This is how that industry works for the most part. When you submit a request it lands on someone's desk and this poor guy has thirty days to contact the creditors you are disputing and get proof that the negative information is legit. This could probably be accomplished in a few minutes with a phone call and a quick email. But then it gets busy. Some schmuck is sending in hundreds of these requests for various people who are paying him to do this. The guy is swamped - the CRA hires more people to keep up with demand. They can't lose sight of that thirty day window. Then another credit repair company pops up. Then five hundred more pop up and slam the CRA with more paperwork than anyone's ever seen in their life. You have to keep hiring to keep up with demand but it starts to get out of control. Profits are being lost to these backroom antics. A few slide through unchallenged to ease the floodgates. Blood is in the water. The credit repair companies smell victory and double the demand letters. The dam bursts open and now thirty to forty percent of these requests are going unchallenged. Credit scores are going up undeservedly. I say undeservedly because we're all adults here and none of us are going to pretend that all those millions of people had false info on their reports. They worked the system. Do I feel bad for the CRA's? Hell no. Stop looking at my fucking zip code you racist bastards. But I digress. The ultimate result is the dumbing down of the entire credit rating system. This loophole was a huge flaw. Individuals jump through it on their own every day. You don't have to pay a company for this.
What to do with this info
You know how to make a demand of the CRA's and further more you understand how the credit repair industry works. Use this method to remove any and all legitimate errors in reporting. There are some freebees that you should be aware of:
The following will be removed automatically with a well worded letter..
Bankruptcies and foreclosures that are more than ten years old (seven years in certain circumstances)
Delinquencies that are more than seven years old
What if they won't play ball?
If you have trouble getting an item removed don't be too shy to pick up the phone and call the company reporting it. Chances are the first person you speak to will be a drone telling you reported info can not be changed. Transfer around until you get a human on the phone. Reported info can be and is altered by the reporting company every day. I once convinced a mortgage company to hold off on reporting a foreclosure so I could get the poor guy refinanced. Anything is possible if you don't hear the word 'no'. Make your case and offer to settle your debt if they put it in writing that your history will be wiped clean when you make payment. It can be done. There are some things on your credit report that may effect your score but you shouldn't worry too much about them..
If an underwriter looks at a credit report which is marginal the following can be dismissed without prejudice:
Medical Collections accounts - NOBODY takes these seriously. Especially if individually they are under one thousand dollars. They will lower your score but they will not prevent you from obtaining a mortgage. EVER.
Student loans - are not dismissed outright like the medical collections but they are not weighted very heavily. Mostly because they can be explained away as having a ten year grace period before becoming due. Most underwriters will take them with somewhat of a grain of salt.
Timeshares - Personally I do hold this against people - how could you fall for this? But luckily underwriters do not take these seriously either. By the way, you're not alone. I have never seen anyone who has complied with the terms of a timeshare and made all (or even most) of the payments. I say this after probably having read in excess of twenty thousand credit reports.
Certain Regionalisms - depending on where you live, local underwriters will not take certain local companies seriously. You will have to determine which these are for yourself. This example may help you understand what I mean. In NYC, Greenpoint Mortgage contracted all of it's collections services to a law firm which I will not name. Let's call them Shifty, Soulless & Hellbound, LLC. SSH was quite famous for accelerating every Greenpoint Mortgage that went D30. Huh? Ok I'll explain. An Acceleration Clause in every mortgage says that as soon as you become delinquent the lender has the right to accelerate the loan. In other words demand full payment, ie foreclose on your unsuspecting ass. A loan which is D30 (30 days late with the payment) is traditionally not accelerated. Normally acceleration comes at 90 or 120 days delinquency. So why did SSH jump the gun when it was obvious the overwhelming majority would make a payment before getting to D60? Because the 'Acceleration Letter' that SSH sent came with a bill (to the customer!) of $300. What was even more astounding was that a reputable bank like Greenpoint let them get away with this for more than five years. What I'm getting to is that in the early nineties in NYC if an underwriter saw a foreclosure action from Greenpoint on your credit report he (or she) would just say "There goes another SSH victim" and would totally discount the validity of the entry. These regionalisms exist everywhere.
My credit is too bad for words, I'll never establish new credit!
Yeah, you will. The best way to build new credit after doing your best to remove the negatives is to bite the bullet and pay exorbitant rates for a while. Get a secured credit card and use it once a month and then pay the bill in full. If you don't use it, it serves no purpose. Don't go out and buy a new TV - charge a lunch once a month, that's it. Need a new car? Even if you don't you'd be wise to go buy a used car from a 'buy here - pay here' lot. They're all over the place. You usually have to make weekly payments in person at higher than normal rates. This is paying your dues. Two years of this and you're mostly back on track. It's not hard to rebuild your credit if you're willing to swallow that bitter pill and pay through the nose. Credit isn't permanent. It's fluid and you have the ability to shape it however you want.
In conclusion
Use these tools wisely. Manipulating your credit report is easy and again is only recommended for removing info which shouldn't be there. If nothing else, take away from this the knowledge of what your credit report consists of and be mindful of decisions which will have long term effects. This got a little long winded and covered quite a bit. If there are any questions on specifics left in the comment section I'll be sure to answer them to the best of my ability. Now go move to a better zip code!
 |
|
|
|
|
|
|
Epinions.com ID:
carnut2k4
|
 - Top 500 |
|
Member: Jason
Location: in the wind
Reviews written: 99
Trusted by: 59 members
About Me:
Muscle Shoals has got The Swampers
|
|
|
© 1999-2009 Shopping.com, Inc.