Lexington Law is the trusted leader in credit repair. Having served over 200,000 clients since 1991, they have the experience necessary to make credit repair work for you.
The lawyers of Lexington Law will fight to remove negative items from your credit reports, so you can improve your credit score, and start living life without limitations. more
Along with outstanding client support, their service includes unlimited disputes and deletions. Lexington will not rest until you are satisfied with your credit report results. more
"My experience with the Lexington Law Firm has been wonderful from
beginning to end and the results you achieved are remarkable. It is also noteworthy, that the fee I paid for such superior professional service must be one of the truly great bargains of all time. My warmest best wishes to you all."
— R.S., Lexington client
"Thank you for all the wonderful work your staff has done on my behalf. The creditors that I wanted removed are no longer there... I couldn't have done it without you, nor would I ever want to. You and your staff are truly professionals and I bow to you."
Many consumers have the mistaken idea that credit bureaus are federally supported organizations backed by a vast array of laws meant to protect creditors. Nothing could be further from the truth. Aside from the government simply recognizing the need for credit reporting, credit bureaus have absolutely nothing to do with the government. Credit bureaus are simply huge bureaucratic companies which exist for the soul purpose of making money by selling information about you-information they never bothered to verify. Because of the vast potential for error in the credit reporting system, the United States Congress has enacted laws to protect the consumer from being victimized by the credit bureaus. It is your right and responsibility to make use of these laws.
The Law versus Practical Reality
As the credit bureaus computerized their processes and greatly expanded their reach and influence in the late 1960s and early 1970s, consumer complaints began to mount at the FTC and state attorney general offices. The credit reporting agencies quickly became huge bureaucracies second only in size to the federal government. The credit bureaus expressly served only the needs of their clients, the credit grantors. Many consumers were negatively affected by the credit bureaus, but they had no way to correct or change their credit information. The American consumer lay completely at the mercy of the credit bureaus. The United States Congress enacted the Fair Credit Reporting Act (FCRA) in 1971 to insure that the credit bureaus investigate the credit items disputed by consumers. This federal law set procedural guidelines, which gave the consumer the right to challenge the accuracy, validity, and verifiability of the credit listings appearing in their consumer credit report. It also required that the credit bureau delete any credit listing if it was inaccurate or could not be verified. Learn More. In theory, the FCRA charges the credit bureaus with responsibility to the consumer as well as the credit grantor. In reality, the credit bureaus resist, resent, and reject consumer disputes. The credit bureaus would rather be left alone to make a profit. And, each time a consumer challenges his credit, profit is lost. The credit bureaus first defend their profits by erecting walls of stall tactics, including requests for more information, further clarification, and additional identification. The vast majority of consumers give up before they even receive copies of their credit reports. If a consumer manages to get a credit report, decipher the codified information, write a coherent dispute, and mail it, the bureaus may still find some reason to disregard the challenge. The entire dispute system is designed to frustrate and discourage the consumer. Many consumers have the idea that the credit bureaus must complete their investigation within thirty days or be forced to remove all disputed information. They threaten to sue the credit bureaus if they don't conclude their investigation in time. In practice, such thinking is delusional. Nobody forces the credit bureaus to do anything.
However, if you manage to submit a valid dispute letter, and the credit bureau investigates your dispute, the chances of success are good. If a credit bureau cannot verify an item before completing its investigation, that item will be removed. Many creditor grantors are simply reluctant to take the time to verify the data. While the credit bureaus are in the business of reporting credit histories, creditor grantors are not. Click Here.
Can credit repair companies be trusted?
Many "credit repair" companies claim to remove negative credit with the flick of a wrist. Their advertisements make bold assertions and money-back guarantees: "Bankruptcy, tax liens, judgments... no problem!! One hundred percent guaranteed!! Credit report 100% cleared in 30 days!!" Can they really make such sweeping guarantees? While some credit repair companies are outright frauds, others are not fraudulent and they use the dispute process to obtain impressive results. In fact, they delete thousands of negative credit listings every day. There is a company called, Lexington Law who has been doing it for 15 years. Click Here to learn more. Unfortunately, it is risky to trust anyone to help you restore your credit. It is estimated that fraudulent credit repair companies have bilked Americans out of more than fifty million dollars. The majority of credit repair companies were started by entrepreneurs with a penchant for marketing. Consumers have flocked to these "credit doctors" only to discover that their advertisements proved far more impressive than their results. Hiring a credit repair company is like playing Russian roulette. Many of them are effective and legitimate, but it is difficult to tell a rip-off from the real article.
So, can credit repair companies guarantee results?
Not a chance! No credit repair company is so good that it can guarantee a specific outcome. It would be like a defense lawyer guaranteeing that the jury will find his client innocent. Guarantees are a sure sign of credit repair fraud. A warranty, where the credit repair company promises a refund if certain results don't occur, is a better, more realistic claim. Lexington Law is a respectable company that we recommend. Not surprisingly, the credit bureaus have declared war against the credit repair companies and those selling instruction on how to do-it-yourself. The bureaus lambaste credit repair companies in the media and send anti-credit repair literature to anyone whom they suspect of using credit repair services. The bureaus unflinchingly deny that accurate information can be removed from a credit report. The simple truth is that you do not have to endure bad credit for seven to ten years as long as you feel comfortable challenging the accuracy or verifiability of your credit listings. If so, it is possible to restore creditworthiness within a much shorter time. However you decide to address your credit challenges, realize that regardless of what you may hear in the news media, thousands before you have sought help and restored their credit. They can show you their homes, cars, and credit cards. Despite the newspaper articles, TV reports, and other credit bureau propaganda to the contrary, the simple truth remains: you can restore your credit. Learn More.
It is quite difficult to repair your
credit without somehow satisfying your outstanding debts.
However, the act of paying off a debt will not improve your
credit rating much, if at all. Negative credit is allowed to
stay on the credit report for a maximum of seven and one
half years, except for bankruptcy which may remain on the
credit report for ten years. Under the old Fair Credit
Reporting Act (FCRA), the seven year clock began ticking on
"the date of last activity" or, in other words,
when the last action took place on the account. Under the
revised FCRA, the credit bureaus must start the seven year
clock on the first payment that you missed that led to the
collection or charge off status. Now, creditors and
collection agencies aren't allowed to extend the reporting
period by passing the account back and forth between
agencies.
However, by paying an outstanding,
delinquent debt you will change the account status to
"paid collection," "paid was late," or
"paid was charged off" - which will still stand
out as a very negative listing. When you have outstanding
debt, it is almost always prudent to seek professional help
so that you may settle your debts without further damaging
your credit. In some cases, it is even possible to negotiate
the deletion of negative credit as part of the payoff.
The credit bureaus have cleverly
spread this myth through the news media and government
agencies to discourage credit repair. In truth, the credit
bureaus will sometimes temporarily delete a negative listing
if they haven't heard from the credit grantor after
approximately thirty days. If the credit grantor reports
late, say after six weeks, and then verifies the negative
listing, the credit bureau will often reinsert the negative
listing on the credit report and reverse the credit repair.
This is often known as a "soft delete." Usually,
though, the creditor simply fails to respond and the
negative listing is permanently deleted and repaired. If the
item is verified by the credit grantor, either before thirty
days or after, the account may still be repaired again at
some future time.
Under the new Fair Credit Reporting
Act (FCRA), the credit bureaus must follow strict procedures
to notify you if they decide to re-report an entry on your
credit report. These new procedures have reduced the
frequency of the re-reporting of listings, and they have
increased the risk of lawsuit for the credit bureaus when
they do it.
There is no type of negative listing
that hasn't been reparied and removed from a credit report
thousands of times. Negative items, such as bankruptcy or
unpaid debts, are certainly more difficult to repair and
remove from the credit report, but this has more to do with
the operational systems of the credit bureaus than with the
severity of the bad credit item. For example, judgments and
tax liens are severely negative listings, yet are, overall,
easier to repair.
Disputing the credit report is easy.
Getting results (and actually repairing bad credit) is
amazingly difficult, complex, and infuriating. It isn't a
coincidence that the Federal Trade Commission receives more
complaints against credit bureaus than any other type of
business. If you call the FTC today to report a complaint
about the credit bureaus, their phone mail system will ask
you if to press one if your complaint is about the credit
bureaus, and press another number if your complaint is about
anything else. Clearly, this situation evolved out of deep
consumer frustration with the uncooperative nature of the
credit repair process.
Remember, the credit bureaus are
primarily interested in protecting their profits.
Investigating your challenge consumes these profits. Short
of sparking a large number of lawsuits, the credit bureaus
seem to do everything in their power to discourage consumers
from making progress with their credit repair. Repairing
your own credit is like repairing your own transmission or
representing yourself in court; it is possible, but you must
decide if your are willing to take the time and assume the
risks of doing it yourself.
Unless you hire a professional to help
you, credit repair will have to become a full-fledged hobby.
Many bankruptcy attorneys do not
adequately understand or explain the effects of bankruptcy
to their clients. Stated simply, bankruptcy is to the credit
rating what the atomic bomb is to the battlefield.
When you file for bankruptcy, every
credit account that you decide to include in bankruptcy will
become an "included in bankruptcy" item.
Additionally, a bankruptcy filing and bankruptcy discharge
listing will appear in the court records section of your
credit report. Because so many negative items are attached
to the bankruptcy, it becomes very difficult to remove all
trace of the bad credit. If at all possible, you should
avoid bankruptcy.
No known creditor considers
information given in a 100-word statement. It makes one
wonder why they included this meaningless stipulation into
the Fair Credit Reporting Act.
Most creditors will not even look at
the credit report when a credit application is made. Rather,
they will simply take a numerical score from the
credit report and make a determination as to whether or not
they should extend the credit. This score, or FICO score,
does not take into consideration the contents of a 100-word
statement.
The statement does, however, verify
that some of the negative listings on the credit report are technically accurate. This just makes your credit repair job
more difficult. Make 100-word statements the first things
you delete from your credit file (if you ever added one in
the first place.)
Many credit repair operators have
promoted this scheme, known as "file segregation".
Technically, we have seen some few people that have
succeeded in using a false Social Security Number and have
fooled the credit bureaus into giving them a new identity.
The scheme is complicated: one must change almost all
identifying information about oneself and be very careful
never to use the old information again. Most often, we've
seen people embark on these schemes only to slip and, at
some time, provide the old information mixed with the new.
Then, both credit reports merge and the consumer is left
with a tangled mess of deception and suspicious credit
reports.
In the worst cases, people have been
charged with crimes, or terminated from jobs, for using the
false information.
This scheme has proven to be complex,
difficult, and (according to the FTC) illegal. Lying about
any personal information on a credit application is usually
a federal crime. Using these "file segregation"
credit repair schemes requires an enormous amount of
coordination, not to mention personal risk.
Recently, the FTC has gone out of its
way to shut down any credit repair company that promotes
literature discussing file segregation. It remains to be
seen if they will be successful under the First Amendment.
If asked for our recommendation as to
whether a person should try a file segregation credit repair
program, our answer is always, "No, it is too risky,
difficult and legally problematic."
Any amount of bad credit is
devastating to your chances of being approved by a credit
grantor. Most credit grantors never actually look at your
credit report. A computer pulls your credit report, rates
your credit standing, income, indebtedness, and stability,
generates a number (or FICO score,) then spits out an
acceptance or denial. Even one or two slow pays will usually
trigger a credit card or personal loan denial. The slightest
amount of negative credit will cause the interest on an auto
loan to skyrocket. You will probably find that even a little
bad credit, regardless of how much good credit you have, is
an unacceptable barrier to credit approval.
Consumer Credit Counseling Service or
CCCS is a nonprofit debt counseling service that assists
consumers who are over their heads in debt. CCCS is funded
and controlled by the credit grantors and the credit
bureaus.
Often, CCCS provides a beneficial
service to the consumer. Because of the obvious allegiance
between CCCS and the credit bureaus, you cannot reasonably
expect CCCS to do anything that the credit bureaus would
frown upon, such as help you repair your credit.
In fact, if you decide to leave CCCS
before you have finished their program, they can list your
failure to complete the process as a negative listing on
your credit report (though this is rare.) When you are
participating in the CCCS program, your creditors will often
note it on your credit report. If you have perfect credit,
and wish to keep it, you may not want to use a credit
counseling service. These services usually create negative
listings because their process will generally make you late
on your bills at least 30 days.
The fact that you resorted to a debt
counseling program is a red flag for prospective credit
grantors. Remember, paying off your debts is a step in the
right direction, but it does not repair your credit.
With these factors in mind, consumer
credit counseling can be a life-saver if you're over your
head and need some help and some breathing room.
When you speak with credit grantors,
collection agencies, or credit bureaus, their typically
under-educated staff may tell you all manner of such
pseudo-legal nonsense. The law demands that negative
listings appear on your credit report for no longer than
seven years. The credit grantor or the credit bureau can
choose to delete the negative credit listing whenever they
see fit.
Repairing your credit by yourself is
possible. But remember, the credit bureaus are committed to
the failure of credit repair efforts, and the credit bureaus
have far more experience in discouraging hopeful consumers
than you have in beating giant credit bureaus.
Yet, some consumers have achieved
results in repairing their credit without professional
assistance. The following is a guide to help you determine
whether or not you should seek professional assistance in
your credit repair efforts.
Attempting to repair your own credit
while failing to dedicate sufficient time or attention can
result in further damage to your credit rating and may make
it impossible for anyone to repair your credit for you. For
this purpose, we'll give you a preview of the time
commitment required to repair your credit. Examine very
carefully your capabilities and your schedule before
deciding to repair your own credit.
Example of
a Month's Activities in Restoring Your Credit (for a
couple)
Activity
Hours Required
Monitored calendar
daily to check deadline of each of six credit bureau
correspondences
2 hours
Drafted six new
original credit bureau query challenges
4 hours
Visited post office
six times to mail correspondences by Certified
Mail/Return Receipt Req.
2 hours
Carefully analyzed and
marked six credit reports to find
negatives/deletions/ positive changes
3 hours
Drafted 4 tardy credit
bureau response follow-up letters
2 hours
Visited post office 4
times to mail follow'up letters by Certified
Mail/Return Receipt Req.
2 hours
Responded to 2 credit
bureau stall letters by providing further
information/ challenging time loss
2 hours
Visited post office 2
times to mail stall responses by Certified
Mail/Return Receipt Req.
1 hour
Responded to 2
"frivolous or irrelevant" credit bureau
rejection of dispute letters
2 hours
Visited post office 2
times to mail "frivolous or irrelevant"
claim Certified Mail/Return Receipt Req.
1 hour
Requisitioned six new
credit reports at $8.00 each through local credit
bureau
2 hours
Contacted ten
creditors and made creditor-direct challenges
8 hours
Drafted 20 letters to
creditors (one per spouse) to challenge and demand
further documentation
4 hours
Visited post office
once to mail letters to creditors Certified
Mail/Return Receipt Req.
2 hours
Contacted ten
creditors by telephone to negotiate deletion of
negative listing
4 hours
Carefully analyzed ten
responses from creditors with billing histories and
promissory agreements
5 hours
Contacted six state,
federal, and licensing organizations to locate
addresses and forms for complaints
2 hours
Prepared complaints to
six state, federal, and licensing organizations
3 hours
Visited post office to
mail complaints Certified Mail/Return Receipt Req.
.5 hours
Total hours per month
(first month)
51.5 hours
This chart shows liberal estimates of
time required to repair your own credit. If you are a single
person working on his/her credit alone, you can subtract 25%
from the total time required. This time investment will
continue on a monthly basis, gradually shrinking as
creditors agree to delete their listings. On the average,
you can expect the process to take between twelve to
eighteen months, unless you have very little negative credit
(meaning, one negative item per report.)
Each response to a creditor or a
credit bureau must be an original and must pertain
specifically to your present situation or you may be
red-flagged as a frivolous credit repair troublemaker or be
ignored altogether. There are no effective "form
letters" or "fill in the blank" responses
that yield results. Credit bureau checkers spot form letters
easily as the sign of someone attempting to repair their
credit. As such, these letters generally earn a swift
"frivolous and irrelevant" response.
Dueling with the credit bureaus and
credit grantors requires an aggressive and tenacious
personality. You must be willing to wade through rejection
after rejection until you achieve your desired credit
repair.
The credit bureaus will shoot down the
majority of your claims and disputes. They will treat you
like a disreputable person and a liar. You must take this
rejection without becoming discouraged. If you are the kind
of person who tires quickly from an emotional struggle, you
should seriously consider hiring a professional to repair
your credit. If you are the kind of person who becomes angry
when dealing with the slow, bureaucratic employees of big
bureaucracies, you will not fare well. Patience is an
absolute requirement. If you are thick-skinned and have the
fortitude to fight the credit bureaus and your creditors for
as long as it takes, then you may have the proper
disposition to repair your own credit.
In the process of repairing your
credit, you will have to track and monitor dozens of
communications at once. This will require organized,
disciplined habits. Every day, you must check up on each of
these communications to make sure that the credit bureau or
credit grantor hasn't overextended their time limit. You
must spend at least one-half to one hour per day tracking
your responses, results, and taking appropriate actions.
Remember, you will be dealing with three credit bureaus per
person, plus you will be communicating with each credit
grantor appearing on each credit report. In most cases, the
number of simultaneous communications will exceed twenty or
thirty. If you are not a very organized person, you are
definitely not in a good position to attempt to repair your
own credit. Click Here To Learn More About Credit Repair.
This rating system is meant to develop a snapshot of the risk you currently represent to a lender. Several parameters in your credit file, including length of credit history, number of open accounts, loans, mortgages, public records, and others are formulated to produce a three-digit score between about 300 and 950. There are other scores used by lenders and insurance companies (some of which are developed by FICO) such as Application and Behavior scores. These other scores take other information into account. Usually a lender will use a combination of your credit score with other factors when determining your risk. They all have the same objective, to determine the borrower's potential risk. Regardless of whether the score was generated by FICO or a system based on FICO parameters, they all yield an industry standard three-digit score. This score places the borrower in one of three main categories (we named the third one ourselves.)
Prime, sub-prime, and shafted
Prime If your credit score is above 680, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card. Sub-Prime If your credit score is below 680, you are "sub prime", and will likely pay a much higher interest rate on your loan. Shafted Below 560 is the shafted score. At least that is how most lenders and credit issuers perceive it. You can still get a credit card but you will likely be hit with a security deposit or high acquisition fee. In addition to that your interest rate will likely be 22 to 23%. You can forget about most home loans and the majority of new car loans at this score. Below 560 is no place to be. You will pay much, much more in higher interest and unnecessary fees. You may even pay more for your insurance rates. A very low score can even prevent you from getting a job with many companies. If your in this catagory Click Here.
How are credit scores calculated?
The methods of calculating your FICO may differ slightly depending on the credit bureau. When obtaining your score from one of the Credit Bureaus it is important to understand that your score does not come directly from FICO. It is adapted to each bureau and is given its own name: Equifax uses "Beacon", Trans Union uses "Empirica", and Experian uses "Experian/Fair Isaac." These scores are also referred to as your "Bureau Scores." Since your score is derived from your bureau data, it will change every time your reports change. However your score is calculated, it will always take into consideration many categories of information. No one piece of information or factor determines your score. As the information in your credit report changes, the importance of one or several factors may change in your FICO score. Lenders look at many things when making a credit decision, including your income and the kind of credit you are applying for. However, your FICO score does not reflect these facts as it only evaluates the information retained by the credit reporting agency. To Learn More Click here.
What factors affect your credit score?
There are five factors which are used in credit scoring calculations that determine your overall credit score. Previous Credit Performance (Payment History) 35% A lender wants to know what your payment history is like. Have you paid everything on time, are you late on anything now, and so on. Your payment history is just one piece of information used in calculating your score, although it can be the very important. Current Level of Indebtedness (Amount Owed) 30% How much is too much? Can the borrower pay me and still afford to pay his other bills? Not necessarily. Having available credit can actually help your ratio of debt to available credit. These are the types of questions that most borrowers want to know and the answers are almost as important as your previous credit history. Amount of Time Credit Has Been In Use (Length of Credit) 15% Generally speaking, the longer the credit history the better your score. However, this factor only makes up 15% of your total score so even young people, students or others with short histories can still score high overall as long as the other factors show good. If you are new to credit than there is little you can do to improve this part of your score. Open an account and be patient. Pursuit of New Credit (10%) Credit is much more popular today. Just look at the number of credit card offers you get via the Internet and in the mail. Consumers can now shop for credit and find the best terms to meet their needs. Each time someone runs a credit check on you, it creates an inquiry. Fair Isaac has changed some of its calculations to account for these new trends. Specifically, they treat a group of inquiries - which probably represents a search for the best rate on a single loan - as though it was a single inquiry (note: this only applies to auto or mortgage loan inquiries.) For example, auto loan inquires that are within 14 days of each other only count as one inquiry. Types of Credit Experience (10%) A healthy mix of different types of credit, installment loans, retail accounts, credit cards, and mortgage. This score is not normally a key factor in determining your score but it can help a close score. Its not a good idea to try and open different types of accounts just to try and make this factor better. It will likely reduce your score in other areas. You should never open accounts you don't intend to use anyway. What type of accounts you have, and how many, can make a big difference. The optimal ratio of installment versus revolving accounts depends on your profile and differs from person to person. One factor that seems to have significant influence is your percent of open installment loans. Too many can lower this portion of your score. For more information Click here.
Improving your credit score
Now that you know how your score is calculated, you can begin making changes to your current financial planning. The best things you can do are simple.
Pay your bills on time. Sounds simple, but this is the biggest thing you can do to keep your score high. Delinquent payments and collections have a major negative impact on a score.
Keep your balances low on unsecured revolving debt like credit cards. High outstanding balances can affect a score.
The amount of your unused credit is an important factor in calculating your score. You should only apply for credit that you need.
Make sure the information in your credit report is correct. If its not, dispute it with the credit agencies and/or with the creditor directly.
Removing negative items on your credit reports has the biggest impact on your FICO score. Generally, negative items stay on your reports for seven years but you can hire a professional credit report repair service such as Lexington Law Firm to do it for you.
You can try to understand the laws and your self, but we have found it's so much easier to have someone do it for you. We strongly recommend using Lexington Law Firm, they are the industry leaders.
Applying for a Loan?--Start by Ordering Your Credit Report
If you are considering applying for a loan, ordering a copy of your credit report may well be the best place to start. Why? Because it’s also the first
thing a potential creditor will be looking at, and even if you pay your bills on time, you will want to ensure that all the information in your credit file is up-to-date and accurate.
Studies have shown that many credit files contain inaccuracies that could affect your credit rating, and even lead to the rejection of a loan application. That’s why reviewing your credit report beforehand may be a good idea, giving you time to dispute any items that may be the result of simple human error or a technical glitch.
And depending on whether you are applying for an auto loan, a mortgage loan, or a loan for business or personal use, different lenders may apply different standards in rating your credit worthiness. For this reason, reading your credit report and understanding how your credit data might be interpreted may give you a chance to improve your credit worthiness from the point of view of a lender.
Before you begin the application process, check your credit report for the following items:
Clerical Inaccuracies
Sometimes credit reports contain inaccuracies that are the result of a computer glitch or a clerical error. These may include payments not credited, late payments, or data mixed in from a credit file of someone with a name similar to yours. Ordering your credit report will quickly show you what the lender will see--then it’s up to you to dispute any information that you consider inaccurate.
Excess Unused Credit
To make your credit more attractive to a potential lender, you may wish to consider reducing the number of revolving charge accounts that are listed as active on your credit report. Lenders will sometimes view too much revolving debt as a negative when considering a loan application.
In situations where you have stopped using a credit account, it is often a good idea to close the account if you don’t plan to use it anymore. Make sure your creditor notates the account “closed at consumer’s request”--otherwise, a prospective lender might assume the creditor closed the account for other reasons.
A few credit cards managed well may improve your chances for a loan--particularly a mortgage loan, where lenders use stricter qualifying guidelines. Another rule of thumb is to keep balances on credit cards around 75% of the available credit limit. Ironically, credit cards that have lots of room on them may be viewed as potential debt, while maxed-out cards make you a less desirable credit risk--both of these situations could compromise your ability to obtain a loan.
30-day and 60-day Late Payments
Even if your credit report contains a couple of 30-day late payment entries that are accurate, many lenders will overlook the occasional late payment if you explain the situation and your credit is otherwise good. Try to avoid any payment being 60 days late however, as this may be a red flag for some lenders--even if they do grant you the loan, it may come at a higher rate of interest and with less favorable terms.
The primary period lenders are interested in on a credit report is the last two years, so try to maintain on time payments, and verify that the payments are being credited properly by checking your credit report regularly.
Avoid Unnecessary Inquiries
Each time a prospective creditor looks at your credit report, an inquiry notation is added to your file, and most inquiries stay on your credit report for up to two years. Inquiries you make yourself, inquiries made during screening for a pre-approved offer of credit, or an inquiry that is part of a background check for employment purposes are not reported to potential credit grantors.)
It is best to avoid over-applying for credit and running up excessive inquiries, for the simple reason that lenders of creditors may think you’re trying to get credit due to financial difficulty, or taking on more debt than you can repay.
Lenders do of course realize that some inquiries are a result of shopping around for the best rates on a loan, and so they will often overlook a block of inquiries within a very recent period. It may help if you explain the inquiries in the application process.
Understanding how your credit report affects your financial future is the key to smart credit management. Incorporating a review of your credit report into your financial planning is also one of the best ways to make sure you meet your goals--especially when those goals involve major purchases, and you’re shopping for a loan with the most favorable terms possible. Learn More.
How Bad Credit Affects You
Very few things in life can have a more devastating effect on your lifestyle than a poor credit score. A low credit score can cost you hundreds or even thousands of dollars per month.
Credit Cards
Most prime credit cards are entirely out of reach to consumers with bad credit. And the few credit cards that are available to them (known as "sub-prime" cards) typically require exorbitant setup fees or recurring monthly fees, offer very low credit lines, often require cash deposits, and in most cases do not even report your positive credit activity to the credit bureaus.
Automobile Financing
If you are making payments on a car, you are probably paying between $5,000 and $9,000 more just for having bad credit. This added interest shows up every month in a higher payment. Take a look.
$20,000
car paid over 5 years:
CREDIT STATUS
RATE
PAYMENT
COST OF BAD CREDIT
Perfect
Mildly Damaged
Damaged
10%
14%
20%
$424.94
$465.37
$529.88
$0.00
$4,722.54
$8,593.30
Home Mortgage
Bad credit in auto financing can really hurt, but it is nothing compared to the cost of bad credit when a home is involved. A typical home can cost between $50,000 and $130,000 more in interest if you are buying the home with bad credit.
Below is a summary of the FCRA. The full Act can be obtained directly from the Federal Trade Commission's web site here. Fair Credit Reporting Act (Summary) Public Law 91-508 The Fair Credit Reporting Act (FCRA) allows a consumer to challenge the information on his credit report on the basis of "completeness and accuracy." If, after a reinvestigation by the credit bureau, the disputed information "is found to be inaccurate or can no longer be verified, the [credit bureau] shall promptly delete such information." The credit bureaus are required to complete the investigation within a "reasonable period of time." This period has been set at thirty days. The credit bureaus can ignore the consumer dispute if they have reason to believe that the dispute is "frivolous or irrelevant." The FTC commentary on the FCRA cites, as an example of a frivolous dispute, a dispute wherein the consumer challenges all negative items on his credit report without providing any allegations regarding specific items in the credit file. However, "A [credit bureau] must assume a consumer's dispute is bona fide, unless there is clear and convincing evidence to the contrary." When a consumer challenges a negative credit listing on the basis of extenuating circumstances, such as health problems, divorce, job loss, etc., the credit bureaus are entitled to ignore that dispute. When a consumer submits a dispute which is neither frivolous nor irrelevant by credit bureau standards, the credit bureau must "at a minimum... check with the original sources or other reliable sources of the disputed information and inform them of the nature of the consumer's dispute." In some cases of consumer dispute, "Reinvestigation and verification may require more than asking the original source of the disputed information the same question and receiving the same answer." In other words, when a consumer files or re-files a valid dispute, the credit bureaus must contact the source of the credit information (the creditor) and confirm that the information is accurate, verifiable, and not obsolete. In some circumstances, the credit bureau is required to go beyond a simple verification of the creditor's own computer record. If, within 30 days, the credit bureau has not received verification from the creditor, then the credit bureau must promptly delete the credit listing. In theory and law, the process is deceptively simple, thus leading many people to think that they can easily handle this themselves "for the price of a few postage stamps." Most quickly discover that the credit bureaus have made it much more difficult than one would imagine. For help in this, we recommend using Lexington Law a professional credit report repair company.
Whenever you apply for any type of
credit or financing, a credit report is pulled from at least
one of the three major credit bureaus. While there are
hundreds of smaller credit bureaus around the country,
virtually every credit bureau is affiliated with either
Experian, Trans Union, or Equifax.
These credit bureaus collect and
maintain information on the vast majority of Americans, but
they are not affiliated with the government in any way. The
credit bureaus are for-profit corporations and they sell
your personal information for money.
The credit bureaus receive your
personal information through the same lenders who grant you
credit. They have agreements with each of these credit
grantors that require the credit grantor to inform the
credit bureaus of everything that occurs in your
relationship with the credit grantor. If you make a payment
late, the negative credit listing is quickly reported to at
least one of the three major credit bureaus and is added to
your credit history. Credit reports are not just a record of
how you are currently managing your credit accounts. Credit
reports are histories of everything you are doing with your
credit now, and everything you have done in the past.
The credit bureaus collect this
information, list it on your credit report, then sell it to
other credit grantors who wish to see your credit history
before they decide to lend you money. The credit grantors
who review your credit are especially interested in any
negative credit. If you have shown any tendency to pay late,
or to disregard your financial commitments in the past, then
the creditors' computers will typically reject your
application.
Just like when you were in grade
school, your credit report is your financial report card to
the world.
Merchant Trade Lines
These include all regular credit lines such as department
store cards, auto loans, mortgages, and credit cards. If
there is any history of late payment, or if the trade line
was included in bankruptcy, charged off, or put into
repossession, the listing will be considered negative by all
credit grantors.
Collection Accounts
When an account is referred to collections because of
delinquency or because of a bad check, this appears on the
credit report as a collection account. Collection accounts
can appear as paid or unpaid accounts. Any type of
collection account, whether paid or not, is considered very
negative by all credit grantors.
Court Records
Court records include bankruptcies, judgments, liens,
divorce, satisfied judgments, and satisfied liens. All court
records, including satisfactions, are considered negative by
all credit grantors.
Inquiries
Every time a potential credit grantor looks at your credit
file, a credit inquiry appears on at least one of your
credit bureau reports. If the number of inquiries is very
few over the last two years, then there may be no negative
effect on your credit worthiness. However, if there are many
recent inquiries showing on your credit report, credit
grantors may become nervous and deny you credit.
With the passing of each year, your
credit report is used more and more often as a yard stick to
measure your character. Prospective creditors will always
review at least one of your credit reports before granting
you credit. Today it is increasingly common for insurance
companies to review your credit before extending auto or
health insurance. Many employers now check credit before
they consider you for a position. If you rent, you may have
already been through a credit check to determine your
worthiness as a renter.
The Fair Credit Reporting Act (FCRA)
requires that most negative credit items be deleted from
your credit bureau file in no more than seven years, except
for bankruptcy which can be reported for up to ten years.
These are the time limits for reporting negative credit. The
creditor or the credit bureau can choose to have the
negative credit information deleted whenever they please.
Inquiries may remain on the credit report for up to two
years.
Under the new Fair Credit Reporting
Act, no collection or charge off may remain on the credit
report for more than seven and one half years from the first
late payment that initiated the collection or charge off
status.
Most credit grantors are not allowed
by the credit bureaus to show you your own credit report.
But you can purchase your credit report from the credit
bureau for a fee or you may buy it on line through a variety
of services.
If you order your credit report from
the credit bureaus themselves, you may find that you cannot
read it because the information is listed in an unfamiliar
code. Trans Union and Equifax credit reports are very
difficult to interpret and understand. Experian credit
reports, however, are relatively easy for most people to
read. The Qspace report is one of the most easy to read.
As you may have already experienced,
even one small late pay listing may result in credit
denials. It is a myth that a large amount of positive credit
can outweigh some negative credit. Any negative credit
whatsoever can become a substantial credit obstacle.
Different kinds of creditors respond
differently to bad credit. It is safe to say that your
bankruptcy will continue to make it more difficult to get
credit for seven years after your last late payment assuming
you don't repair your credit.
Within two years after the last
negative listing, a consumer can usually acquire
"sub-A" financing for a home (assuming all
accounts are paid.) Within three years, the consumer should
be able to get normal, "A," mortgage rates even
without credit repair (that assumes that the person has been
current on bills all the while.)
Auto financing is a little less
forgiving. You may find yourself paying higher or slightly
higher interest rates on cars until seven years after the
negative listings (without credit repair), when the listings
are deleted from the credit report. You can get auto
financing with bad credit in most areas, but the rates are
going to be astronomical. Yet, time heals all wounds, and
you should be doing better within three years of the
negative listing.
Credit cards and banks are the least
forgiving of all. Many standard rate credit cards will not
even consider an application from a person with a any
negative credit on their credit report. In these days,
though, there are credit cards that cater to every credit
situation; even someone who discharged their bankruptcy the
day before applying. Most of these cards charge very high
interest or unusual up front fees or security deposits. It
is common for one of these cards to charge you an
"application" fee equal to the limit on the card.
After the bankrupcty ages, prospects become better, but they
will remain sub-standard until the negative listins fall off
the credit report. With that said, it shouldn1t be
forgotten that bad credit can usually be repaired (after a
significant amount of effort and follow-through.) Even
bankruptcy can be repaired after enough effort and time are
dedicated to the task. Click Here to Learn About Credit Repair.
Five Reasons to Check Your Credit Report Regularly
In much the same way that a resume displays your work experience to a prospective employer, a credit report provides prospective creditors (and in some cases employers and insurers too) with a detailed picture of your credit history. And like a resume, your credit report can influence whether you will receive what you are applying for.
Ideally, your credit report is an accurate, up-to-date reflection of your credit history. However, since we don't live in an ideal world, there are many reasons that your credit report could contain inaccuracies that might prevent you from receiving the credit you deserve. The good news is you can take action to keep your report accurate. Here are the top five reasons why you should make a practice of regularly reviewing your credit report:
Inaccuracies & Mixed Credit Files
Many inaccuracies on a credit report can be the result of simple human error, and are therefore are not difficult to dispute. Of course, if you don't order your credit report, you might never know about it. Whether the inaccuracies relate to payments not credited, late payments, or data mixed in from the credit file of someone else with a name similar to yours, you will want to contact the credit bureau to dispute inaccurate information promptly.
Tracking Payments
One of the most important elements of credit is a demonstrated history of on time payments. Once you send the check though, anything can happen--a delay in the payment being received can kick you over to a 30-day delinquency. If you call your creditor and explain the situation, they might adjust the information. Of course, if you don't read your credit report, you won't necessarily know which payments are being received and reported properly.
Identity Theft
This issue alone is reason to order your credit report immediately. Identity theft is an insidious crime, involving a thief who assumes your name to open new accounts, divert your card statements to another address, and run up all sorts of bad debt without you ever knowing about it until collectors come calling. Over time, identity theft could jeopardize your ability to obtain further credit. The best way to catch a thief who is using your name is by getting a copy of your credit report, which will show you if there are accounts listed you know you haven't opened. For example, if a thief has intercepted a pre-approved credit card offer in your name and sent it in with a change of address, your credit report will include the account.
Inquiries
If you're shopping around for a loan or more credit, you should know that when creditors check your credit, it places an inquiry on your credit report. Inquiries can add up, which is often interpreted as a negative by creditors. For this reason, too many inquiries can
actually make getting credit more difficult. Moreover, if you didn't authorize
someone to look at your credit report and they did, they may have broken the
law.
Credit Fraud--Unauthorized Charges
Credit fraud involves the theft of your credit card or
account number to make unauthorized charges to your account. Though consumers
are protected financially from this abuse, other creditors may take note of
all this activity and decide to raise your interest rates or refuse to grant
you a loan. Ordering your credit report will help you catch new activity on
accounts that you haven't been using, or may have closed.
When it comes to managing your credit worthiness, your
credit report is your best resource. Ordering your credit report gives you the
opportunity to manage your credit wisely today, while planning your credit
strategy for achieving future goals--a credit-savvy move every consumer should
make!
Click Here to Learn More About Credit Repair
In this age of information, credit fraud is not a difficult crime to perpetrate. The idea that a thief could gain access to your account information or personal data is not as implausible as you might think--social security number misuse has increased over the last two years, resulting in a variety of credit-related crimes.
Fortunately, you can fight back against credit fraud by learning how credit fraud and identity theft occur, and by actively monitoring your credit report for unauthorized account use on a regular basis. Your credit report will list any new activity on accounts you haven’t been using, as well as new accounts that you did not open.
One of the best ways to keep track of new information that is added to your credit report is the CreditCheck Monitoring Service, which provides Online Monthly Monitoring Alerts to inform you of new derogatory information, recent inquiries into your credit, and several indicators of possible credit fraud.
To have credit report information at your fingertips is the best way to shut an identity thief down--you can begin the process of notifying your creditors of the fraud, changing your passwords, and closing down fraudulent accounts before they wind up in the hands of collectors and compromise your good credit.
How Credit Fraud and Identity Theft Occur
Specific personal data, such as your Social Security number, home address and mother’s maiden name, can be all a thief needs to obtain a fraudulent driver’s license, take over existing bank or credit accounts, divert card statements to a different address, or even apply for new credit card accounts under your name. Thieves can obtain this information in variety of ways, including fishing through trash for account statements, lifting cards from lost or stolen purses, wallets and briefcases, or through telephone or Internet scams.
How to Prevent Credit Fraud and Identity Theft
Customers may be in a position to prevent potential identity theft by closely guarding their personal data. For example, never give out your Social Security number over the phone unless you know the company you are dealing with and have initiated the call.
Similarly, if your mother’s maiden name is not likely to be a secure password, consider changing it to something a little more difficult for a thief to obtain. Also, carry only the cards you are actually going to use, and leave official documents like Social Security cards, passports and birth certificates at home or in a safety deposit box.
Account Takeover Fraud
Credit card account statements contain a lot of sensitive information that you don’t want thieves to get a hold of, and even store receipts will frequently have your credit card number printed on them. Sometimes an account number is all a thief needs to make charges and obtain cash advances. It’s a good idea to shred all financial documents before discarding them.
A thief in possession of sensitive information about you may also be able to go one step further, and commit account takeover fraud, simply by calling your creditor, reading off your account number, a partial Social Security number and your mother’s maiden name, and asking them to change the mailing address on the account. For this reason, if you don’t receive a credit card statement on time, you should call your creditor immediately to verify that the address has not been changed.
Pre-Approved Credit Offers
Another source of potential credit fraud is pre-approved credit offers. A thief who intercepts one may fill out the application and change the address to obtain a credit card in your name for which you will never receive a statement. (To combat this, some creditors will not issue a card to a new address on a pre-approved offer certificate, but this policy isn’t universal.) This makes checking your credit report especially important, because it will show you if there are accounts being reported in your name of which you are not aware.
The thief may even make the minimum payments for a while, until such time as the card is maxed out. Then the account would eventually be turned over for collections--in your name, and listed on your credit report.
Click Here to learn more about credit repair.
New Goal for Your New Life Together: Becoming Credit-Wise
Many people planning to be married take time to reexamine
financial priorities, set a new budget, and establish savings or
debt reduction goals. Being credit-wise consumers means
realizing that managing your credit requires similar planning
and care-and doubly so when you are entering into marriage.
Think about your special personal and financial goals for the
coming year. Are you planning a major purchase or a trip abroad?
Are you working to establish financial stability and security?
Since good credit takes time to build, planning for your future
together should include checking your credit report. This is a
great time for each of you to request a copy of your credit
reports and look them over--not simply for inaccuracies, but for
ways you might improve your overall credit status.
Many of life's major changes, such as marriage, can impact your
credit, but keeping these credit-savvy tips in mind can help you
keep and build your credit together, so it's always available
when you need it.
Your Marriage and Future
Getting married brings many financial opportunities to couples
who can combine their resources. As you plan your wedding day,
plan for your future too and take these steps to keep your
credit in tip-top shape.
Notify creditors and credit bureaus if you change your name.
When you change your name at marriage--or any other time--it's
important that you make sure your creditors and the credit
bureaus are notified of the change. Otherwise, you might lose
your credit history.
Keep credit in your own name in addition to joint accounts.
Women especially must take care to keep some credit in their own
name. (e.g. "Jane Smith" rather than "Mrs. James
Smith"). Every year women who have never paid a bill late
are denied credit because they have no credit history in their
own name.
If either you or your spouse-to-be has had trouble getting
credit alone, try setting up a joint account to capitalize on
your shared income and/or one person's stronger history. As your
joint account history grows, you should each acquire and
maintain an account of your own as well, to establish your
credit on an individual basis. As you establish individual
accounts, you might close some extra joint accounts, keeping
only those you actually use.
If you anticipate making a large purchase with one of your
credit cards, you might want to request a credit line increase
now, so you know the credit is available when you're ready to
buy.
Building Good Credit Together
When you apply for credit, the lender will undoubtedly check
your credit report. The information in your credit history helps
lenders decide how much credit and what interest rate you are
eligible for. The better your credit history, the more likely
you are to qualify for the best credit deals, including rates on
a mortgage. But what will creditors be looking for?
Pay Your Bills on Time
Creditors always look for indications that the prospective
borrower is a good credit risk: a person who will pay back his
or her debts in a timely fashion. Obviously, a history of
on-time payments demonstrates that you are just such a person.
But that doesn't mean your credit history must be perfect for
you to qualify--few people's are, after all. "Good"
credit can include a few minor dings in your report, such as up
to two credit card payments 30 days late or one installment
payment, such as an auto or student loan payment, 30 days late.
No payments of any kind should be more than 60 days late and
there should be no outstanding public record debts such as
judgments or liens.
Keep Your Debt Load Reasonable
One factor any creditor must assess before offering credit is
the total debt of the person applying. If a large portion of
your income each month is already committed to paying off other
debt, the lender will wonder if you may have trouble paying back
an additional loan. As a rule of thumb, financial experts say
that non-mortgage debt payments should not exceed 10-15% of your
take home pay each month. If your debts are currently too high,
consider ways to pay some down before you apply for new credit.
Avoid Unnecessary Inquiries
Whenever you authorize a creditor, employer, or other
business to check your credit report, an "inquiry" is
added to the report itself--a note that someone has checked your
credit. An inquiry usually stays on your credit report for two
years. A lender considering you for a loan will look at the
number of inquiries recorded there and when they took place. A
large number of inquiries occurring in a short period of time
may be interpreted as a sign that you are either applying for
lots of credit because of financial difficulty or overextending
yourself by taking on more debt than you can actually repay.
(Checking your own credit report, however, does not impact your
credit rating.) Therefore, it's always a good idea to minimize
inquiries into your credit report. If you're shopping around for
mortgages, for example, don't let every lender you consider run
a credit check. You might have to settle for slightly more
approximate estimates on what the lenders can offer you, since
they can't verify your credit history. But that's still better
than doing all that shopping around only to find that the lender
of your choice now perceives you as a less solid credit risk and
wants to charge a higher rate.
Eliminate Excess Unused Credit
Just as a high number of inquiries suggests you may be
overextending yourself, a lot of available credit means you have
the capability to overextend yourself in the future, even if you
have not done so in the past. Although people may perceive
having several credit cards with high limits a sign that they
have good credit, too much of this good thing can make them seem
like a poorer credit risk. The lender needs to be reasonably
sure that you will continue to be able to repay your debt in the
future. But if you have thousands of dollars of unused credit
available, you might spend it all the month after your loan goes
through and suddenly have more debt than you can pay off. To
prevent this concern from arising, you should close unused
credit accounts before applying for a large loan, and/or
consider having your credit limits reduced. If you do either of
these things, make sure to ask the creditors to record that the
account was closed or changed at the consumer's request--you
don't want anyone to get the impression the bank closed the
account because of problems with your payment habits.
Of course, as with most worthwhile plans, building good credit
together requires a long-term commitment. So set your
credit-wise plans for your new life together in motion now and
stick with them. By doing so, you may reap the benefits of that
commitment for a long time to come. Click Here.Let a Law Firm Remove your Negative Items from your Credit Report!
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