Credit Repair and Credit Scores
Credit repair is on everyone’s mind these days. And credit scores are for sale everywhere. There is only one problem. None of these advertised credit scores are the same as the credit scores that lenders use when making credit decisions. Whoa. That’s right. People spend huge amounts of money to buy credit scores which they mistakenly believe are relevant to their life. What the heck is the story? You want to know? Okay. I’ll tell you!
Lenders Use FICO Scores
Lenders use a type of credit score called the FICO score. FICO stands for Fair Isaac Corporation, the creator of this important score. The credit bureaus gather consumer credit data and run their data through the FICO credit score software to produce the scores that lenders use to make decisions.
Avoid Knockoff Scores
If you are starting a credit repair project or plan to get a loan in the near future and want to know where you stand you should purchase your FICO scores. But if you buy your scores from one of the credit bureaus websites you will get the bureaus own proprietary scores. And you will be no wiser than you were before because these knockoff scores can easily be 100 points different from your FICO scores; deceptive for your loan information, and useless for benchmarking your credit repair.
It’s About Money Honey
Alas, the credit bureaus realized they could make more money by creating their own version of a credit score and selling it to the public. If they sold genuine FICO scores to consumers they would have to pay fees to Fair Isaac. Lenders demand FICO scores; it’s a simple fact, they would never settle for less. Consumers on the other hand seem to be clueless. But there is a reason that consumers are clueless, the credit bureaus don’t offer any transparency, just a sales pitch.
Credit Repair and the Right Stuff
It’s all about your FICO scores. If you are going to benchmark your credit repair effort or plan to get a loan these are the only scores that matter. And you can get them online at the website for Fair Isaac Corporation, MyFico.com. The cost is about $50 for all three scores. Now are your ready to hear how these important scores work? Here is a mixture of the information published by Fair Isaac and some practical credit repair tips from yours truly, and I do know a bit about this, so listen up.
Major Credit Repair Weight
Fair Isaac is happy to tell you that the major part of your credit score is based on two categories. These are your payment history, weighing in at a hefty 35% of your score, and your account balances, tipping the scale at 30% of your total score. This is a bare bones fact, and much useful credit repair info is left unsaid, so I guess I’ll say it. If you care about your credit scores you need to focus on your revolving balances.
Revolving Account Bombs
Revolving balances are the lynchpin of your credit scores, and hence your credit repair effort. You can have a decade of perfect credit under your belt. You may have paid off a dozen cars and made every payment on time, but if you run up your credit card balances to the max and then check your credit scores you are in for a rude awakening. Maxed out credit cards will devastate your scores. Do you want some numbers? Okay. A maxed out card can erase 100 points from your score. An over-limit card can knock 150 points off; it’s a credit repair disaster. But wait, there is more.
Credit Repair Leverage
I don’t want you to feel like this is all bad news. Revolving debt is conversely the most powerful credit repair tool you have at your disposal for pumping up your scores. FICO recognizes 5 different balance tiers: 20, 40, 60, 80, and 100 percent usage. If you are getting a loan in the near future and have the resources to pay your balances under 20% of the limit your scores will be shining.
The Rest of the Story
The other ingredients relevant to your credit repair task include the age of your accounts, coming in at 15% of your score, new credit and inquiries at 10%, and the type, or mix of credit at the final 10%. These remaining ingredients are minor and for most people will take care of themselves as life goes on. I should, however, add that it is valuable credit repair advice to avoid opening new accounts before applying for a major loan, and to keep those inquiries to a minimum. Cheers!
Copyright © 2008 Ian Webber. All Content. All Rights Reserved.
By: Ian Webber
Posts Tagged ‘Credit Bureaus’
Credit Repair Shocking Insights
February 27th, 2010Credit Repair Power Techniques
February 16th, 2010
Credit Repair in the Fast Lane
Credit repair does not have to take forever! Yes, it is true that there are some issues that only time will cure, but you will be surprised at the amount of control you can exercise over your credit in a very short amount of time. These powerful credit repair techniques require some self-discipline and a little hard work, but done right you will see absolutely amazing results.
The Big Clean Up
Start the credit repair process by getting a good tri-merged credit report. It is a small investment that will make your job a lot easier. Tri-merged reports are more user friendly than individual reports provided by the bureaus. Once you have your reports in hand it is time to get to work. Keep in mind that just because it is on your credit report does not mean that it is accurate. Do not give any undue credibility to the credit bureaus. It is up to you to decide if an item is accurate. If it looks at all questionable to you it should be disputed.
Powerful Dispute Candidates
There are a number of items that frequently escape notice as people get their credit repair program underway. These items may not look like errors at all, but should not be present on your reports as a matter of law. These issues include underreported revolving limits, paid accounts reporting with balances, closed accounts reporting as open, and duplicate accounts that artificially inflate your total debt. Dispute all of these sneaky little issues for a big credit score boost.
Collections and Credit Repair
One of the most valuable credit repair techniques is cleaning up erroneous collection accounts. When a collector purchases or is assigned an account they are allowed to report it to the credit bureaus. But when they sell the debt or return it to the original creditor they are supposed to withdraw the account from your credit report entirely. Regrettably, the system does not provide an incentive for them to comply, nor a punishment when they do not. Take matters into your own hands and dispute any questionable collections.
New Revolving Accounts
If you do not have any open credit cards you are missing a great credit repair opportunity. The FICO credit scoring model puts great weight on revolving debt, and if you manage it properly two little credit cards can increase your scores by over 100 points within six months. If you cannot get regular credit cards, get two secured cards. Just be aware that not all forms of revolving debt are equally beneficial. Stay away from store cards and consumer debt such as furniture store loans. And to get the big results keep the balances low. Ideally you should only utilize 20 percent of the card limit.
The Rapid Rescore Technique
If you have high balance credit cards, and the ability to reduce your balances significantly, this credit repair technique might be for you. Rapid Rescore is a tool offered only by mortgage originators, so if you are planning to make a mortgage application you should have easy access to this method. If you do not plan to make mortgage application, maybe you can find a friendly mortgage broker to help out. Here is how it works. Pay your credit card balances down, get letters from the creditors stating your new balances, provide the letters to your mortgage originator and ask them to order a Rapid Rescore. Within three days your credit scores will be updated to reflect the new balances.
Big Guns
If you have recognized the amazing potential of taking credit repair, but just do not have the time to manage the job on your own, hire a professional. Credit repair services are very affordable, usually about fifty dollars per month and a small setup fee. They will take care of everything from the initial analysis, to sending your dispute letters. Do it yourself or hire someone else, but take action today. You will succeed!
Copyright © 2009 James W. Kemish. All Content. All Rights Reserved.
By: Jim Kemish
Fix or Repair Your Credit
February 13th, 2010
Credit repair is a process of rehabilitating a person’s creditworthiness or financial credit reputation. It typically starts with obtaining copies of the individual’s credit report and reviewing it for errors, omissions or deceptive information if any. If any corrections are needed, they have to be sorted out by means of formal dispute. Although the individual himself can rectify these errors in most cases, it sometimes tends to become a complex process requiring external and formal intervention. Of course, it is not possible to legally remove accurate negative information from the credit report, but the law does permit you to request for a reinvestigation of information that you might find objectionably inaccurate. It is of vital importance that you fix bad credit reports as you can. Many laws and regulations govern this process and many organizations exist that will help in guiding individuals through this process as well. If the credit bureaus are unable to verify the negative information on the credit report, they are bound by law to remove it.
There are many reasons why you would want to fix your credit report. The most common causes are clerical errors in recording payments, credit problems of an ex-spouse still linked to you, incorrect information like wrong security numbers included by mistake, identify theft and so on.
Once you have received your credit report, carefully evaluate it for all the negative listings. Rank each item in terms of how much damage it is doing to your credit report. This should be done for all credit reports and mark the items that may be duplicated. Some of the items that can be damaging to your credit reports are bankruptcy, foreclosure, repossession, loan defaults, past due and late payments, collections, court judgements, credit rejections and credit inquires. Ensure that you ask for a complete deletion and not just for changing the information. The toughest things to get off your credit report are items like foreclosures and bankruptcies as these are easy for credit bureaus to verify.
A letter with all the documentation and instructions on how they should fix your credit report must be sent to the credit bureaus. It will include your full name, address, date of birth, Social Security Number, any previous names or addresses used during the disputed period, the creditor’s name and details of the account in question, specific instructions on what is wrong and how to fix your credit report. The letter should be sent via registered mail.
While you are meticulously taking these steps to fix your credit report ensure that you keep copies and records of all correspondence you send and receive. Also, if you should encounter any additional problems at a later date and would like help in repairing your credit, you will need these records to proceed.
Once the credit reporting agency has received your dispute letter, they are obligated to investigate. They must resolve all consumer disputes within 30 days. You will receive written notice of the results of the investigation of your credit repair report within five days of its completion, including a copy of the amended credit file if it changed based on the dispute. Once the erroneous information is deleted from a credit file, the credit bureaus cannot reinsert it unless the entity providing such information certifies that the item is accurate. The credit bureau then must notify the consumer within five days.
If the new investigation shows an error, not only do you ask for the corrected version for yourself, but you can request them to send it to all persons and companies that may have received the erroneous report within the past six months. Job applicants can have corrected credit repair reports sent to anyone who received a report for employment purposes during the past two years.
In addition to the credit repair process that is being carried on externally, you can try these specialized techniques too.
Debt validation technique on collections
Disputing the information within the listing, like the date the account was opened, high balance, amount owed, etc. If any of the information is incorrect, you have a good chance of getting the whole thing deleted off of your report.
If you were never served for a judgement, you may have the opportunity to make it void.
Remember, credit bureau disputes are handled by people so the possibility that the claim put forth by you may have been misunderstood or overlooked. Fixing credit takes time, so be patient. You can always resubmit your claims if you are not happy or feel you have not received adequate justice. Lastly, as you fix your credit report, you will have to start building your credit as well to increase your attractiveness to lenders.
By: William Brister
