Featured Posts

What your mother (or father) didn’t tell you about credit.

Every day I speak with clients that truly don’t understand why they can’t get their credit scores above a certain number.  Yes, that pesky little 3 digit number that has become all important to everyone of late. The truth is, they were never taught how to get above a “poor” or “fair” score.  These are [...]

Continue reading

Should I use a “Credit Repair” company?

We love to read all of the differing opinions that flood the internet from the so-called professionals in investing, money management, debt management, etc.  We sift through articles and websites trying to find the best, most accurate information for you, our clients. We do however, have one very significant pet peeve and that is all [...]

Continue reading

Ouch! You just shot yourself in your credit foot.

I can’t tell you how often a client tells me that they can’t “understand” why their scores are so low.  At first I thought it was an excuse.  It took me a while to figure it out (I think I was blond at the time) but the fact is is that most people DON’T understand. [...]

Continue reading

Consumer Financial Laws

 

Consumers’ financial rights are protected by federal and state laws and regulations covering many services offered by financial institutions. If you believe your rights have been violated; this is a MUST READ! You can find out what agency can help you with a specific complaint.

 

Federal Laws

Adjustable-Rate Mortgage Loans

Adjustable-rate mortgage loans are covered by regulations that require, at a minimum, disclosure of the circumstances under which the rate may increase, any limitations on the increase, the effects of an increase and an example of the payment terms that would result from an increase.

 

Community Reinvestment Act

The Community Reinvestment Act requires federal agencies to encourage depository financial institutions to help meet the credit needs of their communities, including low- and moderate- income neighborhoods. The regulatory agencies assess the institutions’ records of meeting those credit needs by preparing a written evaluation of the institutions and assigning a rating with facts supporting the conclusions. Such ratings shall be disclosed to the public for examinations beginning July 1, 1990. The Act also requires regulatory agencies to consider an institution’s record of helping to meet community credit needs when evaluating certain corporate applications, such as permission to establish a branch, to relocate a branch or home office, or to merge.

 

Consumer Leasing Act

The Consumer Leasing Act requires disclosure of information that helps consumers compare the cost and terms of various leases and the cost and terms of buying on credit versus cash. The Act does not apply to real estate leases or to leases of four months or less.

 

Credit Practices Rule

The Credit Practices Rule prohibits lenders from using certain remedies, such as confessions of judgment; wage assignments; and nonpossessory, nonpurchase money, security interests in household goods. The rule also prohibits lenders from misrepresenting a cosigner’s liability and requires that lenders provide cosigners with a notice explaining their credit obligation as a cosigner. It also prohibits the pyramiding of late charges.

 

Electronic Fund Transfer Act

The Electronic Fund Transfer Act provides consumer protection for all transactions using a debit card or electronic means to debit or credit an account. It also limits a consumer’s liability for unauthorized electronic fund transfers.

 

Equal Credit Opportunity Act

The Equal Credit Opportunity Act prohibits discrimination against an applicant for credit because of age, sex, marital status, religion, race, color, national origin, or receipt of public assistance. It also prohibits discrimination because of a good faith exercise of any rights under the federal consumer credit laws. If a consumer has been denied credit, the law requires notification of the denial in writing. The consumer may request, within 60 days, that the reason for denial be provided in writing.

 

Expedited Funds Availability Act

The Expedited Funds Availability Act requires all banks, savings and loan associations, savings banks, and credit unions to make funds deposited into checking, share draft and NOW accounts available according to specified time schedules and to disclose their funds availability policies to their customers. The law does not require an institution to delay the customer’s use of deposited funds but instead limits how long any delay may last. The regulation also establishes rules designed to speed the return of unpaid checks.

 

Fair Credit and Charge Card Disclosure Act

The Fair Credit and Charge Card Disclosure Act requires new disclosures on credit and charge cards, whether issued by financial institutions, retail stores or private companies. Information such as APRs, annual fees and grace periods must be provided in tabular form along with applications and preapproved solicitations for cards. The regulations also require card issuers that impose an annual fee to provide disclosures before annual renewal. Card issuers that offer credit insurance must inform customers of any increase in rate or substantial decrease in coverage should the issuer decide to change insurance providers.

 

Fair Credit Billing Act

The Fair Credit Billing Act establishes procedures for the prompt correction of errors on open-end credit accounts. It also protects a consumer’s credit rating while the consumer is settling a dispute.

 

Fair Credit Reporting Act

The Fair Credit Reporting Act establishes procedures for correcting mistakes on a person’s credit record and requires that a consumer’s record only be provided for legitimate business needs. It also requires that the record be kept confidential. A credit record may be retained seven years for judgments, liens, suits, and other adverse information except for bankruptcies, which may be retained ten years. If a consumer has been denied credit, a cost-free credit report may be requested within 30 days of denial.

 

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act is designed to eliminate abusive, deceptive and unfair debt collection practices. It applies to third party debt collectors or those who use a name other than their own in collecting consumer debts. Very few commercial banks, savings banks, savings and loan associations, or credit unions are covered by this Act, since they usually collect only their own debts. Complaints concerning debt collection practices should generally be filed with the Federal Trade Commission.

 

Fair Housing Act

The Fair Housing Act prohibits discrimination on the basis of race, color, sex, religion, handicap, familial status or national origin in the financing, sale or rental of housing.

 

The Federal Trade Commission Act

The Federal Trade Commission Act requires federal financial regulatory agencies to maintain a consumer affairs division to assist in resolving consumer complaints against institutions they supervise. This assistance is given to help get necessary information to consumers about problems they are having in order to address complaints concerning acts or practices which may be unfair or deceptive.

 

Home Equity Loan Consumer Protection Act

The Home Equity Loan Consumer Protection Act requires lenders to disclose terms, rates and conditions (APRs, miscellaneous charges, payment terms, and information about variable rate features) for home equity lines of credit with the applications and before the first transaction under the home equity plan. If the disclosed terms change, the consumer can refuse to open the plan and is entitled to a refund of fees paid in connection with the application. The Act also limits the circumstances under which creditors may terminate or change the terms of a home equity plan after it is opened.

 

Home Mortgage Disclosure Act Aggregation Project

Using loan data collected from each covered institution, the Federal Financial Institutions Examination Council (FFIEC) prepares disclosure statements and various reports for individual institutions in each MSA, showing lending patterns by location, age of housing stock, income level, sex and racial characteristics. The disclosure statements and reports are made available to the public at central depositories located in each MSA. Requests for the list of central depositories should be forwarded to the FFIEC.

Federal Financial Institutions Examination Council
2100 Pennsylvania Ave, NW
Suite 200
Washington, DC 20037

 

Home Mortgage Disclosure Act (HMDA)

The Home Mortgage Disclosure Act (HMDA) requires certain lending institutions to report annually on their originations and purchases of home purchase and home improvement loans as well as applications for such loans. The type of loan, location of the property, race or national origin, sex and income of the applicant or borrower is reported. Institutions are required to make information regarding their lending available to the public and must post a notice of availability in their public lobby. Disclosure statements are also available at central depositories in metropolitan areas. This information can help the public determine how well institutions are serving the housing credit needs of their neighborhoods and communities.

 

National Flood Insurance Act

National Flood Insurance is available to any property holder whose local community participates in the national program by adopting and enforcing flood plain management. Federally regulated lenders are required to compel borrowers to purchase flood insurance in certain designated areas. Lenders also must disclose to borrowers if their structure is located in a flood hazard area.

 

Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act requires that a consumer be given advance information about the services and costs involved in the closing of a residential mortgage. It also limits the amount that can be collected for mortgage escrow.

 

Rights to Financial Privacy Act

The Right to Financial Privacy Act provides that customers of financial institutions have a right to expect that their financial activities will have a reasonable amount of privacy from federal government scrutiny. The Act establishes specific procedures and exemptions concerning the release of the financial records of customers and imposes limitations on and requirements of financial institutions prior to the release of such information to the federal government.

 

Savings and Time Deposits

Savings and time deposits are covered by regulations that prohibit inaccurate or misleading advertising.

 

Truth in Lending Act

The Truth in Lending Act requires disclosure of the “finance charge” and the “annual percentage rate”–and certain other costs and terms of credit–so that a consumer can compare the prices of credit from different sources. It also limits liability on lost or stolen credit cards.

 

State Laws

Many State Laws also provide rights and remedies in consumer financial transactions. Unless a state law conflicts with a particular federal law, the state law usually will apply. Some states have usury laws, which establish maximum rates of interest that creditors can charge for loans or credit sales. The maximum interest rates vary from state to state and depend upon the type of credit transaction involved

 

Complaint Filing Process

If the consumer has a complaint against a financial institution, the first step is to contact an officer of the institution and attempt to resolve the complaint directly. Financial institutions value their customers and most will be helpful. If the consumer is unable to resolve the complaint directly, the financial institution’s regulatory agency may be contacted for assistance.

The agency will usually acknowledge receipt of a complaint letter within a few days. If the letter is referred to another agency, the consumer will be advised of this fact. When the appropriate agency investigates the complaint the financial institution may be given a copy of the complaint letter.

The complaint should be submitted in writing and should include the following:

  • Complainant’s name, address, telephone number
  • The institution’s name and address
  • Type of account involved in the complaint–checking, savings, or loan–and account numbers, if applicable
  • Description of the complaint, including specific dates and the institution’s actions (copies of pertinent information or correspondence are also helpful)
  • Date of contact and the names of individuals contacted at the institution with their responses
  • Complainant’s signature and the date the complaint is being submitted to the regulatory agency.

The regulatory agencies will be able to help resolve the complaint if the financial institution has violated a banking law or regulation. They may not be able to help where the consumer is not satisfied with an institutions’s policy or practices, even though no law or regulation was violated. Additionally, the regulatory agencies do not resolve factual or most contractual disputes.

 

The following information will help in determining which agency to contact:

National Bank

  • The Word “National” appears in the bank’s name, or the initials N.A. appear after the bank’s name.

Agency to Contact: Comptroller of the Currency


State-Chartered Bank, Member of the Federal Reserve System

  • Two signs will be prominently displayed on the door of the bank or in the lobby. One will say “Member, Federal Reserve System.” The other will indicate deposits are insured by the Federal Deposit Insurance Corporation and/or “Deposits Federally Insured to $100,000–Backed by the Full Faith and Credit of the United States Government.”
  • The word “National” does not appear in the name; the initials N.A. do not appear after the name.

Agency to Contact: Federal Reserve Board for federal laws; State Banking Department for state laws.


State Non-Member Bank or State-Chartered Savings Bank, Federally Insured

  • A sign will be prominently displayed at each teller station that indicates that deposits are insured by the Federal Deposit Insurance Corporation and/or “Deposits Federally Insured to $100,000–Backed by the Full Faith and Credit of the United States Government.”
  • There will not be a sign saying “Member, Federal Reserve System.” The word “National” or the initials N.A. will not appear in the name.

Agency to Contact: Federal Deposit Insurance Corporation for federal laws; State Banking Department for state laws.


Federal Savings and Loan Association or Federal Savings Association, Federally Insured

  • Generally, the work “Federal” appears in the name of the savings and loan association or its name includes initials such as “FA” which indicate its status as a federal savings and loan association.
  • A sign will be prominently displayed at each teller station that says “Deposits Federally Insured to $100,000–Backed by the Full Faith and Credit of the United States Government.”

Agency to Contact: Office of Thrift Supervision


Federal Savings Bank, Federally Insured

  • Generally, the work “Federal” appears in the name of the savings bank or its name includes the initials such as “FSB” which indicate its status as a federal savings bank.
  • A sign will prominently displayed at each teller station that says “Deposits Insured to $100,000–Backed by the Full Faith and Credit of the United States Government.”

Agency to Contact: Office of Thrift Supervision


State-Chartered Federally Insured Savings Institution

  • There will be a sign prominently displayed at each teller station that says “Deposits Federally Insured to $100,000–Backed by the Full Faith and Credit of the United States Government.”

Agency to Contact: Office of Thrift Supervision.


State Chartered Banks or Savings Institutions without Federal Deposit Insurance

  • Institution has none of the above described characteristics.

Agency to Contact: State Banking Department for state laws; Federal Trade Commission for federal laws.


Federally Chartered Credit Union

  • The term “Federal Credit Union” appears in the name of the credit union.

Agency to Contact: National Credit Union Administration


State-Chartered, Federally Insured Credit Union

  • A sign will be displayed by stations or windows where deposits are accepted indicating that deposits are insured by NCUA.
  • The term “Federal Credit Union” does not appear in the name.

Agency to Contact: State Agency that regulates credit unions or Federal Trade Commission.


State-Chartered Credit Unions without Federal Insurance

  • The term “Federal credit union” does not appear in the name.

Agency to Contact: State Agency that regulates credit unions or Federal Trade Commission.


Other

  • Institutions have none of the characteristics described.

Agency to Contact: Appropriate State Agency for state laws; Federal Trade Commission for federal laws.

Complaints

  • Complaints should be mailed to the appropriate agency with copies of all relevant documents.
  • Original documents or currency should not be sent.

 

Addresses for the federal agencies are:

Board of Governors of the Federal Reserve System
Division of Consumer and Community Affairs
20th & Constitution Avenue, NW
Washington, DC 20551

 

Federal Deposit Insurance Corporation
Division of Supervision and Consumer Protection
550 Seventeenth Street, NW
Washington, DC 20429

 

Office of Thrift Supervision
Consumer Affairs Office
1700 G Street, NW
Washington, DC 20552

 

National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, Virginia 22314-3428

 

Office of the Comptroller of the Currency
Customer Assistance Group
1301 McKinney Street
Suite 3710
Houston, TX 77010

 

Federal Trade Commission
Bureau of Consumer Protection
Office of Credit Practices
Washington, DC 2058

Building Credit

Secured Loans – Go to any bank or credit union, preferably the bank you already have a checking and/or savings account with. Banks operate differently. The most common secured loan is you (the borrower); giving the bank, (the lender); money, or the title to one of your assets (vehicle, equity or claim to your possessions like household goods) to borrow money. Tell the bank that you are trying to build your credit and that you want to open a secured account that you will be approved for that will help you build your credit score. Make sure the secured loan will report to the credit bureaus and have at least 12 minimum monthly payments. Once you have agreed on the collateral for the loan, you are given your money and have payments due before your collateral is returned. Make these payments on time and your credit will benefit.
Forced Savings Plans – When you open a forced savings plan you are actually taking out a loan and the entire amount of the loan is deposited into a savings account. You are given set monthly payments. Each payment that is made unfreezes the amount you paid and earns interest. The on time payments are reported to the credit bureaus and you will end up with a nice little savings account when you finished.
Secured Credit Cards – Most secured credit cards, debit cards or loaded value cards do not report to the credit bureaus, therefore they do nothing to improve your credit score so it is imperative that the cards you choose actually benefit you. We have included a link for the Top Cards. These cards are an exceptional value and we highly recommend that you get one if you are trying to build your credit score.
Finance Your Next Purchase – Financing goods or services instead of paying cash is a smart thing to do if you are trying to build your credit. Paying on time will prove to prospective lenders that you can and probably will repay credit extended to you. Remember your credit report is a direct reflection of your spending habits and the risk factor of your probability of repaying the credit extended to you. You can finance furniture, jewelry, appliances, electronics, computers as well as almost anything you would normally pay cash for.Again, opening new accounts that do not report to the credit bureaus does absolutely nothing to help your credit. Make sure that any new accounts you open report to the credit bureaus. When they do report, you are seasoning and building solid credit references that will be the foundation for future credit extended to you.
Piggybacking Technique – The golden-age of piggybacking isn’t over yet!!!One of the best-kept secrets to instantly improve your credit score just stopped working as of February 2008 when Fair Isaac & Company better known as F.I.C.O. made significant changes to its credit scoring model. For many years people were able to benefit from other peoples credit by simply being added as an authorized user. The primary’s credit card account would suddenly appear on the authorized user’s credit reports and the scores would be recalculated with this aged positive account. This technique was referred to as piggy-backing. Creditors & Lenders were up in arms over this unfair advantage and quickly began protesting it with F.I.C.O. They protested this unfair advantage because it meant that they were going to fund loans and credit with credit scores that were not accurate and in the long run they were going to loose money. It is obvious that this is true because the extremely high rate of foreclosures and bankruptcies in recent years. Some people believe that this horrendous mortgage and bankruptcy crisis is due to unfair advantages like piggy-backing because people have obtained credit that otherwise could not have been obtained and are now defaulting.
Not only has the subprime meltdown made almost all credit harder to come by, Fair Isaac & Company has announced major changes to its formula. As a result, some actions that may not have hurt your score much in the past could cause your scores to go down or drop substantially, while other behaviors could help you boost your score more than it used to.
If you want some examples, take this for instance:

  • Keeping your balances high on your credit cards could hurt more.
  • Actively using your credit accounts is more important.
  • Having a mix of different credit accounts (revolving, installment,  auto or mortgage) will help you more because the new formula has a greater impact on your credit score simply because your ability to handle different types of credit.
  • Applying for new credit accounts may not affect you as much.

Some things about the latest revision to the score, referred to as F.I.C.O. 08, will stay the same. F.I.C.O. 08 will have the same 300 to 850 range as the classic F.I.C.O. score in widespread use today, with higher scores indicating lower risk of default will lower interest rates, cheaper insurance premiums, better deals on mobile phones and lower utility deposits, to name just a few of the ways credit scores are used.  F.I.C.O. says most consumers will see a slight increase in their F.I.C.O. 08 scores compared with their classic F.I.C.O numbers, but others will see a drop.
These changes, specifically being added as an authorized user no longer affect your score; so if you have accounts which you are an authorized user on, these accounts will be completely moot and will not be calculated your credit score.
There was a brisk and very brief business which sold a place on someone else’s credit card as an authorized user. If you were one of these people who paid to benefit from someone else’s credit, it no longer works.
There is however; a piggyback technique that does work and very few people know about it. The only way you can piggyback now is to get added as a “Joint” account holder, which definitely has its disadvantages but it can season and increase your credit scores and that is what really matters. Here is how it works:

1st – Find someone you trust. This person must have a credit card account with a major bank in good standing with a low or preferably no balance and be willing to add you as a “Joint” account holder.
2nd – Contact the credit card company and request to be added as “Joint” account holder.
3rd -  Monitor your credit reports to make sure it gets reported to the credit reporting agencies.
That’s it, you’re done. Provided you did everything correctly; this account you were added to should show up on your credit reports with one or more of the major credit reporting agencies Equifax, Trans-Union and Experian within 60 days or less. The next time a lender pulls your credit report for a credit application; F.I.C.O. will recalculate all (3) credit scores and include the joint account as if it was yours. The entire payment history will appear and get calculated into your new F.I.C.O. scores.
Please remember you can also piggyback new accounts by applying jointly but the secret about piggybacking is the fact that F.I.C.O.’s scoring model will take into consideration the years of previous payment history which took place before you were added to the account. For example, if you piggyback an account that was opened in 1990 you just added over 18 years of payment history that gets calculated into your scores. If you open a new account like a car loan, credit card, mortgage or installment loan by applying jointly; that is a new account which will actually affect your score negatively for at least awhile. Of course as time progresses, payments are made and the account ages; the account will begin to affect your credit in a more positive manner.

The disadvantages to piggybacking as a joint account holder are as follows:

  • You are equally responsible for the account.
  • You cannot remove your name from the account until it is paid and closed.
  • If the primary defaults you are responsible for the balance.
  • If the primary is late or defaults, it will affect your credit.

Make sure that the primary account holder is a responsible person and intends on paying the on time and keeping the balance low otherwise there is a good possibility that you will end up with problems. It’s almost as if the primary is cosigning on a loan for you but the primary can also get you in trouble so be very careful and use this to your benefit, not to your demise.

Follow these instructions and techniques and you will see your credit score skyrocket. When you are ready for your next home loan purchase or refinance, please keep us in mind. We have many lenders in our nationwide network and we will shop your loan for you. When lenders compete for your business you will get you the lowest rate and best possible terms; guaranteed. Also, please remember we offer affordable and effective credit improvement service.

 

Tips to Avoid Identity Theft

Order your checks with only your initials on them. Do not have your full name printed. If a check or checkbook gets stolen, the thief will not know if you sign your checks with your first name or just your initials.
Use your work phone number on your checks instead of your home phone.
Use your PO Box on your checks instead of your home address if you have one. If you do not have a PO Box, use your work address.
Never have your Social Security Number printed on your checks. You can add it if it is necessary. But if you have it printed, anyone can get it.
Do not sign the back of your credit cards, gas cards, or debit cards. Instead, write out. “PHOTO ID REQUIRED”. By doing this; anyone that may try to fraudulently use them they must show a photo ID, which will not work.
When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the “For or Memo” line. Instead; just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won’t have access to it.
Place the contents of your wallet or purse on a photocopy machine. Copy both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.

If You Suspect ID Theft or Become a Victim

  • Cancel your credit cards immediately. Make sure you have the phone numbers and credit card numbers readily available. This is where making copies of everything in your purse or wallet comes in. Keep those where you can find them.
  • File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).
  • Call the 3 major credit reporting agencies: Experian, Equifax and Trans-Union immediately to place a fraud alert on your name and social security number. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit. In addition, it will prevent the credit bureaus from reporting any negative information due to the id theft on your credit reports.
  • Document Everything! Make notes of all conversations you had with merchants, banks, police, and/or anyone you spoke to regarding the identity theft. Send all correspondence via certified mail and keep all receipts. This will come in handy because you will probably need it to prove your case.
  • Continually monitor your credit reports and look for accounts you are unaware of, inquiries that you do not recall authorizing, and/or any other suspicious activity. Once you have placed a fraud alert with the credit bureaus you are entitled to periodic free credit reports, depending on the severity of the ID theft. You are also legally entitled having the fraudulent activity removed from your report until the investigation is complete.

How to place a fraud alert on your credit report

  • If you have received notice that your personal information may have been exposed, you are advised to place a “fraud alert” on your credit file with the three major credit bureaus. This is a free service that will request creditors to verify your identity before opening a new account.
  • You may place an Initial 90-day Fraud Alert by calling any one of the three nationwide credit reporting companies. The agency that accepts your request will share your request with the other two credit reporting companies, which will add the alert to your file or request that you provide them additional information. You will receive a confirmation when an alert is added to your file. You may also request a free credit report from each of the three agencies.
  • Choose one of the credit bureaus from the contact information below. Experian allows you to file a fraud alert online or by telephone; Equifax and Trans Union require you to call.

*Please note that your initial call to the credit bureau will be to an automated system. With your copy of the credit report, you will receive another phone number that will allow you to discuss anything unusual with a representative.

Experian

(http://www.experian.com/)
888-397-3742

You can place a fraud alert with Experian online by going to the Experian Credit Fraud Center.

To place a fraud alert with Experian by phone:

  • Dial 1-888-397-3742.
  • Select option 2 (“all other” requests not related to credit management tool).
  • Select option 2 (“if not” wanting to listen to 8 minute recording of CA Civil Code Section 1785.10).
  • Select option 3 (“if you believe that your credit information is being used fraudulently”).
  • Select option 2 (“to add an alert to your credit file using an automated system”).
  • Select option 1 (“add a temporary initial fraud security alert”. There are other options for 7-year extended victim alert and active duty at this point).
  • Select option 2 (“to continue to the automated alert system” which then asks for your social security number).

Equifax

(http://www.equifax.com/)
800-525-6285

To place a fraud alert with Equifax, you must do so by phone. You cannot place a fraud alert with Equifax online.

To place a fraud alert with Equifax by phone:

  • Dial 1-800-525-6285 (this number is specifically for placing a fraud alert).
  • Select option 1 (to place a fraud alert).
  • Follow instructions.

Trans Union

(http://www.transunion.com/)
800-680-7289

To place a fraud alert with Trans Union, you must do so by phone. You cannot place a fraud alert with Trans Union online.

To place a fraud alert with Trans Union by phone:

  • Dial 1-800-680-7289.
  • Enter your zip code.
  • DO NOT press 1 or say 1 to listen to the summary.
  • Wait for the next option.
  • Press 1 or say 1 for Fraud Alert options.

You should also request a copy of your credit report from each of the three credit reporting agencies. When you receive your credit reports, review them carefully. Look especially for these indicators of possible fraudulent activity:

        • Unfamiliar accounts, especially ones that have been newly opened.
        • Unauthorized charges to existing accounts.
        • Addresses that you have not lived at

Facts About Fraud Alerts
Before you add a fraud alert to your credit report, be aware of these effects:

  • You may be asked to provide proof of your identification when applying for instant credit. In some cases, the presence of a fraud alert may limit your ability to receive instant credit for in-store purchases that you plan to take possession of immediately.
  • Creditors may contact you by phone at a designated number before opening a new account
  • A fraud alert should not interfere with the daily use of credit cards or banking or checking accounts.
  • The length of time that an alert stays on your record varies for each credit bureau. You can request an extension when the initial period has ended.

Common Credit Myths

 

 

Credit Myth 1

“When I pay off a past-due account, such as a charge off or a collection account, it will show “paid” and will no longer be negative”

It is quite difficult to restore your credit without somehow satisfying your outstanding debts. 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 while creating a reasonable possibility of deletion of the negative listing at the same time.

Credit Myth 2

“If I succeed in deleting a negative item, it will just come right back on my credit report.”

The credit bureaus have cleverly spread this myth through the news media and government agencies. In truth, the credit bureaus will often 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. This is often known as a “soft delete.” Usually, though, the creditor simply fails to respond and the negative listing is permanently deleted. If the item is verified by the credit grantor, either before thirty days or after, the account may still be challenged again at some future time.

Credit Myth 3

“There are negative listings, such as bankruptcies and foreclosures, that are impossible to remove from the credit report.”

There is no type of negative listing that hasn’t been removed from a credit report thousands of times. Negative items, such as bankruptcy or unpaid debts, are certainly more difficult to 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 easier to remove.

Credit Myth 4

“Disputing the credit report is easy and any consumer can do it himself for the price of a few postage stamps.”

Disputing the credit report is easy. Getting results from the credit bureaus is amazingly difficult, complex, and infuriating. Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking a mass number of lawsuits, the credit bureaus seem to do everything in their power to discourage consumers from making progress with their credit restoration. Restoring your own credit report 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.

Credit Myth 5

“If I declare bankruptcy, I can begin my credit report all over with a clean slate.”

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 nuclear bomb is to war. When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an “included in bankruptcy” account. 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 difficult to remove all trace of the bad credit. If at all possible, you should avoid bankruptcy.

Credit Myth 6

“If you are not satisfied with the results of your credit bureau challenge, you may file a “100-word statement” on your credit report explaining your side of the story.”

Creditors will read your statement and will take it into consideration. To our knowledge, no known creditor considers information given in a 100-word statement. The statement only serves to verify some of the negative listings on the credit report. Make 100-word statements the first things you delete from your credit file.

Credit Myth 7

“By changing numbers in my social security number or by using an EIN tax number, I can fool the credit bureaus into creating a completely clean, new credit file under my name.”

This scheme has proven to be complex, difficult, and illegal. Lying about any personal information on a credit application is usually a criminal offense. Using these “file segregation” schemes requires an enormous amount of coordination, not to mention personal risk.

Credit Myth 8

“If I build enough good credit, it will offset my bad credit and make me credit worthy.”

After all, I was only late a couple of times. 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, indebtedness, and stability, 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.

Credit Myth 9

“I can improve my credit score by closing down some credit cards.

For starters, closing down credit cards usually leads to a significant decrease in the credit score. What’s more, consumers focus far too much on positive credit while negative credit still appears on the credit report. Negative credit effectively wipes out any amount of positive credit when the score is calculated.

Credit Myth 10

“It is illegal for creditors to take a negative, accurate listing off my credit report.”

The law requires that these items remain on the credit report for at least seven years. 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.

 

What is a “Credit Score”?

The very words “Credit Score” scare most people because people are scared of the unknown. Seriously, think back to grade school and ask yourself: Did anyone ever teach me anything about my credit score? Answer is NO! Even though your credit score mandates your entire lifestyle and ability to finance a home, vehicle, or invest without capital; Uncle Sam doesn’t think it’s important! Therefore you have never been taught unless you have thoroughly researched it on your own or paid for your degree. The bottom line is, if you have a low score, you can count on high rates, high fees, high payments and rejection. A high credit score can almost guarantee that you are offered the best rates, lowest fees and most desirable terms, get your score up there and any lender rolls out the red carpet.
Understanding how your score is calculated can help you better understand how to improve your score.
Your credit score is calculated using a sophisticated scoring model which takes into account a wide variety of factors. We have grouped these factors can into five categories as outlined in the pie chart below. The percentages in the pie chart reflect the important of each category in determining your score.

Payment History

  • Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
  • Number of past due items on file
  • Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
  • Severity of delinquency (how long past due)
  • Amount past due on delinquent accounts or collection items
  • Time since past due items (delinquency), adverse public records (if any), or collection items (if any)
  • Number of accounts paid as agreed

 

Amounts Owed

  • Amounts owed on accounts
  • Amount owing on specific types of accounts
  • Lack of a specific type of balance
  • Number of accounts with balances
  • Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
  • Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

 

Length of Credit History

  • Time since accounts opened
  • Time since accounts opened, by specific type of account
  • Time since account activity

 

New Credit

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
  • Number of recent credit inquiries
  • Time since recent account opening(s), by type of account
  • Time since credit inquiry(s)
  • Re-establishment of positive credit history following past payment problems

 

Types of Credit Used

  • Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Keep in mind……

  • A score takes into consideration all these categories of information, not just one or two.
  • No one piece of information or factor alone will determine your score.
  • The importance of any factor depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it’s impossible to say exactly how important any single factor is in determining your score – even the levels of importance shown here are for the general population, and will be different for different credit profiles. What’s important is the mix of information, which varies from person to person, and for any one person over time.
  • Your FICO score only looks at information in your credit report.
    However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.
  • Your score considers both positive and negative information in your credit report.
  • Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.