How to Repair Your Credit Score Now: Simple No Cost Methods You Can Put to Use Today
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About this ebook
Your credit score affects every aspect of your financial life including qualifying for loans and mortgages, low interest rates, housing, employment opportunities, and even insurance premiums. Millions of Americans have negative, inaccurate, and unverifiable information on their credit report. Repairing your credit profile is one of the most important financial decisions you can make. You're about to take the important step of taking control of your credit!
If you're like the average American, having improved credit will save you thousands of dollars on your loans and credit cards. You do not need a credit repair clinic. Save the money. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost using the plan in this new book. There are federal laws in place to make sure that you can repair problems on your credit report and increase your credit score. These laws are found in the Fair Credit Reporting Act.
This book will show you how to use your legal rights to increase your credit score. You will learn how to remove questionable items from YOUR credit reports, including: late payments, collections, judgments, liens, charge offs, bankruptcies, foreclosures, repossessions, and identity fraud. This new book will be your road map to credit repair information, and give you tips on how to maintain a stronger credit profile, repair bad credit, improve credit scores, and correct personal information.
Atlantic Publishing is a small, independent publishing company based in Ocala, Florida. Founded over twenty years ago in the company president’s garage, Atlantic Publishing has grown to become a renowned resource for non-fiction books. Today, over 450 titles are in print covering subjects such as small business, healthy living, management, finance, careers, and real estate. Atlantic Publishing prides itself on producing award winning, high-quality manuals that give readers up-to-date, pertinent information, real-world examples, and case studies with expert advice. Every book has resources, contact information, and web sites of the products or companies discussed.
This Atlantic Publishing eBook was professionally written, edited, fact checked, proofed and designed. The print version of this book is 288 pages and you receive exactly the same content. Over the years our books have won dozens of book awards for content, cover design and interior design including the prestigious Benjamin Franklin award for excellence in publishing. We are proud of the high quality of our books and hope you will enjoy this eBook version.
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How to Repair Your Credit Score Now - Jamaine Burrell
How to Repair Your Credit Score Now:
Simple No Cost Methods You Can Put to Use Today
By Jamaine Burrell
How To Repair Your Credit Score Now: Simple No Cost Methods You Can Use Today
Copyright © 2007 Atlantic Publishing Group, Inc.
1405 SW 6th Avenue • Ocala, Florida 34471 • Phone 800-814-1132 • Fax 352-622-5836
Web site: www.atlantic-pub.com • E-mail: sales@atlantic-pub.com
SAN Number: 268-1250
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be sent to Atlantic Publishing Group, Inc., 1210 SW 23rd Place, Ocala, Florida 34471.
ISBN-13: 978-0-910627-94-8 ISBN-10: 0-910627-94-0
Library of Congress Cataloging-in-Publication Data
Burrell, Jamaine, 1958-
How to Repair Your Credit Score NOW: Simple No Cost Methods
You Can Put to Use Today / Author: Jamaine Burrell.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-910627-94-8 (alk. paper)
ISBN-10: 0-910627-94-0 (alk. paper)
1. Credit scoring systems--United States. 2. Consumer credit--United States.
3. Credit Rating--United States. I. Title.
HG3751.7.B87. .2007
332.7’5--dc22
2007009083
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Web site is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Web site may provide or recommendations it may make. Further, readers should be aware that Internet Web sites listed in this work may have changed or disappeared between when this work was written and when it is read.
A few years back we lost our beloved pet dog Bear, who was not only our best and dearest friend but also the Vice President of Sunshine
here at Atlantic Publishing. He did not receive a salary but worked tirelessly 24 hours a day to please his parents.
Bear was a rescue dog who turned around and showered myself, my wife, Sherri, his grandparents Jean, Bob, and Nancy, and every person and animal he met (well, maybe not rabbits) with friendship and love. He made a lot of people smile every day.
We wanted you to know a portion of the profits of this book will be donated in Bear’s memory to local animal shelters, parks, conservation organizations, and other individuals and nonprofit organizations in need of assistance.
– Douglas and Sherri Brown
PS: We have since adopted two more rescue dogs: first Scout, and the following year, Ginger. They were both mixed golden retrievers who needed a home.
Want to help animals and the world? Here are a dozen easy suggestions you and your family can implement today:
• Adopt and rescue a pet from a local shelter.
• Support local and no-kill animal shelters.
• Plant a tree to honor someone you love.
• Be a developer — put up some birdhouses.
• Buy live, potted Christmas trees and replant them.
• Make sure you spend time with your animals each day.
• Save natural resources by recycling and buying recycled products.
• Drink tap water, or filter your own water at home.
• Whenever possible, limit your use of or do not use pesticides.
• If you eat seafood, make sustainable choices.
• Support your local farmers market.
• Get outside. Visit a park, volunteer, walk your dog, or ride your bike.
Five years ago, Atlantic Publishing signed the Green Press Initiative. These guidelines promote environmentally friendly practices, such as using recycled stock and vegetable-based inks, avoiding waste, choosing energy-efficient resources, and promoting a no-pulping policy. We now use 100-percent recycled stock on all our books. The results: in one year, switching to post-consumer recycled stock saved 24 mature trees, 5,000 gallons of water, the equivalent of the total energy used for one home in a year, and the equivalent of the greenhouse gases from one car driven for a year.
Contents
Foreword
Introduction
Chapter 1: What is a credit score?
Chapter 2: the credit report
Chapter 3: Credit Scoring Models
Chapter 4: Building Credit
Chapter 5: Repairing Bad Credit
Chapter 6: Consumer credit counseling
Chapter 7: Identity Theft
Chapter 8: Filing Bankruptcy
Chapter 9: Maintaining Good Credit
Conclusion
References
Author biography and dedication
Foreword
By Hazel B. Valera
President and CEO
Clear Credit Exchange
In my work with credit challenged businesses and individuals, the subject of bad credit strikes an emotional chord with most of my clients. They find it difficult to ask for help because they think it means admitting that they have failed to manage a basic indicator of success in America. With more people than ever before filing for bankruptcy and with the economy fluctuating at rates unheard of since 1929, this new book, How to Repair Your Credit Score Now, is timely, not only for its subject matter, but for correcting and upgrading credit scores. Not everyone can afford a professional to dig through the morass that is credit reporting in the 21st Century.
After working with hundreds of clients, I have found that people have the power to rebuild their credit on their own. All they lack is the confidence and the information. This book empowers people with information, giving them the tools they need to help themselves. It makes use of the latest technologies and the most up-to-date methods for fixing cracks in your credit so that you can get back on the road to success. Using this book as a guide, you will learn the tools to recover from bad credit on your own. As a certified debt arbitrator and credit coach, I have witnessed the joy that comes with attaining a good credit rating, when financial self-esteem goes from worthless
to priceless.
This is something that you can attain simply by heeding the logical credit repair phases offered in this book.
Hazel B. Valera
President and CEO , Clear Credit Exchange
O: 408-868-4272 F: 408-877-1555
E: clearcredit@comcast.net
W: www.clearcreditexchange.com
Valera is a former mortgage and real estate professional with more than 14 years of real estate finance, underwriting, and foreclosure experience. Her history also includes the successful operation and management of two credit reporting companies in California. Hazel serves as a credit advisor to many real estate investment firms, mortgage brokers, and executives nationwide, and is a trusted expert in her field.
Sponsored by many title companies nationwide, Valera is a known speaker in the real estate and credit industry and holds regular real estate training classes for loan officers on how to extend assistance to credit challenged clients instead of turning them away.
Valera’s mission is to inspire and empower people through financial and credit education.
Table of Contents
Introduction
Repairing your credit score involves an understanding of the parameters that are used to calculate your credit score and taking the necessary actions to manipulate those parameters to work in your favor.
As a consumer your first responsibility in repairing your credit score is to ensure that it was calculated from accurate information describing your credit activities.
By being a U.S. citizen, your financial activity is documented, stored, and maintained in consumer files that are sold and distributed. Contrary to common beliefs, the government does not carry out this transmission of your personal and financial information; private companies do. No one asks whether you want to establish a consumer file. It is created without your knowledge. Further, you can do nothing to prevent companies from compiling this information. Companies and individuals with whom you have financial transactions are responsible for reporting information about those transactions to consumer reporting agencies on your behalf. You will not have an opportunity to approve or disapprove the information, but you must deal with the consequences of having the information in your consumer file.
The information may be inaccurate or just plain wrong. It may belong in someone else’s consumer file with the same or a similar name, address, social security number, or other personal information.
Inaccurate data may spawn a variety of different profiles for you that will affect your ability to perform any financial transaction.
Of the various consumer files that are compiled, maintained, and sold about you, credit files are held by credit reporting agencies, particularly the big three: Equifax, TransUnion, and Experian. The information in these files is used to calculate a credit profile and credit score describing you financially. Other companies also compile information about transactions you engage in that involve money, such as renting property, gambling, applying for employment, acquiring insurance, applying for a promotion, opening bank accounts, and being billed medically. While much personal financial information is compiled and sold about you, you are not entitled to know how these companies generate the profiles or credit scores specific to you. The methodology used by these companies is proprietary. Information reported about you by companies and individuals is not the only information included in consumer files used to profile you and calculate your credit score. Information is also acquired from public records as reported by courts and other entities of the government. This information may also be wrong.
While you may know nothing about the companies that compile such information about you or how they operate, your personal and financial information is an open book for them to sell. The federal government has established the Fair Credit and Reporting Act (FCRA), which justifies the existence of these companies and attempts to regulate how they use the information and how they are to restrict access to confidential information. The FCRA gives you the right to examine your credit file and establishes procedures that you may follow to remove or correct entries in your file that are negative, incorrect, or outdated. The FCRA also grants access only to those businesses and entities that have a permissible purpose. An amendment to the FCRA, the Fair and Accurate Credit Transaction Act (FACT Act), extends the scope of regulations established for credit reporting agencies to all other types of consumer reporting agencies. The FACT Act attempts to set standards that all consumer reporting agencies must meet or be liable for damages.
This book will introduce you to the various types of consumer files about you and explain how to get copies of those files and how to have incorrect information removed as the first step in improving your credit score. It will also explain what credit is, the different types of credit, and how credit affects your credit rating and credit score. It will detail the most common types of public records that affect your credit rating and score, and it reveals how certain life events may affect your ability to acquire and maintain credit accounts that affect your credit score.
Chapter One, What is a Credit Score?,
will tell you how to obtain your credit score and its significance. It defines obligations, rights, and responsibilities specified by the FCRA and the FACT Act. It differentiates a credit score from a credit report from a credit file. Further, it defines a credit-reporting agency and other types of consumer reporting agencies, and it explains how to get copies of your consumer files and reports.
Chapter Two, The Credit Report,
outlines parts of a credit report, specifically those public records and collection accounts that do the most damage to your credit rating. It tells you how long entries may remain in your report, and it identifies information that must be excluded from it.
Chapter Three, Credit Scoring Models,
discusses the Fair Isaac Corporationoration (FICO) scoring model and other credit scoring models that are used in the credit industry. It outlines the parameters used in scoring models. This chapter also discusses credit risks and credit risk predictions.
Chapter Four, Building Credit,
tells you which credit accounts will assist in building credit as well as those accounts that do nothing to assist in building credit. This chapter discusses how certain life events, such as marriage, divorce, or enrolling in college may affect your ability to establish credit. It also shows you how to perform debt calculations the same way a lender does.
Chapter Five, Repairing Bad Credit,
explores the consequences of having bad credit, credit rejection, and adverse actions against credit accounts. This chapter defines the steps necessary to repair bad credit. It includes how to find and correct errors and omissions, how to establish a credit repair plan, how to establish a dialogue with creditors, and how to deal with debt collectors, as well as listing what they may and may not do. It outlines how to file suit against creditors, credit reporting agencies, and debt collectors that maintain incorrect information about you.
Chapter Six, Consumer Credit Counseling,
discusses consumer credit counseling agencies, the services they offer, and how to contact them for assistance. This chapter also gives you an in-depth look at detecting consumer credit counseling scams.
Chapter Seven, Identity Theft,
goes into identity theft and how to safeguard your credit information and other personal information from fraud and theft.
Chapter Eight, Filing Bankruptcy,
explains the Bankruptcy Abuse Prevention and Consumer Protection Act and how to determine whether you qualify for either Chapter 7 or Chapter 13 of the bankruptcy protection code. This chapter tells you how to file for bankruptcy protection and how to reestablish your credit after filing for bankruptcy. It also delves into debt management as an alternative to filing bankruptcy.
Chapter Nine, Maintaining Good Credit,
discusses the types of credit accounts and other consumer accounts that assist in maintaining good credit. This chapter includes detailed pros and cons of credit card debt, use, and costs. It also outlines those actions, credit accounts, and loans that will not help to maintain a healthy balance of credit.
Table of Contentse
Chapter 1: What Is a Credit Score?
A credit score is a number generated by formulas known as mathematical algorithms. A credit score is established for about anyone who applies for credit, opens a bank account, or establishes bills in his or her name.
The algorithms make use of information contained in one’s credit report and information supplied when one applies for credit. This information is used to create parameters that establish a credit profile and credit history for an individual. A statistical model is then used to compare these parameters to similar parameters gathered from millions of other consumers with similar credit profiles. Parameters that define one’s bill-paying history, number of accounts, types of accounts, late payments, collection activity, outstanding debts, and age of accounts are processed with the algorithms to assign points to individuals. The total number of points assigned is one’s credit score. To have a credit score, an individual must have at least one credit account that has been open for at least six months or have at least one report that has been updated within the past six months. The resulting score is a demonstrated likelihood of repaying debts, which is used by creditors as an assessment of an individual’s credit risk.
A California-based company, known as Fair Isaac Corporation (FICO), developed the methodology used in generating credit scores. The methodology includes analyzing one’s credit history and credit profile to generate a credit score. The FICO scoring model is proprietary and is generated by the three major credit-reporting agencies, but only licensed for sale by Equifax. The other credit reporting agencies may generate credit scores using the FICO scoring model and share those results with lenders and creditors, but these other agencies may not offer the scores for sale to their customers. FICO has adapted similar methodologies or modified the FICO scoring algorithms to develop other methodologies that are licensed for use and sale by the other credit reporting agencies.
The methodology used by FICO generates what is known as the FICO score, which has a range of 300 to 850 points. Most people score in the high end of the range, between 600 and 800 points. The national FICO credit score average, calculated by Experian, one the three major credit reporting agencies, is 676 points. The average FICO credit scores calculated for some major metropolitan areas, based on a sampling of two million credit profiles in 2004, are listed in Table 1 from highest to lowest average credit score. The metropolitan areas listed on the left side of the table have credit scores that fall at or above the national average, and the metropolitan areas listed on the right side of the table have scores that fall below the national average.
Table 1: Average Credit Scores
The higher one’s FICO credit score, the less a credit risk an individual presents to creditors and lenders. A credit score of 720 points or higher is considered the most favorable for obtaining credit at the most attractive interest rates. Lower scoring is used as the basis for offering consumers higher interest rates or denying them credit.
Consumer credit scores are available to any legitimate business entity with a need to know. Lenders and creditors rely heavily upon such data to evaluate an individual’s credit worthiness and to determine the interest rate that should be applied to any acquired credit. Companies may also access one’s credit score for the purpose of determining whether to grant an individual employment, a lease agreement, a rental agreement, or whether to engage an individual in other types of business and credit transactions. The major disadvantage to this type of credit scoring is that it relies on information that is likely to contain errors or mistakes. Creditors and court systems may submit information or it may be acquired from public records and debt collection agencies. Information that reflects past and current financial obligations is entered and stored in computer databases with validation limited to the accuracy and integrity of the individual entering the data. Mistakes and errors are commonplace with these methods of data entry, and the only real method of validating and verifying the information is for the particular individual to check the data against his or her financial obligations. Entries made to credit reports may stay in the credit report for as long as seven years, or ten years in the case of a bankruptcy. Positive entries represent an advantage to the consumer, but negative entries may negatively affect one’s credit for years in the future.
The Fair Credit Reporting Act (FCRA)
Public records such as death records, criminal records, real estate records, court decisions, tax liens, and bankruptcies are compiled by various government entities as required by law. Such records are generally available to anyone who requests access to them. Information such