"Learn the Secrets I Used to Wipe Away Negative Items on My Credit Report & Raise My Scores Over 200 Points!"*

Credit Repair Tips - Grab Your FREE report (a $77 value!) Just enter your email addresss to the right & it will arrive within seconds!
E-Mail:

Need Credit Repair Help Right Now? Check Out the Top Credit Repair Services on the Net!

May 31, 2007

Building Credit History as an Authorized User

What is an authorized user?

An authorized user is someone who is added to another person’s credit card account and authorized by the principal cardholder to use that account. The authorized user receives a credit card with his name on it and is able to use the credit card as if it were his own.

Payment history for that credit card is now reported to both the principal card holder’s credit report as well as the authorized user’s credit report, regardless of whether the history is good or bad. That means the authorized user’s credit can benefit from the relationship, but it can also suffer if debt accumulates and payments are late or not made at all.

How to Become an Authorized User

1. Confirm your friend’s or family member’s credit card issuer will allow an Authorized User (not a co-signer unless you need a card…however, there is risk to your friend or relative)

2. Confirm the card issuer reports your friend’s/relative’s account activity for an Authorized User to the big 3 credit reporting agencies.

3. Confirm the card holder has a VISA or Mastercard — most powerful. Avoid Capital One and American Express…they have a *screwed-up* reporting method which actually penalizes a card holder’s FICO.

4. Confirm the card holder’s account does not carry a balance greater than 30%.

5. Confirm the account holder is not late (ever…no 30, 60 or even 90 day late payments).

6. Confirm the account holder has had the card for at least five (5) years – the longer the better. It’s more seasoned.

7. Confirm the account holder regularly uses the card…obviously, there’s a benefit to *using* one’s credit.

When you’re an Authorized User, you do not need to receive a card; therefore, in such cases, there’s no risk…to the other person that is.

NOTE: We’ve made it clear that with no card, there is no risk to your friend or relative. You are now at risk, however! How? Your friend’s-relative’s account history goes to YOUR credit file. That’s AWESOME, provide your friend or relative really HAS the account history he or she has told you. If not, you get your friend’s or relative’s account history…good or bad.

Absolutely know your friend’s or relative’s responsibility.

However, if your friend or family member is not straight with you about his/her payment history (lates), seasoning (age of account), cash-to-credit limit (how much is charged to the card versus credit limit ratio), credit limit (what amount), there may not be a benefit to you.

On the other hand, you also may receive a real card with your friend or relative co-signing for you on their account, if that’s your intent. There’s more risk, but it’s doable.

Posted in authorized users, build credit, credit, credit history, increase FICO | No Comments »



May 29, 2007

How to Build Credit from Scratch

Establishing a good credit history has never been as important as it is today.
It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can determine whether you get a good job, a decent apartment or reasonable rates on insurance. One little mistake — a late payment, maxing out your credit cards, applying for too much credit at once — can haunt you for years.

If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way. Here’s what to do, and what to avoid.

Check Your Credit Report

You’ll first want to see what, if anything, lenders are saying about you. That kind of information is contained in your credit report at each of the three major bureaus: Equifax, Experian and Trans Union.

Credit reports are used to create your credit score and help lenders decide whether to grant you credit based on your credit payment history. Most lenders will just go by your credit scores, but they also may look at the report itself, as may the landlords, employers and insurance companies who use credit to evaluate applicants.

Can you have a credit report if you’ve never had credit? Maybe.

Somebody else’s information could be mixed in with your report, either through a credit bureau mistake or because of identity theft; i.e. someone using your personal information to open bogus accounts. Statistics show that 70 percent of credit reports contain serious errors that might cause consumers to be denied credit cards, car loans and even mortgages.

If that’s happened to you, you’ll need to clean up your credit report before trying to apply for new accounts. The good news is that the Fair Credit Reporting Act requires credit reporting agencies to fix these mistakes. But it takes your diligence to make sure it happens.

Establish Checking and Savings Accounts

Here’s a basic step that’s sometimes overlooked by people seeking credit. Lenders see these accounts as signs of stability.

Opening checking and savings account is also one of the few things you can do as a minor to start building a financial history. While you can’t get a credit card in your own name until you’re 18 and can be legally held to a contract, many banks have no problem letting you open an account.

Not all banks will. If your bank doesn’t, you need to either look around for another bank or consider opening a joint account with an adult. Credit unions are usually the most lenient and have the best rates.

Understand the Basics of Credit Scoring

You need to know that the two most important factors in your score are:

• Whether you pay your bills on time.
• How much of your available credit you actually use.

It’s essential that you pay all your bills on time, all the time. Set up automatic payments or reminder systems so that you’re never, ever late. All it takes is a single missed payment to trash your credit score — and it can take seven years for the effects to completely disappear.

You also don’t want to max out any of your credit cards, or even get close. Keeping your credit use to less than 30% of your credit limits will help you get the best possible credit score and should help keep you from getting over your head in debt, as well.

You don’t need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time.

Authorized Users

The fastest way to establish a credit history can be to “borrow” another’s record, either by being added to a credit card as an “authorized” or joint user or by getting someone to co-sign a loan for you.

Having a co-signer can allow you to qualify for loans you might not otherwise get. The loan will show up on your credit report and, if you pay it off responsibly, will help boost your credit score. If you default, however, you won’t be the only one who suffers. The co-signer has basically promised to make good on this account, so any delinquencies will show up on her credit report as well.

Being added as an “authorized user” has its risks, for you as well as the person giving you access to the card. If your father makes you an authorized user of his credit card, for example, his history with that account can be imported to your credit bureau file, giving you an instant credit record. If he has handled the account well, that reflects well on you. But if he hasn’t, his mistakes would also become yours. Any late payments or other problems could make it harder for you to get future credit than if you’d established your history without help.

Some credit issuers won’t report authorized users to the credit bureaus, particularly if the user is not married to the original card holder. If the point is to give you a credit history, the person who’s adding you as an authorized user should call the issuer and ask how (or if) your status as a user will be reported.

Apply for a Secured Credit Card

If you can’t get a regular credit card, apply for the secured version. These require you to deposit money with a lender; your credit limit is usually equal to the deposit.

You’ll want to screen your card issuer carefully. To be frank, there are a lot of bad guys in this particular niche of the credit world. Some charge outrageous application or annual fees and punitively high interest rates.

Your credit union, if you have one, is a good place to start looking for a secured card.

Ideally, the card you pick would:

• Have no application fee and a low annual fee
• Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
• Be reported to all three credit bureaus.

If the issuer doesn’t report to the credit bureaus, the card won’t help build your credit history.

Get a Finance Company Card

Gas companies and department stores that issue charge cards typically use finance companies, rather than major banks, to handle the transactions. These cards don’t do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.

Again, don’t go overboard. One or two of these cards is enough. If you get many more, you may find that later in your life these accounts could prevent you from getting the highest possible credit score. That’s not a reason to avoid them completely, because right now they’ll do you some good.

Get an Installment Loan

To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages).

Once you’ve had and used plastic responsibly for a year or so, consider applying for a small installment loan from your credit union or bank. Keeping the duration short — no more than a year or two — will help you build credit while limiting the amount of interest you pay.

Use Revolving Accounts Lightly, but Regularly

For a credit score to be generated, you have to have had credit for at least six months, with at least one of your accounts updated in the past six months. Using your cards regularly should ensure that your report is updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it, the issuer could cancel the account.

Just remember the credit tips mentioned earlier:

• Don’t charge more than 30% of the card’s limit.
• Don’t charge more than you can pay off in a month. As mentioned earlier, you don’t have to pay interest on a credit card to get a good credit score, and it’s a smart financial habit to pay off your credit cards in full each month.
• Make sure you pay the bill, and all your other bills, on time.

Posted in authorized users, build credit, credit, credit bureaus, credit history, credit reports, credit scoring, establish credit, installment accounts, no credit, revolving accounts | No Comments »



May 20, 2007

What is Debt Validation?

Debt validation is the process of forcing debt collectors to verify the validity of the debt in question, as well as their attempts to collect. The right to dispute the debt and receive validation are part of the consumer’s rights under the United States Federal Fair Debt Collection Practices Act (FDCPA) and are set out in §809[1] of that act. Under the FDCPA, the collector bears the burden of proof.

For legal purposes, any entities that are not original creditors – including lawyers – are considered collectors. Lucky for you, collectors must adhere to the guidelines of the Fair Debt Collection Practices Act (FDCPA), which will be the basis of your debt validation proceedings. It applies even to those collectors who legally have bought your debt (i.e. they still do not become your “creditor”.)

Generally, debt collectors must be able to prove that:

1. They own the debt legally and have been authorized to collect it from you.

2. The full amount of the debt that they are pursuing is accounted for and documented by your original creditor.

3. They can provide a copy of the original legal contract that you signed with your creditor.

The following is a step-by-step guide of actions to take to demand your right to debt validation:

• Send the collections agency (or lawyer, etc.) a certified debt validation letter asking them to validate your debt. Allow them 30 days to respond to your request. If they fail to do so, they are in violation of the law.

• Meanwhile, if you do not believe they have the right to collect from you, send the credit bureaus (Experian, Equifax, and TransUnion) a certified letter disputing collections actions on your report.

• If the collection agency responds in writing with proof of the three FDCPA requirements listed above and you wish to pursue your dispute further, you may find out whether or not they are authorized to collect in your state. If they are not, write another letter stating the violation and threaten to sue if they do not both cease collections efforts and alert the credit bureaus.

• If the collection agency responds in writing and does not provide sufficient proof, write them another letter specifying their violation of FDCPA. Tell them either to cease collections efforts and alert the credit bureaus or you will file a lawsuit. Allow at least two weeks for a response, and then follow through with your threat in small claims court.

Most collectors will give in before you will have to get the law involved, and some cases may be much easier than others. If a collector has bought or has been assigned your debt, they inherently do not “own” your debt and therefore cannot prove your obligation to pay (unless there is a clause in your original contract). Similarly, unqualified and deceitful collections agencies probably will want to rid themselves of your situation as quickly as possible.

It should be noted that creditors may take legal action against you, so it almost certainly is not in your best interest to just ignore a debt that you think cannot be proven. If you fail to take action and demand proof (or lack thereof) from a collections agency, it really does not matter what you believe to be just and accurate. You still may find yourself with a judgment against you.

Attempting debt validation might sound a bit daunting, but the financial benefits that you may gain from enforcing your rights certainly make it worthwhile for many people. FDCPA and contract laws are usually on your side. And if a collection agency lacks proof of your obligation to pay, well then…you might as well not.

Posted in FCRA, FDCPA, Fair Debt Collection Practices Act, collection agency, credit, debt collectors, debt validation, validation letters | No Comments »



May 13, 2007

Should I Close Old Accounts?

Closing old and unused credit accounts on your credit reports can help you avoid unnecessary fees and guard against identity theft. It can also cause your credit score to drop if you are not careful. Here are a few do’s and don’ts for closing those dormant accounts:

DO…

• Consider closing unused and idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity thieves. Close the accounts with annual fees or the highest interest rates first.

• Check your credit report online to see the status of your accounts. Look for late payments, high balances and signs of identity theft. As a bonus, checking your credit report can save you some research time by providing you with contact information for each of your creditors.

• Be aware that you can cancel accounts that have an active balance. You can ask your creditor to close the account to new charges and continue paying down the balance each month. This may be a good way for heavy credit users to prevent new spending while they are reducing their balances but watch out for hidden fees.

• Keep four to six credit accounts open. This will keep your credit score and debt balances healthy. Signs of active and responsible credit use are viewed positively by creditors.

• Designate one card for regular use and try to pay the balance in-full each month. Reserve the other cards for emergencies only so that you are not tempted to overspend.

DON’T…

• Don’t close the oldest account on your credit report. This could cause your credit history to appear shorter and could harm your credit score.

• Don’t just throw away old cards and expect your accounts to close automatically. The safest way to close an account is to send a certified letter to the customer service department of the credit company. You should receive an account closing confirmation letter in 10 days.

• You shouldn’t be pressured to cancel several accounts all at once. Gradually paying down and closing accounts may be the best plan if you are unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel numerous credit accounts, spacing the closures over time will reduce the chance of attracting negative suspicion from potential creditors.

• Avoid over-consolidating balances onto one card. If your credit balances rise to above 35% of your available limits, you may see a drop in your credit score.

• Don’t forget to check your credit report for updates and errors after you close your credit accounts. Wait 30-60 days for the creditor to report the closed account and the credit reporting agencies to update your records. While the accounts and their payment histories will stay on your report for 7 or more years, they should be marked as “closed.”

Posted in close accounts, credit, credit report, identity theft | No Comments »