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Sep 29, 2008

Do-It-Yourself Credit Repair: Why it’s Not as Simple as it Seems

Looking at credit repair websites online, it’s easy to get the impression that credit repair is simple, painless, and quick. Just hand over your credit report (or in some instances, the company even pulls your credit report for you) choose which items to dispute, and sit back while the credit repair company mails a letter or two and gets the negative information off of your credit report for good. Credit repair sites can make the process look so simple that some people may wonder why they need a credit repair company at all. It’s just mailing a form letter, right?

Though you may be tempted to try to repair your credit on your own, there are some definite pitfalls to this route. Aside from the fact that most people lack the expertise to really repair their own credit effectively, there are some common pitfalls that the ‘do-it-yourself’ types often fall into when it comes to credit repair. If you decide you want to try it on your own, keep these caveats in mind:

1. Don’t Dispute Everything at Once.

Consumer reporting companies are required to respond to and investigate any dispute that is not deemed “frivolous”. There are no hard and fast rules for what constitutes a frivolous dispute, but having all of your negative credit entries in dispute at once will almost certainly cause some companies to ignore your request. This means that negative items may be even more difficult to remove – as multiple disputes over the same item can also be considered frivolous.

2. Provide Proof When You Have It.

If you have receipts that show you paid on the first of the month, but the creditors are showing the payment on the 19th, you should use this to your advantage. Make copies of the receipts and enclose them with your dispute. Is your name correct on those derogatory items? How about your address? Any legitimate reason to dispute a negative item should come along with some proof as to why the dispute is being made.

3. Keep Your Tone Professional.

Consumer reporting companies respond best to communications that are courteous, professional, and direct. Don’t’ write long-winded letters of dispute, and don’t try to obscure the facts. Make your request, present your evidence, and summarize your position on the issue. Poorly worded disputes may also be seen as frivolous, so pay careful attention to both spelling and grammar. Additionally, you may wish to use a template – but be aware that if all of your disputes read like form letters, you may not see much progress. Still, for those who want to handle the dispute from start to finish, there are form letters available online that serve as a good base to start with.

Credit repair isn’t as simple as it seems to be in the surface. The expert credit repair representatives that do a good job and operate above board provide a valuable service to those individuals who either cannot, or will not attempt to handle credit disputes themselves. This is why it is especially important to find a reputable agency to repair your credit – expertise always gets results. However, if you are one of the do-it-yourself types, following the above guidelines will help ensure that your credit repair attempts aren’t derailed from the start.

Posted in credit, credit repair companies, credit repair company, credit report dispute, credit report repair | No Comments »



Sep 24, 2008

The Hidden Dangers of Bad Credit

Most people only think of improving their credit score when they want to apply for new credit such as for a house or car loan. What many people fail to realize is that poor credit can affect your current status and not just your future ability to gain new credit. Many companies that you continually do business with, or have a line of credit with make periodically check your credit report. When they do, if they notice that your credit score has fallen, they may make adjustments to their business relationship with you as a result. This is entirely independent of any payment history that you may have with that company. For instance:

Your credit card company may raise your interest rate due to a lower credit score even if you make your payments to them on time. This is often included in the terms and conditions that are provided when you accept the card, though many people do not realize that until after they are slammed with higher fees.

Businesses may shorten or eliminate any grace periods you have for payment if they notice late payments to other companies. This is because you become a greater risk for payment based on their own internal credit policies. What this means to you is, when that 30-day grace period evaporates, you are suddenly reported for being late on payments that were considered on time before.

Your insurance rates may increase as a result of lower credit scores; some unscrupulous insurance companies may even attempt to cancel your policy. Higher rates will show up at policy renewal as you are moved into a new risk class with the company. Cancellation of your policy may be enacted due to only one missed payment and without notice if your credit score is deemed too low.

Many companies run a credit check on prospective employees, and do not hire prospects with scores below a certain level. This can be for many reasons, but often companies site that individuals with poor credit often have issues that cause distraction and poor employee performance.

If you work in a company that requires a security clearance lower credit scores can endanger your employment as you are considered a greater risk to security if you have a low credit rating. People with jobs that require security clearance are continually evaluated on a number of factors, and their credit score is one of those.

As you can see, there are numerous ways in which a poor credit score can affect your life in the here-and-now, not just the future. With the current problems in the financial sector, these issues can only be expected to worsen as banks are forced to restrict their lending and credit lines to those who have excellent credit. Poor credit can cost you hundreds or even thousands of dollars in rising interest rates, higher premiums, and shorter payment cycles.

Because credit and credit ratings are used so often in our society, credit management services are becoming more popular with all individuals, not just those with poor credit ratings. Improving your credit score will not only help with getting future lines of credit for a big purchase such as a mortgage or car, but it can also help to improve your current credit situation as well.

Posted in bad credit, credit, credit scores, poor credit | No Comments »



Sep 20, 2008

Refinancing Worries: When Consolidating Your Bills May Not Be Your Best Option

Refinancing used to be a standard move when it came to credit repair. Roll over multiple high interest debts into one, lower interest obligation. Now, with the recent worries in the financial market, and the slowing economy, refinancing debt may not be a wise move. Here are two scenarios in which debt consolidation can do more harm than good.

Scenario 1: Refinancing High-Interest Credit Card Debt Using Home Equity

This scenario has been commonly used by many companies claiming that they can lower your credit card debt. By taking out a second mortgage using home equity, a person can pay off high interest credit card debt with the funds received. There are several problems with this scenario:

You must have equity in your home to qualify. This means that for new homeowners, this type of financing option is unavailable. However, in the current market, this is actually a good thing and here’s why:

Financing credit card debt through a mortgage trades an unsecured debt for a secured debt. This means that when you use the mortgage money to pay off credit cards, you’ve essentially tied your homeownership into your ability to pay off the debt. If for some reason you default on the second mortgage, you can lose your house. While credit card debt and late payments may be damaging to your credit, they are unsecured. The credit card company can’t take away your purchases made with the card, but the bank can and will take away your home if you default on a mortgage.

The last problem with this type of scenario is that it is not foolproof – if you decide to use your credit cards again for purchases, then your debt problem doubles. Many times, people who try to eliminate credit card debt end up with more credit worries as they have to make payments on two mortgages and the new credit card charges.

Scenario 2: Consolidating Student Loans

If you are making payments on multiple student loans, consolidating those loans can seem like a smart idea. In some cases it is, however, if you are still in school there are better options available.

  • Forbearance – if you are unable to make payments, you may qualify for forbearance. There are several types of forbearance, including one that applies if you are not making enough money to meet all of your financial obligations.

  • Deferment – this is usually the best option if you are still in school. Even if you are only taking classes half time, you can get a deferment on student loan payments. Just be sure to have your school verify that you are attending, and continue to take enough courses to qualify for in-school deferment.

Once you consolidate your current student loans, you cannot reconsolidate at a later time. Therefore, if there is a chance you will be taking out further student loans, your best bet is to use forbearance or deferment options, and only pay the interest on the loans until you are able to meet the financial obligation.

If you are in debt and are looking for ways to repair your credit, you should explore every possible option, not just debt consolidation. Credit repair companies, or financial assistance through other means may be a better option in the long run for repairing and preserving your credit score.

Posted in credit, debt consolidation, high-interest credit cards, refinancing, repair your credit, student loan consolidation, student loans | No Comments »



Sep 12, 2008

Divorce and Debt: Credit Concerns for the Legally Separated

There’s no question that most divorce proceedings are difficult matters which take their toll on both parties involved. The division of property, assets and other holdings that were amassed during the course of a marriage can leave bitter and unresolved conflicts. However, what some people do not realize, (and later find out to their detriment) is that debts are not as easily divided as assets. This can cause major problems with credit down the line in those instances where one spouse may still be held liable for the debts of an ex.

Pay Attention to the Contract

It doesn’t matter who the divorce decree stipulates as the responsible party for the debt. What matters is the name on the dotted line. If you signed a contract, you are responsible for the debt, even if the divorce decree says your ex is supposed to pay up. If he or she fails to meet the obligation, it’s your credit that will suffer, not your ex’s. So you may want to be particularly careful of those debts you have your ex to take on, if you have any reason to suspect that they won’t be paid in a timely fashion.

Get Credit in Your Own Name

Years of marriage can leave you sorely lacking in the credit history department if everything is in your spouse’s name. Even if you help pay for the house, the car, that business loan or any other debts of the household, if your name isn’t listed, that pristine payment record will not show up on your credit history. Even if you have no plans of divorce, it’s still a smart move to have both spouses jointly responsible for major household purchases such as a house or a car – that positive payment history can help you get credit on your own if someday you and your spouse do call it quits.

Keep a Close Eye on Your Credit Report

Your ex likely had access to all of your personal information throughout the course of the marriage. Sadly, most cases of identity theft are perpetrated by someone that the victim knows. If you’re recently divorced, make certain that all joint accounts are closed, and take extra measures to ensure that no one else is opening accounts in your name with your personal information.

Hire a Credit Repair Service

If a divorce has put a blemish on your credit, don’t despair. Quality credit repair companies are often able to clear up inaccuracies caused by divorce, and any debt that is not your legal responsibility can always be disputed and removed from your credit report. So if you are recently divorced, or in the middle of a divorce, don’t let credit problems catch you by surprise. Be proactive and take measures to preserve the good credit you’ve built over the years of your marriage.

Posted in credit, credit after divorce, credit debt divorce, credit divorce, credit problems, credit repair divorce, credit repair help, credit report divorce | No Comments »



Sep 8, 2008

Credit Repair Scams: File Segregation and EIN

Repair Your CreditOne old credit repair scam that is making the rounds again is the concept of file segregation. Not only does this type of credit repair not work, it is actually illegal and you could face severe fines as well as jail time for attempted fraud. So how can you recognize a file segregation scam? Your first clue should be any credit repair service that promises to give you a “fresh start” or an entirely new credit history. Another clue is any credit repair service that asks you to apply for an Employer Identification Number, or EIN.

Having an EIN is not illegal in and of itself. However, when used in conjunction with unscrupulous credit repair tactics, establishing an EIN may be considered an attempt at fraud. This is because traditionally, an EIN is used to establish credit for a business entity. Misrepresenting yourself as a business, combined with any attempts to segregate your credit history such as using a different mailing address from the one on your personal credit history, can be considered fraud. Companies that claim you can get a clean credit history through file segregation are promoting practices that are known to be illegal. Above and beyond that, this type of strategy will have no effect on your actual credit rating and will not help your ability to obtain credit in the future.

Companies who promote file segregation and EIN are counting on your ignorance of how credit actually works. The EIN may not be linked to your poor personal credit history, however, a lack of negative credit history does not help your chances at obtaining credit when there is no credit history whatsoever. This “blank slate” will also have difficulty obtaining credit from most businesses and banks due to the fact that a new business with no credit history is not a good credit risk. Establishing credit for your new identity is fraught with unnecessary risks, and if you use the EIN legally, your old credit history will be tied to this new number as well. In short, file segregation and applying for an EIN only wastes time, and leaves you vulnerable to criminal fraud charges. Never deal with any company that offers this type of service — it is always a scam.

If you are looking for credit repair solution, steer clear of any file segregation and EIN “solutions” you may be offered. Instead, focus on repairing your personal credit history through proven methods that actually work. By disputing incorrect items on your own credit report as well as other legal methods, you can improve your credit without taking the risk of committing fraud through deception. If you’re unsure of how to repair your credit on your own, make certain that any credit or company you deal with is reputable and has proven results.

Posted in credit, credit repair scams, credit repair service | No Comments »