How to Repair Your Credit
Summary
In this How to Repair Your Credit Guide, you are about to discover a systematic approach designed to arm yourself with healthy financial habits.
The following credit-building and boosting tips, strategies, and tactics will greatly help you in maintaining a strong credit risk rating.
Repairing your credit matters more than you might think.
By the end of this Credit Repair Guide, you will be able to:
- Define key financial terms (including a credit report), and the credit score system.
- Develop your own personalized credit repair plan that addresses your specific financial situation.
- Discover resources that can help expedite your credit score.
- Effectively repair your credit, by using the techniques of Credit Repair Experts (CREs).
- Develop effectual strategies for dealing with your everyday life (in the course of repairing and boosting your credit).
- You will learn how to properly create and execute a simple, but powerful, CRAP (Credit Repair Action Plan).
It is important to remember that repairing your credit doesn't happen in a vacuum. It will definitely require continual patience, focus, and tenacity on your behalf.
However, that does not necessarily make repairing your credit difficult.
Once you have fully assimilated this How to Repair Your Credit Guide, you will have all necessary tools and resources at your fingertips.
Credit Repair Basics
Before you go and attempt to boost your credit score, you need to know the time-proven foundational basis of how credit actually works (as well as what NOT to do when setting out to build or boost your credit rating).
This starts by knowing:
- Exactly what a credit score is.
- How your credit score is properly developed.
- Why your credit score is important to you in your everyday life
Lenders and government agencies certainly can glean all sorts of information from your credit score. If you are not armed with this very same information (as they interpret it), you are at a severe disadvantage.
Knowing this information allows you to make sound decisions more objectively.
Furthermore, it also allows you to see just how deeply your every decision is impacted (and all of the other ways your Credit History affects every aspect of your life).
Understanding How Credit Scores are Derived
Improving your credit score always starts with full understanding of the specific elements of your credit score. Also, how each of these elements specifically relate to you.
Your credit score is a three digit number system that tips off lenders as to:
- How timely you are paying your debts off.
- Just how much of a (good or bad) credit risk you really are.
Your Credit Score Number
In general, the vast majority of individuals fall between 300 and 850. The higher your credit score is, the more “highly attractive” you look to a lender.
A high credit allows you to enjoy credit at superior rates, among numerous other benefits. Scores within the low 600s and lower will often give you trouble in finding credit.
At a score of 720 and above, you will be offered some of the very best interest rates available.
Bear in mind that credit scores are similar to a GPA score or SAT score. What this means, is that they are interpreted by different creditors (including lenders, and government organizations) in different ways.
Some lenders put more emphasis on your credit score factor than others (i.e Banks vs Venture Capitalists). In addition, each credit bureau uses a different method to calculate your credit score.
- This helps to explain why you have different scores, with different credit bureaus.
- You will find that these scores can vary quite greatly too.
The FICO System
Most Lending Institutions, Agencies, and Credit Bureaus (either partially or wholly) use the FICO system.
FICO is an acronym created from the credit score calculation software (designed by the Fair Isaac Corporation Company). They are still considered one of the leaders in the credit repair field.
In fact, your credit score is often times even directly referred to as your “FICO score” or “FICO rating”.
However, this software is not the only software used in the credit repair field.
- Your credit score may, in fact, ultimately be tabulated using different software.
Another important factor for you to understand about is how the software (and mathematics) is used in determining your credit score.
- The mathematics (used by these types of software) is based on comparative mathematics, which makes your credit score essentially calculated in the same manner as an insurance premium.
For instance, insurance companies ask you questions concerning your health and lifestyle choices (e.g. whether you smoke).
They then compare your data with pre-compiled statistical data to determine your risk factor (and how likely you are to make large claims later on).
- Credit bureaus and lenders also look closely at specific types of behavior patterns.
- Remember that your credit score is a merely a reflection of how lending companies perceive you; whether you will repay your debts in a timely manner.
- Also, it is important to understand that it is not a matter of you having to go out to “reinvent” yourself financially.
You just need to focus, prioritize and project a more “highly attractive” image to a reliable lender.
Though it may sound easier said than done, hopefully just this one small realization alone will make your credit repair goals far less stressful!
How Credit Bureaus and Lending Institutions Perceive You
- Factors such as whether you regularly pay your bills on time, your unpaid and overdue bills, and the specific types (and overall amounts) of debt that you carry.
- Other factors such as credit, debit, and savings accounts are also used to calculate your credit score.
- Unlike an insurance company, a credit bureau does not rely on information such as your sex, age, and income. These elements do not count towards your credit score.
The actual algorithms and formulas used by credit bureaus to calculate credit scores are closely-guarded secrets.
It is not a 'hidden mystery' that all of your recent account activity (i.e. debts, length of credit, unpaid accounts, and types of credit) count the highest in tabulating credit scores from a credit report.
- Important Note: It is critically important that you obtain all three of your major credit reports, and have a trained professional look over all of them at once.
This will greatly help you establish your overall best and most beneficial Financial Freedom strategy.
Primary Credit Bureau Contact Information
These are the three major credit bureaus to contact for your credit reports.
If you find an error on your credit report (or would like to dispute a claim), these are companies you must contact in order to correct the problem:
Equifax Credit Information Services, Inc
P.O. Box 740241
Atlanta, GA 30374
Telephone: (888) 766-0008
http://www.equifax.com
TransUnion LLC Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022
Telephone: (800) 888-4213
http://www.tuc.com
Experian National Consumer Assistance Center
PO Box 2002
Allen, TX 75013
Telephone: (888) 397-3742
http://www.experian.com
You should keep this information with your financial information at all times, so that you can quickly contact these bureaus when you are ready.
Your local yellow pages should also have these credit agencies listed.
Making a Healthy CRAP (Credit Repair Action Plan)
Effectively developing and delivering a good, solid Credit Repair Action Plan has to happen in a very specific manner, in order to be truly effective.
This is most readily achieved by properly analyzing all of your credit reports.
You will first need to obtain a copy of all three of your primary credit reports, and duly note each individual credit score.
Only then will you be able to accurately know right where you stand, financially.
This, in turn, will enable you to rapidly boost your credit score in both a legal and ethical manner.
These three credit history “mile markers” will also reveal where the vast majority of your life's problems lie.
This is because they will reveal the exact types of misguided behavioral patterns that you need to be acutely aware of at all times.
They will also help you determine precisely which aspects of your credit unworthiness is in most need of attention and repair.
Some questions of Credit Unworthiness Patterns that various wealthy individuals, agencies, and bureaus tend to look for include:
- Have you ever failed to pay your taxes in a timely manner?
- How many (consistently) overdue or unpaid bills do you have, outstanding?
- Have you ever defaulted on a public loan (i.e. college loan, mortgage, etc)?
- Have you recently been dealt a major financial upset (i.e. bankruptcy)?
- Have you recently been negatively reported to a registered collection agency?
- Are you carrying too many different types of debts (and if so, what are they)?
- Are there too many credit inquires being made on your credit report (in too short a time span)?
- Have you just started out on the journey of building and boosting your credit rating?
That being the case, you just need to establish even more highly attractive Credit Worthiness!
And though there are several more, this begins to give you the general factors that Lending Institutions and Creditors look for when viewing your Credit History.
Also, the above list serves as a good starting point for you to start really observing and recognizing you consumer behavior patterns on a daily basis.
Why is this extremely important to you?
These are the very same financial behavior patterns that individuals and agencies are constantly on the lookout for.
A few examples include:
- Banks
- Credit Bureaus
- Affluent individuals
- Collection Agencies
- Government Agencies
Once you are able to observe and recognize your behavior patterns in real time and with relative ease, everything else will rapidly start to ease up in your financial worries and burdens:
You will have a cohesive plan of action that is both practical and achievable, with sensibly-focused tenacity and patience.
The problems that most greatly contribute to your credit unworthiness should be the governing tactical factors in effectually boosting your credit score:
- As you re-read through this Guide, jot down small “cliff notes” and tips that are particularly useful to your specific set of circumstances.
- From this rough-hewn set of notes, you will proceed to bold craft your person Debt Worthiness Dossier.
- With your Debt Worthiness Dossier, you will then continue to develop specific checklists of the things that will advance your Credit Worthiness on a daily basis (this is where you will start to assemble a solid CRAP).
And always remember – the only way to eat anything, is literally one bite at a time. - These are simple, actionable steps that not only will help your overall financial and credit situation improve; they will also improve your self-esteem, as well.
- Furthermore, your Debt Worthiness Dossier will help put that extra bit of “pep in your step”. This is because you can feel good knowing that you are taking a proactive stand on your Credit Worthiness.
Each financial debt situation that you become victorious over (no matter how small the debt repaid) will continue to give you a new wellspring of deeper energy and satisfaction.
- Naturally, this only stands to vastly improve every other aspect of your life.
As a matter of fact, when you set out to seek professional credit counseling or credit help, you will quickly come to discover the following:
One of the very first things that a financial counselor will do, is help you to develop a personalized financial strategy that expressly addresses your Credit Worthiness.
That is exactly what this How to Repair Your Credit Guide aims to prepare you for.
Know How the Majority of Your Credit Score is Derived
When developing your detailed action plan, it is also very important to know how the majority of your credit score is derived (regardless of the actual software or algorithms used):
- Your credit history.
Your credit history accounts for roughly a third of your overall credit score rating (more in some cases).
Whether or not you have the past performance history of a good credit risk is the single greatest indicator of how you will react to debt in the future.
It is for this reason alone that unpaid taxes, consistently late bill payments, loan defaults, and bankruptcies count against you the very hardest.
Even just paying one of your bills, consistently on time, will slowly help boost your on-going credit score. - Your current debts.
Your current debts also account for roughly one third of your credit score (or more, in certain cases).
If you currently have a disproportional debt load, it triggers a loud warning that you living outside of your means, and propose an undue credit risk.
This is especially so, if you have either borrowed often or if you've applied for multiple credit cards recently.
Each time you apply, can be a count against you. Any time a person applies for numerous credit cards (in a relatively short period of time), it sends out a blaring red flag.
Credit Booster Tips:
Avoid applying for a credit card ever again (none whatsoever), until you are 100% debt-free.
Also, be sure to pay down on each of your debts as far as you can, and as often as you can (even if only a little at a time). - How long you have had credit.
How long you have had credit can account for up to 15% of your credit score, depending on the case.
If you've had credit accounts for a relatively short period of time, then lenders simply have not been afforded the opportunity by you to be convinced of your Credit Worthiness (that you are, in fact, a good credit risk). - Important Note: Avoiding using credit (for a long period of time, such as many months or even years) can directly have a negative impact on your credit rating.
One way to help counter this is to keep your accounts “warm” (open), rather than shutting them down as you clear each one.
Make even just one or two small micro-purchases, and pay them off within the following billing cycle. Just this one measure, done constantly over several months, will greatly amplify your Credit Worthiness. - The types of credit lines that you have.
The types of credit you have account for roughly a tenth of your credit score (in the majority of cases).
Let's face it, lenders simply love to see a well-rounded mix of financial responsibilities (being responsibly handled). - Credit Booster Tip: Having the bills that you normally pay, as well as one or two types of loans, can dramatically improve your credit score (over time).
Having at least one credit card that you manage well, will also improve your credit score. - Important Note: This is best accomplished by paying off your monthly credit card purchases, in a timely manner. Simply avoid letting them go beyond the most current billing cycle.
If You Are Already Behind On One or More Accounts:
- You will need to devise a way to (at very least) pay off each minimum payment in real time. Plus, you'll want to pay as much into your arrears (per payment) as you possibly can.
- Learning to effectively live within your means (or increase your means, with additional income streams) is your single greatest asset, and the real “secret”.
As you can see, it is virtually impossible to determine (with any amount of precision) just how any particular party (individual, organization, or institution) will interpret your credit report fact data.
What makes it even more difficult to determine, is not knowing which one of the “Big Three” credit reports they will draw their conclusions from.
Perhaps they'll even be drawing conclusions from one or more of the smaller Credit Bureaus as well.
- This is why you must “tame” all three of your primary credit reports (and slowly work on repairing them simultaneously), then work backwards.
- Keep each of the above areas firmly in mind, and at all times. Furthermore, make sure that each one of these elements is present in your CRAP and fully addressed in your personalized plan.
- Be sure that your CRAP is actually healthy enough to effectively boost your credit (over the course of the next several months, which is a relatively short period of time).
Tips to Repair and Boost Your Credit Rating
The following section reveals specific tactics and actionable strategies you can immediately deploy, to repair (and enhance) your credit rating.
Tip #1
Pay your bills in a timely manner.
Nothing convinces your lenders that you take your debts seriously, like a history of simply paying your bills on time.
Considering that this accounts for roughly 1/3 of your credit score, this is certainly something your debtors need to see. And it is simply one of the most efficient ways to reliably boost your credit score.
- When you pay all your bills on time, you are presenting yourself as a potentially good risk (in making new debt payments on time).
- It has the added benefit of avoiding further financial penalties (i.e. late fees), and the legal harassment that follows.
Bear in mind, that it will take you several months of repaying your bills in a timely manner (to actually see the positive effects). Before your debtors report your credit score improvements, they need to see some seriously earnest credit history first.
Tip #2
Avoid applying for new lines of credit.
- If you have many lines of credit (or several huge debt loads), you fall into the worst credit risk: Disproportional Debt Load.
- This holds true, even if you've been somehow able to manage all of your debts.
Studies have shown that individuals with disproportionately high debt loads have the greatest financial difficulty, when faced with a financial crisis, such as sudden illness, divorce, or unemployment.
- Stick to only one or two credit cards, and one or two major non-credit card debts (i.e. mortgage, car loan).
Completely avoid applying for any new “just-in-case” lines of credit (including in-store credit cards, like Target, etc). - Applying for multiple new lines of credit, in a relatively short period of time (definitely within a month) will cause your credit score to nosedive rapidly.
- This will damage your credit score, because it comes off (to the Credit Bureaus, Creditors and Lenders) as highly conspicuous. Furthermore, it makes you appear to be financially irresponsible (a bad credit risk).
Tip #3
Pay down on each of your arrears.
- In addition to making your minimum balance payments, paying down on your arrears will begin to elevate your credit rating score.
It can even be just a little bit over, provided there is consistency each and every month.
Bear in mind that you will be a lot less attractive (credit risk-wise) to Creditors and Lenders if you have a $1000 limit on your credit card, and you regularly carry a balance (of let's just say) $950.
Someone else (with the exact same credit card, rates, and terms) that carries only a balance of only $250 represents themselves as being considerably more responsible.
- If you are deadly serious on improving your credit rating score, then start with the largest (reported) public debt you have.
- By paying down on the arrears (of each of your Public Debts), you are using a smaller percentage of your credit total, which (in general) should not exceed 50% of your credit ceiling.
For example-
If your credit card limit of $5000, make sure that you work it down below $2500.
- Carry a balance of (no larger than) half of your overall credit – Less is definitely better.
- Pay off your credit card in full each month, if at all possible (and just a wee bit over, where the Creditor owes you).
One of the critical factors that all Credit Agencies (as well as Lending Institutions, and debtors) take into account is the percentage of your total credit limit that you are using.
- Important Note: In all cases – The lower the better.
Tip #4
Create a highly attractive credit “portfolio”.
The different types of credit you have (not just how much credit you have) are a very important factor in your overall credit score calculation.
- Lenders are most comfortable with individuals who demonstrate the capacity to handle multiple credit types well.
- Though having multiple types of credit is better than having only one type of credit (some form of personal credit line – like credit cards, as well as an auto loan or a mortgage type of loan); it is far better to stay within your comfortable means.
- If consolidating down to only one personal credit card (and no other current debt load carried) initially works best for you, then go with it.
- Important Note: The sole exception to the above –
If you are a highly disciplined individual and plan of leveraging your under-utilized credit resources to build and boost your current credit rating, then you will want to take a very different course of action (covered in greater depth, below).
In either case, there is no sense in jeopardizing the positive credit score you are working hard to attain (and maintain).
Tip #5
Understand your credit history the same way that Credit Agencies see it.
Each year, many honest people are shocked to find that they have low credit scores. We're talking decent people, who are good about paying their bills on time (and with a well-distributed, minimal debt load).
-
A low credit score may be caused (or severely damaged) by online criminal activity and financial predators, due to identity theft.
Identity theft is a heinous crime in which someone steals your personal account information or identification information (for purposes of ill-repute), and poses as you.
And unfortunately, identity theft is becoming more and more commonplace by the year.
For example -
Someone with access to your PIN numbers can “leak” relatively unnoticeable amounts of money from your bank account. Very slowly (over time), they incur a hefty (behind-the-scenes) debt load in your name.
- Remember: Any outstanding debt that you carry is still gaining interest for the company that actually owns your debt.
This is how companies that specialize in buying debt (as well as trading debt, and offering it for sale) make their money.
Tip # 6
Fighting Identity Theft
Although there has recently been a strong push toward legislation designed to better protect those who have been victimized, your best recourse is to take all preventative measures (within your immediate means, as laid out in this Guide).
Apparently the Financial “Powers that Be” did not foresee identity theft (also known as “phishing scams”) as becoming such a wide-spread epidemic.
With no sign of letting up in sight, the US Government sides with the Lender (this means that ultimately, the burden of proof – in proving a crime was committed against you – is 100% on your shoulders).
- Remember: Until legislation drastically changes … In the end result, because it is you must shoulder the burden of proof, you will be legally stuck with the debts incurred –
That is, unless proof beyond any shadow of doubt is amply furnished. - Also keep in mind that an identity theft crime (committed against you) will permanently reflect on your credit report (as you being a poor credit risk), until resolved.
- If you are found to be a victim of identity theft, then you will not be held responsible for the charges (provided that you can, indeed, prove – beyond any shadow of reasonable doubt – that you were victimized).
It's a sad irony that this type of situation can be extremely difficult in proving that it actually was a case of identity theft, considering that the identity thieves are claiming to be you.
And that the victim must bear the shame and undue duress, in proving their own victimization …
That said, here's what you can do to ensure (in the best way possible) that this heinous crime does not befall you:
Preventative Identity Theft Measures
- Always scrutinize and review your account statements and credit reports (all three primary Credit Bureaus) very carefully, each and every month without fail.
- Immediately investigate any new credit accounts that you do not recognize. This is the one of the very best preventative measures in protecting yourself against identity theft.
- Report any reasonably suspicious-looking activity, or charges that you fail to accurately account for.
- Be cautious of a sudden or prolonged disruption in your physical mail service, compared to what you're normally used to.
If this happens, contact your Post Master and inquire if a “change of address” was filed, for your address. It sounds strange, but it's true.
Identity criminals have been known to change addresses (right at the local post office), and redirect your mail to some other bogus post office box number.
After collecting your account-based personal info (pre-approved credit card applications, bank statements, etc), they use this information to acquire illegal purchases and run up unearthly charges, all in your name.
Just simply keeping a keen eye out on your physical mail routine will definitely help keep your credit score safe.
Tip #7
What to do when you've been victimized by identity theft.
The very first thing to do when you have been victimized by an identity thief, is to file a report with the police at once. Be sure to get a copy of the police report.
By keeping a paper trail of the entire identity theft crime investigation, it'll be much easier for you to re-establish or repair your Credit Worthiness.
Here are some important Credit Repair Safety Tips to keep in mind, if you or a loved one becomes victimized by an identity thief:
- At very least, you should get your passwords changed immediately.
- Also, immediately send copies of the police report to all three primary Credit Bureaus, as well as each of your banks.
- Have all three primary Credit Bureaus attach the police report to your actual credit report, if at all possible. If you approach the Credit Agent with dignity and respect, they will likely be glad to assist you.
- Be sure to sincerely thank each Credit Agent that you correspond with, as this can go a long way towards their willingness to (continue to) assist you.
- Be prepared to close all current accounts and reopen new ones, if so advised.
- When you make contact with each of the three major Credit Bureaus, ask for their Fraud Department.
Explain that you have been or that you have strong reason to believe that you may have been victimized by an identity thief.
Ask for an “alert” to be placed on your file.
This will let any future Lenders, Creditors, or Agencies (who request to look at your report) know that you have or may have been victimized by fraudsters.
It has one additional added benefit, as well –
- You will be alerted every single time time a company or agency requests to look at your credit report file!
The reason why this is important to you? Because each time any new party looks at your file, it alerts you to the possibility that identity thieves are attempting to open a new account in your name.
When a potential lender sees that it is not you applying, the identity thieves will be denied credit.
Often times this will completely arrest any further unscrupulous deeds (for at least that thief). They tend to cease and desist in attempting any further access to your identity, and move on to “easier” prey.
Your on-file credit alerts (in most cases) will only last either three months, or six months.
However, you can extend this period to several years by requesting each of the credit agencies for an “fraud alert” extension.
Important Note: Be sure to make these requests in writing, so that you receive the confirmation in writing. - In some States, you can even request that a freeze be placed on your credit history.
This prevents virtually everyone (but yourself, certain Government offices and branches, and your current legitimate creditors) from having any access to your credit history files. - Also, you can obtain a free copy of your credit history if you (even have strong reason to think that) you've been victimized by identity theft.
- Considering that it normally costs you to obtain a copy; be sure to take full advantage of this opportunity to ascertain exactly how your credit rating was potentially affected.
- Always dispute all discrepancies that are not righteously yours.
- Call the Federal Trade Commission's (FTC) Fraud Hot Line at 1-877-438-4338.
This special hotline was set up specifically to help (potential) victims and consumers identify and deal with fraud and identity theft.
Here, you can obtain the most up-to-date information concerning your Rights.
They will also supply you with invaluable (zero cost) advice as to what else you can do to guard and improve your credit score (for future reference). - Contact each of your creditors that the identity thieves either abused your accounts, or opened an account with under your name.
Have each one of them patch you through to their Security Department. - Important Note: You very well may need to fill out one or more fraud affidavits (to officially state, in your own words, that you feel a crime has been committed against you).
- Be sure to always note down who and when you made contact, throughout the entire process.
- Also, be sure to maintain a copy of each affidavit for your own personal records.
- Remember: By asking well thought-out questions, each creditor's Security Team can give you invaluable insight as to what options you have available.
And by having the records of each step that you took in dealing with the crime, not only will you be able to prove (beyond any reasonable doubt) that a crime has been committed …
You will be able to relatively rapidly re-establish your good credit. Bear in mind that it is a frustrating experience for your creditors, as well. They, very rightfully expect to be paid in a timely manner, consistent with the terms agreed to.
And because enough system abusers have unrighteously avoided paying for charges they personally ran up, some creditor companies will come off hard-nosed, as well as completely unsympathetic and somewhat cold.
Avoid taking this at a personal level, in all cases.
- Remember: Remain dignified and polite at all times, take lots of notes, accurately log all contacts made, and keep solid proof that you've been victimized.
You will eventually prevail, in clearing and boosting your good name and credit score (with patience and diplomatic persistence).
In the meanwhile, you can reasonably expect to be:
- Massively inconvenienced (such as having to make numerous contacts, close and set up accounts, etc),
- Temporarily demeaned (by being slapped with a much lower credit rating than you rightfully deserve),
- Waiting until further notice, on certain big-ticket purchases (larger ones that require their own loan).
Tip #8
Always practice safe banking, and computing.
- Be especially on your guard any time that you get an email from your bank requiring you to verify your info by clicking on a link (this is highly popular among phishing scams).
- Most unsolicited offers are from legitimate companies. However, be especially wary of any emails, phone calls, or mail advertisements that promise you a credit card (especially over the telephone, as you have no direct written records).
There are certain unscrupulous companies which will not only charge your existing credit card, and they will not even send you what was promised. - Similarly, be on the look-out for any unrecognized emails, phone calls, or mail advertisements that promise you some specific item or service for free …
“Provided that you first supply them with your credit card info (in order to receive the free offer, supposedly for “verification purposes”)”.
Check with the Better Business Bureau first, just for good measure. - Important Note: You will specifically want to inquire with the same Better Business Bureau chapter as the State that the company making the offer operates out of (which may mean a toll call).
- When sending payment via “snail” mail –
Be sure to send money orders (which are not tied to any of your account numbers), instead of personal checks or your credit card information. - If you'd rather make your payment, electronically –
Consider using a rechargeable Gift Card (with a Bank Logo such as Visa, or Mastercard – these rechargeable Gift Cards actually act as debit cards).
Always report directly to the company that issued you your credit card any payments you made for a product that did not arrive, as well as informing the company that sent the product. - If numerous attempts have been made in good faith (on your behalf) to obtain that which was promised to you (to no avail), only then should you file with that State's Better Business Bureau chapter.
- Important Note: Physical mail theft (and package misdirection) is not entirely uncommon, these days.
It very well may have been that the company righteously shipped your merchandise, but it was stolen.
Nevertheless, they should be more that willing to “go the extra mile” and make it right by you (certainly if they truly value you as a potential lifetime customer).
Catching these things early allows the credit company to either stop payment or issue a refund of your money.
Tip #9
Prove the Professional Scam Artists wrong.
Ever got a notice informing you of your new ___ million dollar Euro Lotto winnings (for which you only need to provide your highly-sensitive personal account information to collect it)?
Perhaps you've gotten an offer for a free state-of-the-art laptop computer or equally tempting piece of consumer electronics (of which you only need provide your account information strictly for “verification purposes”)…
- Stop and consider that offers sounding “too good to be true” almost always are.
- Professional Scam Artists are highly skilled in Herd Psychology, Herd Mentality Marketing and compelling copywriting.
They will deftly feed upon your deepest core desires and beliefs in order to cajole you into trusting them, based solely on the fact that you want what they offer bad enough to toss good judgment right out the window.
After all... It simply boils down to a statistical “numbers” game, and there are still yet plenty of unsuspecting victims to be fleeced. - When faced with a questionable offer, exercise due diligence and do some in-depth web-research. Contact the Better Business Bureau too.
- You might also consider directly hard-questioning the company making you the offer.
- Always make it your habit to read the fine print.
Some services or companies will have non-obvious clauses carefully woven into their contract agreement.
Often, these clauses allow them to hit you out of nowhere with completely legal “pop” fees.
Also, there may be a clause that allows the company to retract the very offer that you are interested in, without any further notice to you.
What this basically means, is that they'd have your sensitive credit or account info on file and legally get away with not even having to make good on what was originally promised in the offer.
Tip #10
Exercise due diligence.
- You are most likely to prevent problems (and report inconsistencies) by checking your credit score four times a year. This should definitely be done (a bare minimum of) at least once a year.
Once per fiscal quarter is a good trade-off, however. - This is because once per fiscal quarter is far better than only once per year, and not necessarily every single month (since too many credit inquiries – in a very short time period – will actually cause harm to your credit rating).
- Be sure to check (your credit rating) with all three of the primary Credit Bureaus. When you notice anything odd, report it immediately.
- Important Note: Ironically, errors have been found that were actually caused by Credit Bureau employees, themselves. This is doubtfully due to sabotage. Most likely they were either day dreaming, stressed out or over-worked.
At any rate, these anomalies can seriously damage your credit score and preventing (or immediately fixing) them only stands to improve your credit score.
Tip #11
Avoid Common Credit Scoring Mistakes
There are a number of things to be acutely aware of, concerning potential threats to your credit score.
The following Credit Repair Safety Tips will help you avoid the common traps that can massively increase your at-risk factor, whereby rapidly sinking your credit rating:
- Many people are not aware of the fact that in the long run, unused credit ultimately reflects as bad credit.
For instance -
Let's say that you applied for an in-store credit card three years ago, and for whatever reason …
You have done nothing with it for several months, perhaps even years …
Maybe it's that you simply just forgot all about it: - When you have credit lines or cards that you don't regularly use, you can appear as a questionable credit risk.
This is because you present the risk of “overextending” your credit. This is similar in effect, to what happens when you overextend one of your major muscle groups.
An example of this would be a particularly tough financial situation, in which you responded to by maxing out one or more of your credit lines. - Also, having multiple accounts (that you don't frequently use) increases the perception to your creditors and lenders that you will somehow forget about an older account, and thus cease making timely payments on it.
Both of the above scenarios result in a deflated credit score. - Close all unused accounts that you are not planning to leverage off in rebuilding or boosting your credit rating.
- Remember: It is far easier to leverage off your derelict accounts, especially if you have no outstanding arrears, than it is to start from scratch and have to open up a bunch of new ones.
This is covered in depth, below. - Be sure that all remaining accounts are tightly kept track of.
Also, realize, that when you close an account – the closed account still remains on your credit report record and can residually affect your credit score for quite a while into the future.
In fact, closing your unused credit accounts may temporarily cause your credit score to drop for at least a few months, typically.
This is because you will have overall higher credit account balances spread out over a smaller credit base.
For example -
Let's say you have an unused credit account with a $2000 ceiling, and you have an outstanding balance of $1000 owed on your current credit account also with a $2000 credit ceiling.
If you do absolutely nothing but simply shut down your unused account …
You have, in effect, gone from using one fourth of your available credit to sucking up a whopper one-half of your credit.
Based on our previous example, $1000 owed on a possible $4000 credit ceiling, which you could have potentially borrowed off, you'd now owe $1000 based on a possible $2000 credit ceiling!
This ultimately will cause your credit risk rating to take a serious nose-dive.
However, knowing your own personal limitation is also an important consideration:
If, in the end, avoiding the stress-inducing temptation to make purchases with credit that you know that you can't really afford keeps you safe, then go with it.
On the other hand… You may even end up determining that carefully leveraging these older (unused) accounts would actually be the best way to go. Provided, of course, that you are an inherently well-disciplined individual.
For example -
If you were only to make one or two monthly micro-purchases, very quickly and easily paid off with your previously-unused credit lines, you'd then be further building yourself a solid foundation as an attractive credit risk.
This is because you will be demonstrating your ability to comfortably manage multiple types and lines of credit, in a responsible manner.
So you'll definitely want to factor all of these things into your overall credit-building and boosting strategy.
Tip #12: Avoid too many unnecessary credit inquiries on your report.
- Every time that there is a request (from a potential Lender, Creditor, etc) to view your credit report, the inquiry is duly noted.
- If you have many inquiries on your credit report, it appears as if you are a “Loan Hound”, shopping around for several loans at once.
This is particularly true, if any of your credit inquiries are done within relatively short periods of time.
If a noticeably large number of them occurred over the last thirty, sixty, or even ninety days, especially if they're spread out in “bursts”, then it comes off as highly conspicuous.
It also projects the image of being rejected by several creditors or lenders, whether it's actually true or false.
Either of which makes you out to be an unattractively poor credit risk. - Even more alarming, is the fact that each inquiry over a certain reasonable amount, and within a certain reasonable period will adversely harm your credit score.
Unfortunately, the specifics of these details are kept well away from public knowledge. Only the upper-level management lenders and creditors know these algorithms are specifically used.
This means that you should be extremely prudent in allowing your credit report to be viewed, even when viewed by you, as each of your own request still counts as a separate and unique credit inquiry. - Important Note: If you are actually shopping for one or more loans –
Do all of your shopping around within a very short period of time (i.e. within 72 hours, less is better), then back completely off (for at least a good 90+ days).
Once again, this is where exercising your due diligence will definitely pay off for you.
The reason for this is because if a number of inquiries are made within a just few short hours or days of each other, they will typically be compared, calculated, and counted as one general inquiry.
This is provided that there is a logical congruency to your Loan Hound “shopping spree”. - You can vastly cut down on the number of individual inquiries on your account by approaching multiple lenders, simultaneously, the ones that you have already pre-researched and determined that you'd like to do business with.
Pay your due diligence forward, and research out each of your potential lenders or creditors, prior to making any direct credit inquiries.
And only then, do you approach them. Doing it this way will allow you to enjoy considerably fewer individual inquiries accessing your credit report within the same time period.
This is because you can have it already pre-arranged with release forms signed, as necessary, for all of your potential lenders to work as a Team.
Not only can this help save your credit score, it can also greatly aid you in boosting it.
This is because it shows some good faith and sincerity, on your part.
Namely, that you are deadly serious about re-paying your creditors back in a timely fashion.
Tip #13
Be wary of online loan rate and credit card comparisons.
Online credit card and loan quotes are way too easy to get. Simply type in some personal information and in just a few short seconds… Voila!
And even scarier, is the fact that you can get a quote on practically anything – car loans, personal loans, student loans, mortgages, you name it… in mere seconds.
- This free and highly convenient means of quickly acquiring loan rate quotes is unfortunately used for duping many people into comparing several companies in too short of a time period; naturally you want the best deal possible.
- Even though online quotes are still a fairly new phenomenon, the Credit Bureaus still treat each of these quote estimates as a separate and unique credit inquiry.
This means that comparing too many online quotes, will quickly drive your credit score down, just the same as offline credit inquiries. - Important Note: Though it is quite easy to drive your credit rating straight into the ground, it is immensely more difficult to get it back up again, so exercise extreme caution!
Does this mean that you should avoid seeking loan online quotes, altogether?
Not necessarily.
Obviously, generating online loan quotes is a great time-savings resource that stands to quickly assist you in getting the very best loan rates possible.
What the above information does mean, is that you should exercise discretion and due diligence, just as you would, seeking offline credit and lending sources. Research down to just a very small handful of companies.
By narrowing down your possible lenders to only a choice few, prior to making any actual credit inquiries, you'll keep yourself from harming your credit rating and ensure a healthy CRAP.
Tip #14
Closing ANY of Your Credit Line Accounts is a Bad Idea If…
- You will be applying credit (or a loan) in the near future.
Closing any of your accounts will throw up a red flag, and cause a noticeable short-term drop to your credit scores.
In the end result, you will not qualify for any good loan rates. - You do not wish to incur a disproportional debt load on yourself.
This will send your debt load balance completely off the scale – way too high.
For example –
If you owe $1000 right now (and in closing one or more accounts, would be left with only a maximum $2000 credit ceiling), then this means that you are right on the razor's edge of maxing out your credit.
This, in turn, negatively affects your credit rating.
Remember: You would want to keep your debt load well below 50%, at all times.
In the short term, closing accounts will never increase (and almost always lower) your credit score. In the long run, however, it can possibly be beneficial.
However, it is best to utilize your pre-established leverage, provided that you are highly disciplined and can resist all extra-curricular spending activities.
Tip #15: Avoid the concept that you only have three credit reports.
People speak of having some “universal” credit score. The fact of the matter is that most people have a minimum of three scores, and these scores can massively vary.
Yes, there are only three primary Credit Bureaus in the USA. However, there are also numerous smaller credit Bureau Companies, as well.
- Additionally, many large lenders have their own calculations, based on the information within your various credit reports).
- At the very least, you should make contact with all three of the major Credit Bureaus, and work on repairing or boosting each of your three main credit scores simultaneously.
- Keep in mind, that for each account that you do not need and close, you will have to eventually reapply for credit.
- Virtually all Credit Bureaus give highly favorable points to those with a long-term history in overall good standing.
This means that closing derelict credit card accounts even with arrears paid off, and a zero balance will definitely affect you adversely in the short-term, and may actually harm you in the long term, as well. - If you have too many credit lines or accounts that you aren't using, then first pay off any arrears.
- From there, start nursing them back to life by making a couple of quickly-paid micro-purchases – a couple of purchases less than $5 each month, per credit line account, will do just fine.
That one strategy, alone, will put you far ahead of the pack, in repairing and boosting your Credit Worthiness. - Otherwise, still pay off all of your arrears. Only then go to close out all of you unnecessary accounts – those that you have no desire, whatsoever, to leverage a more favorable credit rating off.
- General Rule of Thumb: Close your most recent accounts first. And then, only if you are absolutely certain that you will not be using that credit in the foreseeable future, continue to work backwards.
