Credit Education and Repair

Introduction

Bad credit stops people from getting mortgages, car loans and credit cards. When credit can be obtained those with poor credit scores pay higher rates and fees. Most people deal with their credit report issues by ignoring them. Fortunately, fears about repairing one’s bad credit prove largely unfounded and lack of knowledge concerns easily resolve themselves with free credit repair information. By taking an aggressive approach, even folks emerging from bankruptcy can find their credit repaired back up to reasonable levels within a year or two. The following article outlines how to solve the underlying causes of bad credit, repair of a bad credit report and rebuilding credit.

Resolve outstanding issues

Before beginning a full-scale attack on one’s bad credit and repair of a negative credit report the person must first address each of the negative items and resolve them. Resolution may take many forms, which we will explore here. From a credit repair standpoint the significant starting point is "closing the book" on each of the bad credit items on the credit report. A horrible but old and closed bad credit item most often gets viewed better than an open current bad credit item. Believe it or not, a viable resolution method turns out to be Chapter 7 bankruptcy (as of October of 2005, the new bankruptcy laws have made it virtually impossible for a regular consumer to qualify for this, if you have more than $166.66 in expendable income you may NOT be qualified for it!!!).

In this context the bankruptcy paves the way to the first step of credit repair by putting an end to the old bad credit items. While bankruptcy adds it’s own significantly terrible credit reporting item, bankruptcy by definition will be "resolved" when the case ends. In the early stages of bad a credit incident the easiest and best solution can be catching up on a payment. As with many of the circumstances we will discuss the prior late payment will still appear on the credit report. The important point being discussed in this section is resolving the initial issue. Catching up on a past due payment constitutes resolution. When payments continue delinquent for a long enough time catching up may become out of reach. Negotiating a payment plan with the creditor either directly or with the aid of a credit counselor constitutes resolution of the item for credit repair purposes. Settlement of a debt, even at a fraction of the original amount due, means resolution.

Eventually banks charge off unpaid debt balances. A charge off does not mean that a forgiveness of debt occurs, it only indicates the creditor has made an accounting notation that they do not believe that the debt will ever be repaid. A charge off represents a significant black mark on one’s credit report. Charge offs can be noted in several ways. A charge off which is unresolved appears as such on a credit report. Charge offs can be resolved the same as any other debt by either paying them in full, paying them at a discount, making a payment over time or filing a bankruptcy. Aside from the obvious downside of a charge off in that it paints the debtor in a very poor light, an open unpaid charge off indicates to a potential creditor reading your report, not only was there financial trouble at one time but further more that the debtor has not made any effort to deal with the problems. A bankruptcy is certainly not a favorite resolution by the creditors but it shows that the debtors have recognized there is a problem and has taken some action. In terms of a credit report a bankruptcy is not a clean slate. A bankruptcy remains a nasty item on one’s credit report as long as ten years. On the positive side, however, the bankruptcy is a clear time or "line in the sand", from which the debtor can begin to rebuild. With open unresolved charge offs there is no such point in time where rebuilding can start. Open unresolved charge offs remaining glaring poor credit cavities on ones credit report.

To convert this concept into terminology in the medical or financial industry, the first step is to "stop the bleeding". Many people look at their financial picture and think they must cure the entire situation in one huge step. Most times this is neither something an individual with limited resources has the ability to do nor something anyone with unlimited resources could achieve. The debt and credit resolution process takes several steps. One does not go to a hospital with a gaping wound and expect to walk out perfectly cured the same evening. In the first step the doctor stops the bleeding then, as we will see, there must be time for healing of the wound itself followed by an inevitable scar and perhaps in time fading of the scar itself or cosmetic surgery.

Base line evaluation

With the negative events resolved and the worst over with, damage assessment comes next. In order to recover from bad credit and reclaim one’s good credit a careful evaluation of the credit must take place. In the United States, three major credit-reporting agencies control the credit reporting business. Each agency maintains its own records on each individual. The most comprehensive method of reviewing one’s credit therefore requires reviewing the reports from all three bureaus, which is often referred to as a tri-merge report. The debtor can order a tri-merge report on-line at www.annualcreditreport.com from any of the major credit bureaus such as Experian or Equifax for free (credit scores will be charged if requested) or request it by mail at $9.00 per report, per agency; if you want your credit scores as well, the fee will be $14.95 per agency, per report.

Throughout the country each zip code has one of the credit reporting agencies designated as the "preferred agency". It makes sense then if you only plan to obtain a single credit report you should get it from the preferred agency for your area code.

Residents of Colorado, Maryland, Massachusetts, New Jersey, and Vermont are entitled by state law to one free credit report from a credit-reporting agency per year. Residents of Georgia are entitled to two (request credit report by mail). To better understand how good or bad your credit has become and communicate the situation with potential lenders, consultants or attorneys obtaining your numerical credit scores may be helpful even if it costs a bit more.

Erroneous items

Many of those unfamiliar with credit reports share a mistaken belief that credit reports display a near perfect accuracy. In reality errors on a credit report occur with alarming frequency. Reporting agencies rarely verify or cross check information unless they have a specific reason to do so. Therefore it becomes the obligation of each individual to verify the accuracy of their own credit report and begin the process of correcting inaccuracies of the credit report. Inaccuracies on a credit report may take several forms including reporting of credit information on items which were never associated with the individual in question, items which may be related to an individual but are reported improperly or items which may be attributed to the individual but should no longer be reported on a credit report. Important personal items are often miss-reported as well including ones address, social security number and employment history. Everyone should check these personal items as well when reviewing the accuracy of the credit report. Federal law sets the limit on reporting items of negative credit at 7 years except the case of Chapter 7 bankruptcy where the limit extends to 10 years.

Credit Repair

If one discovers inaccuracies on their credit report responsibility lies with the individual to begin the corrections process. Letters must be written explaining exactly what the problem is and the remedy they feel warranted. Especially when dealing with inaccuracies individuals must remember that each credit reporting agency maintains its own database of information. Therefore one agency might report an item properly while others report it improperly and vise versa. Furthermore, if a common inaccuracy exists with multiple reporting agencies the repair process must take place with each agency reporting the item inaccurately individually. In many cases this means to remove an item that has made its way onto each bureaus agency report, an individual must write three sets of letters and follow the process through with all three different agencies in order to be sure an item comes off from the reports. Once notified of a problem an agency will contact the creditor or reporter of the item in question and seek a response regarding the accuracy of the item. Under the Federal Fair Credit Reporting Act if the agencies do not receive a reasonable proper response within 30 days they are obligated to follow your directives on proper treatment of the item. Should a proper response be received the bureau may well request more information on why you believe your position be the correct one. Many people advocate dealing with only one item per correspondence. To extend this out given earlier facts that each item must be dealt with individually with each agency, a hypothetical result for someone with ten erroneous items could mean initiating 30 sets of correspondence to correct the problem. Once you find you have completed this task follow up once again or check the report again. Just because a letter has been written and a creditor has not responded within a given time frame does not mean that the agency will remove the report without further follow up and an additional correspondence. On the other hand keep in mind changes may take a month or more to appear on a report. While the process for proper credit reporting is in place, assuring accuracy of your own credit report rests with you.

Improving ones credit score is one of the few areas of life where doing nothing can be tremendously productive. Once the items causing negative impact on the credit report have ended, the simple passing of time does wonders for one’s credit score. While the advantage of improving your score with the passing of time comes in the form of non-existent effort, the disadvantage comes in that time must take its own course. Even those with the best of credit cannot buy more time or speed the passing of time. Generally the date used to trigger the passing of time in this context starts with the date of the last activity of the account. Interpretation and misuse of this rule accounts for many reporting errors. For example if a person last made a payment on a charge card in 1995 and in 1999 a new entity buys the account and begins to report it the new entity the credit reporting bureaus may treat the initial reporting as the date of the new entity. But in reality the date of the last activity of the debtor’s point of view came in 1995 with the last payment. "Last activity" for purposes of credit reporting means the debtor’s last activity, otherwise by re-selling accounts or re-generating some new phantom activity the creditors reporting can be extended in perpetuity. To maintain the accuracy of records that should be dropped from account through passage of time, usually seven years as I referred to earlier, individuals should know the exact date of the last activity and have records for proof. The help of a Credit Repair consultant can help you in the long run. It is recommended that you allow a consultant help in the credit repair process. Professionals will keep you up to date on your credit activity and since it’s their job to fight for you, they will never forget to contact you or the bureaus if something erroneous shows up on your report.

Credit Rebuilding

I cannot stress enough the importance of staying out of trouble as a credit-rebuilding tool. Even doing nothing can help a bad credit report, but repeating poor credit habits can make things much worse. Creditors can be somewhat understanding of a bad credit incident, if corrected. This can be particularly true when the bad credit originated with problems outside of the debtors control such as emergency medical bills. Repeated bad credit behavior indicates a problem with deeper roots and looks to be a stronger indication that future credit worthiness looks shaky. If you want your credit to improve, be perfect with your new credit, as well as old credit where accounts remain open.

To accelerate the rebuilding process try to have at least three active credit lines open, and be perfect with them. Car loans or mortgages count if you still make payments, as well as old credit cards if they can still be used. If you need to obtain new credit store cards or gas cards can be easier to obtain than major credit cards. If even those fall beyond reach any one can be accepted for secured credit cards. Make sure when taking a new credit for rebuilding purposes that the creditor reports to the major credit agencies. Not all creditors submit information to the credit bureaus, and almost no debit card or check card issuers do, even ones with a MasterCard or Visa logo. Use the credit you have obtained and make your payments on time (did I mention I can’t stress this enough). On time means never being 30 days late. At fifteen days you may pay a late fee, but late items must hit 30 days overdue before they will be reported. Using credit does not mean abusing it, you need not run the card up to its limit. On the other hand, leaving the card in your wallet will not help rebuild your credit as much as positive usage.

Conclusion

No one needs to allow a bad credit report to hang over their head. Some people may feel comfortable working with credit report issues on their own while others will need help from books, web sites, professionals or you may wish to try one of our memberships at FDI. Only ignoring the situation or falling victim to a scam would be bad approaches. Individuals must decide based on their own knowledge and skills what works best for them. In any case, within a year or two of concentrated effort, even the worst bad credit can improve to very high levels. Bad credit need not put your entire life on hold in either the short run or the long run.

Click here to resolve your credit issues and manage debt at the same time.

Original by Anonymous

Financial Education

The number one reason America has gone from the number one economy in the world, to that of a nation in debt is the lack of financial literacy. The credit card companies and retail outlets have teamed up (Bestbuy and HSBC, just to name one) to keep you in debt for the rest of your life, by constantly bombarding you with advertising.

Teasing your senses with the latest and greatest that the retailers have to offer and convincing you that you can’t live without it, not to mention offering financing and "EASY" low monthly payments.

You know who pays for it in the end?

YOU AND YOUR FAMILY DO.

If you just saved your money and paid cash for it, you could be doing things freely and on your way to wealth.

Original by David Naetzel

Make your creditors leave you alone!

Chapter 7 bankruptcy

Chapter 7 often is what people have in mind when they consider ’bankruptcy’. It is liquidation bankruptcy, the intended result of which is a discharge and forgiveness of debt. It can be utilized both by individuals and businesses, and usually is the preferred filing option for those who meet the eligibility requirements.

Through filing Chapter 7, your property is liquidated and sold in order to pay off as much of your debt as possible. You will be left with enough property to be able to re-start your financial life, and some property such as clothing automatically is "exempt". Any unsecured debts that remain after liquidation generally are discharged, and you no longer are held responsible for their repayment.

In the case that you do not own much property to begin with, you may be considered a "no asset" case and your property subsequently will not be liquidated. It also is possible, in rare cases, to discharge secure debts.

Liquidation bankruptcy results in a discharge of debt so that the filer no longer is liable for repayment. Property of the filer is "liquidated" and then sold, to pay off as much of his or her unsecured debt as possible. Debts that remain after the liquidation generally are discharged.

There are certain unsecured debts that either are very rarely or never discharged in bankruptcy. Federal student loans, tax debts, and spousal or child support are among these obligations.

Chapter 7 is very popular because it does not require that you repay debt. For this reason, however, there are eligibility requirements that many people do not meet. If it is judged that your income is high enough such that you can make some payments, you may not be able to file for Chapter 7. The entire filing and liquidation process generally takes about three to six months.

Original from www.debthelp.com

Make your creditors leave you alone!