Credit Repair Secrets
How To Have (And Maintain) Perfect Credit
Roughly 1% of the population has perfect credit, i.e. a FICO score of 850 (on a scale of 300 to 850). Folks with such a high credit score all have the following traits in common:
- Between four and six revolving accounts (this means credit cards).
- At least one “installment” trade line (g., a mortgage or automobile loan) in good standing.
- Several accounts around 20 years old with a long history of positive use. (To get a score above 800, you need 10 years of positive account history.)
- Around 30 years of credit us
- No late payments (or other serious account errors) for at least the past seven years.
- Very few credit inquiries (no more than 1-3 in a six-month period).
- No derogatory notations — collections, bankruptcies, liens, judgments, etc.)
- Debt levels on credit accounts of less than 35% of their overall credit limit.
In other words: Long but sparse use of several accounts without any payment issues along the way.
Now That You Know Their Simple Secret…
Here’s what you can do to follow their lead and improve your credit and keep it stellar for life:
See what everyone’s saying about you:
Three major credit-reporting agencies are keeping tabs on what you do with your credit and finances. At least once a year (and a few months before entering into any major loan), review your credit reports from Equifax, Experian and TransUnion. You are entitled to one free copy from each bureau once a year (and more under certain circumstances).
Fix all typos and errors:
Since your credit record spans almost a decade of your borrowing activity, it makes sense that errors sometimes turn up. In fact, a recent study showed that 79% of all credit reports contain errors. Some common credit-reporting errors include out-of-date addresses, closed accounts being shown as open, credit lines not reported at the correct amount, and erroneous information.
Change your ways, immediately:
Self-inflicted credit wounds (such as a history of late payments, defaults, and irresponsible behavior in general) will fade from your record over time. You cannot wipe out accurate information from your credit report. So don’t trust any firms who offer to do so for a fee. However, it is possible to negotiate removal. Since the most recent behavior on your reports carry more weight than old news, vow that from this day forward you will be a financial upright citizen, and over time your score will grow.
Remember that a credit card is not cash. It represents money you do not have:
Even though you have been approved credit by a bank, a store, etc (Visa, MasterCard, Sears, Kmart, etc.) to borrow thousands of dollars, you don’t actually have thousands of dollars to spend, which leads nicely to the next rule…
Ignore anyone’s rules on what should be an “acceptable” amount of debt:
Your debt-to-income ratio is the measure of how much debt you carry to how much money (after taxes) you have coming in. In the world of lending, it is acceptable to carry 25% of your income in debt. That ratio is still very high. You might want to consider trying to keep your debt (including car loans) to 15% or less of your after-tax income.
Based on the above information, you can see that the trick to keeping your credit score high is to keep your spending under control, pay your bills on time, and don’t apply for credit too often. Follow these rules and your credit score will start to rise.
Dealing With Negative (But Correct) Information On Your Report (And Collection Agencies)
Despite popular belief, it is often possible to negotiate removal of negative items from your credit report. In some cases, you might not even have to pay the creditors the full amount owed*. The important thing is to be positive, be patient, and get in contact with your creditors to try to work out a deal.
If you’ve ignored (or never received) a creditor’s bills or phone calls, or if you failed to keep up with payments, your bill may be turned over to a collection agency. Keep in mind that collection agencies are hired by the creditor and their only goal is to collect the money owed (or as much of it as they can) as quickly as possible. For their efforts, they are paid a percentage of what they collect.
If you feel that the amount in question is being billed in error, you have the right to ask for proof and verification of the charges. If the charges are indeed yours, it may be in your best interest to negotiate with the collection agency. You may be able to negotiate payment of the total sum (or even a partial amount) in return for their removing their negative marks on your Credit History Report. You might be able to settle on paying a portion of your debt, or you might be able to work out a payment installment plan with them.
Collection agencies can be very aggressive when it comes to collecting money. Remember that you have the right to ask a collection agency to stop contacting you, especially if you feel harassed. Many of the letters in our software (and in this book) will help to give you breathing room while working through your plan to reorganize your finances.
How Credit Bureaus Give Consumers The Run-Around
The dispute process can be unnecessarily long and frustrating. But why is that the case? Shouldn’t credit bureaus want the most accurate information about consumers? Unfortunately, the credit bureaus are often more concerned with profitability and convenience than accuracy. This is why credit repair companies have become so popular. The majority of consumer credit reports contain inaccuracies, inconsistencies, or outdated information; but consumers do not have the information or representation necessary to rectify them. Understanding the means by which credit bureaus gather information and investigate disputes is an important part of operating a successful credit repair company.
When a consumer sends in a dispute letter, it is first sent through the E- Oscar automated re-investigation system to filter out any duplicate or “frivolous” requests. The disputes are then electronically diluted into one of twenty-six two-digit codes. That code is then shared with the credit bureau to “investigate”. The credit bureaus want to have a large quantity of data that can be sold to other organizations, so the accuracy of this data isn’t as important as the quantity.
This is a very problematic system for several reasons. First, distilling a complicated issue down to a 2-digit code is an unacceptable oversimplification. This is especially true because over 40% of disputes are dumped in to a generic “catch all” category. Additionally, 70% of disputes employ nothing in the “comments” field to provide elaboration or explanation. It is impossible for these issues to be adequately explained in this situation. As a result, consumers are often frustrated because their disputes are not investigated based on the full nature of the issue, as outlined in their original dispute letter.
Another major problem with this system is the way that disputes are “investigated”. When a consumer writes a dispute letter because information on their report is inaccurate, the bureau will investigate by consulting the same inaccurate information they have on file, thus “verifying” that the information is correct. This type of circular reasoning can be difficult for consumers to understand, because false information is verified as correct based on the same false information.
In order to get around this exasperating and inefficient system, consumers need to be empowered with the information necessary to submit a successful dispute. The best way to do this is to send back-up documentation for every dispute. This will force the bureaus to investigate your dispute beyond comparing it with their existing inaccurate information. Additionally it is crucial to hold the bureaus responsible by continually disputing requests on a strict timeline. The Fair Credit Reporting Act (FCRA) gives bureaus 30 days to investigate each request. Consumers should follow up every 40 days to ensure that their disputes are not ignored. This is why it may be necessary to submit the same dispute multiple times. Finally, if all else fails, it is possible to pursue a lawsuit against the bureau for violating the FCRA by failing to properly investigate inaccurate information.
How To Negotiate A Lower Credit Card Interest (Apr)
Credit card lenders usually charge anywhere from 0 to 20% in interest (APR), with the meanest banks charging as much as 30% (yikes)!
Most people do not realize that you can negotiate with your credit card company for a lower rate, especially if you’ve had any of your credit cards for a long time.
All you need to do is to call them up and insist on a lower rate. Shoot for 9-15%. You’ll be surprised at how easy it is to save yourself a lot of money.
Here’s how to do it:
- Start with a credit card that you’ve had for a long time. One that you have never been late on with payments.
- Look on the back of the card and dial the customer service number.
- Start negotiating. Here’s a sample script:
You: (Upbeat and polite) “I just got an offer in the mail for a new credit card that has an introductory interest rate of only 6.9%! I don’t really want to switch cards, because your service has been wonderful. But even though I’ve had your card for five years, I’m still paying a 19% rate on my balance. I’m going to have to transfer my balance unless you can lower the interest rate.”
Them: (Over the sound of keyboard keys being tapped as your credit and payment history are being examined.) “Hmmm … well, that is the standard rate… but let me see…”
You: “Of course, I understand that, but I can pay a lot less in interest if I transfer my balance. I really need you to reduce the rate to 9% or so.”
Them: “Hold on while I check with my supervisor … OK, how about 9.9%?” You: “No problem.” (Now pat yourself on the back for saving some bucks!)
This may not work as well if you’re frequently late on your payments and over your head in debt. But it can’t hurt to at least ask for an interest rate reduction. If you have a solid track record, handle your obligations and are generally polite, your lender should be willing to offer you a lower rate to keep from losing you to their competition.
Keep trying. If you don’t get what you want the first time, try to get another customer service rep or a supervisor on the line. They still won’t lower the APR? Mark your calendar to call them back in a few months.
Don’t be angry. I have found that I am far more successful in all financial endeavors when being polite. These financial “gatekeepers” have angry people calling them all day long. Isn’t it nice not to get yelled at for once? I’ve found that if you’re nice and treat them with extra respect, they often return the favor and give you a little extra care.