Answering your important questions about credit repair.

What is credit repair?

Credit repair is the process of trying to improve your credit score.  Lenders use your credit report and credit score in order to judge your reliability as a loan candidate. Your credit report indicates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer, so cleaning up negative and inaccurate items will raise that score and help you save money.

How is your credit score computed?

Your credit score is determined by an algorithm developed by the Fair Issue Corporation (hence its other name of FICO score). Three corporations, called “credit bureaus”, specialize in collecting and reporting on financial histories. Those three companies are Equifax, Experian and TransUnion.  While their calculations are secret, we do know that the basic building blocks of your credit score are founded on: Inquiries, Mix of Credit, Age of Credit, Debt Ratio, and Delinquencies.

Why is a good credit score important?

A good credit score can save you thousands or tens of thousands of dollars on mortgage loans, credit card interest rates, car and student loans, and even insurance.  Many employers are even now looking at credit reports when screening applicants!

Are there quick fixes and tricks that are guaranteed to improve your credit score? 

No.  Credit repair is an ongoing process of making good choices to manage your debt load and finances responsibly, and then making sure accurate information shows up on your credit reports.  Stay far away from anyone who promises guaranteed results, quick fixes, or tricks.

So how does it legitimately work?

Credit repair is a process of identifying incorrect, misreported, and duplicate items on your report and then sending dispute letters to the credit reporting agencies to challenge the validity of negative information.  The credit bureaus are carefully governed by the Fair Credit Reporting Act that requires them to either fix the problem or respond with evidence that it’s true within a certain timeline.  Either they will fix the inaccurate negative credit item or if they don’t have evidence or don’t respond in time, the item will be removed.  Either way helps your credit score to rise to where it should be. 

Are there really that many errors on credit reports?

You’d be shocked!  The credit bureaus are in the business of selling information first and foremost so duplicates, wrong addresses, misspelled names or aliases, identity theft, and old items that should have fallen off are all examples of the common mistakes that show up.  According to the Consumer Data Industry Association, a trade organization for credit reporting agencies, credit repair disputes account for no less than 30% of disputes received by the credit reporting agencies. 

What are credit repair companies?

Credit Repair companies act as advocates for consumers, doing the hard work and exercising the knowledge to dispute and remove negative items.  Credit repair companies work for the client who hires them for their services. 

Why do so many credit reporting companies have a bad reputation?

Unfortunately, it seems there are a lot of bad companies and services in the realm of finances.  Far too many credit repair companies make claims that are not true, offer guarantees and promises just to collect large fees, don’t represent their clients to the best of their abilities, or claim legal representation when none exists. 

Can you try to do it yourself?

Yes, you can try to repair your credit yourself and write dispute letters to the credit bureaus. 

Why would you hire a credit repair company?

“Trying” it and successfully obtaining the desired outcome are two different things.  A good credit repair agency has the knowledge, experience, manpower, systems, and dedication to achieve the best possible result. 

Think of it like this:  Do you do your own taxes?  Trade your own stocks?  Maybe you do, but most people chose to hire the best possible professional because it’s important enough to get right. 

Other than dispute letters, what else should be included in a responsible credit repair plan?

First, devise an action plan for things you can do to maximize your credit profile; simple adjustments to the way accounts are being reported can have a massive impact on your overall credit grade, and profile.  Next, review your credit line by line to identify items that are potentially reporting incorrectly, items that are outdated, unverifiable, misleading, or questionable.  Assess all of your debts and loans to see what is helping you and hurting you, not only in regards to credit score but in the context of your whole financial picture.  Last, there should be continuing education so you’re never left operating in the dark as you make important decisions about your credit score in the future.

What assurances do you have when you use a credit repair company?

Credit repair companies are prohibited from making promises or guarantees.  They also cannot charge customers until after services have been performed.  Make sure they disclose that you can try to improve your score yourself and follow all state and Federal laws and regulations as laid out in the Credit Reporting Organizations Act.  Good credit repair agencies let you log in or check in at any time to track the exact progress of your disputes and your file.  You will have direct access to a professional staff member who answers all of your questions and proactively coaches you. 

How do you make the best-educated decision and find the right credit repair company?

Check in with the Better Business Bureau to make sure a credit repair agency is registered and in good standing with a good rating, or else do not hire them.  You can also ask them for a statistical range of past results.  This is not a guarantee that you will receive the same thing, but a reasonable range of expectations.  Make sure your credit repair company has a physical brick and mortar office you can walk into if you wish and professional counselors you can call any time.  Ask them point blank if all of their practices are ethical and legal and request documentation in compliance with the FTC and CROA.   

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Do you have any questions or would like more information about credit repair?  Feel free to contact us for a complimentary consultation.  

10 Urban myths about credit score debunked.

Did you know that if you drink Coca Cola and eat Pop Rocks at the same time, your stomach will explode?  It happened to Little Mikey – you know, “Mikey likes it” from the old Life cereal commercials?

And that if you play the Beatles album “Helter Skelter” backward you’ll hear messages from the devil?  (On a related note, I tried listening to Britney Spear’s latest album forward and it sounded like the devil.) 

Or, how about this one…there was this family who drove down into Mexico for their family vacation and found a cute little scraggily street dog and took him back home with them.  When they got back and took the dog to the veterinarian, the vet told them that the dog was in fact a giant sewer rat.

Ok that one is actually true - my cousin’s friend’s brother’s auto mechanic heard it from his ex-girlfriend who worked at the vet’s office - but the rest of them are just urban legends, myths that float around but no one really knows where they came from – or if they’.  Today we’re going to cover a few urban myths that are still prevalent, but these rumors have to do with your credit score.  I know, not as exciting as a sewer rat as your family dog, but debunking these myths about your credit score will probably be far more helpful.

Here are 10 Credit Score urban myths debunked:

1. Previous occupants of your home could affect your credit score.

Your home address has nothing to do with your credit rating or credit score, and certainly no one else’s name, social security number, or credit history is tied to your own credit report through your address.  The bureaus do keep track of your current address, but that’s to track stability, not to conjoin you to anyone who’s lived there before.

2. Credit bureaus make lending decisions.

Credit bureaus like Experian, TransUnion, and Equifax don’t ever make decisions about if you get credit.  They do, however, collect data about your use of debt and compile a credit score to share that with banks, lenders, or retailers who are considering lending you money so they can better gauge risk.

3. If you don’t use your credit or don’t hold debt, your score will be good.

Not true – if you have blank credit history, that only shows future lenders that you don’t have an established history of managing debt responsibly and paying on time.  Sometimes, no credit history can be a big negative than a marginal credit score!

4. You could be on a credit score blacklist.

There’s no such thing as a list of people who are blackballed from getting credit.  Each company or bank makes their lending decisions independently based on the data in your credit history, your score, and other factors like income.  Credit agencies also don’t even register personal data like religion, race, gender, or political orientation – it’s just the facts.

5. You only have one credit score.

You have three credit scores because there are three major credit bureaus and they each have different algorithms for calculating your credit score.  There are usually similarities but each bureau reports independently so it’s important to monitor and manage each one.  Equifax may have something reported incorrectly while TransUnion has it right, so your scores will vary based on errors, duplicates, and their formulas. 

6. Items from your credit history stay with you forever.

Missing a payment or even something as big as a bankruptcy won’t haunt you forever.  Everything that posts to your credit report, positive or negative, will remain for approximately 6 years before dropping off for inactivity, depending on what type of item it is and the level of activity.

7. You should pay off and close your credit lines to increase your score.

It seems like common sense – pay off a credit card to $0 balance and close it down and you’ve just demonstrated financial responsibility so your credit score will go up.  Unfortunately, that’s not the case – what you just did was erase an established history of responsible payments.  Credit bureaus are all about assessing your risk, and the more evidence that you can manage your existing credit lines correctly, the better.  Some old accounts are worth closing, but for your oldest accounts, (length of history matters) you should pay the balance down below 30% of the total available credit limit and keep making monthly payments to improve your score.

8. Checking your credit will really hurt your score.

We’ve all been tackled by a concerned friend as they scream, “OMG! Don’t let them pull your credit – it will ruin your score!” at the car dealership.  (No?  Just me?)  But in reality, having someone pull your credit won’t harpoon your credit rating.  Sure, you want to be careful about who pulls it (rent-a-centers, retail credit lines, etc. are seen as irresponsible use of credit and therefore higher risk) and any grouping of frequent pulls could be seen as a desperate grab for credit to the bureaus, but having your credit pulled to shop for a home loan, a car, or even search for a good new credit card won’t by itself hurt your score.

9. Co-signing on a loan won’t affect your credit score.

You may think you’re “just” the cosigner, but what you did when you signed the paperwork was assume full responsibility for the debt obligation.  That means the trade line will show up on your credit report and you’re 100% accountable to make the payments if the first signer or loan holder defaults.  Sorry, but you can’t swim without getting wet, and if you’re a cosigner you’re on the hook for repayment of the debt. 

10. You automatically get a joint credit report when you get married.

Getting hitched means sharing almost everything, but merging credit scores is not one of them.  Different states have different rules for obligation of your marital partner’s debts but you’ll always still have your own separate credit report, not one that is combined between husband and wife.