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Chapter One: The Secrets Of The Credit Bureaus Top of Page What is a Credit Report? What Kind of Information Appears on a Credit Report? How Long Will Negative Information Stay on my Credit Report? How does Bad Credit Affect a Mortgage? Can I See My Credit Report? How Much Bad Credit Does it Take for Me to be Denied Credit? Who Looks at My Credit Report? 10 Favorite Myths about Bad Credit What is a Credit Report? Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with either TRW, Trans Union, or Equifax. These credit bureaus collect and maintain information on the majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations and they sell your personal information for money. They receive your personal information through the same lenders who grant you credit. The credit bureaus have agreements with each of these credit grantors that require the credit grantor to inform the credit bureau of everything that occurs in your relationship with the credit grantor. If you make a late payment, the negative credit listing is quickly reported to at least one of the major credit bureaus and is added to your credit history. Credit reports are not just a record of how you are currently managing your credit accounts. Credit reports are histories of everything you are doing with your credit now, and everything you have done in the past. The credit bureaus gather this information, list the information on your credit report, then sell it to other credit grantors whoosh to see your credit history before they decide to lend you money. The credit grantors who review your credit are especially interested in any negative credit. If you have shown any tendency to pay late, or to disregard your financial commitments in the past, the creditors' computers will immediately reject your application. Exactly like when you were in grade school, your credit report is your financial report card to the world. What Kind of Information Appears on the Credit Report? Merchant Trade Lines These include all regular credit lines, such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in the bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors. Collection Accounts When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any type of collection account, whether paid or not, is considered very negative by all credit grantors. Court Records Court records include bankruptcies, judgments, liens, divorce, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered very negative by all credit grantors. Inquiries Every time a potential credit grantor looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the number of inquiries is very few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit grantors will become nervous and you will probably be denied. How Long will Negative Information Stay on my Credit Report? The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for bankruptcy which can be reported up to ten years. These are the time limits for reporting negative credit. The creditor or credit bureau can choose to have the negative credit information whenever they please. Inquiries remain on the credit report for two years. How Does Bad Credit Affect a Mortgage? Would you believe that it is usually much harder to qualify for a gas card than it is to qualify for a home loan? Like many, you may have already disqualified yourself from buying a home due to bad credit. Little do you know, you may be considered an "A" buyer by many brokers and lenders. Even if your bad or insufficient credit disqualifies you as an "A" buyer, a home loan at standard interest rates may still be within your reach. Homes are very secure collateral. Because of this, the lenders feel more comfortable lending you money against the property. As opposed to unsecured credit lines, the lender will be primarily interested in your job security, debt to income ratio, and ability to pay a reasonable down payment. Your credit report will only represent minor role in your mortgage approval. Can I See My Credit Report? Most credit grantors are not allowed by the credit bureaus to show you your own credit report. But, you can purchase your credit report from the credit bureaus for a fee. Once you receive your credit report, you may find that you cannot read it because the information is listed in an unfamiliar code. Trans Union and Equifax credit reports are very difficult to interpret and understand. TRW credit reports, however, are quite easy for most people to read. How Much Bad Credit Does It Take for Me to be Denied Credit? As you may have already experienced, as little as one small late pay listing will bring credit denials at every turn. It is a myth that a large amount of positive credit can outweigh some negative credit. Any negative credit whatsoever will become a substantial credit obstacle in almost every case. Who Looks at My Credit Report? With the passing of each year, your credit report is used more and more often as a yardstick to measure your character. Prospective collectors will always review at least one of your credit reports before granting you credit. Today, it is increasingly common for insurance companies to review your credit before extending auto or health insurance. Many employers now check credit before they consider you for a position. If you rent, you may have already been through a credit check to determine your worthiness as a renter. (Continued in "Secrets" Ebook...) 10 Favorite Myths about Bad Credit Top of Page Myth #1 When I pay off a past-due account, such as charge off or collection account, it will show "paid" and will no longer be negative. It is practically impossible to restore your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt actually hurts your credit. Negative credit is allowed to stay on the credit report for a maximum of seven years, except for bankruptcy which may remain up to ten years. This seven year clock begins ticking on the "date of last activity," or, in other words, when the last action took place on the account. By paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off"-which will stand out as a very negative listing. Furthermore, you will create a new date of last activity on the day you settle the account. The seven year clock will reset and begin all over again. When you have outstanding debt, it is almost always prudent to seek professional aid so that you may settle your debts without further damaging your credit (see Should I Use a Professional?) Myth #2 If I succeed in deleting a negative item, it will just come right back on my credit report. The credit bureaus have very cleverly spread this myth through the news media and even government regulators. In truth, the credit bureaus will often temporarily delete a negative listing if they haven't heard back from the credit grantor after approximately thirty days. If the credit grantor reports in tardy, say after six weeks and verifies the negative listing, the credit bureau will often reinsert the negative listing on the credit report. This is often known as the "soft delete." Eventually, though, the creditor simply fails to respond to respond and the negative listing is permanently deleted. If the item is verified by the credit grantor, either before thirty days or after, the account may still be challenged again at some future time. Myth #3 There are some types of negative listings, such as bankruptcies and foreclosures, that are impossible to remove from the credit report. There is no type of negative listing that hasn't been removed from a credit report a thousand times. Some types of negative listings, such as bankruptcy or unpaid debts, are certainly more difficult to remove from the credit report, but this has more to do with the operational systems of the credit bureaus than it has to do with the severity of the bad credit item. For example, judgments and tax liens are severely negative listings, yet are easier negative listings to remove. Myth #4 Disputing the credit report is easy and any consumer can do it himself for the price of a few postage stamps. Disputing the credit report is easy. Getting results from the credit bureaus is amazingly difficult, complex, and infuriating. It isn't a coincidence that the Federal Trade Commission receives more complaints against credit bureaus than any other type of business. Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking mass numbers of lawsuits, the credit bureaus will do everything in their power to discourage consumers from making progress with their credit restoration. Restoring your own credit is like repairing your own transmission or representing yourself in court: it is possible, but you must decide if you are willing to take the time and assume the risks of doing it yourself. Myth #5 If I declare bankruptcy, I can begin my credit report all over with a clean slate. Many bankruptcy attorneys do not adequately understand of explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to the credit Establish AAA Credit in 30 Days Top of Page To work this plan you need at least $400 to begin. You should borrow this from your friends if necessary. Then go to a bank of your choice and deposit the $400 into a regular passbook savings account. Wait a few days for the account to be posted and return to the bank to ask for a $400 loan - you offer the passbook as collateral. Since the bank is already holding your $400, you go to another bank open a savings account lending you another $400 and they won't even make a credit check. Then, with your borrowed $400, you go to another bank, open a savings account, return a few days later, borrow $400 from that bank using your passbook as collateral. Then repeat the process at a third bank with your borrowed $400. Wait a few days to go to a fourth bank where you open this time a CHECKING account. Wait a few days and make a payment on each of the other three loans. A week later, make payments again on the three loans, and continue paying each week until you have almost paid off the balance. A credit investigation at this point will show you with three active bank loans (which are considered hard to get), a checking account, and a paying history for the three bank loans - with you having paid up in advance. Thus, you have AAA credit in as little as 30 days. From here you go on to apply for loans, credit cards, and other items on credit. Credit Repair Kit Book Top of Page SECTION One The Credit System - Learn exactly how the entire credit system works so that you can utilize your rights under the Fair Credit Reporting Act. SECTION Two Credit Reports -Obtaining and Translating - Learn all about the (3) major credit bureaus and how to use the provided forms to obtain your credit reports. SECTION Three Disputing - How to do it Effectively - Learn how to successfully dispute items off of your credit reports using the federal laws and the tactics of an experienced credit restoration professional. SECTION Four Specific Credit Report Items - If there is an item on your credit report you will learn more about it in this in depth section which is filled with proven effective dispute phrases for every item. Forget the theory, use the information that has been tested! (Slow pays, Medical bills, Student Loans, Repossessions, Foreclosures, Civil Judgements, IRS, Tax Liens, Child Support, Inquiries, Felony Convictions, Personal Information, Basic Credit accounts, Etc...) SECTION five Understanding Bankruptcy - You will be taught all of the essentials of bankruptcy from the common Chapter 7 through the more complex Chapter 13. Legal contacts are also provided. SECTION Six Top of Page Compromising With Creditors - Learn how to make a compromising offer to a creditor or collection agency with beneficial results to your credit report. Sample Letter included. SECTION seven Handling Collection Agencies - Learn how to deal with debt collectors on their level. You will be provided with a sample cease communication letter, so that you can immediately STOP collectors from ever harassing you again. SECTION eight Resolving Bad Checks - If you have ever bounced a check you will learn how to quickly resolve it inexpensively and without it affecting your credit. SECTION nine Debt Reduction & Lowering Your Bank Card a.p.r. - You will learn eight easy and different methods for getting out of debt. You will also learn how to lower your interest rate on your bank cards in about 5 minutes. SECTION ten Rebuilding Your Credit with Secured Credit cards - After you clean up you credit you will have to learn how to rebuild it. We make rebuilding easy by providing you with a comprehensive list of banks offering secured and unsecured credit cards. But first, we instruct you on what to do and what not to do. SECTION Eleven Important Offers & Opportunities - This section has been dedicated to help the consumer with improving their financial well being by providing a select group of offers and benefits that we highly recommend our consumers to take advantage of. SECTION twelve Top of Page Frequently Asked Questions - This is where you will find an entire series of answers to the most common and frequently asked credit questions. You name it and it has probably been asked and answered in this informative section. SECTION thirteen Cut To The Chase - We have included this section because of popular demand! Not enough time to thumb through an entire book for credit restoration answers and instructions; or just simply hate reading and want to cut to the chase, then this section is just for you. Simple step-by-step instructions and which forms to use in the book to cut to the chase and get your credit back on track, the quick way! APPENDIX This appendix is overflowing with essential information to restore your credit. You receive all the needed forms, examples, and contact information to deal with the credit bureaus, collection agencies, and creditors. You also receive a glossary of terms and an extensive list of banks offering unsecured and secured credit cards. About FICO Scores More Credit Education from our FICO partners.... Along with the credit report, lenders can also buy a credit score based on the information in the report. That score is calculated by a mathematical equation that evaluates many types of information that are on your credit report at that agency. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score identifies your level of future credit risk. In order for a FICOŽ score to be calculated on your credit report, the report must contain at least one account which has been open for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough information - and enough recent information - in your report on which to base a score. Credit bureau scores are often called "FICO scores" because most credit bureau scores used in the US are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the three major credit reporting agencies: Equifax, Experian and TransUnion.
FICO scores provide the best guide to future risk based solely on credit report data. The higher the score, the lower the risk. But no score says whether a specific individual will be a "good" or "bad" customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single "cutoff score" used by all lenders and there are many additional factors that lenders use to determine your actual interest rates. However you can now see what interest rates lenders typically offer consumers based on FICO score ranges. Other Names for FICO Scores
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