Credit Repair Secrets #1

Credit Repair Secrets #1

Secret #1

Divorce Settlement

It really doesn’t matter who the court says should pay the debt; the lender will hold only the original signer responsible for the payments. Instead of having a spouse made responsible for your debt, insist that the payments be made directly to you so you can control them and make sure the payments are made on time.

Secret #2

If you are offered a free “skip payment” offer around Christmas, ignore it and make your payment as originally agreed. Though you wouldn’t expect it, by taking them on their offer, you may be inserting a negative item into your payment history. You can’t assume that the missing payment will be ignored by the credit reporting bureaus per their offer.

Secret #3

Your credit report will always have at least some minor problems on it. Some people are stunned to find that major negatives that were certain were on their reports, we absent. It can and does happen but unfortunately you can’t depend on such helpful slip-ups.

Secret #4

Close inactive credit accounts several months before you apply for a mortgage or other large loan. The fewer accounts you have open the better. Think of it this way – the more accounts the more opportunities there will be for mistakes. But here is the real secret: any late payments will remain on your credit record for from 12-36 months provided you keep the account open and active. If you close the account, those late payments will stay on your record a full seven years! Be careful to only close those accounts that are problem free. Those will late payments should be kept open until all late payments have been retired.

Secret #5

If your mortgage is sold off to a different mortgage firm, check your credit record two or three months later to be sure the switch hasn’t been misinterpreted by the credit reporting agencies. If not correctly recorded you may appear to be carrying twice as much debt which can severely damage any attempt to secure credit in the future.

Secret #6

If you check your credit report prior to applying for a mortgage and find an entry that is incorrect, you might want to consider attaching a letter to your credit application warning the lender that incorrect items may appear on your report.

Secret #7

Avoid using independent credit reporting sites. One site was widely promoted on TV claiming you could get a single report from them that would include information from the three major credit reporting agencies. The ad went on “What’s the catch? There is no catch!”

Well, there was a catch. When you requested their “free” report, you were automatically enrolled in an annual credit protection service. This scam eventually came to the attention of the Federal Trade Commission who is now investigating them. Only deal with directly with the three largest credit reporting agencies.

Secret #8

Never co-sign for some else’s loan. When your friend doesn’t pay – you’ll get stuck holding the bag and you’ll lose their friendship along with your money. It’s a bad deal any way you look at it.

If you ever have to consider whether or not to co-sign for another, you should only go forward with the arrangement if you’re fully prepared to pay the entire balance yourself. If you’re unwilling or unable to cover the debt, you’ll also lose your good credit rating in the bargain.

Secret #9

When reviewing your credit report you might notice debts that seem unfamiliar. Many stores will be listed under corporate names of other divisions of the firm. “Larry’s Records and Music Store” may appear as “Acme United, LTD” on your credit report. You may have to make a phone call or two to uncover the name of the real account holder.

You can also use the account numbers to resolve any unknown accounts.

Secret #10

There are three main kinds of credit reporting errors. First you have the random mistakes that pop up from time to time. A quick phone call can usually iron out these problems.

Then you have misdirected information that’s lost it way. Someone else’s late payment may show up on your report just because their first name, middle initial and last name are the same as yours. Call the credit reporting agency and insist they check the social security numbers. This will usually straighten things out.

But the worst kind of problem has to do with erroneous information provided by creditor firms. If you call a credit reporting agency and request that they verify the information, the creditor will quickly confirm its validity – despite the fact that the information is in error. You’ll need to deal directly with the creditor if you’re to have any hope of clearing things up.

Secret #11

If you’re about to apply for a mortgage and suspect that you’re credit rating isn’t all it should be – don’t despair. Mortgage brokers have professional credit repair operators that only they can use. If your application looks good but falls a bit short on credit rating, it’s common practice to bring a professional credit repair operator into the deal to get you in under the wire.

These credit repairers are effective but unfortunately you can only access their services through your mortgage lender. Keep this fact in mind and should your application run into a roadblock, be sure to ask if the lender can call in the pros.

Expect to pay for the services of a professional repairer but you’ll find their services affordable as in most states they’re not allowed to charge up front fees. You pay as you go and are only billed for actual services rendered.

Secret #12

Car dealers very often make more money on your car loan than they do on the actual sale of the car. Should you ever be fortunate enough to buy a new car for cash, you’ll notice the scowl on the salesman’s face when you tell them you’re paying cash and expect a cash discount.

Secret #13

If you credit history is somewhat damaged, you may still be able to obtain a home mortgage but you may run into problems financing a car. Why? It’s because cars are mobile and houses aren’t. A mortgage lender can always find you for the simply reason that you can’t move your house. Hence it’s easier to finance real estate then wheels.

Secret #14

Car dealers love to lease cars to individuals but for most buyers it’s a bad deal. Through a lease he can get you into a much more expensive car than you could afford if you were buying in the traditional way.

But there’s a very common leasing scam out there you must avoid. When you come to turn in your leased car at the end of the lease period, you’re shocked when they hand you a huge repair bill for “exceptional damage” even if your car looks show-room fresh.

One friend ran into this trap. When he tried to turn in his leased car he was promptly told that he would be required to pay for over $4,000 of repairs before the car could be accepted.

But here comes the scam – if he signs another lease for a new car of the same model, they would let him off the hook and waive the entire repair fee. This is how they get people to lease car after car.

Another scam involves mileage charges. You lease the car for a very attractive monthly fee. But when you read the contract you’re shocked to see that you’re only allowed 10,000 miles per year. Every additional mile will cost you a whopping twenty five cents! This can really add up as most Americans now drive 15,000 to 20,000 miles each and every year.

Leasing is very much like renting a car. You pay a fee and get to use the car for a specified period. You never actually own the thing. This leads to another problem. The leasing company that actually owns the vehicle will insist that you cover the car with high-limit auto insurance. If there’s an accident they want to know they’re fully protected against any expenses. Of course, you are stuck with the bill on all this insurance.

There is one exception to the leasing prohibition. If you own your own small business you may be able to deduct the lease fee from your taxable income. Ask your tax advisor for the details.

Secret #15

Same-as-cash purchases often seem attractive to consumers. Through them you can purchase a major appliance and defer payment for anywhere from several months to several years with no interest charges.

These arrangements are fraught with potential credit problems. First, many of these programs require that the consumer make small monthly payments. Though the amounts are seem insignificant, they’re a trap. If you make even one of these payments late, substantial late fees kick in.

Then there is the potential damage these programs can cause to your credit record. Major retail stores often use less reputable third-party finance companies to manage these systems. Without knowing it you end up with the name of the third party firm on your credit report. As a result, in the future you may have more of a problem obtaining credit from more mainstream lenders.

Secret #16

When your total debt payments equal around 20% of your net income, creditors will become much less inclined to offer you additional credit. Anything over 20% is seen as excessive.

Though there are exceptions. Some “sub-prime” credit card companies make a business out of approaching over strapped debtors offering credit at incredibly high interest rates. Even having one of these cards listed on your credit report will damage your future credit rating.

Secret #17

Think the interest rate your credit card company is charging you is too high? Here’s an effective way to immediately and permanently lower your rate to a more manageable level.

If your credit rating is still relatively sound, you should be receiving a steady flow of new credit card offers through the mail. A new account complete with a new outstanding balance will do your credit rating no good. But if you can get your present credit card firm to lower their rate, that’s a good thing.

When you receive an offer for a new credit card at a rate significantly lower than your current card, call your credit card firm and simply and directly tell them about the new offer. Tell them that you’re considering obtaining the new card and using the tempting balance transfer option they’re offering.

The customer representatives you’ll be talking to often have some latitude on these matters. A moderate reduction should be easy to obtain. If not, thank them for their time, hang up the phone and go with the new card.

Secret #18

If you’re carrying a good deal of debt, you may be receiving a constant flow of new card offers. They may be offering zero percent deals anywhere from three months to a full year in length. Wonderful you think as you review them.

It may appear tempting to keep transferring your outstanding balance from one card to another. If you’re clever, you might be able to keep your balance in zero percent cards forever!

Problem is – credit reporting firms hate people who switch too much. They have a name for such people – “Credit-jumpers”. This is a label you don’t want. Remember, the credit grantors are in this to make money. Anything you do that costs them a dime is to them a major sin that must and will be punished.

Secret #19

Here’s an old-fashioned tactic that still works. Before applying for a mortgage, trot down to your local bank and open a traditional savings account. It’s a bad bet as the interest rate you’ll get is miserably low. But many mortgage lenders still ask if you have such an account as its existence tends to impress lenders. Only someone who is careful with their money would have a savings account. So open one not for investment purposes but instead for the image it creates.

Secret #20

We Americans are a positive lot. When we apply for a mortgage we tend to end up buying a home that is the most home we can afford according to a formula provided by out lender.

After approval your mortgage lender may say something like “you’re approved for anything up toe $400,000”. They may issue you a letter confirming your access to funds. The realtor you choose may require a copy of the letter. (They want to know in advance that you’re qualified to borrow before they spend their time showing you properties)

Problem is – most of us will either go for the max when looking at homes or will let our realtor push us into a larger property than we really need. You should never buy more home than you need – just because you can.

Instead buy only what you need. I know – those his and hers Jacuzzis in that $400,000 home look appealing but if you only need a $300,000 home – skip the Jacuzzis and buy a home you can more easily afford.

Secret #21

Accumulate some cash as an emergency fund. Should you lose your job or become ill, you’ll need money to keep up with your normal living expenses. In today’s world you may find that your access to credit becomes rather limited the minute your earning potential falls. The credit you have now may vanish should the sharks that run your credit card firm finds out you’re no longer the golden goose they thought.

Some people are opening up equity lines of credit well in advance of any financial problems. Should your situation sour you’ll have access to funds when other sources have dried up. But if you wait until you’re in hot water to apply you may find your application denied or the interest rate increased.

Secret #22

Good debt allows us to purchase assets that steadily increase in value and as a result we become more and more wealthy. Real estate, antiques, rare coins are all good examples.

Bad debt threatens to destroy our financial health by leaving us in debt for items that decrease in value. Automobiles are the clearest example of this negative effect. From the moment you buy it, its value tumbles.

When you consider taking on additional new debt, consider the future value of the asset in your calculations.

Secret #23

Mortgage lenders and realtors are fond of repeating the mantra that the interest portion of your mortgage payment is tax deductible. While everyone knows this fact, it’s often an illusion.

The standard deduction has been increased to the point that many tax payers find it more profitable to take the standard deduction and ignore the mortgage interest rate deduction.

Check with your tax advisor before assuming that your mortgage interest will be deductible.

Secret #24

Millions of young Americans are struggling to pay their student loans. But with interest rates so low, can’t you just refinance the loan and trim your payment?

The answer is yes and no. Before you jump on a refi at a lower rate, be sure to ask how many times you can perform a refi. You may find that you’re limited to a single switch. If so be very sure you’re making the right move as it may be your last.

Secret #25

In the credit world there are two classes of lenders. First you have the reputable firms with household names. They’re big, they dominate the market and their names look good on your credit report.

Then you have the sleazier side of the industry. You have finance companies, rent-to-own stores, payday loan firms, check cashing operations and the lender of last resort – the pawn shop.

This class of lender knows that their customers are desperate and will fully exploit their vulnerability with sky-high interest and other charges. It’s not at all uncommon for customers to pay 200-300% annual interest rates for short term loans! They are often able to keep their customers locked into debt while they ruthlessly exploit them. These companies are nothing more than legal loan sharks.

If you want to protect your credit rating you should carefully avoid doing any business with these less than reputable outfits. Most reputable lenders will look down their noses at loans from such places. They will assume that you resorted to borrowing from them only because you couldn’t obtain less expensive credit from a more mainstream source. That creates the impression of desperation which you’ll want to carefully avoid. Whenever possible stick with larger more respected lenders.

Secret #26

Lenders usually use one of the three major credit reporting agencies. It’s not against the rules to ask your lender which firm they’ll be using when they evaluate your loan. Be very sure that agency will provide a clean report when asked.

Secrets #27

Your FICO score is determined by considering a combination of the following factors:

Your Income

Your Assets

Length of employment

How long you’ve lived at your present address

Past payment history

Scores run from 300 to around 850. To get above 750 you’ll need a completely unblemished payment record with no problems of any kind. The national average score is around 730. Anything above 730 is considered a “good” credit rating.

Your FICO score is used by lenders to determine if you are credit worthy or not. And if you’re approved it will also be used to determine the interest level you’ll pay. So it’s vitally important that you learn your score and make sure it isn’t damaged by errors.

www.myfico.com

Here you can obtain your FICO score for a modest fee. You’ll get three different numbers one each from the major credit reporting firms.

The three numbers will vary a bit and that’s normal. But if one score is too low, get a copy of that report and check it for errors.

Secret #28

Always make your mortgage payments on time. Most homeowners figure that since they don’t have to pay an additional late payment until the 15^th of the month, they can wait until the 13^th to make their payment.

Though the late fee doesn’t kick in until mid-month, it’s officially due on the first. If you want a strong credit rating you should keep this fact in mind. Though your lender won’t report payments made on the 13^th as being late, you can bet they will notice and record your payments on their own records which may come back to haunt you at a later date.

Secret #29

Some people feel that once a negative item has appeared on their record their credit is trashed and any additional negative items won’t matter much. Nothing could be further from the truth. Each additional black mark makes credit more difficult to obtain and at the same time more expensive.

Secret #30

Most people feel that when a collection agent calls, they have no option but to pay. In fact, you’ll have more options than you might suspect.

First, consumer laws allow you to ban them from every calling or contacting you again. While this is true, it doesn’t solve anything. Should you ban a collector from calling you – the next phone call you’ll probably get will be from an attorney.

Second, if you ask (and few people do) you may find that collection agents have much to offer. Many will offer to remove late payments from your credit report at the major credit reporting agencies in return for full payment.

Converting late payments to current payments is called “re-aging” and it’s a common practice in the industry so don’t be afraid to ask.

One small wrinkle though – should a creditor agree to correct negative items on your credit reports – be sure to get you new agreement in writing. That way should the creditor attempt to cheat you by refusing to make the promised changes after you’ve made payment – you can get the items removed yourself using the new agreement later.

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