Does credit really matter? Why is it important to have good credit?
Do you want insurance? Your credit will be checked! Do you want a job? Your credit will be checked! Do you want a home? Your credit will be checked! You want a car (and spending over 10k) your credit will be checked!
The information on the credit report is what makes up the score! However, the credit report is created by the data within each credit bureau.
The FICO model has a credit scale ranging from 300-850, and you have the ability to gain 550 points.
35% of your score is paying on time
30% of your score is total utilization or amounts owed
15% of your score is how long you had credit
10% of your score is types of credit
10% of your score is new credit or inquiries
You have the ability to gain or lose 550 points;
192.50 points of your score is paying on time
165 points of your score is total utilization or amounts owed
82.50 points of your score is how long you had credit
55 points of your score is types of credit
55 points of your score is new credit or inquiries,
The most popular and used credit score algorithm is by FICO.
The FICO model has a credit scale ranging from 300-850, and you can gain (550 points)35% of your score is paying on time (192.50 points)30%of your score is total utilization(165 points)15%of your score is how long you had credit(82.50 points) 10% of your score is types of credit(55 points)10%is new credit and or inquiries(55 points).
CLAIM YOUR FREE CREDIT REPORT EVERY YEAR!
Did you know that under the FACT ACT you're entitled to one free copy of your credit report every 12 months from each of the three credit reporting companies (Equifax, Experian and TransUnion.). You can order online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228. You will need to provide your name, address, social security number, and date of birth to verify your identity.
Credit scores are going to be different between the bureaus, banks, score models, and companies that provide you access to your credit score and credit reports.
Two things develop credit scores: Your data at the credit bureau, and the algorithm used to score the data.
All credit scores predict your ability to repay a loan. It’s an educated guess by the report provider on the chances of you defaulting on a specific type loan within 90 days. An overwhelmingly high percentage of every credit algorithm will be your ability to manage your finances.
Important Information About Credit
4 Phases on Personal Credit
These are the 4 stages on your personal credit report
Review Credit Report
This section will go over total balances, total amounts, type of accounts ranging from real estate, auto loans, credit cards, student loans, other accounts, inquiries and negative items
This section displays public record information on you such as bankruptcies, judgments, tax liens, civil lawsuits, child support and sometimes criminal records.
This section will go into each account that makes up your credit score. Every real estate account, student loan, auto loan, credit card and negative items will be listed individually.
This section will contain your Name, Date of Birth, Current Address, Previous Addresses and possibly a place of employment.
Pull all 3 credit repots. It is best to pull your monthly 3-report file from a credit monitoring company.
Each account will include some or all of the following: Name, partial account number, date opened, high balance, current balance, type of account, date last reported, condition, payment amount, contact information of creditor and payment history for the last two years.
Items stay on your credit report 7 years plus 180 days from the date of last activity. Just because you paid your car off doesn't mean it will instantly be removed. For example; if you have a collection, and you pay it, that will start your 7 years over! So it makes no sense to pay for a charge off or collection unless it is a "pay for deletion."Meaning, if you pay for the debt, it will be DELETED from your credit report. Make sure to get all "pay for deletion" agreements IN WRITING!
Some inquiries are “Hard,” and some are “Soft”. Applying for credit cards will automatically result in hard inquiries. Too many hard inquiries will lower your score.
IMPORTANT INFORMATION YOU MUST NOT FORGET
Take out your credit reports.
HIGHLIGHTER = cause for concern
RED PEN = CREDITORS ERROR
BLUE PEN = YOUR ERROR
Audit Your Credit Report
The 1st and most important check is your personalinformation. If your name is spelled wrong, any addresses that you haven’t lived at in the last two years, if your job is wrong, we need to highlight it for correction and put a red check mark next to it.
Review your account summary, and if something jumps out at you make a note to double check the account details.
For example, if you do not own a home, but the account summary is saying that you have real estate. That’s a red flag that we need to address by finding it within the report.
When you're looking at the account details:
Is the partial account # correct?
Is the date open correct?
Is the current balance correct?
Is the type of account correct?
Is the condition correct?
Is the payment amount correct?
Is the payment history correct?
Is the last date paid correct?
Remember a public record is something that would be in the courts. A lot of people have no clue they were sued for something until it pops up on their credit report.
Hint, Hint! Because of public records, it's very important that your address is updated. People have been sued, and received a judgment on their credit because they did not receive the mail to attend court to counteract the lawsuit.
Then in your highlighted areas ask the question:
Is this wrong or negative because of them or me?
If it’s because of them, we put a RED check mark next to it because it’s inaccurate. If it’s because of you, we put a BLUEcheck mark next to it.
When You Audit Your Credit Report....
The Federal Trade Commission (or FTC for short) conducted a study and found that one out every four people had an error on their credit report!
If you applied for credit with someone who put an inquiry on your report LEAVE IT ALONE! Do not highlight it. You do not want to challenge the inquiry for an open account!
I want you to do an exercise of going through the report and adding up all the blue check marks and all the red check marks.
“I have x number of red checks and x number ofblue checks.”
X, of course, is your total number of red or blue check marks. If you have more blue than red, we know that you are blocking your blessings (causing your credit issues).
If you have more red than blue, then we know someone else is blocking your blessings (causing your credit issues).
Are the credit bureaus the problem?
Or are you the problem?
HOW TO DISPUTE NEGATIVE ITEMS ON YOUR CREDIT REPORT
1st of all never dispute something that is close to the statute of limitations, and that’s not bothering you. NEVER DISPUTE ANYTHING ONLINE. BY DOING SO YOU WILL WAIVE YOUR RIGHTS TO SUE THE COLLECTION AGENCIES.
If you’re within 1 or 2 years of the statute of limitations to be sued or to fall off your credit report leave it alone.
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What if the credit bureaus results come back and it’s verified?
If the credit bureaus send results that say they verified the debt. Send a method of verification letter or alternative to the credit bureaus and then send a “goodwill letter" sent to the "Original Creditor” or “Goodwill Adjustment” letter to the original credit requesting an investigation. However, if the item is inaccurate and they still verified it, then send a “Basic Dispute For Creditor of Furnisher” letter to the original creditor. Don’t ask for goodwill if your rights are being violated.
What if the credit bureaus do not respond to my dispute?
If the credit bureaus do not respond send a “dispute follow-up after no response for 30 days” letter via certified mail.
What if the credit bureaus ignore my dispute follow up letter?
If the credit bureaus don’t respond again, send the “dispute follow up after no response for 60 days” via certified mail.
What if the credit bureaus ignore that letter?
If there is still no resolution, send the “Intent to file a lawsuit for FCRA Violation” letter via certified mail.
What if there is no response to that letter?
If no response again then escalate your claim to the FTC, CFPB and an attorney for violation your rights.
Other questions you might have are “What if the original creditor doesn’t reply to my goodwill letter?”
If they have an online chat function on their website contact them for the next seven days via chat asking for the late payment to be removed. This works if you catch it within ten days of being late.
The 1st dispute letter is always to the bureaus, and you must wait for their response before sending anything to the original creditor.
Your letter to the credit bureaus is your “basic dispute round 1" or any of the alternatives to that letter challenging the late payment on your credit report based on factual information.
If the late payment has been negative for longer than it has been positive, ask for a deletion. If it's just one late payment out of 7 years of history ask for an update in your letter.
Do not delete 7 years of history because of 1 late payment.
There are three types of public records that can appear on your credit report. They are Bankruptcy, Tax Liens and Civil Judgments.A Bankruptcy is when took the necessary steps to legally get relieved or relief from your debts. If you obtain a Chapter 13 bankruptcy, you’ll pay some of the debt you owe in like a payment plan, and it will remain on your credit report for seven years from the filing date. If you get a chapter 7 bankruptcy, you will not pay any of the debt included in the filing, and it will remain on your credit report for ten years from the filing date. A tax lien is a public record that results when you have an issue paying your taxes. Then you have civil judgments which are results of you losing a lawsuit either by defense or by default. If you get anything in the mail saying that you have a court date. Do NOT IGNORE IT! If you ignore the official paperwork and miss your court date which results in a default judgment, you will not be happy with what happens to your credit. Here is the thing about “public records” they aren’t very public. The information is collected from the courthouse by a 3rd party representative of the credit bureaus. The credit bureaus will claim the courthouse provides them data or reports to them, but they don’t!
Step 1 is to send a letter to the courthouse asking the courthouse if they verify information with the credit bureaus. We need to send a letter to the courthouse with a self-addressed stamped envelope so that they can reply quickly. So your 1st dispute is with the courthouse. You need to send a letter to the courthouse to get them to admit in writing that they do not provide information to the credit bureaus. Send the “COURTHOUSE LETTER” to your courthouse and wait for a response before challenging with the credit bureaus.With your courthouse response in hand now you challenge the public record with the credit bureaus. Your letter to the credit bureaus is your “basic dispute round 1 or any of the alternatives to that letter” challenging the public record based on finding a fault in their information. You will always ask for the deletion!
HOW TO DISPUTE PUBLIC RECORDS
But first, let’s get into the 7 step dispute process.
Step 1. You find all the accounts that are inaccurate, unverifiable, questionable, outdated and incomplete.
Step 2. You challenge the information with the credit bureaus and data furnishers which are original collectors or debt collectors.
Step 3. Mail letter via certified mail with return receipt (if dealing with collections or original creditors), but your rounds one and two to the credit bureaus should be regular mail.
Step 4. Wait 30 calendar days from the date you sent the letter. By Law, the credit bureaus have 30 days to respond.
Step 5. If you do not get a response in 30 days, follow up with a second letter requesting them to comply.
Step 6. If no response again sends a demand letter demanding that they remove the items by law.
Step 7. If you did get a response back, but it isn’t what you expected, then you respond based on the response of the credit bureau or data furnisher.
The biggest mistake people make is sending random disputes. There is a reason we have credit monitoring and audit the credit report.
Items get removed from your credit report earlier than seven years plus 180 days when a dispute identifies a violation of your rights under the Fair Collection Reporting Act (FCRA).
A creditor can charge-off an account 180 days after the first date you missed a payment. The date you became delinquent begins the “Aging” process and once the debt has matured 7.5 years, it must be DELETED from your credit report.
The address to the credit bureaus are:
P.O. Box 740256
Atlanta, GA 30374-0256
P.O. Box 9701
Allen, TX 75013
P.O. Box 2000
Chester, PA 19016
The next thing you need to do is set your calendar for 45 days. The credit bureaus have by law 30 business days to respond once they receive the letter, so we’ll give them a generous grace period to account for the routing of our letter and the weekends.
There is no reason you should not have a great credit score within 6 months.
ADDING POSITIVE CREDIT
Within the next 60-90 days, you should have 10 brand new perfect lines of credit on your report.
Here are a few things you need to be aware of to maintain your good credit history:
Debt-to-Credit Ratio: This is simply the amount of credit you have used compared to your credit limit. It is very important to stay under 20% (most people say 30%), because anything above that will affect your credit score. So, if your credit limit is $100, you don’t want to spend more than $20.
New Collection Account: This will kill your new credit score, so don’t let this happen. If you receive a collection notice in the mail, by law, they must give you 30 days to respond before reporting it to the credit bureaus. That is your time to negotiate a settlement /"pay for deletion," or dispute it. Here is a very important tip for you;ifyou negotiate a settlement, make sure you get them to agree not to report that account to the credit bureaus and get it in writing.
Late Payments: A new late payment will hurt your score for the next two years. If you make a late payment, immediately call your creditor and ask they remove it from your record. This is called a “Good Will Correction” and it works if you have not been late too many times with them.
STEP 1: Get Credit for Paying Your Rent
One Time Registration Fee $25 Per Renter Monthly Rent Reporting Individual = $6.95 Per Month Renter w/ Spouse/Roommate = $8.95 Per Month
RentTrack can report every payment you make with your property manager so you get credit automatically each month.
after you make your first payment it can take upwards of two months for your RentTrack tradeline to show up on your credit reports. You might see it show up at different times for each bureau, but it will shortly show up on all three.
Your tradelines will continue to be updated as long as you are making your payments through RentTrack.
RentTrack reports to all 3 credit bureaus
STEP 2: Use Catalog Cards to Your Advantage
Apply for The Following Card:My Jewelers Club
$5000.00 Limit $99.00 One-Time Fee $100 Minimum Order Reports to ALL 3 Bureaus One Inquiry from Experian
Hutton Chase – offers a $1,500 line of credit that reports to Equifax and TransUnion only.
Ox Publishing – offers a $2,500 line of credit that reports to Equifax only.
Whatever option you choose to open (from $1,500 up to $4,000) you will position yourself to balance out your Credit Utilization and Debt to Income (DTI) ratio.
STEP 3: Save Money & Raise Your Credit Score!
ASelf Lender Credit Builder Accountis basically a reverse loan because when you open an account with them, you will be making payments that will go into a savings account that you will have access to after 12 months.
No Credit Check Three Loan Levels ($550, $1100, or $2200) $550.00 Minimum Loan $12 Fee to Open an Account 10.57% Interest Rate on the loan (Example: You pay $594 for a $550 CD, $1176 for an $1100 CD Funds Are Released After 12 Months Missed payments will reflect on your report.)
Strengthen & Diversify Your Credit Profile
Add Two Authorized User Tradelines:
Almost every credit card will allow the “Primary Card Holder” to add what’s known as an “Authorized User” or “Secondary Card Holder” to their account, and when this is done, the entire payment history will get reported to the authorized user’s credit report.
Find a primary account holder with good credit card history only!
Get Multiple Secured Loans
Take a small secured loan for $300-$500 from your local bank or credit union. This is an installment loan, which will give you the proper mix types of credit, and it will show a loan from a major banking institution, which looks good on your report.
Step 1: Open a bank account at a credit union, and while there, ask what the minimum amount is to open a secured loan. The minimum amount should be between $100 and $500; that’s the amount you want to place into your new bank account.
Step 2: A few days later, return to the credit union and apply for the minimum secured loan. You will be approved, because they will use the funds in your bank account as security.
Step 3: Once the loan is approved, they will give you access to the funds and a schedule to pay it back. Ignore the payment schedule and pay the loan off in full with 21 days of opening it. You have just created a positive, fully paid-off line of credit. (Rinse & Repeat)
Get Couple of Secured Credit Cards:
Go to Capital One, Discover IT, and Open Sky apply for their secured card. This is one of the best ways to get a major credit card reporting in the next 10-15 days. This is a major credit card, and it will look good on your credit report. Approval is almost guaranteed, and they have a small deposit options of between $49 of a $200. Now, at this point, your credit report should have between 6-10 lines of credit reporting.
WHEN APPLYING FOR NEW CREDIT...
You are assigned a certain number of points, based on how you answer each question on your application. Certain answers get more points;therefore, your odds of approval will increase if you use the best possible answers. The following information is what scores the highest on an application.
Annual Income: $50,000-$80,000
Time at current address: 5 Years or more
Time on the Job: 5 years or more
Checking and Savings account: Choosing both scores higher