Have you ever wondered what companies send you when they claim you can erase your bad credit overnight? How about those ads that say you can get any major credit card 100% Guaranteed regardless of your credit?
Ads abound almost everywhere (online and off) selling books, systems and secrets to help you fix your credit in a hurry. Many of these programs have claims, which read like the covers of supermarket tabloids, "In 3 hours my credit score jumped from 580 to 676!"..."Erase bad credit and smash your debts with just 2 Magic Letters!"..."Create a completely new credit file in 24 hours!" Are these types of claims ALWAYS too good to be true? The answer is "Yes and...no."
While many people would love for you to believe that the only thing that can fix bad credit is time; in reality… nothing could be further from the truth. The fact is, time is only one factor which will fix a credit report (but it's a far cry from being the only factor). How can I back this up? Easy. Under a consumer protection law known as the Fair Credit Reporting Act (a.k.a. the FCRA), the only negative information which can remain on your credit report is not what is accurate… but what can be proved as such. What's this mean to you?
It means any negative item on your credit report can only remain there if it is accurate and CAN BE PROVED AS ACCURATE under the guidelines of the FCRA. This indisputable fact presents consumers with both good news and bad news. The good news is that through the FCRA, your credit score can most likely be improved dramatically in a very short period of time with only a modest amount of effort on your part.
The bad news is that while the actual "work" will take very little of your time, it is vital that you have good information on "how" to go about it. This is the bad news; 9 out of 10 courses on restoring your credit will do nothing more than lead you into a snake pit. This is because they provide you with outdated "Boiler Plate" dispute letters which are rarely effective. These are nothing more than form letters and… quite frankly (more bad news) the Credit Bureaus and Creditors will laugh at you if you try to use them.
While I agree with the Federal Trade Commission (FTC) that "Anything a Credit Repair Clinic can do for you legally, you can do for yourself at little or not cost"… the key element you need for success is the latest inside techniques and procedures to get the results you want. These involve strategies known as "Proof of Contract", "Constructive Notice", "Challenge of Procedure" or "Restrictive Endorsement" and many others.
All these terms may "sound" impressive, but they are really quite simple. In the end, it is nothing more than a method of communication which exercises your consumer protection rights, gets the results you want, and raises your credit score. Even more impressive, once you learn how simple it can be by doing it for yourself, you will find there is a fortune to be made doing it for others! Either way, it all starts by requesting a free copy of your credit report by visiting: www.AnnualCreditReport.com.
The TRUTH About Credit Repair
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about Scott Bilker and DebtSmart can be found in the online media kit.
Taking the right little steps can fix credit in a big way.
Everyone should care enough to improve their credit score. Lenders use this three-digit number to decide whether to give you credit, and at which interest rate and terms. Insurers, utility companies, cellphone companies and even landlords also use credit scores.
The FICO score is the most commonly used credit score. It ranges from 300 to 850. You can get your credit score for a fee from myFICO.com — the consumer division of FICO — or from the three credit reporting agencies, Equifax, Experian and TransUnion. And several credit card companies give cardholders free access to their FICO scores.
You also can get a version of your score for free from a website such as GOFreeCredit, which offers a TransUnion credit score as part of a seven-day trial of GOFreeCredit’s credit-monitoring service.
If your score is low, you might have a hard time getting credit. Even if you do get credit, you likely will pay higher rates because you are considered a risk. But you don’t have to settle for a low score. “There are many strategies to increase your credit scores — some with limited effectiveness and others with much more,” said John Ulzheimer, a credit expert formerly with FICO and Equifax. “The first thing to do is to be realistic with your expectations.”
For example, if your score is low because you filed for bankruptcy this past year, there isn’t much you can do except let time pass, because it will stay on your credit report for seven to 10 years, Ulzheimer said.
But if your credit score drops for one of many other reasons — such as racking up debt over the holidays, opening several new credit accounts or making other similar credit mistakes — you can take these steps to build credit and improve your score in 2017.
1. Check Your Credit Report
Get a free copy of your credit report from each of the three credit reporting agencies at AnnualCreditReport.com. Your score is based on information in your credit report, including:
How much you owe
Your payment history
The type of credit you have
The number of accounts you have
How long you’ve been using credit
Note what you find when looking over your credit report. Do you see missed payments listed on your report? Have you maxed out several credit cards? Such factors can lower your score. Your score might vary among the credit bureaus because they use different formulas to calculate credit scores, and their reports might have differing information about your credit, according to AnnualCreditReport.com.
The average FICO score in the U.S. is 699, according to the most recent data from FICO. Lenders have their own criteria for determining a “good” score, but FICO classifies scores of 740 to 799 as very good, according to myFICO.com. A score of 800 or above is considered “exceptional.”
When you review your report, make sure all of the information is correct. An error on your report can affect your score. If you find a mistake, AnnualCreditReport.com recommends contacting the credit bureau that issued the report, or reaching out to the business that provided the information to the credit bureau so you can dispute the inaccurate information.
2. Avoid Making Late Payments
Payment history accounts for 35 percent of your FICO credit score, according to myFICO.com. “The best way to avoid a low score is to never give any creditor a reason to report you as being delinquent on your obligations,” Ulzheimer said.
You have 30 days after the due date before a lender can report you as being late to the credit bureaus, Ulzheimer said. To avoid paying bills late or missing them altogether, use an app such as Mint Bills to alert you when due dates are approaching. If your score has slipped because of late payments in the past, making on-time payments going forward will help boost your number, according to myFICO.com.
If you typically pay bills on time but were late just once, ask your credit card company or lender to reach out to the credit bureaus and remove your delinquent payment from your credit report.
3. Pay Off Big Credit Card Balances
If you racked up debt during the holiday season, paying it down in the new year can improve your score. “One of the fastest ways to bump up your credit scores is to reduce balances on credit cards,” said Gerri Detweiler, head of market education for Nav, a credit resource for businesses.
Detweiler said debt usage accounts for up to one-third of your credit score. “Some consumers can see their credit scores improve by 10 to 50 points or more in as little as a month just by reducing their balances,” she said.
Credit-scoring models compare the balances on your lines of credit to your credit limits. Detweiler said consumers with the best scores tend to use less than 10 percent of their available credit.
Did you get a big tax refund in 2016? If so, it is an indicator that you might find extra cash in your budget in 2017 to pay down credit card debt. A refund signals that you let Uncle Sam withhold too much in taxes during the year. To adjust your withholding, file a new W-4 form with your employer to claim more allowances.
If you received the average refund of $2,777 in 2016, adjusting your withholding could add about $231 to your bottom line each month in 2017.
4. Eliminate Small Balances
If you can’t pay off — or even just pay down — credit card debt right now, Ulzheimer suggested another option. “If you’re able to eliminate the lower ‘nuisance’ balances, then your scores will also improve even if you still have other cards with balances.”
For example, perhaps you opened retail credit cards during the holidays to get discounts on purchases. If so, you might have multiple accounts with fairly small balances. “The more you have, the more problematic it is for your scores,” Ulzheimer said.
So, you can make paying down small balances a priority while paying the minimum on cards with bigger balances. Start with the smallest balance by paying as much as you can toward it each month until it’s paid off. Then, move to the card with the next highest balance and keep repeating the pattern.
5. Pay Credit Card Bills Early in the Month
Even if you start paying your credit card balance in full each month in 2017, your score might not rise as much as you expect. That’s because making payments at the end of the month might work against you.
“Most issuers report balances when the billing cycle ends before you make your payment,” Detweiler said. “That means the reported balance may be higher than the balance you end up with after you’ve made your payment.”
In particular, this can impact consumers who use their credit cards for everyday purchases to earn rewards points and carry higher balances as a result. So rather than wait until your bill is due, Detweiler recommends paying earlier.
“You can make an extra payment before the billing cycle closes to reduce the balance that will be reported to the credit reporting agencies,” she said.
6. Don’t Close Accounts After They’re Paid Off
It’s a mistake to close credit card accounts after you’ve paid off balances — even if you don’t plan to use those cards again. “There’s really never a good reason to close a credit card account because of the possible damage you can cause to your scores,” Ulzheimer said.
Having cards with zero balances strengthens your credit utilization ratio because you haven’t used any of your available credit on those cards. If you close those accounts, you lower the total amount of your available credit. Such a move can lower your credit score if you carry balances on other cards.
For example, let’s say you owe $500 and have a total credit limit of $2,000 across all cards. Then, you close a few accounts, and your available credit drops to $1,000. Now, you’re using 50 percent of your available credit instead of 25 percent.
“Once your cards have been paid off, it’s a good idea to leave them open and even use them sparingly from time to time so the issuer doesn’t close them due to inactivity,” Ulzheimer said. “Having unused and open credit cards on your credit reports is helpful to your scores.”
7. Use a Personal Loan to Consolidate High-Interest Debt
You might be able to improve your credit score by taking on new debt to pay down existing debt. “If you can’t afford to pay down your high credit card balances, another way to boost your scores can be to use a personal loan to consolidate,” Detweiler said.
Opening a new line of credit can lower your score, according to myFICO.com. However, a personal loan for a fixed amount is typically reported as an installment loan and is not included when calculating the credit utilization ratio, Detweiler said. Transferring debt to a personal loan often can improve the credit utilization ratio — and improve your credit score.
Of course, you need a very good credit score to get the best personal loan rates. But even if you can’t get the top rate, you still might get a personal loan rate that’s lower than the rates on the credits cards you want to pay off.
8. Get Tax Liens Off Your Credit Report
Fail to pay your taxes, and the federal government will file a tax lien against you. “Tax liens are one of the most seriously negative types of information on credit reports,” Detweiler said. “Normally, they stay on credit reports for seven years once paid, and indefinitely if unpaid.”
Paying your tax bill in full is the best way to get rid of a tax lien, according to the IRS. However, if you can’t afford to pay all of what you owe, take advantage of the IRS Fresh Start program, Detweiler said. If you meet the qualifications, you might be able to get the lien removed from your credit report even before your tax bill is paid off, she said.
“This can raise your credit scores by 50 to 75 points or more,” Detweiler said. “Some taxpayers have found this to be a relatively fast process — a month or so — while others have reported it took a few months.”
CFPB Orders TransUnion and Equifax to Pay for Deceiving Consumers in Marketing Credit Scores and Credit Products
Credit Reporting Companies Misstated the Cost and Usefulness of the Credit Scores and Products They Sold, Lured Consumers into Costly Recurring Payments
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Between them, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. TransUnion and Equifax collect credit information, including a borrower's payment history, debt load, maximum credit limits, names and addresses of current creditors, and other elements of their credit relationships. These generate credit reports and scores that are provided to businesses. Through their subsidiaries, TransUnion Interactive and Equifax Consumer Services, the companies also market, sell, or provide credit-related products directly to consumers, such as credit scores, credit reports, and credit monitoring.
Credit scores are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users rely in part on these scores when deciding whether to extend credit. No single credit score or credit score model is used by every lender. Lenders use an array of credit scores, which vary by score provider and scoring model. The scores that TransUnion sells to consumers are based on a model from VantageScore Solutions, LLC. Although TransUnion has marketed VantageScores to lenders and other commercial users, VantageScores are not typically used for credit decisions. Scores Equifax sold to consumers were based on Equifax’s proprietary model, the Equifax Credit Score, which is an “educational” credit score that also is typically not used by lenders to make credit decisions.
TransUnion, since at least July 2011, and Equifax, between July 2011 and March 2014, violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:
Enforcement ActionUnder the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent orders, TransUnion and Equifax must:
The full text of the CFPB’s Consent Order against TransUnion is here:http://files.consumerfinance.gov/f/documents/201701_cfpb_Transunion-consent-order.pdf
More information about credit scores can be found here: http://www.consumerfinance.gov/about-us/blog/what-you-need-know-understanding-why-offers-your-credit-score-are-not-all-same/
copied from: http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-transunion-and-equifax-pay-deceiving-consumers-marketing-credit-scores-and-credit-products/