The Credit Repair Bible
All the Sec ret s to Neve r Be Turned urned Dow n fo r a Loa n Ag a in a nd Sa ve Tho usa usa nd s o f Do llars in interest interest Pa Pa ym en ts
C o p yrig yrig ht © 2008 2008 Ch ris Linus
Notic Notic e of rig rig hts All rig hts reserved eserved . No p a rt of this b oo k ma y be rep rod uc ed or tra tra nsmitted nsmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Disclaimer This his b oo k is is intend ed to b e used used a s a guide a nd it d oe s not rep la c e the figure figure of a n a tto rney. The The informa informa tion c ont a ine d in this this rep ort is is for informa informa tiona l p urp urp oses oses only a nd is not lega l a d vic vic e. While the author and/or publisher have carefully researched information from c red ib le source source s, they c a nnot g ua ra ntee the a c c ura ura c y, c orrec orrec tness tness or intend ed use use of the informa nforma tion tion p resente esente d . The a utho r a nd / o r p ub lishe ishe r he re b y d isc isc laims a ny liab liab ility ility for loss loss, risk, isk, d a m a g e , inc onve nienc nienc e (rea (rea l or ima ima gined ), tha t ma y b e inc urr urred b y or res resul ulti ting ng from from the use use o f an y id id ea s, informa informa tion tion , or op inion inion s c on ta ined or presen presen ted in this this b oo k. As with any credit or legal matter, a consumer should seek the advice of a c om p ete nt leg leg a l p rofe ssiona l b efo re a p p lying ying a ny of the infor informa ma tion tion p resente esente d in this b o ok.
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The Credit Repair Bible
All the Sec ret s to Neve r Be Turned urned Dow n fo r a Loa n Ag a in a nd Sa ve Tho usa usa nd s o f Do llars in interest interest Pa Pa ym en ts
C o p yrig yrig ht © 2008 2008 Ch ris Linus
Notic Notic e of rig rig hts All rig hts reserved eserved . No p a rt of this b oo k ma y be rep rod uc ed or tra tra nsmitted nsmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Disclaimer This his b oo k is is intend ed to b e used used a s a guide a nd it d oe s not rep la c e the figure figure of a n a tto rney. The The informa informa tion c ont a ine d in this this rep ort is is for informa informa tiona l p urp urp oses oses only a nd is not lega l a d vic vic e. While the author and/or publisher have carefully researched information from c red ib le source source s, they c a nnot g ua ra ntee the a c c ura ura c y, c orrec orrec tness tness or intend ed use use of the informa nforma tion tion p resente esente d . The a utho r a nd / o r p ub lishe ishe r he re b y d isc isc laims a ny liab liab ility ility for loss loss, risk, isk, d a m a g e , inc onve nienc nienc e (rea (rea l or ima ima gined ), tha t ma y b e inc urr urred b y or res resul ulti ting ng from from the use use o f an y id id ea s, informa informa tion tion , or op inion inion s c on ta ined or presen presen ted in this this b oo k. As with any credit or legal matter, a consumer should seek the advice of a c om p ete nt leg leg a l p rofe ssiona l b efo re a p p lying ying a ny of the infor informa ma tion tion p resente esente d in this b o ok.
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TABLE OF CONTENTS Contents TA BLE O F C O NTE NTENTS NTS ................ ........ ................. ................. ................ ................. ................. ................. ......... 2 C o n t e nt s....... s............ .......... .......... ......... ......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... ........ ... 2 PRE PREFA C E – WHY WHY YOUR YO UR FINA INA NC IAL IA L FUTUR UTURE E DEPEN PENDS O N HAVING HA VING A G REA T C REDIT SC O RE....................... E.............. ................. ................. ............... ...... 4 PAR PA RT 1 - HOW HO W A BETTER C REDIT SC O RE C A N SA V E YOU YO U OV O V ER $100,000 ON O N YOU YO UR M O RTG A G E A LO NE.................. NE................................... ................. 8 C a se Stud y: The Im p a c t o f a C re d it Sc Sc o re o n a $250,0 50,00 00 M o rtg a g e ......... .............. .......... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... 8 C a se Stud y: The Im p a c t o f a C re d it Sc Sc o re o n a $20,00 0,000 0 C a r Lo a n ............................................ ................................................................... ....................................... ................ 9 C o nc lusi usio n: The The Hig he st Pa id Wor Wo rk Yo Yo u Will Will Eve Eve r Do .... ...... .... .. 10 PA RT 2 - THE BA SIC S................. ........ ................. ................. ................. ................ ................. ................. ........ 12 Wha Wh a t is a C red re d it Sc o re? .......... .............. ......... .......... ......... ......... .......... ......... ......... .......... ......... .... 12 Ho w is Yo ur Cred it Sc Sc o re C a lc ula te d ? .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... 14 Do Yo u Ha ve G o o d C re d it? .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. 16 Wha Wh a t is Yo ur Sc Sc o re? .......... ............... .......... ......... ......... .......... ......... ......... .......... ......... ......... .......... .....17 17 PAR PA RT 3 - IM PRO PRO V ING ING YOUR YO UR C REDIT SC O RE: BAS BA SIC PRIN PRINC C IPL IPLES ........................................... .................................................................. .............................................. .................................. ........... 19
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The 2 Most Im p o rta nt C onc ep ts You Will Eve r Lea rn Ab out Your C red it Sc o re .................................................................. 19 The 10 Co m m a nd m ents for Build ing a Grea t C red it Histo ry ................................................................................................. 20 A Ste p -By-Ste p Pla n to Sta rt C rea ting Hea lthy Fina nc ia l Rec ord s................................................................................... 27 PART 4 – SKYROCKETING YOUR CREDIT SCORE: ADVANCED STRATEGIES................................................................................. 32 Step 1: Setting Up the Plan ................................................... 32 Ste p 2: Building a Positive Cred it Histo ry ............................. 39 Ste p 3: Disp uting the Ne g a tive Ite m s.................................. 41 Step 4: Follow ing Up .............................................................. 58 PART 5 – ALL YOU NEED TO KNO W TO BOOST YOUR FINANC IAL IQ BY 1000%............................................................ 61 All the Sec rets to Neg otiate With C red ito rs a nd Sa ve Thousa nd s of Do llars.............................................................. 61 HO W TO PROTECT YOURSELF FROM ID THEFT (OR FIG HT IT, IF IT’ S TOO LATE) ........................................................................ 62 How to Ge t Rid Of Anno ying Collec tion Ag enc ies...........65 How to Ac hieve a 700-Cred it-Sc ore Within 36 Mo nths of Filing fo r Ba nkrup tc y .............................................................. 66 How to G et a Che c king Ac c ount If You Are In ChexSystem s.......................................................................... 67 3
Cred it Rep a ir Ag enc ies (For Busy Peop le) ......................... 68 PART 6 - BONUSES...................................................................... 70 EPILOGUE................................................................................... 78
PREFACE
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WHY
YOUR
FINANCIAL
FUTURE DEPENDS ON HAVING A GREAT CREDIT SCORE There is som et hing tha t m a kes the Am eric a n ec ono m y unique: the easy access to credit. It has become common to b uy not o nly hom es a nd c a rs, but a lso hom e a p p lia nc es, b oa ts, a nd eve n p a y for va c a tions w ith c red it c a rd s. The truth is tha t c red it c a n b e rea lly go od a nd very ba d a t the same time. It just depends on how you use it. If you are resp onsib le a nd know how to p la y the g a me , then you c a n use your credit to build a business, invest in real estate, or m a ybe in the stoc k m a rket. But if you d on’ t know w ha t you a re d oing, c red it c a n b e d a ng erous, very d a ng erous. Think a b out it: you c a n b uy almo st a nything that you w a nt even if you d on’ t ha ve the mo ney to p a y for it! They m a ke it sound great: get this, get that. You don’t have to pay for it, just slide your card! And then you realize that all these small monthly payments are eating up all your income. And the worst part is that your debt never decreases, you are just
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paying interest. You are working really hard to make som eb od y e lse ric h! Again: credit can be a really good thing; you just have to lea rn ho w to use it in your fa vo r inste a d of a g a inst yo u. I like to sa y that the re a re tw o d ifferent kind s of d eb t: g oo d d eb t a nd b a d d eb t. Go od d eb t is mo ney you use to m a ke som e kind of investment (start or grow a business, invest in stock, buy investment real estate, etc.) Bad debt is when you use your c red it to b uy c onsum er go od s: a b ig g er TV, a w ee k in Ha w a ii, exp ensive resta ura nt m ea ls, etc . Essentially, good debt can make you wealthy; bad debt c a n ma ke you broke. The one q uestio n tha t yo u ne ed to a sk yourself to find out whether a debt is good or bad is this: “Will this put money into m y po c ket o r ta ke it out?” If yo u a re rea d ing t his b o ok, you p ro b a b ly have som e c red it problems. But I want you to know that you can solve them. In fa c t, I a m sure you w ill. The fa c t tha t yo u b oug ht this b oo k is a good sign that you are committed to solve your credit problems. But let me warn you: reading this book is just the first ste p . Nothing w ill ha p p en until you a c tua lly DO w ha t this b oo k tea c hes you. If you d on’ t go out there a nd d o w hat it takes to improve your financial situation, nobody will do it for you. This b oo k is a b out imp roving your c red it sc ore. But w hy is tha t so im p ortant ? Bec a use w ith a b a d c red it histo ry you w ill
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m iss the b est o p p ortunities: the b est m ortg a g es, the b est c a r loans, and the best credit card rates. Many lenders will just avoid doing business with you, and those who don’t, will c ha rg e yo u outra g eous inte rest ra te s. The y will see yo u a s a big risk, so they will make sure they get paid well for taking that risk. You will end up paying thousands of dollars extra in interest. But d on’ t frea k out. It d oe sn’ t m a tter how b a d your c red it is, you now have a step-by-step plan to dramatically improve it in a sho rt p eriod of tim e. The first thing you ne ed to keep in m ind is tha t inform a tio n is p ow er. This is a g a m e, a nd if you know how to p la y it, you can radically benefit from it. Unfortunately, most of the information contained in this book is not available to everybody. If it were, we wouldn’t see so many people suffering from fina nc ia l p rob lem s. I will teach you the rules; I will teach you the secrets. I will reveal the truths and the myths. Once you know how the syste m w orks, you c a n m a ke it wo rk to your ad va nta g e. You will notice that a lot of times the system doesn’t make a lot of sense, or it just doesn’t seem fair. Don’t waste your time jud g ing it. There’ s nothing you c a n d o a b out it, exc ep t for lea rning ho w it works a nd ta ke a d va nta g e o f it. If you want to read the Fair Credit Reporting Act, visit this website: www.ftc.gov/os/statutes/031224fcra.pdf You don’t need to if you don’t want to, because I will
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explain to you exactly what the FCRA is all about and how c a n you take a d vantag e of it. I hope you enjoy reading this book and I can guarantee that if you do at least a couple of the things that this book will teach you, you will see your credit score getting a lot better, you will save thousands of dollars, and your financial situation will improve in a way you never thought possible.
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PART 1 ‐ HOW A BETTER CREDIT SCORE CAN SAVE YOU OVER $100,000 ON YOUR MORTGAGE ALONE It is essent ia l tha t yo u und ersta nd w ha t a hug e d ifferenc e a credit score can make when it comes to loan payments. Most people don’t understand the power of a good credit sc ore until the y see c a se stud ies like the one s I a m a b o ut to sho w yo u. I believe that there is no better way to make a point than show ing you rea l c a ses; rea l exam p les w here a g oo d sc ore c a n ma ke a ll the d ifferenc e.
Case Study: The Impact of a Credit Score on a $250,000 Mortgage This is a n exa m p le o f a typ ic a l 30-Yea r fixed m ortg a g e fo r the a m o unt o f $250,000. You c a n c lea rly see how som eo ne with a credit score of 720 will pay $1,479 a month and the to ta l inte rest tha t he w ill p a y d uring 30 yea rs w ill b e $282,557, slig htly mo re t ha n the p rinc ip le a m ount . Now , c om p a re t ha t to som eo ne w ho ha s a sc ore of 559. This person’s monthly payments will be $2,763 (almost twice as much as the person with a good credit score!) And he will p a y $744,524 in inte rest. Tha t is 3 tim es a s m uc h a s w ha t the 8
first p erso n w ill pa y. It is ha lf a m illion d olla rs m ore! You d on’ t wa nt to p ay that muc h more, d o you?
Case Study: The Impact of a Credit Score on a $20,000 Car Loan In this case, we can clearly see that someone with a really good credit score will be offered an interest rate of 5.8%. Now, compare that to the almost 15% interest rate that som eo ne w ith b a d c red it w ill g et . The first p erson w ill p a y
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only $3,088 in inte rest, wherea s “ Mr. Ba d Cred it” w ill p a y $8,500, almo st 3 times a s m uc h.
Conclusion: The Highest Paid Work You Will Ever Do I hope that by now you realize that we are not talking just about a number that doesn’t really mean that much. We are talking about thousands of dollars you are giving away and should be keeping for yourself. If you are paying for a $250,000 house and a $20,000 car, you can save $1,400 a month by just having a good credit score. How does an extra $1,400 in your p o c ket e ve ry month so und ? 10
To use the sa m e d eb t c a lc ula tor tool I used to c a lc ula te the se p a ym ents visit t his w eb site : http:/ / ww w.myfic o.co m/ myfic o/ Cred itCentra l/ Loa nRa tes.a sp
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PART 2 ‐ THE BASICS What is a Credit Score? A credit score is a 3-digit number that ranges between 450 and 900 and rates your credit history. Lenders use this information to determine how much risk is involved in lend ing m one y to you. The hig her your c red it sc ore is, the less risky you a re c o nsid ered b y lend ers. Your credit score is based on your credit report. A credit report is a snapshot of your credit history for the last 7 years. It shows late payments, collection accounts, current debt, and also positive items, such as bills paid on time, “paid as a greed ” , “ never late” , etc . Your credit score doesn’t bring into consideration race, c o lor, na tiona l o rig in, ma rita l sta tus, sa la ry, oc c up a tion, title, em p loym ent histo ry, etc . You might think that your current credit score is fair, or maybe you don’t think it is. But the truth is that this system, even with its deficiencies, can give the lender an idea of how resp onsib le yo u ha ve b ee n a t m a na g ing your fina nc es, a nd he w ill ta ke tha t into c onsid era tion w hen he d ec id es if he is going to approve you for a loan, and what rate he is g oing to offer you.
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There a re 3 ma in c om p a nies tha t m onitor your c red it rep ort: Experia n, Eq uifa x, a nd Tra nsUnion. Ea c h o ne ha s its o w n sc oring syste m . Experian’ s syste m is c a lled Experian/ Fa ir Isa a c , Eq uifax’ s is c a lled Bea c o n, a nd Tra nsUnion’ s is c a lled Empirica. Each of these companies is referred to as credit bureau. Ea c h c red it b urea u will ha ve a d ifferent c red it sc ore for you. This d o esn’ t o nly ha p p en b ec a use t hey w ork w ith d ifferent systems, but also because most creditors don’t report to the 3 b urea us. Fo r exa m p le, if you d id n’ t p a y your p ho ne b ill la st month, the phone company may report to Experian only or m a yb e to Exp eria n a nd Tra nsUnion, b ut no t to Eq uifa x. In March of 2006, the 3 bureaus decided to create a new sc oring syste m : Va nta g eSc ore. Its m a in p urp ose w a s to solve discrepancies between the different scores each b urea u ha d for ea c h p erson. It m a d e thing s b ette r, b ut the system is far from being perfect, and many times there are b ig d ifferenc es b etw ee n the c red it sc ores ea c h b urea u w ill p rov id e fo r the sa m e p erson. FICO is a c om p a ny who p rovid es c red it sc ores b a sed on the rep orts o b ta ine d fro m Eq uifax, Exp eria n, a nd Tra nsUnion. FICO developed its own scoring system called FICO Exp a nsio n Sc ore, w ho se m a in g oa l is to inc lud e p eop le w ith a thin o r ine xiste nt c red it histo ry into the ir sc o ring syste m . Here is the contact information for each of the three bureaus. You will need it when you dispute inaccurate or inc om p lete neg a tive items on yo ur c red it rep ort. 13
EXPERIAN P.O. Bo x 2104 Allen, TX 75013 (888) 397-3742 EQUIFAX P.O. Box 740241 Atla nta , GA 30374 (800) 685-1111 TRANSUNION P.O. Bo x 2000 Che ste r, PA 19022 (866) 726-7388
How is Your Credit Score Calculated? 35% of the sc ore is b a sed on y our pa ym ent history This m a kes sense sinc e one o f the p rim a ry rea sons a lend er w a nts to see the sc ore is to find out if (a nd ho w tim ely) you p a y your b ills. The sc ore is a ffec te d b y ho w m a ny b ills ha ve b ee n pa id la te, how m a ny were sent out for c ollec tion, any b a nkrup tc ies, etc . When the se thing s ha p p ene d a lso c om es into p la y. The m ore rec ent, the w orse it will b e fo r your ove ra ll sc ore.
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30% of the sc ore is b ased on o utstand ing d eb t How much do you owe in car or home loans? How many c red it c a rd s d o you ha ve tha t a re a t the ir c red it lim its? The more cards you have at their limits, the lower your score will b e. The rule of thum b is to kee p your c a rd b a la nc es a t 25% or less of their limits.
15% of the sc ore is ba sed on the leng th of time yo u've ha d credit The long er you've ha d esta b lishe d c red it, the b ette r it is for your overall credit score. Why? Because more information about your past payment history gives a more accurate p red ic tion o f your future a c tions.
10% of the sc ore is b a sed on the num b er of inquiries on y our report If you've applied for a lot of credit cards or loans, you will ha ve a lo t o f inq uiries on your c red it rep ort. The se a re b a d for your score because they indicate that you may be in some kind of financial trouble or may be taking on a lot of debt (even if you haven't used the cards or gotten the loa ns). The m ore rec ent the se inq uiries a re, the w o rse for your credit score. FICO scores only count inquiries from the p a st yea r.
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10% of the score is based on the types of credit you c urrently have The num b er of loa ns a nd a va ila b le c red it from c red it c a rd s you ha ve m a kes a d ifferenc e. There is no m a g ic num b er or combination of types of accounts that you shouldn't have. These a c tua lly c om e m ore into p la y if the re isn't a s m uc h othe r inform a tion o n your c red it rep ort o n w hic h to b a se the score.
Do You Have Good Credit? To d et ermine ho w g o od your c red it is, w e w ill show w ha t the sc ores of the entire US p op ula tio n loo ks like so you c a n d o some comparison: Up to 499: 1% 500 - 549: 5% 550 - 599: 7% 600 - 649: 11% 650 - 699: 16% 700 - 749: 20% 750 - 799: 29% Ove r 800: 11%
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What is Your Score? There a re free a nd p a id servic es tha t a llow you to a c c ess your credit report and score. We strongly suggest that you stick to the paid services for a couple of reasons: they will p rovid e you w ith more a c c ura te d a ta a nd the free servic es usually are not that “free” after all, and start charging you a fter a 30-d a y tria l. According to the law, you have the right to get one free c red it rep ort e ve ry 12 m onths. To g et yours, yo u c a n req uest it online at www.annualcreditreport.com or calling 877-3228228. No te tha t the y w ill g ive you a c red it rep o rt fo r free , not a credit score. You can, however, purchase a credit score from them . When you req uest yo ur c red it rep o rt, ma ke sure the y ma il it to you, as o p p o sed to g et ting the online v ersion, since the report you will receive in the mail will be more complete than the one you can get online. Even if you req uest your rep ort online, you c a n g et it ma iled to yo u. Additionally, if you have been a victim of ID theft and you have reported it to the bureaus; they will send you a free credit report. Do this only if your identity has really been sto len. Doing it just fo r the c red it rep ort d oesn’ t m a ke sense, sinc e yo u w ill b e unab le to op en ne w a c c ounts for 90 d a ys. If you a re thinking a b out b uying a p iec e o f rea l esta te a nd your b ro ker or lend er ge ts your c red it sc ore to ev a lua te your 17
history, you ha ve the rig ht to g et a c op y of tha t sc ore from him or her. The re a re a c oup le o f c red it sc ore e stima to rs o nline . Although they are not the real deal, they can usually give you a very good idea of what your score could be. And they are free . Chec k out a c oup le o f them : MSN Mo ney Ce ntra l: http://moneycentral.msn.com/investor/creditreport/main.as p Bankrate.com: http://www.bankrate.com/brm/fico/calc.asp
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PART 3 ‐ IMPROVING YOUR CREDIT SCORE: BASIC PRINCIPLES The 2 Most Important Concepts You Will Ever Learn About Your Credit Score High Credit Limit Your high credit limit is the total amount of unsecured revolving accounts that you have in your name. It includes credit card debt and any other kind of credit not secured b y an a sset. It d oesn’ t inc lud e m ortg a g es or c a r loa ns, sinc e these kinds of loans are secured by a piece of real estate a nd a c a r, resp ec tively. Let’s say you have 4 credit cards, each with a limit of $10,000. Your high credit limit would be $40,000. The hig he r your hig h c red it lim it is, the b ette r your c red it score.
Deb t-To-Cred it Ra d io The d eb t-to-c red it-ra d io is the tota l a m ount o f d eb t in relation to your available credit. In the previous example, yo ur high c red it lim it w a s $40,000. Tha t is ho w m uc h yo u a re
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allowed to borrow. Now, let’s say you only borrowed $20,000. In this c a se, your d eb t-to -c red it rad io is 50%. The low er your de b t-to-c red it ra tio, the b et te r your c red it sc ore. The lend ers a ssum e tha t if you c a n b orro w $40,000 and you only have a $5,000 debt, you are managing your fina nc es resp onsib ly.
The 10 Commandments for Building a Great Credit History Pa y Your Bills on Tim e It g oe s w ithout sa ying tha t la te p a yme nts a ffec t yo ur c red it score. Obviously, a person with a big list of items showing “never late” will have a much better score than someone w ith a b unc h of ne g a tive hits for la te p a yme nts.
Start Early Build ing a g oo d c red it histo ry ta kes tim e. Yo u w on’ t b uild a n a m a zing c red it rec ord ove rnight. Tha t is w hy it is so im p ortant to sta rt e a rly.
Ope n Savings and Chec king Ac c ounts A lot of people still rely on cash as a main method of p a yme nt. This c a n b e a b ig m ista ke if you a re trying to b uild a c red it history. Op en a t lea st o ne sa vings a c c ount a nd one c hec king a c c ount. And use them. 20
Don’t Close Old A c c ounts Closing accounts can be very damaging to your credit sc ore. Kee p them op en. If you have a n old c red it c a rd , the first o ne you e ver go t, and you a re thinking a b out c losing it because the interest rate is 30%, don’t do it. Keep it open. Make sure you keep a really small balance, even if it’s $10, so you don’t have to pay a lot in interest. But don’t close it. An old account with on-time payments history can boost your c red it sc ore. This a lso a p p lies for sto re c a rd s, suc h a s a Wal-Ma rt c a rd , Sea rs, Hom e Dep ot , etc . Don’ t c lose them . If you a re a n ob sessive shop p er a nd a re a fra id o f sp end ing m one y just fo r having the cards, cut them in half and throw them away, but don’t go to the store and ask them to close the account.
Kee p Your Deb t-to- Cred it-Ra tio be tween 10% a nd 30% If your high credit limit is $40,000, try to have an outstanding balance of between $4,000 and $12,000. If you really need to g o ov er tha t, neve r g o p a st 50%. Tha t w ould hurt yo ur credit. If you have 4 credit cards and you max out all of them, it is not g oing to help you.
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If you decide to pay off your credit cards balances every month, it is not a bad idea, but keep in mind that creditors m a ke the ir m one y whe n you p a y interest to them . If you p a y your c red it c a rd b a la nc es in full eve ry mo nth you w ill ha ve a g oo d sc ore, but no t a s g oo d a s if you kep t a 10% b a la nc e. Now, let’s say you have a high credit limit of $40,000. And yo ur deb t is $15,000. Tha t is a d eb t-to -c red it ra tio o f 37.5%. To d ec rea se tha t to 30%, w here is c o nsid ered op tim a l, you c a n p a y $3,000 of your c red it c a rd b a la nc e a nd d ec rea se your debt to $12,000. But there is another thing you can do to ta ke your d eb t-to-c red it ra tio b a c k to the 10%-30% ra ng e. You can increase the limit of one of your credit cards by at least $10,000 (or get a new card with a limit of $10,000 or higher). Now your new high credit limit is $50,000, and even tho ug h yo u still ow e $15,000, your de b t-to-c red it ratio is no w 30%. Som et hing else t o keep in m ind is ho w to d istrib ute your debt among your accounts. For example, if you have 4 c red it c a rd s w ith a lim it o f $10,000 ea c h a nd your to ta l d eb t a m o unt is $12,000, it w ould b e OK a s lo ng a s your b a la nc e is $3,000 on each of those cards. If one of the cards is maxed out (you used all your credit, which was $10,000), and the other cards have balances of $1,000, $500, and $500 respectively, that will damage your score, since you are way over 30% on one of your cards (actually, the debt-toc red it ra tio for the c a rd w here you ha ve a $10,000 b a la nc e is 100%).
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Make sure your debt is distributed evenly among your accounts.
Inc rea se yo ur high c red it limit As we mentioned before, a higher credit capacity can increase your credit score. But you need to be very careful a b out t his. If you op en to o m a ny a c c ounts in a short pe riod of time, it will hurt your score. If last week you had a limit of $10,000 and you went and got 3 new credit cards for $10,000 each within the last 4 days, it will damage your sc o re a lot . The re is no rule for how m uc h yo u c a n inc rea se your lim it to get your credit to improve instead of get worse. It is just c o m m on sense. Think ab out it this w a y: if you w ere a lend er and you were looking at someone’s credit report, and this p erson ha d a lim it o f $10,000 until la st w ee k, a nd no w she is opening more and more credit cards, taking more debt, you w ould n’ t see tha t a s a g oo d thing. You w ould think tha t this person went crazy and you don’t know how well she is going to manage her new credit capacity. One thing is to manage a $10,000 credit limit, and a very different thing is to m a na g e $40,000 a ll o f a sud d en. When you w ere a tee na g er, your p a rents let yo u g o to your first party and asked you to be back by 9 PM. For the next party, you probably begged them to let you stay until 9.15 PM, or maybe 9.30 PM, but you didn’t ask them to stay until
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m id nig ht. They w ere g o ing to sa y no. You w ere sm a rt a b o ut it a nd tried to neg otiate little things a t a tim e tha t you knew you c o uld g et . A c o up le of yea rs la ter, you we re fina lly allowed to stay until midnight, because you were patient a nd a sked for sm a ll thing s tha t you knew you c o uld g et. The sa m e thing ha p p ens w ith c red it sc ores. If your lim it is $10,000 today and $40,000 tomorrow, some red flags will ra ise a nd your sc o re w ill sig nific a ntly d rop . Open new accounts slowly but constantly. Another tec hniq ue tha t a lm ost nob od y uses b ut it ha s p rove n to b e very effec tive is to c a ll your c urrent c red it c a rd vend ors a nd ask them to raise your limit. Ask them to raise it by 50%-100% every 6 months. If you always paid on time and kept your debt-to-credit ratio below 50%, they will almost always a gree to d o it. You a re a go od c ustom er to them a nd if they c a n ma ke m ore m oney on you, why wo uld n’ t they?
Make Sure to Have a Mix of Revolving Debt and Installment Debt So far, we ha ve o nly ta lked a b out revo lving d eb t, w hic h is unsec ure c red it, suc h a s c red it c a rd s a nd a ny othe r type of c red it tha t is no t sec ured a g a inst a n a sset. In ord er to ha ve a g rea t c red it sc ore, you a lso ne ed to ha ve som e insta llm ent d eb t: a m ortg a g e, a c a r loa n, or a ny other kind o f lo a n sec ured b y a n a sset .
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A lot o f pe op le fina nc e their c a rs eve n if they do n’ t need to, b ec a use it is ve ry b enefic ia l for the ir c red it histo ry.
Use Your Revo lving Deb t Ha ving a b unc h of c red it c a rd s is not e noug h. You ha ve to use t hem . Try to kee p sm a ll b a la nc es (b etw een 10% a nd 30%) a nd use your c a rd s a s ofte n a s you c a n. Try to a vo id cash. The key is using yo ur c a rd s lig htly b ut reg ularly. If yo u just keep them in your wallet, they won’t do much for your credit.
Avo id Ha rd Inquiries The re a re 2 d ifferent kind s of inq uiries: soft a nd ha rd . Soft inq uiries a re reg ula r a c c ount review s a nd they d on’ t a ffec t your c red it sc ore, so you d on’ t nee d to w orry ab out them . Hard inquiries take place when you apply for a firm offer of c red it o r insura nc e. They d o hurt yo ur c red it sc o re a nd c a n stay on your credit report for up to 2 years, even though FICO only takes into consideration the ones during the last 12 m ont hs to c a lc ula te your sc ore. A ha rd inq uiry c ould low er your sc o re up to 35 p o ints, so only allow them if you are serious about a credit or insurance a p p lic a tion w ithin the ne xt 2 m o nths.
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Note that nobody can place a hard inquiry on your report unless you a utho rize the m to . It d oes ha p p en tho ug h. Som e c o m p a nies w ill d o it de sp ite o f the la w . If it ha p p ens to yo u, contact the creditor or collector and ask them for their “permissible purpose”. We have included a template letter tha t you c a n use for this c a se. If the y d on’ t ha ve a permissible purpose, you can ask for and collect damages for up to $1,000 ($2,500 in California). Mortgage broker inquiries are not rare, even when they did not process your a p p lic a tion. They have to ma il you a n a p p rova l/ d enia l letter and state that you did not put the application on ho ld . If not, they ha d no p erm issib le p urp o se.
Show a Stable Lifestyle Even though this might not directly affect your credit, showing stability can greatly improve your chances of getting new credit card offers, which can ultimately improve your credit score, as we mentioned earlier in this chapter. Cred it c a rd c om p a nies a re m ore likely to o ffer you a c a rd if you d id n’ t rec ently get d ivorc ed , if you ha ve kep t the sa m e a d d ress for a c o up le o f yea rs, if yo ur m a iling a d d ress is no t a P.O. b o x, if you ha ve a la nd line liste d a s your p rim a ry p ho ne number instead of a cell phone, and if you are not selfemployed.
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Actually, being self-employed can be very detrimental to your c red it. But the re is som ething yo u c a n d o a b o ut it: yo u can create a business entity (corporation or LLC), and you w ill b a sic a lly b e a n em p loyee of this c om p a ny. You ne ed to own no more than 55% of this new business, or you will be considered self-employed anyway. Find someone you trust to ow n the rest of this c om p a ny. If you see your self-em p loyed sta tus on yo ur c red it rep orts a s a neg a tive item , you c a n a lw a ys ma il a c oup le o f W2s a nd paystubs to the credit bureaus along with a letter stating that you a re a n em p loyee a nd you are subm itting p roo f of tha t. Ta lk to your a c c o unta nt to g et he lp set ting this up .
A Step‐By‐Step Plan to Start Creating Healthy Financial Records Som e young p eo p le, im migra nts, a nd rec ently wid ow ed or divorced women might have a very thin credit history or eve n no c red it histo ry a t a ll. Som e o f these p eo p le think tha t c red it rep orts only c o nta in negative hits, and that they are actually better off not ha ving a c red it histo ry a t a ll. This is a b ig m isc onc ep tio n. Let’s say you fall behind on your cell phone payments, but after a couple of months you bring the balance current. Lenders now know how you are likely to act if you are ever la te a g a in on your pa yme nts. They know you m a d e a 27
m ista ke in the p a st b ut yo u a lso d id so m ething to fix it. But if you don’t have a credit history, they have no idea about how you a re g oing to a c t if you fa ll b ehind sc hed ule. If you a re a m a rried w om a n who ha s only joint a c c ount w ith your husband, it is very important that you start creating accounts of your own. Here is why: if your husband has financial difficulties and his credit is affected by that, yours will be too. If you have credit of your own, you and your husb a nd c a n rely on yo ur c red it until he c a n fix his. There is a not her rea son w hy you w a nt to b uild a c red it history of your own. If you get divorced, all your joint accounts will be gone, and you will have absolutely no credit history. Believe me: that is a situation you don’t want to p ut yo urself in. If your c red it is a lm ost no nexistent , you c a n p ig g yb a c k yo ur husband credit (more on this technique later) by having joint accounts with him. But once you have built a credit history of your own, you need to open accounts in your na me a nd c lose the joint a c c ounts. I know I rec om m end ed earlier keeping accounts open, but in this case you have m ore to lose tha n you ha ve to w in. If you ha ve a n ine xiste nt o r ve ry thin c red it histo ry, you ne ed to get started with secured credit cards and catalog cards. With a secured credit card, you make a deposit with a lender and your credit limit is usually equal to the deposit. You can find these cards on www.bankrate.com or searching on Google for “secured credit cards”. Please 28
make sure that they report to the bureaus. If they don’t, the re is no p oint in do ing it. Sinc e t he m a in rea son w hy people get this kind of cards is to start building a credit history, most of the secured cards published out there will report to the 3 bureaus, but it wouldn’t hurt to doublecheck. Most of these cards will convert to regular, unsecured credit cards after 12 to 18 months of on-time payments. You can also get catalog cards, also known as store cards. You c a n g et one of the se a t Sea rs, GAP, Hom e Dep ot , and so many other chain stores. Again, make sure that these cards will report to the credit bureaus, or they won’t help you at all. And I can’t emphasize enough that you need to a c tua lly use the c a rd s, a nd p a y a lw a ys on time. If you d on’ t use t hem , the y w on’ t b uild a c red it histo ry for you. A couple of months after you get catalog and secured c a rd s (a nd if you a lw a ys p a id o n tim e), you w ill sta rt g ett ing in your ma il offers for mo re rep uta b le unsec ured c a rd s, suc h a s Visa a nd Ma ste rCa rd . Sta rt filling out a p p lic a tio ns for these. This is w he n yo ur c red it histo ry w ill sta rt b uild ing a t a much higher pace. Get these cards one at a time. Remember that increasing your high credit limit all of a sudden doesn’t do you any good. Apply for one, get approved, and pay on time. A couple of months later, apply for another one, get approved, pay on time, and so on.
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Ma ke sure yo u d on’ t a p p ly for tho se c red it c a rd s o ffers tha t sound too good to be true. If you get rejected, that will count as a hard inquiry on your credit report. If you are getting started with building your credit and you get an offer for a 0% interest card for the first 10 years and a limit of $50,000, w ell, it d oesn’ t loo k like it is fo r rea l. Loo k for “ p reapproved” offers only. Be aware that a lot of companies use that term as a marketing tool, so make sure you read the sm a ll p rint b efo re a p p lying . The re is a sm a ll tric k tha t a friend of m ine d isc o ve red a lm o st b y ac c id ent a nd sha red w ith me . She c a lled her c red it c a rd company to cancel her card, and the telemarketer talked her into staying with them by waiving the annual fee for her c a rd a nd d ec rea sing her inte rest ra te c onsid erab ly. The te rm s w ere g rea t, so she sta yed w ith this c om p a ny. She the n decided to cancel her other card, since she thought she had too many, and something similar happened: they offered to waive her annual fee and to decrease the interest rate . She then rea lized tha t she c ould g et g rea t deals by using this technique and all the credit cards companies except for one offered her much better terms. So the re yo u g o, try that if you d on’ t w a nt to w a ste yo ur m one y pa ying unne c essa ry fee s a nd hig h inte rest ra te s. And if you are getting started and you already have a couple of secured and catalog cards, remember to add som e insta llm ent c red it to your m ix. Yo u mig ht no t q ua lify for
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a mortgage yet (maybe you don’t even want to buy a hom e), b ut you a re p rob a b ly rea d y to a p p ly for a c a r loa n. If you have had some secured and catalog cards for a w hile (tha t you ha ve b ee n using ) a nd you still d id n’ t rec eive any unsecured credit card offer in your mail, you might w a nt to c ont a c t Innov is Dat a Solutio ns. This c om p a ny keep s c o nsum er fina nc ia l rec ords, a nd the y c a n filte r you o ut from their databases –causing you not to receive credit card offers- if they don’t think you will be a good prospect for c red it c a rd c om p a nies. They m ig ht ha ve som e ne g a tive items on your credit history that don’t show on the reports tha t the c red it b urea us kee p of you. To c o nta c t Innovis, visit the ir w eb site : http :/ / w w w .innovis.c om / p ers_p la c eDisp ute.htm l
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PART 4 – SKYROCKETING YOUR CREDIT SCORE: ADVANCED STRATEGIES Step 1: Setting Up the Plan Ge t Your Cred it Rep orts The first ste p is to g et yo ur c red it rep orts. The 3 of the m : from Exp eria n, Eq uifax, a nd Tra nsUnion. Rem em b er; get t he m m a iled to you, sinc e the online version is not a s c om p lete a s the p a p er versio n.
Keep Rec ords for at Lea st 7 Years Cred it rep orts c o nta in yo ur fina nc ia l inform a tion for the la st 7 years. After 7 years, items disappear from your credit report and cannot be considered to calculate your score. Tha t is the law . Tha t is ho w the Fa ir Cred it Rep o rt Ac t sa ys it should b e. Tha t is w hy I rec o m m end tha t yo u keep rec o rd s for the la st 7 years. When you dispute a negative item with the credit bureaus, you need to show proof. If you send them a letter saying “I paid for this” and you don’t enclose any proof, the y w ill d isreg a rd it. If you send the m the sa m e let te r w ith a receipt where it shows you paid that bill on time, they will
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remove the item from your credit score right away. Keep your rec ord s.
Why it is Not Ab out Just Rem oving the Neg ative Item s Rem em b er w e m entione d tha t p oo r c red it is b ette r tha n no credit? Adding positive items to your report is as important a s rem o ving the neg a tive o nes. Som et im es, the re a re ne utra l ite m s tha t yo u w ill w a nt to leave on your report. For example, if you had some late payments on your electrical bill, but then you brought it current; even if you find a mistake on the item, it may be convenient to leave it, or maybe request a correction of that item instead of deletion. Remember, it is not about d eleting a s muc h as you c a n.
Lea rn the Num b er One Rule You might have a number of negative items on your credit rep ort that m ight b e leg itima te a nd you d on’ t think you c a n d isp ute. Well, let m e t ell you a b ig sec ret . I w a nt you to p a y extra attention because this is what all the credit repair a tto rneys know b ut the y neve r reve a l: it is not a b out w ha t is legitimate, but what creditors and the bureaus CAN PROVE is legitimate. You will find some negative items on your report. And you a re g uilty until you p rove you a re innoc ent. But if you d isp ute 33
the item, then the creditor or the bureau need to PROVE you a re g uilty. Do you see how it w orks? If they c a n’ t p ro ve something, even if the item is legitimate, they need to rem ove it.
Choose Whic h Item s You Will Disp ute Let’ s sa y you have a c ollec tion a c c ount tha t w a s p a id in full 2 yea rs a g o. It sho w s on yo ur rep orts. In this c a se, you sho uld probably not do anything about it, because even though there was a delinquency once on that account, you have p rove n to b e resp onsib le eno ugh to p a y it o ff. There is no rule to help yo u d ec id e w hic h a c c ount s you should try to dispute and which ones you should not. Just use your common sense. It always helps to put in the shoes of a lend er: “ If I w ere a lend er eva lua ting offering a loa n to this person, would I consider this account a positive or neg a tive one?” In addition, if there is a mistake that actually benefits you, suc h a s a d elinq uenc y tha t show s it sta rte d 5 yea rs a g o a nd it was in fact only 2 years ago, don’t do anything. Remember that after 7 years that item will disappear from your report, so if they say it’s 5 years old instead of 2, it’s b ett er for you a nd you shouldn’ t a sk for c o rrec tion.
Perform Factual Disputes
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Neve r d isp ute ea c h sing le neg a tive ite m on your rep ort just b ec a use “ you d on’ t w a nt to see it there” . There ha s to b e a reason for you to dispute an item, or otherwise it will get verified and the bureaus will classify you dispute as “frivolous” and reject any further disputes for up to 12 months. For that reason factual disputes are the way to go. If your disputes are factual and the bureau does not make the necessary corrections or deletions, they have violated the FCRA and you now have some leverage. Without any violations, all you can do is file worthless complaints to reg ula tors (who w on’ t even b othe r to help you a nywa y). Believe it or not, most of the items on your credit report will either b e inc om p let e o r c ont a in erro rs. And eve n if they a re leg itim a te, DO N’ T EVER ALLOW A NEGATIVE ITEM THAT IS INC OMPLETE OR CONTAIN ERRORS to sta y on yo ur c red it rep ort. It is im p era tive t ha t yo u und ersta nd this. If yo u see a late payment from last year on your report and you know you did pay late, but the item doesn’t show the payment d a te, disp ute it! How c a n you know you w ere late if they a re not giving you the payment date? Let me repeat what I said before: even if you know you were late on that payment, the entry has a mistake, so it’s your job to dispute it. Often times, creditors and the bureaus make mistakes, and that is exactly what you want, because if an item is inc om p lete or c ont a in e rro rs, it should n’ t b e there.
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The p revious p a ra g ra p h is p rob a b ly one of t he m ost important ones in this book. I encourage you to read it again. When you submit factual disputes, you need to include a letter explaining why you are disputing a certain item and attach evidence supporting your statement. For example, if it was a creditor’s mistake, have the creditor write a letter sta ting tha t it w a s the ir m ista ke. If they do n’ t rem ove a n item rig ht a w a y afte r you sub mitted a fac tua l d isp ute, kee p m a iling them eve ry mo nth until they comply.
Lea rning the Different Kind s of Req uests When you dispute an item, there are 2 things you can request: correction or deletion. If you think an item should be removed, ask for deletion. If you want it corrected, ask for c orrec tion. Let the m know w ha t you w a nt them to d o. If you just point out a mistake but don’t specify what action d o you w a nt them to take, they will not d o a nything. The re is a third kind o f req uest: va lid a tion. Neve r a sk for validation. What is the point of asking for validation anyway? “I request validation for item number #####”. And they will answer “Item validated. We confirm it is correct.” It just doesn’t make sense. You don’t have a nything to ga in.
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Dispute the Most Harmful Items First The re a re 2 c rite ria you w ill nee d to use to esta b lish w hic h ite m s yo u w ill d isp ute first: a g e a nd seve rity o f the ite m . The old er an ite m is, the less w eig ht it ha s on yo ur sc ore. So , if you ha ve 2 la te p a yme nts (one from la st yea r a nd the o ther one fro m 5 yea rs a g o), go a fter the new er one first. Seve rity of the item is a very im p ortant c o nc ep t. If you ha ve c o llec tion ite m s on yo ur rep orts, disp ute tho se o ne s first. You w ill a lw a ys ha ve time la te r to c ha se the sm a ll stuff. A very important thing that you need to know is that collection accounts are allowed to be re-aged. Do you rem em b er w e m ent io ned tha t a fter 7 yea rs a ll the item s a re erased from your credit report? Well, collections have an assigned date, and collection companies often sell or tra nsfer your d eb t to othe r c ollec tion c om p a nies. And e very time your account is assigned to a new debt collector, it resets its date on your credit report, and can stay there forever. Actually, debt collectors are very well aware of this and will do it to inflict the most possible pain until you pay your d eb t. So, d isp ute the m ost ha rm ful ite m s first a nd lea ve the sm a ll stuff for la te r.
Ca ll the Creditor
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I am impressed by how often people don’t even consider this c ho ic e, a ltho ug h it is ve ry p ow erful. It consists in calling the creditor (the company you owe money to) and negotiating a deal where you pay them whatever you can afford, and they report to the credit b urea us that the a c c ount is “ p a id a s a g reed ” . Most c red ito rs m ig ht no t eve n think tha t you w ill eve r p a y, so if you call them and offer to set up a payment plan with them, they are likely to be very receptive. After all, you are g iving them mo ney, so w hy in the w orld w ould n’ t they ta ke it? Som etime s, eve n if you ha ve p a id off the d eb t entirely, you c a n offer them som e kind of inc entive so they rem ove your negative item from your credit report forever. Again, you are offering them something, and they don’t really benefit from d a m a g ing your c red it, so they m ig ht a s w ell ta ke your money and help you clean your credit. I noticed that especially small companies are always willing to work som et hing out w ith yo u if the re is so m ething in it fo r the m .
It is important that you know all these techniques because you might use them at some point, but what you need to understand is that not everybody will need to use all of the se strate g ies. I a m just g iving you t he to ols. Use only tho se to o ls tha t you rea lly nee d .
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Step 2: Building a Positive Credit History Ask Som e Co m p a nies to Report the G oo d Stuff Too As we mentioned earlier, your credit report doesn’t only c onta in neg a tive item s. It c a n inc lud e a c c ounts tha t show a status a s “ p a id a s a g ree d ” a nd “ never la te” . Well, you can use this to your advantage. Call some companies you do business with (only if you always paid them on time) and ask them to report a good payment histo ry to the b urea us. The truth is tha t m o st b ig c om p a nies w o n’ t eve n ta ke the time to do it, but some smaller companies appreciate your business so much that they will be glad to do you a favor. Don’t threaten anybody with taking your business somewhere else, just ask nice and you will be surprised by the resp onse you g et . Deposit Loans Deposit loans are a great option to build credit fast. You see , there is o ne kind o f m ortga g e c a lled SIVA, whic h sta nd s for Sta te d Inc om e Ve rified Assets. So you d on’ t ne ed to sub m it p roo f of your inc om e b ut you do nee d to show p roo f of yo ur assets. The w a y a d ep o sit loa n w orks is this: a lend er will put some amount of money in a bank account in your name. It can be anywhere from $25,000 to $10,000,000. You
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c a n’ t w ithd ra w a ny of tha t m one y; it is just there to “ p rove ” tha t yo u ha ve a ssets. This is p erfec tly leg a l. And you p a y 1% of t ha t a m o unt e very mo nth. Som e lend ers w ill req uire tha t you ha ve the mo ney “ sea soned ” in the b a nk a c c ount for a t least 3 months. Having $25,000 in the account for 3 months will cost you $750, so it isn’t very cheap, but you will have a c c ess to a mo rtga g e tha t you otherwise w ould n’t. And the other great aspect is that the payments for the deposit loans are reported to the credit bureaus as a current installment loan, which can skyrocket your credit sc o re in just a few m onths.
Pigg yb a c k: Borrow ing Som eb od y Else’s Cred it This is a rea lly g rea t strate g y if yo u ha ve a ve ry thin or nonexistent credit history and want to improve it d ra m a tic a lly in a lm o st no tim e. Nearly every credit card or credit account will permit the primary account holder to add on (at a later date) an a utho rized user o r sec ond a ry ac c o unt ho ld er. In m ost c a ses, when this is done, the entire account history (retroactively) gets posted to the authorized user’s credit report regardless of their c urrent a g e o r c red it histo ry. This strate g y ha s b een used m ostly by p a rents w ith the ir c hild ren, b ut it c a n b e used b y a nyone . The key he re is to find som eo ne w ho trusts you a nd is w illing to d o this for you. It is no t a lw a ys ea sy, b ut you c a n a sk them to a d d you a s a n 40
authorized user to their account and to have the card mailed to their address. You don’t need it; you just need to b enefit fro m the ir c red it histo ry.
Crea ting a n Alternate Cred it Profile Before you start reading this, let me warn you that there are ma ny illeg a l wa ys to d o this a nd we d on’ t rec om me nd a ny of them. Always stick to the law and you will get the best results. There is a leg a l w a y to c rea te a n a lte rna te c red it p rofile a nd it is so basic that often times it is overlooked by people with b a d c red it. It b a sic a lly c a n b e p erforme d b y c rea ting a new leg a l entity: a c orpo ra tio n o r LLC. At first, the new entity’ s c red it w ill b e linked to your p ersona l credit, but using all the techniques explained on this book, you can build a strong credit history for the new company and it will eventually have credit of its own, and will not be linked to your pe rsona l c red it rec ords a nymo re.
Step 3: Disputing the Negative Items Inc orrec t Leg itima te Item s Som e items on yo ur c red it rep ort c a n b e leg itim a te (w hen the fact did happen), but the item is mistaken or has an
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inc om p lete field . You a re g oing to use t hese m ista kes in your fa vor to c lea n your c red it rep ort. For exa m p le, if you p a id a bill late and the creditor reported it but they forgot to mention the date of the late payment, you can dispute it. The ir m ista kes a re yo ur ga in. It g o es w itho ut sa ying tha t if an ite m is not leg itim a te , by a ll m ea ns you w ill w a nt to d isp ute it. Fo r exa m p le, if the y rep o rt a la te p a yme nt a nd you p a id on tim e, it w ill b e e a sy for you to get that item removed assuming that you have proof of your on-tim e p a yme nt. Tha t is w hy I rec om m end ed you to kee p rec ord s for the la st 7 yea rs.
The Proc ess You w a nt t o d isp ute your ite m s b y m a il. It is the ea siest w a y. The e nvelop e w ill c ont a in the d isp ute lette r, p ro of o f wha t you are disputing (this is critical for success), and 2 forms of ID (d rive r’ s lic ense a nd Soc ia l Sec urity c a rd , or any o the r kind of ID). Now, a warning about the letter: you don’t want to sound like a lawyer. Don’t try to threaten them. Don’t waste your tim e e xp la ining the la w to the m ; it is a b unc h of la w yers tha t you w ill b e d ea ling w ith. The y kno w exa c tly how this w orks. Don’t dispute items if you don’t have a reason for it (i.e. illeg itima te , erroneo us, or inc om p lete ite m s). If yo u a sk them to remo ve a n item from your rep ort just b ec a use yo u d on’ t
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wa nt to ha ve it there, they w ill la ugh a t you a nd they wo n’t rem ove a nything . OK, I just told you what not to do. Now let me explain exac tly how to d o it rig ht. Send them a short, c onc ise, a nd simple letter. It should have your contact information, the bureau’s contact information, the date, the account or item number you are disputing, why you are disputing it, your nam e, Soc ia l Sec urity Numb er, d a y o f b irth, and your previous address (if that is the address that shows on the report). I have included dozens of sample letters with this kit. Use the m . Tw ea k the m a little b it. The sec ret is tha t you d on’ t w a nt them to loo k a s te m p la te lette rs. But you c a n d efinitely use them as a guide to write your own letters, or fill in the b la nks a nd then c ha ng e the form a t a little b it. Tha t is a ll you need. Once you start reading the sample letters, you will realize how ea sy a nd sim p le the y a re. And you w ill notic e tha t they c ut rig ht to the c ha se. The y a re sho rt, c onc ise, a nd powerful. Basically, you need to tell them what are you disputing, what is the reason for disputing it, and what a c tion d o you exp ec t them to take (c orrec tion or d eletion). And, of course, you want to include your personal inform a tion so the y know w ho is w riting the let te r. The re you go, that is the secret formula. Actually, the secret resides in submitting proof. Nothing can beat hard evidence. For illeg itim a te item s, if they rep orted tha t a n a c c ount w a s not
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p a id a nd you ha ve the rec eip t that show s that you d id p a y, send the e vid enc e o r forg et a b out see ing the item g one . If they didn’t require proof, everybody would be disputing everything. It would be a big chaos. For legitimate items, look for m ista kes or inc om p let e fields a nd just te ll the m “ ite m # # # # # d oe sn’ t show c red itor’ s nam e (or wha tever mistake the item ha s). I req uest im m ed ia te rem ova l” .
Disp ute 1 Mistake a t a Time Let’s say an item has 2 mistakes: the account number is m issing a nd it’ s a c ollec tio n ite m w ith a c red it lim it (c lea rly, a c ollec tion a c c ount c a n never have a c red it limit). Instead of sending a removal request mentioning both mistakes, mention just one, and see what happens. If they rem ove the item , then you are d one. But if they didn’t remove it (let’s say they now included the account number), there is still 1 mistake and you can req uest a rem ova l a g a in. If you mention both mistakes on your first letter, they might correct both and now you have no reason to dispute it anymore. Keep in mind that you a re d ea ling w ith pe op le, and p eo p le make mistakes. Your creditor could have received the fax from the bureau asking them to update your account number, and someone at your creditor’s office could have
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p ut that fax am ong a b unch o f other p a p ers a nd it go t lost. It ha p p ens a ll the time . The b urea u ha s b y la w 30 d a ys to update the item or they have to remove it. Probably your creditor’s employees where oversaturated with work and didn’t have the time to find your account number, write a letter for the bureaus and fax it. Great! Now the bureaus have to delete the item or they will be violating the Fair Cred it Rep orting A c t. Tha t is exac tly w hy you w a nt to d isp ute 1 m ista ke a t a tim e. The m ore d isp ute s you sub m it, the m ore c ha nc es the bureaus and your creditors have to mess up. And by now, you know ho w it w o rks: if the y mess up , you b enefit. If you need to dispute different items, you can do it with 1 lett er, a s long a s you d on’ t d isp ute m ore tha n 1 m ista ke p er item.
Ma iling the Dispute Mail your disputes through USPS (United States Postal Servic es). Use the ir Priority Ma il servic e. And p a y a ttention to this: d on’ t req uest a sig na ture. The b urea us a re o ve rlo a d ed w ith w ork a nd if they c a n a vo id g et ting your let ter, they w ill. Don’ t g ive t hem rea sons to rejec t it. If you a re g oing t o send m a il to your c red ito rs, I rec o m m end tha t you use First Class servic e. Neve r eve r send orig ina l do c ume nts, a lw a ys send c op ies.
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Merged Ac c ounts You first need to identify if your credit file has been merged w ith so m eone else’ s. The w a y to d o it is b y c a lling the c red it bureau and asking them if there are any other sources of inform a tion linked to yo ur a c c ount. It c ould b e a sp ouse, exspouse, relative or a complete stranger. If so, request the files b e sep a ra te d . The ir syste m c o nta ins a field c a lled “ Ad d itio na l Sourc es of Inform a tio n.” Tha t field sho uld b e blank. Once those additional sources of information are removed, everything linked to that source should drop off your report. If the credit bureau is not helpful, then have a m ortga g e lend er pull a tri-m erge c red it rep o rt. Tha t w ill usually list the additional source of information. You can the n d isp ute it w ith the c red it b urea us. OK, let’ s sta rt listing the m ost c o m m on m ista kes you c a n find on your credit report and how to dispute them. Remember that you will find sample letters for all these situations, but b efo re filling in the t em p la te let ters you ne ed to und ersta nd what you are doing. In each case I mention what kind of evidence you can submit to support your dispute, but you also need to use your common sense and make sure you are sending all the necessary documents to prove your c a se. It he lp s to a sk yourself this: “ If I w orked a t a c red it bureau, what evidence would I need to verify what this p erson is te lling m e?”
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Cred itor’s Nam e Missing If your report shows a negative account but it doesn’t say w ho you o w e m one y to, how in the w orld a re you sup p osed to know if the item is right or not? If you report contains an item tha t d oe sn’ t sp ec ify the c red ito r’ s na m e, d isp ute it.
“ I d isp ute [ na me of a c c ount], ac c ount num b er [xxx]. This listing d o es not show the c red ito r’ s na m e. I d em a nd
Ac c ount Numb er Missing Every creditor should assign you an account number. Witho ut o ne, the item is inc om p lete a nd you sho uld d isp ute it.
“ I d isp ute [na m e o f a c c ount], ac c ount num b er [xxx]. This listing d oe s not show the a c c ount num b er. I d em a nd 47
Bla nk Field s No b la nk fields a re a llow ed on your rep o rt. If a c ertain field d oe sn’ t a p p ly, it should show “ N/ A” . If it’ s b la nk, disp ute the item.
“ I d isp ute [na m e o f a c c ount], ac c ount num b er [xxx]. This listing d oe s not show ing the d a te o p ene d . I d em a nd
Inconsistencies You w a nt to look a t ea c h d erog a tory ac ross a ll the 3 c red it reports to find inconsistencies. If you find different dates, balances, or any other inconsistencies on derogatory accounts, consider contacting the original creditor for documentation. If the inconsistency was on the Experian’s report, for example, submit a copy of your report from the other 2 credit bureaus showing the accurate information to prove your d isp ute .
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Let’s say the first report is from Experian and the second one from Tra nsUnion. Yo u c a n see the inc onsiste nc y on the “Date Opened” field. In this case, contact your creditor to find out w hic h d a te is a c c ura te, and req uest c orrec tion if it w ill be nefit yo u. “ I d isp ute [na m e o f ac c ount], ac c ount numb er [xxx]. The d a te op ened is 12/ 1993, no t 12/ 1999, a s sho w n in the evid enc e a ttac hed. I d ema nd d eletion.”
Inc om plete Item Som etime s, a d erog a to ry ite m d oe sn’ t show req uired information, such as dates, balances, etc. In this case, you wa nt to d isp ute the inc om p lete item .
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“ I d isp ute [ na me of a c c ount], ac c ount num b er [xxx]. This listing is inc om p lete ; the Hig h Ba la nc e is m issing . I d em a nd
Wrong DOLA (Day of La st Ac tivity) The d a y of la st a c tivity is a tim e sta m p of w hen the a c c ount was last permanently delinquent. We mentioned before tha t item s w ill sta y o n yo ur rep ort fo r 7 yea rs. Som e companies play dirty and do what is called “re-aging” an account. If you notice that they report a wrong DOLA, you c a n ge t the item d elete d . These c om p a nies re-ag e accounts for 2 reasons: they want to hurt your credit as much as they can by keeping your delinquent account foreve r o n your rep ort, a nd the sec o nd rea son is tha t new er a c c o unts a re e a sier to resell to d eb t c ollec to rs. Think ab out it: if a n a c c ount is 6 ½ yea rs old , you know tha t if you d o n’ t pay for it, it will be gone from your report in 6 months anyway. But if an account is just 1 year old, you have a bigger motivation to pay, or otherwise that item will be on yo ur rep ort fo r 6 yea rs. Rem em b er that the only ac c ounts that c a n be re-ag ed a re collections, since the date for these accounts resets every
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time your debt is transferred from one debt collection c om p a ny to a nothe r. Tha t is w hy c ollec tion d elinq uenc ies a re the first thing you nee d to ta ke c a re o f. Don’ t forg et to sub m it p roo f of the a c tua l DOLA if you ha ve it. Only Eq uifa x reve a ls the DOLA. For Tra nsUnion a nd Experia n, the re is still a w a y you c a n e stima te the m . On Tra nsUnion reports, take the “Estimated date when this item will be removed” and count back 7 years. On Experian reports, if you have an account listed as a “Charge off as of Jun 1997” , c ount b a c k 6 m ont hs. If you have different DOLA for the same item from different b urea us (a nd the d ifferenc e is sig nific a nt), c ha nc es a re the y ha ve re-a g ed the ite m s. The o ld est DOLA w ill b e the c orrec t one, since it is very common for creditors to re-age items, b ut inverse re-a g ing a lm ost ne ver ha p p ens. Contact your creditor and ask them for a letter stating the rig ht DOLA a nd w rite a d isp ute to the b urea us send ing the m a c op y of the let ter your c red ito r issued you.
“ I a m d isp uting the d a te o f la st a c tivity for a c c ount num b er [xxx]. It ha s b ee n re-ag ed . Plea se d elete this
Ba lanc e is Highe r tha n High Ba lanc e
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The b a la nc e is w ha t you c urrently ow e. The high b a la nc e is the most you ever owed. If we are talking about a credit card, the high balance is the biggest balance that card ever had . Obviously, the current balance can’t be higher than the hig h b a la nc e. Disp ute your ite m if you find this m ista ke.
“ I a m w riting to d isp ute a n a c c ount tha t’ s show ing a b a la nc e tha t’ s hig her tha n the hig h b a la nc e. Enc losed is a c op y of the rep ort w ith the item c irc led . Plea se d elete it”
Incorrec t Cred it Limit If you ha ve a $10,000 lim it fo r o ne of your c a rd s a nd the lim it shown on your report is different, send the bureaus a credit card statement where it shows what your real limit is, along with the proper letter, and ask for correction. Remember, the b ig g er your hig h c red it lim it is, the b ette r your sc o re. So if your report shows a limit of $20,000 instead of the actual $10,000, d on’ t d o a nything; you w ill b enefit fro m it.
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“ I d isp ute [ na m e o f a c c ount], ac c ount num b er [xxx]. This listing sho w s a c red it lim it o f $[xxx] a nd it sho uld b e $[xxx]. Enc losed is a c op y of m y la st c red it c a rd sta te m ent show ing the c orrec t c red it lim it. I d em a nd c orrec tion.” A Co llec tion Item Ha s a Cred it Limit This ha p p ens ve ry ofte n a nd is a m ista ke yo u w ill ea sily g et your item rem oved or c orrec ted over. A c ollec tion a c c ount c a n’ t ev er ha ve a c red it lim it. It is not a c red it c a rd . Disp ute it.
“ I d isp ute [ na me of a c c ount], ac c ount num b er [xxx]. This listing is sho w ing a c red it lim it o f $[xxx]. Ho w c a n a c ollec tion item ha ve a c red it limit? I d em a nd d eletion.”
Delinque nc ies After Closing Date
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An account can’t show delinquent activity after its closing d a te, or the d a y when it wa s c harg ed -off. If the d a te w hen the a c c ount w a s c losed or c ha rg ed off is not o n your c red it rep ort, you will ha ve t o w rite the c red ito r. Sup p orting evidence will make the difference between deletion and correction. With or without evidence, factually dispute the la te-pa ys a fter the c losed d a te. “ I d isp ute [ na me of a c c ount], ac c ount num b er [xxx]. This a c c ount w a s c losed on [ d a te], b ut is show ing d elinq uent a c tivity a fter the c losed d a te. Your p roc ed ures ha ve a llow ed this sinc e [d a te c losed or c ha rg ed -off] a nd this ha s b ee n hig hly da m a g ing to m e. I w a nt this a c c ount Unda ted Late Pa ym ents This is a ve ry c om m on m ista ke. How c o uld you know if a p a yme nt w a s la te if it ha s no d a te ? Disp ute it. “ The fo llow ing listing is inc om p let e: [na m e o f a c c ount] / [a c c ount numb er]. I a m d isp uting this a c c ount d ue to the fa c t tha t it’ s listing a n und a ted la te p a y. Plea se d elete it.”
Inc orrec t Ac c ount Typ es If a charged-off account shows as open, it is clearly a mistake. It should show “Closed Account”, “Charged-Off”, or not show a n ac c ount typ e a t a ll.
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“ I a m w riting c onc erning the follow ing a c c ount: [a c c ount na me ] / a c c ount numb er [xxx]. I a m d isp uting the a c c ount type . It’ s ina c c ura te. A cha rg ed -off or c losed a c c ount ca nnot b e a n “ op en ac c ount” . Plea se d elete it.”
Date Verified Did No t Up d a te When you dispute an item and a bureau verifies it, the “Date Verified” field should update. If it doesn’t, it means that they didn’t really verify it, which is a violation and you ha ve to req uest im me d ia te d eletion.
“ On [da te] I d isputed [ac c ount nam e], [ac c ount numb er]. ite m a[ac s a c ount c ura te. The hacte ver the DUer]. is “You On verified [da te] I the d isputed nam e],[w [ac ount numb namverified ed for the urea d id [w nothacteve hangr e. You thebite mu a sina qc uestion] c ura te. The theNo DU is investig tiothe n wa a c tua ne. Delete thec hang item .” nam ed afor bs urea u inllyq do uestion] d id not e. No investig a tion w a s a c tua lly d one . Delet e the ite m .”
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Ac c ount Inc luded in Ba nkruptc y Show s a Ba lanc e If an account was included in a bankruptcy, its balance should b e zero or “ N/ A” . If no t, d isp ute it.
“ The b a la nc e fo r a c c ount num b er [xxx] is ina c c ura te. Plea se d elete this ite m .”
Ac c ount Inc luded in Ba nkrup tc y Show s a s Op en If there is a certain item that you included in your b a nkrup tc y, it shouldn’ t show a s op en a nymo re.
“ The a c c ount type for a c c ount numb er [xxx] is ina c c ura te. An item inc lud ed in ba nkrup tc y c a n’ t b e o p en. Plea se
Item Not Yours
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Before disputing an item as “not mine”, first make sure that you never had a business relationship with that company. Even if the name of the company doesn’t sound familiar, call the phone number on the report and ask them to c hec k out w ho they a re. The rea so n w hy, is tha t som e companies have a commercial name that is different from the ir leg a l na m e. Their c om m erc ia l na m e c a n b e “ The Sho e Pla net” , a nd the leg a l entity b ehind is “ Okla hom a Shoe Distrib ution Inc .” . If you d id ha ve a b usiness relationship w ith tha t c om p a ny in the p a st b ut you a re p ositive tha t you ha ve no o utsta nd ing d eb t w ith them , c a ll them . They m ig ht ha ve m essed up a nd they now have to contact the bureaus and get the item rem ove d . Even if the y p ro m ise to d o tha t, ask them to send you a letter stating that it was a mistake and mail it to the bureaus along with another letter explaining what ha p p ene d a nd req uesting d eletio n. If you d o it yourself, you have the pea c e of mind that has b een d one.
“ I a m w riting c onc erning the follow ing a c c ount: [a c c ount na m e] / a c c o unt num b er [xxx]. I a m d isp uting ite m . It is not m ine. Enc losed is a let te r of the c red ito r a d m itting the
Ac c ount Sold or Transferred With an Outstand ing Ba lanc e
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If there is an account that was transferred from the company XXX to the company YYY, then your outstanding balance with XXX should be zero or “N/A”, that is if it shows on your report at all. If you owe the first company $5,000, they transfer your debt to the second company, and it shows that you owe $5,000 to each, request immediate removal. “ I d isp ute [na m e o f ac c ount], ac c ount num b er [xxx]. The b a la nc e is inc orrec t. Plea se d elete .”
You might have noticed that I always use very stra ig htfo rw a rd w o rd ing . Tha t is the w a y to g o. Sho rt, sim p le, a nd c onc ise. Tell them w ha t is w rong a nd w ha t you w a nt the m to d o a b o ut it. Tha t’ s it. Also, d on’ t try to explain the whole situation. Write as little as possible. In the last case, you could see how I just told them that the balance was incorrect. I didn’t explain that it could be because my a c c o unt w a s sold or tra nsferred . You just let t hem kno w tha t a certain item is not correct. It’s their job to find out why. If they do n’t, they are b rea king the la w .
Step 4: Following Up After you submit your dispute, the credit bureaus have 30 days to investigate it and take action (verification, deletion,
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or correction). It is the law. If they don’t comply with this, they will be violating the FCRA and now you have some leve ra g e. Send them a lette r letting them know tha t they have violated the Fair Credit Reporting Act and request imm ed ia te rem ova l. It is im p ortant tha t yo u know the rules b ec a use you w ill nee d g oo d inform a tion to fig ht these g uys. If the item gets verified within 30 days, you can ask them wha t verific a tion m ethod d id they use a nd where d id they g et the inform a tion from . “ On [d a te] yo u verified a p ublic rec ord I ha d d isp uted . It wa s a [type o f pub lic rec ord ] rep orted / filed on [d a te]. I a m now req uesting the m etho d of ve rific a tion, inc lud ing the na m e a nd a d d ress o f the furnisher of informa tion.”
Never threa ten the b urea us. Do you know how m a ny lette rs a d a y they g et from p eo p le sa ying tha t they w ill sue the m? Don’ t g o there; it’ s a w a ste o f tim e. Som ething e lse yo u d o n’ t w a nt to d o is w riting the Atto rney Gene ra l or the Fed era l Tra d e Ad m inistrat io n. You w ill just wa ste your time a nd p osta ge mo ney. If you do n’ t ha ve the time or just d o n’ t w a nt to d ea l w ith this yourself, you c a n use a c red it rep a ir c om p a ny. I listed a c oup le of the m in Pa rt 5 of this b ook.
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Two mo re p iec es of a d vic e b efore w e g o to the next chapter: the first one is to get always every statement in writing. If a creditor tells you that your debt has been paid off, you inform that to the bureaus, the bureaus contact your creditor, and your creditor denies it, you have nothing to prove that your creditor said what they said. Always, a lw a ys g et eve rything in w riting . The sec ond a d vic e is to a lw a ys c ont a c t c red ito rs if you d id n’ t find a ny m ista ke w ith a ny g iven ite m . The c red ito rs, especially if they are a small company, might have reported your case to the bureaus and then got rid of the documents and have no records of your debt. If this is the case, contact the bureaus and ask for deletion, since it’s against the law reporting an item without proof of the delinquency.
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PART 5 – ALL YOU NEED TO KNOW TO BOOST YOUR FINANCIAL IQ BY 1000% All the Secrets to Negotiate With Creditors and Save Thousands of Dollars It is a g o od id ea to c a ll your c red ito rs b efo re yo u send them m a il. The truth is tha t the y will w elc om e yo u if you w a nt to w ork o ut so m e sort o f pa yme nt sc hed ule. Cha nc es a re the y c onsid ered your d eb t a s a loss a nd thoug ht they w ere ne ver go ing to see a p enny from you ag a in. You have a lot of leverage in these negotiations, since you w on’ t p a y unless the y a c c ep t your c ond itio ns. There is a rule of thum b tha t w orks very w ell: o ffer to p a y them 20 c ent s on the d olla r. If you ow e t he m $100, offer the m $20. The y will ask for more, but you can usually get them to report your account as “paid in full as agreed” for 25% to 35% of the orig ina l d eb t a m ount . Also, set up a p a yme nt p la n of $200 a m onth fo r eve ry $10,000 you o w e the m . This a p p roa c h w o rks like a c ha rm . Sta y aw a y from d eb t c onsolid a tions c om p a nies. The y all sa y tha t the y ha ve sp ec ia l rela tionship s in the c ollec tion ind ustry a nd c a n ge t you a ma zing d isc ounts on your d eb t a mo unt. This is no t true . All they ha ve is a c om p ute r syste m w ith the same sample letters I give you with this book. Debt 61
c o nso lid a tio ns c om p a nies w ill neg ot ia te the interest o n your d eb t, b ut not ho w the p rinc ip le, and tha t is the m a in rea son why you do n’t w a nt to wo rk with them .
HOW TO PROTECT YOURSELF FROM ID THEFT (OR FIGHT IT, IF IT’S TOO LATE) The first a d vic e I w ill g ive you is tha t it is b etter to b e sa fe tha n sorry. Be ve ry c a reful with w ho yo u g ive yo ur SSN to , a nd kee p it a s sec ret a s p ossib le. If you use online b a nking a nd your na m e is Jo hn Sm ith, don’t pick up passwords like “johnsmith”, “jsmith”, “ sm ithjo hn” , etc . Try to use a c om b ina tion o f ra nd o m lette rs a nd numb er so no b od y c a n g uess it. When you receive those emails asking you to log in to your Pa yPa l a c c ount (o r eve n w orse, your b a nk ac c ount), ig nore the m . They a re a lw a ys sc a m s. If it’s already too late and your ID has been stolen, follow these ste p s: 1. Pla c e a fra ud a lert o n your c red it rep orts a nd review your credit reports. Contact any one of the nationwide consumer reporting companies to place a fraud alert on your credit report. Fraud alerts can help prevent an identity thief from op ening a ny mo re a c c ount s in your na m e. The company you call is required to contact the other two, w hic h w ill p la c e a n a lert o n the ir ve rsions o f your rep o rt, too .
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Eq uifa x: 1-800-525-6285; www.equifax.com Exp erian: 1-888-EXPERIAN (397-3742); www.experian.com TransUnion: 1-800-680-7289; www.transunion.com In addition to placing the fraud alert on your file, the three consumer reporting companies will send you free copies of your c red it rep orts, a nd , if yo u a sk, the y w ill disp la y o nly the la st fo ur digits o f yo ur So c ia l Sec urity num b er on the m . 2. Close the a c c ount s tha t you kno w , or b elieve , ha ve b een ta mp ered with or op ened fra udulently. Contact the security or fraud department of each c om p a ny whe re you know , or b elieve, ac c ounts have b een tampered with or opened fraudulently. Follow up in writing, and include copies (not originals) of supporting documents. It's important to notify credit card companies and banks in w riting. Send your lette rs b y c ertified m a il, return rec eip t requested, so you can document what the company received and when. Keep a file of your correspondence a nd enc losures. When you open new accounts, use new Personal Identification Numbers (PINs) and passwords. Avoid using easily available information like your mother's maiden na m e, your b irth d a te , the la st four d ig its o f your Soc ia l Sec urity num b er, your p ho ne num b er, or a series of c o nsec utive num b ers.
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3. File a rep rep ort w ith your loc a l p olic olic e or the po lic e in in the c om munity munity where where the id entity entity theft theft too k pla pla c e. Get a copy of the police report or, at the very least, the number of the report. It can help you deal with creditors who need proof of the crime. If the police are reluctant to take your report, ask to file a "Miscellaneous Incidents" report, or try another jurisdiction, like your state police. You also can check with your state Attorney General's office to find out if state law requires the police to take reports for identity theft. Check the Blue Pages of your telephone d irec tory tory for the p hone numb er or c hec k na na a g .org org for a list o f sta sta te A tto rne ys G ene en e ra l. 4.
File a c o m p la int w ith the Fe d eral era l Tra d e C o m m issio n.
By sha sha ring your yo ur id entity en tity the ft c o m p la int w ith the FTC , you w ill provide important information that can help law enforcement officials across the nation track down identity thiev e s a nd sto p the m . The FTC a lso c a n re re fer fe r yo ur complaint to other government agencies and companies for further action, as well as investigate companies for violation viola tions s o f la la w s tha t the th e FTC e nfo rc e s. You can file a complaint online at www.ftc.gov/idtheft. If yo u d o n't ha ve Inte rne t a c c e ss, c a ll the FTC 's Id e ntity The The ft Hotline, toll-free: 1-877-IDTHEFT (438-4338); TTY: 1-866-6534261 4261;; o r w rite: ite : Id e ntity nt ity The ft C lea ringho ing ho use use , Fe d e ra l Tra d e Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. 20580.
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I hig hig hly hly rec rec om me nd you to c om p lete a nd fil file a n ID ID Theft Affid Affid a vit. vit. You You c a n find find it he re: http://www.ftc.gov/bcp/conline/pubs/credit/affidavit.pdf
How to Get Rid Of Annoying Collection Agencies There is is som et hing hing t ha t mo st p eo p le d o n’ t know know a b o ut c oll ollec tion tion a g enc ies a nd I a m a b out to revea l it. You ha ve no ob lig a tion tion to d ea l w ith them . So, whe n they call you requesting payment, you can politely say “thank yo u, but b ut I do n’ t w a nt yo y o ur b usi usine ss” . ItIt is tha t si sim p le . The y are a company, you are a customer. Nobody can force you t o d o b usi usiness ness w ith the m . They c a n “ invite nvite ” you, b ut you ha ve no ob lig a tion tion to a c c ep t their their invita nvita tion. tion. Le t’ s sa y your yo ur c e ll p ho ne se rvic e p ro vide vid e d b y T-Mo T-Mo b ile . This company has the right to collect money from you. If you d on’t pa y, they c a n c all all you and d ema nd p a yment. But ifif “Debt Collectors Inc.” calls you to get money from you on b eha lf of TT-Mo b ile, you ha ve t he ri rig ht to sa sa y “ I d on’ t know know you, I d on’ t w a nt to d o b usi usiness ness w ith yo u, I ow e m o ney to TMo b ile, not to you. Don’ Don’ t c a ll m e a nymo re.” The re is o ne exc e p tio tio n to this rule ule , and an d tha t is w hen he n yo u sig ned a c ontra ontra c t sta sta ting ting tha t in in c a se o f de linq uenc y, “ Deb t Collectors Inc.” has the right to collect the payments on b eha lf of the c om p a ny you a re d oing oing b usi usiness ness w ith.
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If you you a c c ep t the b usi usiness ness of the c ollec ollec tion tion c om p a ny, ma ke sure they don’t bully you. If they use aggressive techniques to g et you to p a y, you c a n sue sue them . Som e o f the nonaccepted practices could be: threatening to hand your case over to their legal department when they don’t have one , send ing m a il p ret end ing to b e a tto rneys, neys, c a lling b efo re 8 AM o r a fte r 9 PM, PM, c a lling se ve ra l tim tim e s, etc . If they do tha t let let them know tha t they a re b rea king the la w a nd sue the t he m if nec e ssa ry.
How to Achieve a 700 700‐‐Credit‐ Credit‐Score Within 36 Months of Filing for Bankruptcy When you file for bankruptcy it will show on your credit report for up to 10 years and will also become a matter of p ub lic re c o rd . But it is is no t the e nd o f the w o rld . Fa Fa r fro fro m it. You can file for either Chapter 7 or Chapter 13. If your income is above the median for your state and you can make payments of at least $100 a month, you will have to fil file fo r C ha p te r 13, sinc e yo u w o n’ t q ua lify for C ha p te r 7. But most attorneys will still recommend filing for Chapter 7 first. I a m not q ua lified fied to g ive leg leg a l a d vic vic e, so so b y all m ea ns g o to see a n a tto rney b efo re fil filing for b a nkr nkrup tc y. The g oo d new s is tha t you c a n sta sta rt c rea ting ting a g oo d c red it profile even before applying for bankruptcy. Create new
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a c c ounts, p a y them o n time a nd d on’ t inc lude them in the bankruptcy. You will notice that after filing, you will have a c oup le o f ac c ounts with imp ec c a b le p a yment history. In a d d ition, afte r b a nkrup tc y you a re d eb t-free . Tha t m ea ns that a lot of lenders and credit cards companies that specialize in high-risk markets will approach you with credit card offers, which is exactly what you need to start rebuilding your credit history. However, be prepared to pay hig h inte rest ra te s, so kee p the b a la nc es o f your new c red it c a rd s very low . Follow the a d vic e in this b oo k to sta rt c rea ting a g oo d c red it histo ry fro m sc ra tc h. If you d o this, d on’ t b e surp rised if w ithin 3 years of filing for bankruptcy you have a credit score of 700 or hig her. I’ ve see n it ha p p en a g a in a nd a g a in.
How to Get a Checking Account If You Are In ChexSystems Che xSyste m s is a c he c k verific a tion servic e a nd c onsum er credit reporting agency like Experian, Equifax and Tra nsUnion. While m o st c red it rep orting a g enc ies b roker data about how a consumer handles credit relationships, Che xSyste m s p rovid es d a ta relat ed to how a c o nsum er ha s ha nd led d ep osit a c c ounts a t b a nking institutions. Che xSyste m s w o rks und er the FCRA rules, just like the c red it bureaus. And the process to dispute items on your report is
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pretty much the same. First, you need to request your report. You can get 1 for free ever 12 months. Request it by p ho ne b y c a lling 800-428-9623, by fa x: 602-659-2197, or ma il: ChexSystems Inc., 7805 Hudson Road, Suite 100, Woodbury, MN 55125. Once you have the report, dispute the negative items factually, just like you would do with Experian, Equifax, or Tra nsUnion. The m ost c om m on ite m s on a Che xSyste m s rep ort a re NSF (non-suffic ient fund s) a nd no n-pa id ove rd ra ft fees. With ChexSystems your negative items will stay 5 years on your rep o rt inste a d o f 7, so tha t’ s g oo d new s. Fo r a free list o f b a nks tha t d on’ t c he c k the C hexSyste m s d a ta b a se a nd w ill op en a n ac c ount for you even if you a re in ChexSystems, visit this website: http://www.chexsystemsvictims.com/AboutmyList.html You c a n a lso c hec k http://www.passchecking.com
Credit Repair Agencies (For Busy People) In c a se you d on’ t ha ve the time to rep a ir your ow n c red it or just d on’ t w a nt to, there a re som e rea lly g oo d c red it rep a ir a g enc ies out the re: •
Onyx Leg a l Cred it Rep a ir http://www.onyxcreditrepair.com/ 888-322-3643
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•
•
•
Bue na Vista Cred it http://www.buenavistacredit.com/ 888-235-8056 Veracity http://www.veracitycredit.com/ 866-383-1801 Lexing to n La w http://www.lexingtonlaw.com/ 800-458-5202
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PART 6 ‐ BONUSES You w ill find in this kit som e b onuses I a d d ed a s a w a y to sa y tha nk you fo r rea d ing this b oo k. Sample Letters I have included over 30 sample letters to send to the bureaus, creditors, and collection agencies. Just fill in the b la nks, p ersona lize the m a little b it a nd m a il them . It is rea lly simple. Som e of the te m p la te lett ers you w ill find in the CD inc lud ed in this kit a re: o
Sa m p le Tem p la te Lette r to Cred it Burea us
o
Sa m p le Tem p la te Lette r to Cred ito rs
o
Free Cred it Rep ort Req ue st
o
Cred it Rep o rt Purc ha se
o
ID The ft Alert
o
ID The ft A lert Rem ova l
o
ID Theft Alert Extension
o
Inc om p let e Rep ort of Ite m Disp ute
o
Inc orrec t Cred it Lim it Disp ute
o
Inc orrec t Ba la nc es Disp ute
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o
Delinquency or Past-Due Amounts After Account Closed o r Cha rg ed -Off Disp ute
o
Und a te d La te Pa ys Disp ute
o
Inc orrec t A c c ount Typ e Disp ute
o
Wrong or Re-Ag ed Da te of La st Ac tivity Disp ute
o
Date Up d a ted / Date Verified Disc rep a nc y Disp ute
o
Ite m No t Inc lud ed in Ba nkrup tc y Disp ute
o
o
Incorrect Balance Bankruptcy Dispute
of
an
Item
Included
in
Re-Aged Date of Last Activity for an Item in Bankruptcy Dispute
o
Da y o f La st A c tivity Follo w Up to Verific a tio n
o
Burde n o f Proof o n The Cred it Burea u
o
Req uest fo r Me tho d of Verific a tion
o
Follo w Up for Met ho d of Verific a tion
o
No Resp o nse to Req ue st fo r Metho d o f Verific a tion
o
Jud g m ent a nd Ta x Liens
o
Co llec tion Ag enc y – Cred it Burea u Disp ute
o
Investig a tio n Results Disp ute
o
Ina c c ura te La te Pa y
o
“ I d on’ t w a nt your business” to Deb t C ollec tors 71
o
Sa m p le Va lid a tio n Exa m p le if C red ito r Ha s No Documentation
o
Sta tute of Lim ita tions Expired
o
ID The ft to Cred ito rs
o
Req uest o f Doc ume nta tion from Cred itor
o
Una utho rized Inq uiry b y Cred ito r
o
Una utho rized Inq uiry b y Deb t C ollec to r
o
o
o
o
Una utho rized Inq uiry b y Deb t C ollec to r Afte r “ I d o n’ t w a nt yo ur b usiness” Let te r Follo w Up to Una uthorized Inq uiry Letter ID The ft Letter to Cred it Burea us Ab out Fra ud ulent Account ID The ft Lette r to Cred ito rs or Deb t C o llec to rs Ab out Fra ud ulent Ac c ount
o
ID The ft Affid a vit
o
Cea se a nd Desist (Pho ne Ca lls Only)
o
o
Cease and Desist Correspondence) Cea se a nd Desist (A ll)
Interviews with Cred it Rep a ir Exp erts
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(Phone
Calls
and
All the insider secrets from the most successful credit repair a tto rneys in the ind ustry. The y ha ve b een fixing c red it rep orts for yea rs, da y a fter d a y, a nd now they a re g oing to reveal all the things you ever wanted to know about your c red it sc ore. Find the audio interviews in the CD included with this program.
How to Ma ke $60,000 a Yea r Fixing Cred it Rep orts Pa rt-Tim e Maybe you already thought about this while you were reading the book. Four hours ago you were in the dark as fa r a s c red it sc o res c o nc ern. You knew no thing a b out the m . Now you are almost an expert. You have the necessary knowledge to help other people overcome their credit problems. Here a re so m e id ea s to g et sta rte d . The first thing I encourage you to do is to fix your own report. After that, offer your spouse, other family members, and some friends yo ur servic e fo r free . The re a re 2 rea so ns fo r this: the first o ne is that you really want to learn the process before you start c ha rg ing for your servic e. The sec ond rea son is tha t t he se p eop le w ill b e so ha p p y that you help ed them g et a b etter sc ore fo r free tha t they w ill refer a b unc h of p eo p le to yo u. Once you are already established and you know what you are doing is time to start promoting yourself. I recommend tha t yo u think of a p rom otion a s a 2-ste p p roc ess. The first 73
step is creating your marketing message and the second ste p is d elive ring it. Crea te a n a m a zing m essa g e a nd I c a n a ssure you tha t you w ill ha ve to sp end ha lf a s m uc h tim e p rom o ting yourself a nd w ill ha ve tw ic e a s m a ny c lients. You need to decide if you want to offer a one-time repair servic e, an ong oing m a intena nc e, or b oth. The n you ne ed to think a b out yo ur c lients a nd a sk yourself some questions: “why would someone want their credit report fixed?”, “what is the biggest motivation for someone to improve their credit score?”, etc. You need to understand why someone would hire your services in order to ela b ora te your m a rketing m essa g e. After you have done some research, I suggest that you create a sign with your marketing message. It doesn’t have to be flashy; just make sure you communicate your m essa g e c lea rly. Tha t w ill forc e yo u to think a b o ut the benefits you can offer to your clients and the reasons you w ill g ive the m to g et the ir c red it rep a ired b y you. This is just a n e xam p le of w ha t this sho uld loo k like. Feel free to c op y som e o f these ide a s if you w a nt.
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This is fa r fro m b eing the b est sig n tha t yo u c a n eve r m a ke, but the point here is that you fine-tune your message. How a re you g oing to c om m unic a te your servic e? You w ill ha ve to answer 2 questions: “why do people need to improve their c red it sc ore?” a nd “ w hy should they d o it w ith you?” If you can successfully answer both questions in your 75
m essa g e, yo u w ill ha ve a lm ost g ua ra nte ed suc c ess. Tha t is, if you a lso g et rea lly g o od a t the sec ond p a rt o f this p roc ess: d elive ring your m essa g e. This is no t roc ket sc ienc e. It’ s just c om m o n sense. Ask yourself this question: “where can I find people with the problem I offer the solution for?” You have to know who they are, whe re you c a n find them , a nd how you c a n rea c h them a t a low c ost. The first thing tha t c om es to m y m ind is to g o visit so m e m ortg a g e b rokers a nd c a r d ea lership s. These g uys turn down dozens of people every day based on their bad credit. What if the next time they turn someone down they give them your c ard a nd rec om mend them to g o see you, fix their credit, and come back in a couple of months for a g ua ra ntee d a p p rova l? The b roker or c a r d ea ler will feel good about it because they will be offering their clients a service that will benefit them. If their clients get their credit repaired they can buy their product later on (mortgage, loan), and you can compensate them with a percentage of ea c h refe rra l’ s fee . Eve ryb od y w ins. Tha t is, in m y op inion, the m ost p ow erful a nd c ost-effic ient marketing tool: going to get the customers where the c usto m ers a re. In a d d ition to tha t, there a re m a ny other things you c a n d o: list a sm a ll c la ssified a d in yo ur loc a l ne w sp a p er, buy a listing in the Yellow Pages, put a sign on the message boards of your local grocery stores and colleges, etc. If you are really 76
good at what you do, word-of-mouth will do the rest of the work. How much should you charge? I recommend that you to c a ll som e na tiona l c red it rep a ir a g enc ies a nd a sk them how much their services run for and charge a similar amount. You can’t offer many years of experience yet, or fancy offices, or nationwide reputation, but you can offer something that these big guys sometimes can’t: personal a ttention, one -on-one c usto m er servic e. Tha t is p ric eless. When you a re sta rt ma king a b unc h of mo ney, d on’ t forg et to send m e 10% of it!
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