Credit restoration is the process by which one can have negative, derogatory, outdated or incorrect information removed from one's credit report. This process is legal and even moral. While there are many scam artists out there who are purporting to be credit restoration specialists, in truth there are VERY few true professionals. Credit restoration should be used as one more tool in proper credit management. Not only will it help to ensure a respectable credit report, it can also offer another layer of scam protection.
In most cases, one can perform what I call "credit maintenance" on their own. This involves cleaning out the "clutter" on your credit reports. Clutter is information that is dragging down your score but is not really important. Things like inquiries and credit denials fall into this category. Each inquiry can cause your credit score to drop anywhere from four to 10 points EACH. So doing a routine cleaning of these items at least three times a year will help maintain optimal credit ratings.
When it comes to the more serious issues, bankruptcies, charge-offs, collections, etc., it is better to have a professional do the work for you. Keep in mind that there are 340 different laws in the Fair Credit Reporting Act (FCRA). Unless you know how each of them works and how to manipulate them in their infinite combinations, let the experts who deal with these laws every day handle the more difficult issues. You will have far better results than if you go it alone. Inevitably, when most people do their own credit repair, they come across two brick walls: Frivolous and Verified. Once you have met these obsticles, you will get no further on your own.
There are many supposed "experts" out there who have purchased those do-it-yourself kits and credit "holy books" who think they can fix everybody's credit reports. I have purchased many of these items myself and so have many of my clients. I can tell you from the standpoint of a professional, they will get you nowhere, or at best, limited results. I have found them all to be either deliberately incomplete (so you will purchase more information) or just plain inaccurate. People trying some of these methods stand a very good chance of doing prison time.
There are several reasons that one should have a credit restoration performed if they have bad credit. The obvious one is the benefits of having a higher credit score. Lower interest rates on your mortgage, auto loan and credit cards. Lower auto, home and renter's insurance rates. The security of knowing that when an emergency happens, you are better prepared to meet it. But have you thought about these issues: a better future for your child(ren); protection from certain scam artists. These are very important things to consider when deciding whether or not to undergo credit restoration.
Examining how your credit score affects the interest on your $20,000 SUV, you can see how much MORE of your hard earned money you are throwing away by having BAD CREDIT. With perfect credit, you may qualify for 0% interest. But, if you only have moderate damage to your credit report your interest rate can cause you to pay an extra $5,500 in interest. With BAD CREDIT you will be lucky to get away with 20% interest. Auto loans can have up to 30% interest. (Figures based on $20,000 auto loan over 60 months.)
Let us examine now what could happen to your mortgage rates with perfect credit versus damaged and bad credit. The following figures are based on a $100,000 mortgage, refinance or equity loan over 30 years. Notice how much money you are losing just by having your interest rate jump by two or three points. With Great credit you can get a mortgage at 7% interest. For this example, that will be our base. With only moderately damaged credit you can expect to have a 9% interest rate. Your monthly payments jump from $655.30 to $804.62. At 12% interest (for those with BAD CREDIT) your monthly payments skyrocket to $1,028.60! You will end up paying $230,791.63 for your $100,000 loan.
So, ok, you can live with paying 230% of the value of your home, right? But you haven't considered the cost of homeowner's insurance. Because you have bad credit, the insurance companies are going to rape you. You can pay as much as TRIPLE the rate of those with good credit. You have to figure this into your monthly budget as well. Don't forget the insurance premium on your SUV. That is going to have a significant increase as well. With some companies as much as FOUR TIMES higher than with good credit! Is there any money left over in your budget now to feed the kids?
What about your children? How does your bad credit affect their future? If you are like me and have the world's most intelligent girl, you are going to want her to attend college. After all, how else is she going to become a Nobel Prize winning scientist? But college costs lots and lots of money. And because of your bad credit you cannot obtain a loan to send her to college. Now your Nobel Prize winning daughter is doomed to a life of mediocrity at best. Maybe you will be able to muster up enough money to send her to community college, and there is nothing wrong with that. But, let's face it, community college is no substitute for a university.
As I mentioned above, there are a lot of scam artists out there. Some of them will prey on you because of your bad credit. There is a very successful scam going on right now called a debt collection scam. The credit reporting agencies do not care whom they sell your information to. So these shysters purchase a list from the credit reporting agencies of people with bad credit. They target those with collections and charge-offs on their reports. These scoundrels then pose as collection agents or bill collectors and bully their unsuspecting victims into paying off their debt. Just as a real bill collector would do. You, the victim, are then surprised when a legitimate bill collector (if there is such an animal) comes along wanting you to pay your debt, AGAIN. You will have to pay TWICE because of the outlaw who hoodwinked you. But what if that information was not available? If you have that information removed, it CANNOT BE USED AGAINST YOU! Then when a bill collector does call you, it cannot be argued that he is not with a legitimate company.
And about those other scoundrels we know as bill collectors. How will credit restoration help you in your battle them? Imagine this scenario: you are about to get ready for bed after a long day. Your phone rings. When you pick it up, you are told very politely (because the recorders are running) that it is ABC Debt collection agency. Then they proceed to make every threat under the sun to try to get you to pay. Let me make this very clear: ALL BILL COLLECTORS LIE ALL THE TIME! The only other group of people whom I have ever heard this comment made about is convicts. (How proud these people must make their mothers to have jobs that are classed on the same level as criminals!) Bill collectors have ONLY ONE legitimate threat, ruining your credit. They CAN have derogatory information placed on your credit report. But YOU know that the information can be removed from your report just as fast as it can be put there. Now, YOU have control. Now YOU have the power! YOU get to set the terms of repayment, not them! If they don't agree to your terms, then YOU get the satisfaction of hanging up on them. When they call back, YOU STILL have the power. They have NO legitimate threat to use against you! Have fun with them. Tell them you will pay in full tomorrow. When they call back, tell them you have changed your mind. Now you only want to pay one dollar per month. You can drag this out for as long as you want because YOU have the carrot and they are the asses chasing it.
If this article hasn't convinced you that credit restoration is a vital part of good credit management, then you should pull your head out of the sand and re-read the article. Then contact me and I will help you get started.
Showing posts with label credit restoration. Show all posts
Showing posts with label credit restoration. Show all posts
Friday, March 2, 2007
Wednesday, February 7, 2007
How do I know what is the best course of action for me when it comes to a bad credit report?
Let us assume for the sake of this article that you have bad credit. You have a couple of things in collection, a few charge offs, some late payments and a repossession for that washer and drier a few years back.
But in the last couple of years things have finally started to go right for you and now you are in a position where you feel you can afford to buy a house. Life is good and you are determined to keep it good. So you get your free annual credit report to see how much longer you are going to have to wait before you can apply for a loan. And the good news is that it is going to be relatively soon. The bad news is that it is going to be at least three years. So you are considering a credit restoration. But is this really the right course for you? Credit restoration can cost anywhere from $500 to $1000. And that price could even double if you have to include your spouse.
So let’s take this step by step.
When you look at your report you notice that there are two items that are going to fall off your report next month. There are a couple that are about two years away from falling off and a couple that are three years away. The ones that are going to expire next month have low balances that you could pay off in a couple of months. The other accounts have all been turned over to collection agencies. So now you need to form a plan of attack. How do you handle these accounts in the way that will benefit you most?
You have made the debts; you are obligated to pay them until they are legally discharged either through bankruptcy or the companies who own the accounts write off the account as a loss. But, is it really worth doing so? The answer is NO. It is actually better in some cases to let the debt go. Here is how you can tell if it is time to let the debt go or make the payments to get it paid off.
The first thing to do is determine if the account is still active. You do not want to contact the collection agencies who purchased the account. There are two reasons you don’t want to do this. One is that ALL BILL COLLECTORS LIE ALL THE TIME. Now previously the only other group of people that I have heard this statement about is convicts. This is a terrible thing to say but the fact is it’s their job to scare you into paying the debt. If they told you the truth, you would know that there is nothing to be afraid of and you will delay paying the debt. Most bill collectors work on commission so they have to do whatever it takes to get you to pay the debt. This means that the only thing they are going to tell you is that you have to pay the debt. This brings us to the second reason why you don’t want to contact them.
You may not have to pay the debt. It is entirely possible that the account has been discharged by the granting company and written off for a tax break or maybe even an insurance business loss claim. If this has happened, the collection agency is no longer legally able to collect on that debt. So, why is this a problem? Refer to reason one. They WILL lie to you about the debt. Since there is absolutely no oversight on this aspect of debt collection, they can tell you that you owe the debt even if you don’t. They can get away with this because they are not obligated to tell you if the debt has been written off. So why take the chance of re-activating the account and having to put up with harassing phone calls and nasty threatening letters. As a general rule of thumb, if the collection agencies have stopped contacting you, it is likely that you have fallen off the radar. Do yourself a favor and stay off the radar.
What about the accounts which are active? Remember, in this scenario, you have no assets like a house. So the absolute worst thing that can happen to you if you don’t pay the debt is that you will have your wages garnished. In order for this to happen, you have to be sued by the granting company and a judgment placed against you. Then the granting company has to try to collect on the debt again. If that fails they have to go back to a court and have a Judge order your wages garnished. It usually never goes that far. Most companies use bluff and bluster to scare you into payment after the judgment but if you still refuse to pay, they charge it off of their books and collect from their insurance companies, or they write it off on their taxes.
But, if you follow this route, your credit is ruined because that one account has caused a lot of damage. You have 30-60-90-120 day late payments, a collection and a judgment all from that one account. SIX negative items from you being too stubborn to pay what you owe.
So you might try to obtain a small high interest loan to satisfy those debts that they are still trying to collect on. There are banks and financial institutions out there who will work with you.
And finally, determine if it is worth waiting for another three years for your credit to be clean on its own. Are you happy with your neighborhood, the kid’s schools and other considerations? Do you want to move out to the country? Are you tired of the commute? If you can be satisfied with waiting the three years for the credit to clear on its own, then that is what you should do. But consider this, if you wait, and something negative happens within that time, you will have to wait longer and put off your dream again. But, if you clean your credit and get into a house, when that negative thing happens, there are more options available to you because you are a real property owner. Without the real property, you are just another credit score and not a very good one at that. It’s not just your future, it is your children’s future too. Plan with care.
But in the last couple of years things have finally started to go right for you and now you are in a position where you feel you can afford to buy a house. Life is good and you are determined to keep it good. So you get your free annual credit report to see how much longer you are going to have to wait before you can apply for a loan. And the good news is that it is going to be relatively soon. The bad news is that it is going to be at least three years. So you are considering a credit restoration. But is this really the right course for you? Credit restoration can cost anywhere from $500 to $1000. And that price could even double if you have to include your spouse.
So let’s take this step by step.
When you look at your report you notice that there are two items that are going to fall off your report next month. There are a couple that are about two years away from falling off and a couple that are three years away. The ones that are going to expire next month have low balances that you could pay off in a couple of months. The other accounts have all been turned over to collection agencies. So now you need to form a plan of attack. How do you handle these accounts in the way that will benefit you most?
You have made the debts; you are obligated to pay them until they are legally discharged either through bankruptcy or the companies who own the accounts write off the account as a loss. But, is it really worth doing so? The answer is NO. It is actually better in some cases to let the debt go. Here is how you can tell if it is time to let the debt go or make the payments to get it paid off.
The first thing to do is determine if the account is still active. You do not want to contact the collection agencies who purchased the account. There are two reasons you don’t want to do this. One is that ALL BILL COLLECTORS LIE ALL THE TIME. Now previously the only other group of people that I have heard this statement about is convicts. This is a terrible thing to say but the fact is it’s their job to scare you into paying the debt. If they told you the truth, you would know that there is nothing to be afraid of and you will delay paying the debt. Most bill collectors work on commission so they have to do whatever it takes to get you to pay the debt. This means that the only thing they are going to tell you is that you have to pay the debt. This brings us to the second reason why you don’t want to contact them.
You may not have to pay the debt. It is entirely possible that the account has been discharged by the granting company and written off for a tax break or maybe even an insurance business loss claim. If this has happened, the collection agency is no longer legally able to collect on that debt. So, why is this a problem? Refer to reason one. They WILL lie to you about the debt. Since there is absolutely no oversight on this aspect of debt collection, they can tell you that you owe the debt even if you don’t. They can get away with this because they are not obligated to tell you if the debt has been written off. So why take the chance of re-activating the account and having to put up with harassing phone calls and nasty threatening letters. As a general rule of thumb, if the collection agencies have stopped contacting you, it is likely that you have fallen off the radar. Do yourself a favor and stay off the radar.
What about the accounts which are active? Remember, in this scenario, you have no assets like a house. So the absolute worst thing that can happen to you if you don’t pay the debt is that you will have your wages garnished. In order for this to happen, you have to be sued by the granting company and a judgment placed against you. Then the granting company has to try to collect on the debt again. If that fails they have to go back to a court and have a Judge order your wages garnished. It usually never goes that far. Most companies use bluff and bluster to scare you into payment after the judgment but if you still refuse to pay, they charge it off of their books and collect from their insurance companies, or they write it off on their taxes.
But, if you follow this route, your credit is ruined because that one account has caused a lot of damage. You have 30-60-90-120 day late payments, a collection and a judgment all from that one account. SIX negative items from you being too stubborn to pay what you owe.
So you might try to obtain a small high interest loan to satisfy those debts that they are still trying to collect on. There are banks and financial institutions out there who will work with you.
And finally, determine if it is worth waiting for another three years for your credit to be clean on its own. Are you happy with your neighborhood, the kid’s schools and other considerations? Do you want to move out to the country? Are you tired of the commute? If you can be satisfied with waiting the three years for the credit to clear on its own, then that is what you should do. But consider this, if you wait, and something negative happens within that time, you will have to wait longer and put off your dream again. But, if you clean your credit and get into a house, when that negative thing happens, there are more options available to you because you are a real property owner. Without the real property, you are just another credit score and not a very good one at that. It’s not just your future, it is your children’s future too. Plan with care.
Wednesday, January 24, 2007
The TRUTH about Credit Repair: Aren't They All Scams or Illegal?
This topic is a really hot one right now. People are falling victim to so many scam artists out there who are taking people's money and offering false hope.
What is credit restoration? It is a means by which one can have negative information removed from one's credit file by using the more than 300 different laws contained in the Fair Credit Reporting Act (FCRA). If you know how to use and manipulate those laws, you can successfully remove any information from your credit report, even if it is legitimate. This is possible because of many factors, but chief amongst these is that there is no law in any jurisdiction in the United States which REQUIRES information about you be reported for seven minutes, much less seven years. The truth is that anyone can write to the credit bureaus to have negative information removed from their file. But, like fixing your car's engine, it is usually better to have a professional do it for you. If you don't know what you are doing, you can end up doing more harm than good.
That is easier said than done. Currently in the United States, there are ONLY A FEW legitimate credit restoration companies. Each has their strengths and their flaws, but they are professionals with many years of experience backing them up. Unfortunately, this cannot be said about most people in the country who are performing credit repair. What has happened in many cases that I have investigated is a person bought a do-it-yourself kit over the internet and had some success with their own credit file. Problem is, now they think they can repair anyone's credit. This is what worries me most. An untrained, unlicensed, un-bonded and uninsured person handling other people's credit files. There is absolutely NO accountability if, or rather, when this person screws things up.
It is up to you to do the research. You should ask a lot of questions and perform your due dilligence. If you can't do the bare minimum to protect yourself, then don't come crying to me if you are taken for all of your money. But, to help you determine the scams from the legits, I have compiled 10 tips on how to tell the difference:
1: If they advertise that they will repair your credit in anything less than 18 months, you are not dealing with a legal company. The LAW requires that any credit restoration agency cannot advertise or represent that they can restore or repair your credit in less than 18 months. (Remember this number, it is going to come up again later.)
2: Check on how long the company has been in business. If they have been around for more than 10 years, you are probably dealing with a reputable company.
3: Do your due dilligence. Check with the BBB. The BBB will provide an unbiased report of how many complaints have been filed against the company in the previous three years. There are two things that you want to consider here. First, if there are more than a dozen complaints over the previous three year period, then this company has serious issues and you should be concerned. Also, if the BBB has no file at all on the business, just walk away from the business. Anyone who is hiding from the BBB should be looked upon with suspicion.
4: Ask for pricing when talking to one of their reps. If they hem and haw about what they charge, or say that it depends on how much they have to remove from your report, they are hiding something from you. A good rule of thumb, if the rep is unwilling to answer any question of yours up front and with honesty, you are not dealing with a legitimate company. This does not mean that if the rep states that they will answer the question in a moment, that they are hiding something. It just means that they are getting there and just need to lay a little groundwork first. Remember, reps are all salespersons. They are there to sell you their service. This is good, believe it or not. This encourages competition in the business and keeps costs down. (Which reminds me: DON'T PAY MORE THAN $1200 PER PERSON FOR THE SERVICE.)
5: Ask if the company is licensed, bonded and insurred. Ask for proof. If they will not provide you with their bond information, (which they MUST have in order to obtain their license and insurance) this should raise alarm bells.
6: Ask for examples of successes the company has had. A legitimate company will have copies of investigation results (with personal information blacked out of course) that will show you how successful they can be.
7: How long are they going to work for you? Yes, that's right, remember that these companies work FOR you. If they are just going to maintain a business relationship with you for the length of time it takes to repair your credit, beware. What often happens in these cases is that after the company has cleared negative information from your credit report they sever their relationship with you and a couple of months later the information returns to your credit report. Now what are you going to do? Your options are to leave the negative information and suffer for 7-10 years or hire someone, again, to remove the information, again. A reputable company will stay with you for the FULL 18 months (I told you this number would come up again). This allows them to continuously monitor your credit reports and remove any negative information that may re-insert itself after the initial sanitizing.
8: What other services do they offer? If they are a legitimate company, they will have rescources that will help you to re-establish yourself in the financial world. Things like the ability to help obtain a debit card even if you can't open a checking or savings account. (Yes, believe it or not, it can be done!) Can you call their credit advisors any time for advice? Is legal representation available if you have to go to court against the credit reporting agencies? ASK! If the company is letgitimate, they will have a team of lawyers that will handle these kinds of legal matters for the duration of your contract.
9: Does their contract advise you of your rights? If not, why? Because they don't know the laws! And if they don't know the laws that are designed to protect you, how can you expect them to know the complexities of the Fair Credit Reporting Act which has over 300 laws?
10: Is there a money back guarantee? In this business refunds are usually prorated. In other words, if you have 50 negative things on your reports and they can only have 30 removed, you are refunded 40% of your money since they were able to get 60% of the information removed. If there is no money back offer, run away! A company that has faith in their services will offer to refund the money if they can't do the work.
I hope this information helps people out there who are confused about credit restoration programs. In a future article I will discuss who should and should not use credit restoration.
What is credit restoration? It is a means by which one can have negative information removed from one's credit file by using the more than 300 different laws contained in the Fair Credit Reporting Act (FCRA). If you know how to use and manipulate those laws, you can successfully remove any information from your credit report, even if it is legitimate. This is possible because of many factors, but chief amongst these is that there is no law in any jurisdiction in the United States which REQUIRES information about you be reported for seven minutes, much less seven years. The truth is that anyone can write to the credit bureaus to have negative information removed from their file. But, like fixing your car's engine, it is usually better to have a professional do it for you. If you don't know what you are doing, you can end up doing more harm than good.
That is easier said than done. Currently in the United States, there are ONLY A FEW legitimate credit restoration companies. Each has their strengths and their flaws, but they are professionals with many years of experience backing them up. Unfortunately, this cannot be said about most people in the country who are performing credit repair. What has happened in many cases that I have investigated is a person bought a do-it-yourself kit over the internet and had some success with their own credit file. Problem is, now they think they can repair anyone's credit. This is what worries me most. An untrained, unlicensed, un-bonded and uninsured person handling other people's credit files. There is absolutely NO accountability if, or rather, when this person screws things up.
It is up to you to do the research. You should ask a lot of questions and perform your due dilligence. If you can't do the bare minimum to protect yourself, then don't come crying to me if you are taken for all of your money. But, to help you determine the scams from the legits, I have compiled 10 tips on how to tell the difference:
1: If they advertise that they will repair your credit in anything less than 18 months, you are not dealing with a legal company. The LAW requires that any credit restoration agency cannot advertise or represent that they can restore or repair your credit in less than 18 months. (Remember this number, it is going to come up again later.)
2: Check on how long the company has been in business. If they have been around for more than 10 years, you are probably dealing with a reputable company.
3: Do your due dilligence. Check with the BBB. The BBB will provide an unbiased report of how many complaints have been filed against the company in the previous three years. There are two things that you want to consider here. First, if there are more than a dozen complaints over the previous three year period, then this company has serious issues and you should be concerned. Also, if the BBB has no file at all on the business, just walk away from the business. Anyone who is hiding from the BBB should be looked upon with suspicion.
4: Ask for pricing when talking to one of their reps. If they hem and haw about what they charge, or say that it depends on how much they have to remove from your report, they are hiding something from you. A good rule of thumb, if the rep is unwilling to answer any question of yours up front and with honesty, you are not dealing with a legitimate company. This does not mean that if the rep states that they will answer the question in a moment, that they are hiding something. It just means that they are getting there and just need to lay a little groundwork first. Remember, reps are all salespersons. They are there to sell you their service. This is good, believe it or not. This encourages competition in the business and keeps costs down. (Which reminds me: DON'T PAY MORE THAN $1200 PER PERSON FOR THE SERVICE.)
5: Ask if the company is licensed, bonded and insurred. Ask for proof. If they will not provide you with their bond information, (which they MUST have in order to obtain their license and insurance) this should raise alarm bells.
6: Ask for examples of successes the company has had. A legitimate company will have copies of investigation results (with personal information blacked out of course) that will show you how successful they can be.
7: How long are they going to work for you? Yes, that's right, remember that these companies work FOR you. If they are just going to maintain a business relationship with you for the length of time it takes to repair your credit, beware. What often happens in these cases is that after the company has cleared negative information from your credit report they sever their relationship with you and a couple of months later the information returns to your credit report. Now what are you going to do? Your options are to leave the negative information and suffer for 7-10 years or hire someone, again, to remove the information, again. A reputable company will stay with you for the FULL 18 months (I told you this number would come up again). This allows them to continuously monitor your credit reports and remove any negative information that may re-insert itself after the initial sanitizing.
8: What other services do they offer? If they are a legitimate company, they will have rescources that will help you to re-establish yourself in the financial world. Things like the ability to help obtain a debit card even if you can't open a checking or savings account. (Yes, believe it or not, it can be done!) Can you call their credit advisors any time for advice? Is legal representation available if you have to go to court against the credit reporting agencies? ASK! If the company is letgitimate, they will have a team of lawyers that will handle these kinds of legal matters for the duration of your contract.
9: Does their contract advise you of your rights? If not, why? Because they don't know the laws! And if they don't know the laws that are designed to protect you, how can you expect them to know the complexities of the Fair Credit Reporting Act which has over 300 laws?
10: Is there a money back guarantee? In this business refunds are usually prorated. In other words, if you have 50 negative things on your reports and they can only have 30 removed, you are refunded 40% of your money since they were able to get 60% of the information removed. If there is no money back offer, run away! A company that has faith in their services will offer to refund the money if they can't do the work.
I hope this information helps people out there who are confused about credit restoration programs. In a future article I will discuss who should and should not use credit restoration.
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