What is the cost of bad credit?

Example B's total lifetime penalty for poor credit? Over $250,000!! The above example underestimates the true financial costs of poor credit:

● Interest rates in the example are from 2004 - a time when interest rates were at record lows. Higher rates are now prevailing.

● Example B probably paid insurance premiums that were 20-30 percent higher than Example A's, and he/she might of had trouble finding an apartment, all because of his/her credit score.

● The example does not count "opportunity costs" - what Example B could of bought if he/she was not paying so much more interest.

Since more of Example B's paycheck went to lenders, he/she has less money available for other goals: vacation, a second home, college education for children, and retirement. We do not want to see you waste anymore money.

You’ve got your credit reports. Now what?

Request credit reports from all three agencies. Some businesses only use Experian and not the others. They all have different scores as they utilize different algorithms to determine scores. Some creditors do not report to all three agencies. A late payment may be reported to Experian, but not to TransUnion.

A credit score is determined by a combination of negative and positive marks. Negative marks on a credit report are averaged with positive marks for the final score. Negative marks do not always have a major impact on the total score. Take note of negative marks and review them for inaccuracies. Consumers have the right to dispute any incorrect information, including your name, date of birth, dates, creditor, or amounts.  

Request verification the debt belongs to on the report. If the agency cannot provide this information, they must remove the mark. Remove as many negative marks as possible.  Send dispute letter  to each agency. Most agencies allow disputes  directly on their website. The longer the debt has been on file, the less likely proof will be provided. Later, discussing how to add positive credit to increase your score will addressed.

New accounts are easier to verify. (“New” is approximately 18 months.)  Do not submit more than 5 to 8 items at a time. Otherwise, it will look like you are trying to take items off of your account whether they are legitimate or not. Request for negative deletions are less likely to be approved in a mass submission. There is no limit on the number of times an item can be disputed. If it doesn’t come off the first time, send in another request.  Once a mark is removed, a score can increase in as little as 30 days.

Next post will be on sample letters and agency contact information.

Submit your credit repair questions

Monday, I will be answering any credit repair questions you may have. Questions and answers will be posted on the site anonymously. Please submit your questions to: elizabethlane@live.com

How To Get A Free Copy of Your Credit Report

Very few people have ever gone through their financial life without having a few bumps in the road. Job loss, medical issues, divorce, and many other instances can cause you to fall behind on your bills. At some point, you get past the problems, but now you have to deal with poor credit. It really doesn’t matter where you are at; it only matters that you get started. Here are some tips for do-it-yourself credit repair.

Before you can fix your credit, you have to know where you currently stand with your credit. There are a lot of ways to do this. There are many services that charge monthly or annual fees to keep you updated on your credit. If you know you have bad credit and you’re only trying to start the road to recovery, I wouldn’t suggest paying for a service. There are a couple of sites that are my favorite.

CreditKarma.com is a site you can register with. They don’t give a detailed report of your credit with each credit bureau, but rather a compiled score. It also updates every month so you can have some idea where you are at and if you are going in the right direction. To get a detailed report from all three credit bureaus you can order your free credit report at www.annualcreditreport.com. As implied, you are able to get your credit report free one time every 12 months.

If you are turned down based on your credit history, you are entitled to get a free credit report. The company who turned you down must supply you with the credit bureau’s name, address, and phone number. You have 60 days to contact the bureau and request a free copy of your report.

You need to get reports from all three credit bureaus in order to get a clear and accurate view of your credit. Not all companies report to all three agencies, thus you may get different scores. One may have a delinquent account the others do not. The three bureaus are Equifax, TransUnion, and Experian.

The Economy and Credit Repair

Wow! Who's credit has not been effected by the economy. People have lost their homes, retirements funds, jobs, and savings. It's hard to fathom how anyone is going to be able to even use credit as a standard in the future. If you're credit has faltered and you still want to salvage it through the economy, here are a few tips:

1. Keep at least two credit cards open and keep them up to date. If you can arrange other installment loans, go ahead and do so. This will help rebuild your credit.
2. Pay all of your accounts when they come due.
3. File disputes against any derogatory entries on your credit report.

If you're not sure what your credit score is, but want to get a good idea--you can also use the free service at creditkarma.com. It will update you monthly with any changes and is a great way to monitor your progress if you are trying to get back on track.

Don't give up! The economy will make a comeback and when it does, you want to position yourself to have the good credit you need. 

Best Credit Repair Sites

If you decide to use a credit repair company, get sound advice. Ask your friends and family who they have had success with. You may be surprised by how many people have used credit repair. The following link has rated the top ten credit repair companies:

www.top-10-credit-repair.com/

The Credit Repair Scam

When most people hear the words "credit repair" they almost automatically think of a scam. I recently received a call from a client. He told me how he had spent over $1,500 with two other credit repair companies. His score is currently in the 500's.

He felt like he had been scammed. So many companies make promises that they can delete bankruptcies, judgements, and negative credit. It's not hard to put out a sign and claim to be an expert in credit repair. However, if you don't understand how credit works, you may be making the problem worse instead of better. Most people just don't understand the rules of the credit game.

Anyone can bombard the CRA's (credit reporting agencies) with dispute letters. They might even get lucky and have some of the negatives removed. Your credit score, is unfortunately, a game, with some self-appointed powers that be making up the rules as they go along. Oftentimes, the rules change. Most people don't even know that negative credit only makes up 35% of your credit score. Which means, you have 65% to focus on positive credit.

Don't go into the credit repair game with high hopes and lots of cash. You may be disappointed, unless you can find a true educator who can guide you through the murky waters and help you with true credit improvement.