Have you been through a period of financial stress? Is your credit a mess? It can be difficult to look at the damage, but ignoring your credit report is the number-one worse thing you can do. Did you know that late payments, charge-offs, and collections are almost guaranteed to generate errors that will depress your credit scores even further? It's ironic that shortcomings in the credit reporting system create a bias against the very consumers who can afford it the least. Fortunately there is good news. It is never too late to stand up for your rights. Take a deep breath and start your credit repair effort today.
Credit Repair Sin #2: Canceling Your Cards
So you decided to start a credit repair program, cut up your Credit Cards, and make everything right. Right? Sorry. Wrong. As righteous as the plan sounds, there is a flaw. The FICO scoring model puts so much weight on open accounts that even as you remove erroneous items from your credit report your score will go nowhere; it may even fall. If you have open Credit Cards, don?t close them. Switch gears and get into management mode. Get the balances down, make your payments on time and watch your scores go up.
Credit Repair Sin #3: Failing to Rebuild
It's common to emerge from a time of financial stress with no open accounts. Many people in this situation begin a credit repair effort and decide to postpone applying for new credit until their report looks better. Who wants to be denied? Why not just wait? Well, there is a reason. As mentioned above, without open accounts your credit repair effort is likely to do little for your credit scores, and you will be no closer to being lender-ready than you were before. You need to rebuild! Just get a couple of secured Credit Cards. You won?t be denied and you will be on your way to building truly usable credit.
Credit Repair Sin #4: Maxing Out Revolving Balances
You are doing everything right; you cleaned up your credit, you opened new accounts, and you are paying your bills on time. So, why isn?t your credit score cooperating? You may blame an old paid collection or some old public record for keeping your score in purgatory. But you are wrong! It's just your darn credit card balances. The newest version of the FICO credit score model adjusts your score dramatically depending on the ratio between your balance and your credit limit. If you want to optimize your score keep the balance under 20% of the limit. Just try it and watch the credit repair magic happen!
Credit Repair Sin #5: Ignoring Collection Letters
Got a collection letter? It is tempting to throw it away. But throwing it away won?t make it go away. And if you throw it away you will have missed a golden opportunity to exercise a powerful legal right that exists for just 30 days from the time the collector sends the letter. For those 30 days the Fair Debt Collection Practices Act requires collectors to comply with your request to provide proof of their right to collect and an accounting from the original creditor proving the dollar amount is correct. If they cannot do this they must cease all collection efforts and not report the collection to the credit bureaus.
Credit Repair Sin #6: Not Knowing Your SOL
Statutes of limitation (SOL) limit the time a debt may be collected through the court system. The SOL is different for each state and may be found easily on the Internet. The SOL may be as little as two years for some debt types in some states. If a collector cannot get a judgment they cannot enforce collection. They can ask nicely, or they can threaten, but the threats have no substance. Did you know the Fair Debt Collection Practices Act gives you the right to send a letter to a collector asking them to cease all communication? This is a handy credit repair tool. After all who needs the stress? If you are harassed by a collector beyond the SOL you can send a Cease Communication Letter and they will go away.
Credit Repair Sin #7: Flying Solo
One of the big mistakes people make with credit repair is going it alone. Credit repair is a lot like fixing an automobile. If you need an oil change you can do it yourself and probably don?t need a repair manual or a mechanic. But if you really need a tune-up you better know what you are doing. You wouldn?t just pop the hood and start taking the engine apart. Would you? Credit repair can produce awesome results if done properly, so please do the right thing for yourself and buy a book or consult a credit repair professional.
Copyright ? 2007 James W. Kemish. All Content. All Rights Reserved.
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