Fix Credit: How Do You Fix Credit Report Errors?

About four out of every five credit reports have errors on them. Most of these are minor inaccuracies, such as incorrect employers, which do not affect your credit score. However, sometimes credit reports will erroneously show debt that you have paid off as currently in default or even include accounts that are not yours. When you FIX CREDIT reports to remove these false marks, you can significantly improve your credit score.

First, Get Your Report

You can get your report for free once a year from AnnualCreditReport.com. Grab reports from all three reporting bureaus. Each bureau gathers information independently, so, you can wind up with different information in different reports.

Scan The Reports for Inconsistencies

Are there accounts showing as open and unpaid that you know you handled? Are there others that you don’t even recognize? Highlight everything that looks like it is incorrect. It can sometimes be difficult to tell which debt is what, as collection agencies will buy bad debts for pennies on the dollar.

However, many accounts that show up as a new debt to another agency could be incorrectly on your report. If, for instance, you had a debt discharged during a bankruptcy, it could have been sold anyway. Creditors often do not inform new agencies that a debt has been settled, and it can take time for the news to spread.

In other cases, you may find that certain debts show up twice. For instance, if your student loans are sold after you’ve removed them from default, make sure that the old accounts show up as being closed. If it still appears that those accounts are open, it can make your debt burden look twice as large as it actually is.

Request Removal of Bogus Accounts

Contact each of these creditors, in writing, to ask them to verify the account. By law, a creditor must verify that an account is valid within 30 days of the request. If they can’t prove that the debt is yours, the credit reporting agencies are required to remove it.

You can also dispute debts directly with the credit reporting agencies. Each has processes online for disputes. This will also give you the opportunity to follow up and make sure that errors are handled.

Keep Up the Maintenance

Request your report at least once a year to make sure that everything is accurate. It can help to tie your annual request to another important date such as your birthday or anniversary so you don’t forget. If you are in the middle of efforts to fix credit ratings so you can buy a house, you may want to look into a subscription account or a free service like CreditKarma so you can check more often.

Getting erroneous bad marks removed from your report can provide an almost instant boost to your credit scores. It’s worth the time and effort to make sure that your credit reports are correct.

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Controversies Regarding Credit Scores and Credit Reports

Credit scores are a quick and handy shorthand that banks and other potential creditors use to assess their risk before loaning money. But, as is common with shorthand systems, they are also prone to a number of flaws that can negatively affect you, the consumer.

There are actually a number of controversies surrounding the use of credit scores and credit reports. Some states have proposed legislation to give consumers more protection. Some of the issues with credit scores that can hurt consumers:

Possible Errors in Credit Reports

Experts estimate that 79% of all credit reports contain errors. While most of these are innocuous errors regarding employment or past addresses, others contain negative marks that can lower your credit score. And, when there is an error in your credit report, you are presumed guilty. You, or a credit repair specialist working on your behalf, must initialize investigations into erroneous reportings. In some cases, inaccurate data has stayed on credit reports long enough to begin legal action.

Non-Credit Uses of Credit Scores

Credit scores are not just used for assessing credit. They are also more and more commonly used when you are seeking employment. This has become even more common, and more damaging during the economic downturn. Many worthy applicants are turned away because economic hardships have left them with less than perfect credit histories. At least seven states have put laws into place banning employers from pulling applicants credit reports or limiting what information employers can see.

Further, there is little evidence that credit scores and credit reports are a good indicator of employment performance. Representatives from TransUnion admitted that they had no figures correlating credit score and worth as an employee. A study done by the New York Times failed to find any relation between the two.

Complexity of Credit Scoring Process

The truth is, no one knows exactly how the credit scoring agencies arrive at your credit score. The work involves complex computations that are largely kept secret to avoid gaming the system. Credit reporting agencies have shared the how each section is weighted; however, the exact figures are kept secret. This has led many consumer advocates to criticize credit reporting agencies for a lack of transparency.

Variations Between Different Agency’s Scores

The version of your credit score that you can access is not the same one seen by potential creditors. And, your score can vary depending on which credit scoring agency is used. According to a report from the Consumer Financial Protection Bureau, one in five people are getting credit score reports that are significantly different from what retailers see. This can cause many consumers to pay a higher interest rate than they should because they fail to shop for a better deal on credit card interest rates. In other cases, consumers inadvertently lower their own scores by applying for loans that are beyond what they can qualify for.

In the end, the best thing you can do is arm yourself with knowledge. As you work toward home purchase plans, stick with accepted best practices for credit health. By keeping your eye on your financial health, you can find your way through this complex and sometimes unfair system.

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Bankruptcy and Your Credit Score

Bankruptcy and Your Credit Score
Bankruptcy and Your Credit Score
There’s no way around it: a bankruptcy will unavoidably negatively impact your credit scores. However, there are a number of factors that will affect just how severe the effect is on your score, some of them unexpected. While there is no straightforward formula regarding how many points any one person will lose in a bankruptcy, there are a few factors that can help you make a healthy guess.

A few things to consider:

How High Was Your Score Before?

Ironically, someone with a higher FICO score will see a bigger drop as the result of a bankruptcy than someone with a lower score. In a mock scenario released by FICO in 2010, they compared two hypothetical scenarios: one person with a 780 and one person with a 680, both of whom file for bankruptcy. The person with the higher score lost 240 points while the person with the lower score lost only 150, leaving them both with scores in the mid 500s.

However, bankruptcy usually occurs after a long stretch of failing to pay bills on time, so, it is likely that late payments already negatively affected your score by the time that you file.

How Many Accounts Are Involved?

The more accounts that are included in your bankruptcy, the larger the effect on your credit score. The discharged debts each count as a negative filing. However, these will drop off your credit record seven years after filing, so, your credit rating will start to improve even before the bankruptcy is gone from your credit records.

How Long Ago Was the Bankruptcy?

A Chapter 13 bankruptcy filing stays on your credit record for seven years, while a Chapter 7 bankruptcy stays for 10. The longer it has been since you filed and the more responsible you have been in the interceding time, the less your bankruptcy will depress your credit score.

Rebuilding After Bankruptcy

After a bankruptcy, you can rebuild your credit and achieve goals that include a home purchase. Some methods to use during your credit repair journey to improve your score:

  • Review your credit reports. Make sure that all debts that were discharged in the bankruptcy are reflected accurately. As many as 79% of all credit reports have at least one error, so, it is worth it to check.
  • Pay every bill on time. Late payments can snowball and destroy your credit over time. Try automating payments so you never forget one.
  • Look for a secured credit card. Cautiously add revolving loans so that you can show creditors that you can be trusted with credit.
  • Use cards sparingly but regularly. Build up a regular habit of responsible use. One good way to do this is to charge a small, regular bill like a gym membership to your card and pay it off in full each month.
  • Do not close old credit card accounts. If you have any credit card accounts from before your bankruptcy, keep them open. The age of your credit accounts is a factor in your credit score, and the older your accounts, the better.

While a bankruptcy is a challenge, it is not the end of your financial life. Educate yourself about your credit, and carefully rebuild to restore your financial future.

 

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Is a Credit Union Right For You? – Bigger Isn’t Always Better

With all the negative press that big banks are getting these days, a lot of people have started to wonder whether a credit union would be a better bet. The answer to that question depends a lot on your specific circumstances and what you are hoping to get out of a banking experience.

What is a Credit Union?

Credit unions are non-profit, member-owned financial organizations. Their primary objectives are to serve members best rather than to maximize profits. Members can borrow money at lower rates and often have access to fee-free productions, like no-fee checking accounts. In most cases, you need to be a member of a specific organization to join one. They can be a boon to people going through the credit repair process, as they are often more likely to approve someone for an account than for-profit banks.

The Perks of Dealing with Credit Unions

There’s a lot on the plus side of dealing with a credit union instead of a bank, including:

  • Lower interest rates. During your home purchase process, check out rates for mortgage loans at a credit union. Often you will find that they are lower than those at banks.
  • Better service. Most credit union members report much higher rates of satisfaction then customers with similar accounts at big banks do.
  • Lower fees. While zero-fee checking is an endangered species at regular banks, most credit unions still do their best to offer it.
  • More likely to approve you for financial products. Since credit union membership is often based on group membership, they are more open to providing credit cards and loans to members.

The Drawbacks of Credit Unions

But, there can be some downsides to doing all your banking at a credit union:

  • Fewer branches. This can mean that getting to a physical branch is less convenient. People who deal with a lot of cash, such as servers or bartenders, might find it less convenient to make deposits if the closest branch of their credit union is too far away.
  • Fewer services. Credit unions often lag behind their big bank rivals in features such as mobile banking or online bill payment. If you are considering a credit union, ask what features come with the account.
  • Lower perks. If you are looking for reward credit cards, you may be better off looking for one from a big bank. When Bankrate recently rated the top 50 credit cards that offered cash-back or other rewards, only five were ones offered by credit unions instead of banks.
  • Membership requirements. While there are many credit unions open to the public, many others have limitations on who can join. Some only take members of certain professions, while others are limited to alumni of certain schools or people who work for a specific employer.

When you are bank shopping, compare and contrast offerings from both local credit unions and local branches of big banks. Have a list of features and services that are important to you and see which will give you the best deal. By doing thorough research, you can find the financial services that will serve you and your family best.

For more information on how to fix your credit scores feel free to contact our office for a Free Consultation.

Credit Laws : Check out our new page!

Check out our new page dedicated to the rules, regulations and laws that govern credit and debt collections. You will find a downloadable pdf of the fair credit reporting act (fcra), the fair and accurate transactions act (facta), the fair debt collections practices act (fdcpa) and the credit repair organizations act (CROA).

Nikitas Tsoukalis, President

p.s. As always, feel free to give me a call at 617-265-7900 with any questions regarding the credit repair process. Feel free to request a free consultation to speak to one of our consultants.