Credit During The “Crunch” How to THRIVE while others are trying to Survive!

Agenda
Explain the roles of the credit reporting agencies Explain why/how items can often be removed from credit files Discuss how we can thrive in today’s economy Share 10 credit tips

Fair Credit Reporting Act Specifically States that Every Item Reporting on a Credit Report MUST be:

Reported Timely
 Bad credit can be reported for 7 years, 10 years for bankruptcy. Good credit can be reported for 10 years. Guess which one fails to get reported the most? Guess which one gets sold multiple times only to continue being reported?

 

100% Verifiable
 If the credit bureau ,creditor, collection agency can’t verify that an item belongs to you, it

MUST BE REMOVED!

100% Accurate
Every aspect of an item must be accurate. Balance, on time payments, late payments, high credit, ect.

So if it’s not reporting legally, the bureaus remove it, right?
NO, many times we have to fight to get items removed that legally should not be reporting. Approximately 30% will come off easily through a standard dispute process. The rest is like a game of chess. If you don’t know how to play the game, you will not get the results your looking for.

So why is there so much resistance to remove what shouldn’t be reporting anyway?

MONEY!!!!
The credit bureaus earn money by selling your information to lenders. Credit Card Companies Banks Insurance Companies Any industry that revolves around credit.

How do we prepare ourselves?
Educate Debt Management Budgeting Credit Restoration

FICO in a Nutshell

1. Past Delinquencies…

35%
of Credit Score

2. Revolving Debt Ratio…

30%
of Credit Score

3. Average Age of Credit File…

15%
of Credit Score

4. Mix of Credit …

10%
of Credit Score

5. Inquiries…

10%
of Credit Score

10 Credit Tips

1. BE SELECTIVE ABOUT APPLYING FOR NEW CREDIT OF ANY KIND.  Including those “You have been preapproved” credit card invitations that you receive in the mail.  Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately.  Depending on the elements in your current credit report, you could lose anywhere from 2-15 points for one hard inquiry.

2. PREPARE BEFORE PAYING OFF COLLECTIONS OR CHARGE OFFS
Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you are going to pay off the debt. make sure the creditor validates that the debt is yours that the creditor agrees to give you a letter of deletion

3. DON’T CLOSE CREDIT CARD ACCOUNTS.

If you close a credit card account it will appear to the FICO that your debt ratio has gone up because what you owe versus available credit % increases. Also, closing a card will affect other factors in the score such as length of credit history.

4. DON’T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process.

5. DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in #4.

6. BE CAUTIOUS “HELPING” OTHERS.
Ask yourself, why does this person need help? Do they need help getting started? Do they need help because they have never paid anyone? If you really want to help your children, educate them on how to properly use their

7. BUY A CD AND SECURE A LOAN WITH IT TO GET REESTABLISHED. Start early, don’t wait until you need a loan to get started. You can also do this with a secured credit card, but……

8. DO STAY CURRENT ON EXISTINGING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-125 points.

9. IF FACED WITH A SITUATION OUT OF YOUR CONTROL, BE PROACTIVE.  Call your creditors and communicate with them. Many times they will work with you. Deferments, refinance, other options. Most would rather work with

10. STAY ON TOP OF YOUR MEDICAL INSURANCE! Address any medical billing issues immediately. Medical bills are the most common items that are reported derogatory. A recent medical bill can be difficult to remove even if it is an error.