Archive for the ‘Credit Repair’ Category

You are most likely weighing the pros and cons of a short sale vs. a foreclosure. If you, like many other Americans right now, are coping with a challenge to meet your mortgage payment. This may be due to one or a combination of these common struggles: 1) job loss, 2) increasing rates if you are in an ARM loan, and 3) decreasing home values. It is most likely that you are deeply concerned with how either of these ugly terms will affect your credit score and which one may be the better choice of the two burdens. Instead of being intimidated, you are at least getting educated on your choices and the consequences. Though the reality of a short sale or foreclosure is not positive, researching what you will face is a good start to finding the best solution to your individual situation.

With a short sale, lenders typically take a loss on a loan that reflects the difference between what you owe and what the property actually sells for. They must be willing to accept this level of risk, and may execute one of two actions in a short sale: A) Sue you, the homeowner, for the difference; reflecting on your credit as a deficiency judgment which could profoundly impact your credit score in a negative way, or B) if they choose not to sue, they very well could absorb the loss, show it as a tax write off, and the IRS would see this as income sent your way. You would then be taxed based on the difference of the lender’s loss. This could prove to be extremely costly; however there would be no deficiency judgment showing on your credit.

Maybe your mortgage payments are current and you could proactively foresee any issues with your ability to continue to make them. Partnered with being current, if you have available assets to pay the difference within your short sale, then there should be no need for negative dings to your credit. Since you are in control of the sale, on top of your mortgage payments, and could pay the difference out of pocket, this may not be handled as an actual foreclosure. Hence this would be the ideal situation.

Now, a foreclosure is exactly what it is. You have fallen behind in your mortgage payments; you cannot sell your home due to housing market conditions and have chosen to walk away. A completed foreclosure can stay on your credit for up to 10 years and can literally sink your credit scores. Your credit score could potentially drop anywhere from 100 to 400 points; severely impairing your credit. If you are forced into a short sale, behind on your payments, and are unable to pay the difference, this “short sale” could reflect on your credit just the same as a foreclosure would.

Either situation that confronts you, whether it is after your foreclosure or a deficiency judgment from a short sale, the key to recovering from this successfully, is the determination to improve your credit once the damage is done. With your positive actions, commitment and patience you can fix your credit, and the dream of becoming a homeowner once again could someday become a reality.

It seems like a logical step. You say to yourself, “I want to fix my credit, so I will pay off some of my credit card debt.” You take your savings and apply it to your balance. You sit back and wait for your credit score to go up. It’s guaranteed, right? Not always.

According to ABC News with the collapse of the economy, credit has been more difficult to come by, and banks are feeling the pressure of the easy credit they once handed out freely to their customers. Well, it has now become the customers who are feeling the pressure. Many people have experienced what is called the “follow me down” phenomenon while attempting to fix their credit. When a customer pays down his balance, “follow me down” reacts by decreasing their card’s spending limit. While paying down debt should help this customer’s credit score, the result of the phenomenon is a credit score decrease due to the cut in the credit card’s spending limit. Providers like Chase and Citibank have been cited by consumers in recent months for taking part in this practice.

Paying off debt should not have a negative impact on your credit score. Avoid the “follow me down” phenomenon by taking steps to protect yourself:

The economy has taken some hits, but don’t let the same thing happen to your credit score. An attempt to fix credit should be praised, not punished. Beware of the dangers of the “follow me down” phenomenon and use the tools above to avoid it.

Many people feel hesitant after declaring, “I want to fix my credit.” It’s easy to wish for a better credit score, but common mistakes on the path to fixing credit can actually lead to a more lengthy process. Read on to discover some common scenarios.

1. “I’ll wait to rebuild my score.” While it seems logical to wait until your credit issues are resolved before taking additional steps to improve your score, you are missing out on a great way to fix credit. Be proactive about paying down your debt and looking for new ways to diversify your credit portfolio.

2. Closing old accounts will help fix my credit score.” Credit longevity is a good thing, and accounts that have been in good standing for several years can only help you. By closing your oldest account, your credit history will appear shorter than it actually is.

3. “I want to fix my credit; I should charge more on my credit cards.” Spending more does not equal better credit. In fact, maxing out your credit cards will hurt your score. The best way to use consumer credit to your advantage is to keep your credit card balances below their limits; ideally, aim for 25 percent or less.

4. “I don’t have time to deal with the long process of credit repair. I’ll bet there is a quicker option online!” Indeed there is, but be cautious. While there are reputable online companies aimed at fixing credit, do your homework before signing up. What are their credentials? How much experience do they have? Are there hidden costs? Find the answers to these questions to make sure you have an advocate, not an adversary.

5. “Keeping track of every credit-related email and letter is not that important.” Wrong. Keeping current records of the correspondence between yourself and the credit reporting companies is crucial. By law, these companies have 30 days to respond to disputes, but don’t rely on them to stay within this timetable. Have your dispute letters notarized at the post office to provide proof of the mailing date. You may need this documentation if you don’t receive a response.

The smart way to fix credit is the organized way. Before taking any steps to repair your credit, do your research. Find out which actions can help you (and hurt you) the most. Keep thorough records of your conversations and correspondence with the credit repair companies. “I want to fix my credit” is an assertive statement; let your actions follow suit.

Credit repair scams are everywhere, from TV commercials to Internet ads. With so many out there, it is difficult to discern which credit repair companies are legitimate and which participate in fraudulent schemes. Before you hire someone to help repair your credit, consider the following six signs of credit repair scams:

1. The company asks for up-front payment. This tactic is perhaps the most common credit repair scam, and it is also illegal. Under the Credit Repair Organizations Act (CROA), credit repair companies cannot accept payment before performing the work they’ve agreed to complete.

2. You are not advised of your rights. All credit repair companies are required to inform you of your right to repair credit on your own. They must also provide you with a copy of the “Consumer Credit File Rights Under State and Federal Law” in addition to a services contract that outlines your rights and responsibilities.

3. You are discouraged from contacting credit reporting companies. The three major companies, Experian, TransUnion and Equifax are responsible for handling dispute letters filed on your behalf. Just as you have a right to repair your own credit, you also have a right to contact those who change it.

4. The company claims they can erase all bad credit. While it is your credit repair company’s job to help erase negative items that are false, no one can erase bad credit from your record if it is legitimate.

5. You are encouraged to assume a “clean identity.” Scams often advocate credit repair by asking customers to obtain an Employer Identification Number (EIN) from the IRS. While this is not unlawful on its own, it is illegal to use this number to replace your Social Security Number.

6. The company claims FTC endorsement. The Federal Trade Commission (FTC) is an independent government agency designed to protect consumers. The FTC does not support or endorse any credit repair company.

Credit repair can be a stressful and daunting process. You may be desperate to repair your credit, but don’t make yourself vulnerable to credit repair scams. Know your rights and if you choose to get help, find reputable credit repair companies that will work with your best interests in mind.

For victims of identity theft, the experience of losing a good credit score can be crippling. The lasting effects are just as bleak as those with bad credit; identity theft victims also face the potential of denied loan applications, lost opportunities, and high interest rates.

Despite the unfortunate circumstances that surround identity theft, credit repair is an option – just not an easy one. Many people spend countless hours and thousands of dollars attempting to improve their credit score and restore their good name. However, this doesn’t mean you should give up. Good credit is important, and there are ways to fight for it.

What should I do first?
According to the Federal Trade Commission, there is a long list of steps to take after realizing that your identity has been stolen:

1. Contact one of the consumer reporting companies (Equifax, Experian, or TransUnion) immediately. They will place a fraud alert in your credit file and notify the other companies to do the same.

2. Obtain and review your credit report. Make note of any charges you did not make and call to ask your creditors (e.g., your bank, retail stores, etc.) to freeze or cancel your accounts. In future months, you should continue to check your credit report periodically to make sure no other fraudulent accounts have been opened in your name.

3. File a report with your local police station. Ask for a copy in order to verify the date and time it was filed.

4. File a complaint with the Federal Trade Commission. This will help the police to track and hopefully locate the person or people who have committed this crime.

How do I repair my credit?
Even after taking the necessary first steps, the process of cleaning up your credit is long and difficult. In order to have fraudulent charges removed from your credit report, the Fair Credit Reporting Act (FCRA) requires you to contact both the consumer reporting company and your creditors. You must supply them with a copy of your Identity Theft Report and a letter highlighting the fraudulent charges. From there, the consumer reporting company will decide whether to block and expunge the charges from your record. If, however, they choose to deny your claims, the charges will remain on your credit report and you will be responsible for paying off charges you did not make. If this happens, you will be forced to go through a frustrating dispute process to further prove that your Identity Theft Report is accurate.

Need Help?
If you don’t want to handle this process alone, ask for help. Credit repair companies handle identity theft cases on a regular basis and are equipped with the expertise needed to represent you during an often stressful and emotional time. As the victim of a crime, you should not be forced to spend your time defending yourself and your innocence. Focus on your life and let experts focus on your credit score.