Credit Counselor Leavenworth KS
Building a Good Credit Record
Newspapers, radio, TV and now the Internet are filled with advertisements that offer -- for a fee -- to erase negative information in your credit file. I must get 20 emails a day promising to repair my credit record. The scam artists who run these ads cant deliver. Believe me. Only time, a deliberate effort and a plan to repay your bills will improve your credit record.
You know its probably a scam when you see statements like:
.Ã Credit Problems? No problem.
.Ã We can erase your bad credit -- 100% guaranteed.
.Ã Create a new credit identity -- legally!
.Ã We can remove bankruptcies, judgments, liens and bad loans from your credit file, FOREVER!
So what can you do to build a solid credit record? The first step is understanding how your credit rating is established and reported.
Consumer Reporting Agencies
If youve ever applied for a credit card, a personal loan or insurance, theres a file on you. This file contains information on where you work and live, how you pay your bills and whether youve been sued, arrested or filed for bankruptcy.
Companies that gather and sell this information are called consumer reporting agencies (CRAs). The most common type of CRA is the Credit Bureau. The information CRAs sell to creditors, employers, insurers and other businesses is called a consumer report.
The Fair Credit Reporting Act is designed to promote accuracy and ensure the privacy of information used in consumer reports. Recent amendments to the act expand your rights and place additional requirements on CRAs. Businesses that supply information about you to CRAs and those that use consumer reports also have new responsibilities under the law.
To find the CRA that has your report, contact the CRAs listed in the yellow pages under "credit
or "credit rating and reporting.
Because more than one CRA may have a file on you, call each until you have located all the agencies maintaining your file. The three major credit bureaus are listed on page 27.
If anyone takes some action against you in response to a report supplied by a CRA -- such as denying your application for credit, insurance or employment -- they must give you the name, address and telephone number of the CRA that provided the report. If they dont, you can report them to the Federal Trade Commission.
A CRA must tell you everything that is in your report (if you ask them), including medical information and, in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year -- two years for employment-related requests. Theres no charge if a creditor takes an adverse action against you -- like denying your application for credit, insurance or employment -- and if you request your report within 60 days of receiving the notice of the action. The notice must provide the name, address and telephone number of the CRA. In addition, youre entitled to one free report a year if 1) youre unemployed and plan to look for a job within 60 days, 2) youre on welfare or 3) your report is inaccurate because of fraud. Otherwise, a CRA may charge you for a copy of your credit report.
Even if you have not been denied credit, you may want to find out what information is in your credit report. Its smart to review your credit report periodically for inaccuracies or omissions. This could be especially important if youre considering a major purchase, like a home or a car. Checking in advance on the accuracy of the information in your credit report could speed the credit-granting process and prepare you for what lies ahead.
Credit bureaus collect and sell the following types of information:
. Identification and employment information
. Your name, birth date, Social Security number, employer and spouses name
. Accounts with different creditors, showing how much credit has been extended and whether youve paid on time
. Referrals of overdue accounts to a collection agency
. Events that are a matter of public record, such as bankruptcies, foreclosures or tax liens
CRAs must maintain a record of all creditors who have asked for your credit history within the past year and a record of those persons or businesses requesting your credit history for employment purposes for the past two years. A CRA also may provide information about your employment history, homeownership, income, and previous address, if a creditor requests this type of information.
Improving Your Credit Report
CRAs and organizations that provide information to CRAs, like banks or credit-card companies, are responsible for correcting inaccurate or incomplete information in your report. If you have a dispute, protect your rights under the law by contacting the CRA and the information provider.
CRAs must investigate the item(s) in question -- usually within 30 days. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so that they can correct this information in your file.
Disputed information that cannot be verified must be deleted from your file. If your report contains inaccurate information, the CRA must correct it. If an item is incomplete, the CRA must complete it. For example, if your file shows that you are late making payments but fails to show that you are no longer delinquent, the CRA must show that your payments are now current. If your file shows an account that belongs only to another person, the CRA must delete it.
When the investigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice of its intent to reinsert the items and includes the name, address and phone number of the provider.
Upon your request, the CRA must send notices of a correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.
Accurate Negative Information
Accurate negative information about you generally can stay on your report for seven years. There are certain exceptions:
. Bankruptcy information may be reported for 10 years.
. Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
. Information about criminal convictions has no time limit.
. Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
. Default information concerning U.S. government"insured or "guaranteed student loans can be reported for seven years after certain guarantor actions.
. Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
Adding Accounts to Your File
Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to CRAs. Some travel, entertainment, gasoline card companies, local retailers and credit unions are among those creditors that dont.
If youve been told that you were denied credit because of an "insufficient credit file
or "no credit file
and you have accounts with creditors that dont appear in your credit file, ask the CRA to add this information to future reports. Although they are not required to do so, many CRAs will add verifiable accounts for a fee. However, understand that if these creditors do not report to the CRA on a regular basis, the added items will not be updated in your file.
Dealing With Debt
So far, weve discussed credit and credit reporting problems.
Are you having trouble paying your bills? Are you getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?
If your answer to any of these questions is yes, youre not alone. Many people face financial crises at some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job or simply overspending, it can seem overwhelming, but often can be overcome. If you are having financial difficulties, consider overhauling your budgeting procedures, obtaining credit counseling from a reputable organization, consolidating your debt or filing for bankruptcy. Which will work best for you? It depends on your level of debt, your level of discipline and your prospects for the future.
Developing a Budget
The first step toward taking charge of your financial situation is to do a realistic assessment of how much money comes in and how much money you spend. Start by listing your income from all sources. Then, list your fixed expenses -- those that are the same each month, like your mortgage payments or rent, car payments and insurance premiums. Next, list the expenses that vary, such as entertainment, recreation or clothing. Writing down all your expenses -- even those that seem insignificant -- helps to track your spending patterns, identify the expenses that are necessary and prioritize the rest.
Contacting Your Creditors
Contact your creditors if you are having trouble making ends meet. Tell them why its difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Dont wait until your accounts have been turned over to a collection agency.
Dealing With Debt Collectors
The Fair Debt Collection Practices Act is the federal law that governs how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m. or at work if the collector knows that your employer doesnt approve of the calls. Collectors may not harass you, make false statements or use unfair practices when they try to collect a debt. Debt collectors must honor a written request from you to stop further contact.
If you arent disciplined enough to create a workable budget and stick to it, cant work out a repayment plan with your creditors, or cant keep track of mounting bills, consider contacting a credit counseling service. Creditors are usually willing to accept reduced payments if you enter into a debt repayment plan with a reputable organization. In these plans, you deposit money each month with the credit counseling service. Your deposits are used to pay your creditors according to a payment schedule developed by the counselor. As part of the repayment plan, you may have to agree not to apply for or use any additional credit while youre participating in the program.
A successful repayment plan requires you to make regular, timely payments, and could take 48 months or longer to complete. Some credit counseling services charge little or nothing for managing the plan; others charge a monthly fee that could add up to a significant charge over time. Some credit counseling services are funded, in part, by contributions from creditors.
Debt repayment plans usually cover unsecured debt. Your home loan is considered secured debt. You must continue to make your mortgage payments directly.
If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe youre acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past-due amount. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce your monthly payment. Ask whether additional fees will be assessed for such changes, and calculate how much they will add up to in the long run.
If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling service to homeowners with Federal Housing Administration mortgages, but many offer free help to any homeowner whos having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city or county for help in finding a housing counseling agency near you.
You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Think carefully before taking this on. These loans require your home as collateral. If you cant make the payments or if the payments are late, you could lose your home.
The costs of these consolidation loans can add up. In addition to interest on the loan, you may pay points. One point is equal to one percent of the amount you borrow. On the other hand, the interest payments on such loans may be tax deductible, lowering your net out-of-pocket cost.
The Credit Repair Organizations Act
By law, credit repair organizations must give you a copy of the Consumer Credit File Rights Under State and Federal Law before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract. The law contains specific consumer protections. For example, a credit repair company cannot:
. Make false claims about their services
. Charge you until they have completed the promised services
. Perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without owing any fees.
Your contract must specify:
. Payment for services, including total cost
. A detailed description of the services to be performed
. How long it will take to achieve the results
. Any guarantees they offer
. The companys name and business address
A bankruptcy filing will have a long-term negative impact on your creditworthiness.
There are two types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. Attorney fees can vary widely. Chapter 13 allows you, if you have a regular income and limited debt, to keep property, such as a mortgaged house or car that you otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to pay off a default during a period of three to five years, and not surrender any property.
Chapter 7 involves liquidating all of your assets that are not exempted by law. Exempted property may include cars, work-related tools and basic household furnishings. Some property may be sold by a court-appointed official -- a trustee -- or turned over to creditors. You can discharge your debts under Chapter 7 only once every six years.
Both types of bankruptcy can rid you of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary. Personal bankruptcy usually does not erase child support, alimony, fines, taxes and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, call 877-382-4357, or go to the FTC website https://rn.ftc.gov/pls/dod/wsolcq$.
startup?z_org_code=pu01 and use their online complaint form. n
Milton Zall is president of Zall Enterprises, an editorial consulting firm based in Silver Spring, Md. He writes on taxes, investments, technology, the Internet and HR/business issues. He is a certified internal auditor and a registered investment advisor. He can be reached via email at firstname.lastname@example.org