Brent’s Credit and Debt blog

When you are looking to rebuild your credit, you have to ask yourself a few questions:

• Have I solved the problems that gave me bad credit to begin with?

• Am I willing to make sure I don’t go down the wrong path again?

• Have I taken care of the debts I already incurred?

• What is my reason for wanting great credit scores?

I talk to a lot of people that are in the credit repair game for the wrong reason.  They are looking for MORE credit, a new car, a new house, or the ability to carry that shiny gold card.  However, they have yet to fix the problem that got them in trouble in the first place.

You need to take stock of your situation.  If you are using credit to extend your ability to spend, you will end up right back in the same bad place you were in before.

Credit was designed as a convenience for people who didn’t want to carry cash.  Later, it became an emergency measure in case something happened that you couldn’t cover with cash.  However, these days credit has become a luxury item.  We overspend, and comfort ourselves that we only have to make a small payment to cover what we buy.

Well, the truth is that those small payments add up.  Over time, small purchases here and there can force you into very large monthly payments that can actually destroy your financial position!

There are a group of people, referred to as the ‘FICO High Achievers’.  These are people with credit scores above an 800 (out of a possible 850).  It is a rarified goal, and one that very few ever achieve.  These people have access to loans, to better interest rates, to lower insurance scores, and generally don’t have the same kinds of credit problems that the rest of us have.  Why?  The use credit as a tool, instead of as a lifestyle enhancement.

I spoke to my banker.  He told me that the people that he serves that have the wealthiest appearance, such as big houses, luxury cars, and luxurious ‘stuff’ in their homes, are typically the farthest in debt.  They are using credit to support a lifestyle they can’t afford, and it catches them in the end.

At the same time he told me that people who learn how to manage their money when they are young are the most likely to be financially successful.  They live well, instead of extravagantly.  The spend money wisely, and use credit only when they are making a large purchase that cash won’t cover.  They don’t buy on impulse, and are less likely to have a 4 dollar coffee in their hands than they are a cup of coffee from the coffee maker on their desk.  These are the people that manage their money, and are more likely to be credit ‘High Achievers’.

You have to make a choice.  You can repair your credit, and go back to the lifestyle that caused the problems in the first place, or you can fix the problems and live better in the long run.

Whatever you choose, I wish you luck in living with credit!

I see a lot of ads for ’30 Day Credit Repair’ or ‘Credit Repair Fast’. The ads are on the radio, on the internet, and I wouldn’t be surprised if they show up in your mail box.

Can they really fix your credit in 30 days?

Well, the honest answer is yes, and no. (I know, the answer sucks, but it is real.)

You can make changes to your credit in 30 days. Things like aged accounts, old accounts without validation, and possibly even a few good will adjustments can be yours in a short time. Those items will absolutely help your scores.

However, there are things on your report that are tough to crack. Changing information, getting rid of collections, and trying to make bad items look better all take time. You have to be willing to do the work to make things as good as possible. If you try to take shortcuts, like hiring a law firm that specializes in credit repair, you will likely end up with a credit report that is clean, and has nothing useful on it at all.

A great credit report requires several things:

• A history of using credit responsibly.

• Maintaining lower balances on your credit cards.

• Making payments on time.

• A good mix of credit.

• Not trying to get credit too fast.

If you can achieve these things, you will have great credit.  It is more about understanding how to use credit as a part of your lifestyle than a ‘quick fix’.Credit repair takes diligence, time, and a consistent effort. If you put the effort in, you can improve your scores and have a credit report that will get you ahead in life, instead of leaving you where you are.

The most important thing you can do is start working on your credit today!

We can just go ahead and answer this now:  10 years.

However, what does that really mean?  10 years from when?  Well, the removal date of a bankruptcy is determined based on the filing date of the bankruptcy, NOT the discharge date.  Either chapter 7 or chapter 13 debts will fall off after those 10 years are up.  However, it is possible that the credit bureaus will remove them after 7 years, if you request it.  They may not remove the entry, but you can dispute it at that time and it may fall off.

But what about all the accounts included in bankruptcy?  Well, they will be on your report for 7 years.  Here is the trick, though.  The 7 years is calculated based on the first date of delinquency on your account.  In other words, the clock starts as soon as you miss your first payment resulting in default.  So, if you start missing payments in January, but don’t file bankruptcy until November, the clock starts for your 7 years in January.  You will need to check your reports for this, as each creditor will report the late payment differently.

Does it matter if you file Chapter 7 or Chapter 13?  Nope.  Not really.  On a Chapter 13 repayment plan, your discharge date won’t occur until the payment plan is satisfied, but the clock starts ticking with the filing.

So, what it boils down to is this:  You have 7 years to see the individual items fall off, and 10 for the bankruptcy itself.  Of course, by working diligently you can get all of them removed much quicker, but that does take work and a bit of knowledge.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

It’s happening a lot now. An account you had forgotten about, from a different time in your life, suddenly shows up again as a Dunning Letter from a collection agency. You vaguely remember the address, and you are pretty sure you paid that off, but that was 15 years ago! It was your debt, but you don’t have records that far back. Why are they bugging you now?

The game has changed. There is old debt out there worth tens of billions of dollars that was believed to be un-collectable. In other words, the utility company didn’t know how to find you, so they never pursued the debt. This debt is very cheap to buy, and the fact is that a very small number of collections against it can generate large rewards for the collection agency, so they are willing to put in the time and effort to try to get a bit of cash out of you.

Some collectors are unscrupulous (comes as a surprise, doesn’t it?), and don’t care who they collect from. They might add a negative to someone’s credit report even if they can’t verify the owner of the account. In that case, they are hoping the innocent victim will pay for a deletion of the account rather than take the time to fight it. In many cases, this is the cheapest way to go.

But again, why bother? Well, the original creditor wrote the debt off years ago. Now they see a way to make some cash back. So, they cell their debt for 3 or 4 cents on the dollar. Look at the benefit to the collector.

They buy a million dollars worth of debt for, say, $40,000.00. Over a period of a month, they are able to bring in 10 percent, or a hundred thousand dollars. They make HUGE profits on a very few wins.

So, how do they prove the debt is yours? Well if the original creditor has a paper trail showing this is your debt (usually by a matching SSN), you are stuck. But often, they have no paper that proves the debt is yours. So, you can contest it, they can’t prove it, and by law they have to delete it from your credit report.

However, they often don’t delete it. They will change something, like the date reported, or the amount, but won’t delete the negative. And unless you act, they will have 7 years (in most states) that the debt will show up on your report.

What can you do? If this happens to you, the first thing to do is send a letter demanding proof. Not that they verify the debt, but that they prove it is yours. If they can’t prove it, you have a case against them.

The second thing is to call the original creditor and explain the situation. They may have simply made a mistake, and might be able to help you out.

Your next step is to dispute with a credit bureau. If you do that, the bureau has 30 days by law to respond, and if they get no proof they have to delete the data from their credit reports.

The point is, you need to do something. Check your reports, and take action against the bad. If you do that, your reports will improve, and you will save money over the long run.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

I check my credit scores and reports once a week. For a while, I checked daily, but that seemed a tad excessive. OK, maybe it was seriously paranoid. Alright, fine, I basically did nothing else. I went crazy. I wanted my reports CLEAN!

It’s true, I was in the process of cleaning my credit reports up. I spent a lot of time and a lot of effort learning how to get that done. And after I had reached my goals, I got kind of sick of it. Always trying to figure out what had changed, what was good, and what was bad. Not an easy task.

So, for a couple of months, I quit watching. Just let it go, pay your bills on time, and kind of relax. Then I got the letter…

Yep, Equifax wanted me to know that there had been a negative on my report. A collection agency had reported to my credit report for someone else’s utility bill in another state. I had never lived in that state, or gone by that name, but they accused me. So, I pulled my credit.

It wasn’t just one. I had three new negatives on my report. One, as I mentioned, wasn’t mine. The other two were. But, they were old! Also paid for, but that didn’t matter. One was a car loan I had paid in full 8 years earlier. The other was for a traffic ticket I actually contested in court. Since I had a copy of the car title, and could get a copy of the court record, those were easy to fix. They went away in a couple of months. But the other, the false claim, took 6 months and the threat of legal action before the collection agency would back off.

At the time it happened, it didn’t really matter. I was in good shape financially, and didn’t need to buy anything on credit. But what would it have been like if I was trying to buy a car, or a house? I wouldn’t have been able to. And, by the way, my credit scores went down by 110 points.

So, now I check once a week. If something shows up, I want to know about it. More than that has no purpose, and longer doesn’t give me the reaction time I need. But, it isn’t just about the invalid credit reporting. There are actually some really good other reasons as well:

1) It is an easy way to detect identity theft. If someone gets a hold of your SSN, in example, and opens a credit account, you will see it quickly and can get it cancelled before they do damage.

2) It is a great way to see who is checking you out. Any pull against your credit reports will show up as an inquiry. It is always nice to know that someone has done that illegally.

3) Your creditors may do something wrong. They have good intentions, but showing you as late, even once, can cause a 60 point drop in your scores.

4) Bad things could go away. If you have had late payments, collections, or defaults in the past, they will fall off over time. If you are actively working on the problems, they might go away much sooner. And THAT is a good feeling.

5) Because it is still kind of fun!

Credit is still kind of a big game to me. The rules are vague, and if you play hard you can win.

My recommendation? Buy into a service that let’s you check your credit, and use it. Over time, it can save you a ton of money, and a ton of time.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.