January 17th, 2014 | Credit Scores
Over the last 10 years a three digit number known as a credit score have become very important in a consumer's personal and financial life. It will determine if you qualify for a home mortgage, what your interest rate on a vehicle loan and even for new employment or a job promotion.
The sad fact is that 25% of all credit reports have a mistake(s) that may impact the credit score due to improper reporting by creditors. Many times a collection account will report multiple times for the same account. So it is up to the individual to monitor their credit report at lease once a year to check on the accuracy of the reporting information.
The 3 Steps on correcting disputes or derogatory accounts
Anytime a creditor puts information on your credit report you can legally dispute the information, especially if it is consider derogatory. A derogatory account is either showing as in collections or having late payments. A recent derogatory account can knock the stuffings out of a credit score, especially what is considered “thin” credit report. A “thin” credit report is when there are just a couple of accounts being reported. The rule of the thumb is to look for any derogatory accounts that are less than 24 months old plus look for any accounts reporting a couple of times with the same information.
Another common problem results from improper reporting on a bankruptcy. Many times a bankruptcy does not update the information as the accounts included in a bankruptcy is still being listed as a collection or past due. A collection or past due account counts more against the individual than when the account is being reported “included in bankruptcy”. A person who either does a chapter 7 or 13 will need a copy of their discharge papers along with a complete copy of the bankruptcy that shows the accounts as that will be needed to update the credit report.
The first step is to order a credit report as that will generate a file number that will be needed when an individual communicates with the three credit reporting agencies, Trans Union, Equifax and Experian.
1 STOP Mortgage recommends ordering your credit report via the website:www.annualcreditreport.com
as it the only official free website that provides a free copy of your credit report, at your request, once every 12 months. An individual can also call toll free 1-877-322-8228 or mail to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. If you find the credit report confusing call 1 STOP Mortgage for assistance.
Once the report is received and there are accounts you may wish to dispute you have a couple of options for credit repair. The first option is to mail the creditor corporate office a certified letter and state your rights pursuant to the Fair Debt Collection Practices Act (FCRA). Basically the individual is requesting to the creditor to provide documented proof why this account belongs to you, it is a request to validate debt. If the creditor does not respond to you in a month the information should be deleted on the credit report. Contact 1 STOP Mortgage for information concerning Fair Debt Collection Practices Act. When the creditor does not provide you the requested documentation after 45 days of the date of the receipt you make a copy of the sent letter with a copy of the mail receipt and send it to Trans Union, Experian and Equifax and request to delete the entire account information.
The second option is not to dispute the reported information but arrange a settlement payment of the account in exchange of receiving a deletion letter. Never pay the account until a requested deletion letter is received and never agree to pay an account until you have the money. Simply, a deletion letter is a letter agreeing the account would be deleted from the credit report in exchange for the payment.
1 STOP Mortgage can further explain the steps on getting a deletion letter.
The third option is called a “Goodwill Deletion” letter. This letter works well with a long term customer will an excellent payment history but for some reason there are recent late payments on the account. By writing a letter to the corporate office addressed to the CEO the customer does not dispute the information but because of the excellent long term relationship that a letter of goodwill deletion be given to you to erase the recent late payment(s). I have seen creditors also delete the late charges off the balance.
If you are saying to yourself “ Gee, this could be a lot of work and may take some time” you are correct. 1 STOP Mortgage will assist anyone who is willing to roll up their sleeves in this process as we do view credit scores have become too important over the individual overall financial picture.
The Importance of Credit Cards
One third of a credit score is determined by credit available on revolving accounts. Those are credit cards. Needless to say it is important to make the payments on time; 1 STOP Mortgage recommends mailing 10 days before the due date. However when a credit card balance approaches the credit limit (maxed out) the credit scores will drift downward despite an excellent payment history. The rule is that the higher the percentage of credit available on the revolving accounts the higher the credit score. For every 1% of credit available will increase a point to a point and a half to the score. A person with an above average credit score (700+) usually has a minimum of 70% percent credit available. In other words, a $10,000 credit limit will not be over $3,000 as a balance. If having difficulty getting a credit card contact 1 STOP Mortgage at (901) 388-1588 for suggestions.