While the entire world is talking about going “debt-free” which I admire, the fact of the matter is unless you never intend on purchasing a home or any other high dollar item, and you are not independently wealthy (in which case creditors will offer you all the credit you wish) you will need to establish credit at some point in your lifetime…  duh!

Sorry, that last just slipped out.  I have as many referrals come from broker’s whose clients are denied because of lack of credit or payment history as I am for “credit restoration”.

Many people are also looking to re-establish credit after a bankruptcy, short-sale or divorce or short-sale.

Yikes, so where do you start when nobody is willing to take a chance on you?  As anyone that hasn’t been living under a rock for the last 5 years can attest everything we used to think we knew about credit no longer exists.  We will pause here while this sinks in…continue when ready.

It’s a good thing that I have been doing this for long enough to have learned a thing or two.  Yes, even getting the “starter” store credit card is crap shoot and one that has very little chance of succeeding. I never recommend that clients have store credit cards anyway unless they have them when they enter my program.  They usually have higher interest rates, they can be used at only one place and little known fact, but they don’t appear to garner as many points as “bank issued” credit cards.

There are several different types of credit but for our purposes and for most people we are looking for installment loans and revolving credit trade lines.

Examples of installment loans would be a car, mortgage, furniture purchase (unless on a store credit card), payday loans (eek!) and a personal loan.  These are loans which have a fixed interest rate and have a set monthly payment.

Examples of revolving credit are credit cards or perhaps a HELOC or line of credit where the interest rate is set but your payment amount depends upon the amount that is outstanding at the time of the statement date.

Every person should have both.  I am not advocating for going out and applying for every loan possible…in fact the exact opposite is true.  However, it is important to know that many people that have lived “off the grid” and not thought much about their credit or established credit… these same people are usually surprised to see that when they receive their credit report it is nearly made up of entirely negative accounts.  This is because early on creditors realized that in order to collect monies from you, they could use the whole “pay or we’ll ruin your credit” gambit and people usually paid (whether their account or whether accurate or not).  The other problem for those that have been very lucky and never owed a debt is that there is simply not enough information to provide the FICO scoring models enough data to generate a score for you, so a lender simply cannot make a sound judgement for a high ticket item.  (Yes, your utility provider will place your account on your credit report if you move and forget to pay your last bill, but they don’t put the 15 years of on-time payments on your credit report!)  Definitely wrong, (on so many levels) but there it is.  The system is broken so we have to work within it.

Generally, I have discovered that it takes at least 4 current trade-lines (preferably positive) to generate a FICO score.

Now, you may be asking what are your options?

Well, there are a few.  It used to be quite simple.  Walk into the GAP or JC Penney’s and they would fall over themselves to give you a credit card.  Another option, visit a college campus.  No job, no problem.  As you have probably realized the world and credit have changed a bit.  No longer are credit card companies allowed to solicit on college campuses and apply for credit for that extra 10% off on your initial purchase at your own risk.  These are no longer considered “starter cards”.

Instead the reality, as hard as it is to swallow may be…(gulp) the secured card, the authorized user, the secured line of credit or the dreaded, absolutely last option “sub-prime” credit card lender.

How do they stack up against each other, you ask?  And a darn good question indeed.

Well let’s start with the obvious a credit card – without a co-signer the chances of someone with no credit getting an unsecured card from a bank are credit union are somewhere around the chances of me being picked for “America’s Next Top Model”.  Although it could happen (in an alternate universe where everyone drinks copious amounts of alcohol and fashion is designed for 5’4″ women) it is highly unlikely. So your options for a credit card come down to these: secured, authorized user, or sub-prime.

Although secured credit cards do not garner as many points in your FICO scoring model, consider this “training wheels” for how to responsibly use credit.  After all, it is your money.  Once it is your money and not some faceless bank (or the millions of taxpayers that bail it out) it becomes a little more real.  We will talk about the best use of credit cards to garner points in another post.  This is my recommendation for all clients starting out.  If you keep in mind that credit was never meant to be used for “I want” purchases you can start to use credit wisely.

Second is the “Authorized User”.  Although in 2009 FICO was to role out a new scoring system FICO 08 (in ’09) but alas, I have yet to see any of the lenders that I work with using it.  This would have severely limited the use of the “authorized user” ability for persons trying to establish credit.  My thoughts are these with regards to “authorized user” accounts… for a child it is a great way for them to begin using and understanding credit.  For a spouse that may not have their own credit again, a good way to begin using and understanding credit.  The thing that people need to keep in mind is that if you are an authorized user on an account, your payment history will be exactly that of the primary card holder.  Therefore, if they go skiing and run into a tree and miss a payment it is going to show on your report, too.  Guess what?  The bureaus don’t care that you are only and authorized user.  So use this option wisely.

A third option may be a secured line of credit or a secured CD offered by many banks and credit unions.  These report as installment loans on your credit report and as we said earlier you should have a mix of both installment and revolving credit lines. My understanding is that it works much like a secured credit card except that you place the money into a CD or line of credit and borrow against the money.  You pay the money back monthly, therefore establishing a positive payment history (right?…on time payments required).

And last and certainly least is the “sub-prime” credit card.  Now I know that they serve a purpose…opening doors for b&e crews, drinking games at parties (or so I’ve been told) etc.  However, I find little use for them for people that are serious about establishing credit.  Many have avoided restrictions imposed by the Credit Card Consumer Bill of Rights and the C.A.R.D. Act by raising their interest rates (some as high as 79.9%), doing away with grace periods, etc..  I find that although they may many times be easier to acquire the penalties are severe so I don’t recommend these unless you have a full understanding of how credit cards work.

Okay, so those are several options to start to establish trade lines (just the minimum) so that you can at least generate a score, just in case you decide one day to purchase a home, car or any other high dollar item.

For this and other strategies for building positive credit, contact us at 702-686-8218 or by email any time.

I can’t tell you how often a client tells me that they can’t “understand” why their scores are so low.  At first I thought it was an excuse.  It took me a while to figure it out (I think I was blond at the time) but the fact is is that most people DON’T understand.

So what are some of the things that people do with good intentions that net bad results?

1. You do what everyone is doing these days and you order a copy of your credit report…YIKES!!!  There’s a $36 bill from ABC Collection Co from 6 years ago that you don’t even remember.

So being the responsible person that you are, you pay it because who wants a collection account on their credit report???  Hmmm?  Now it would seem logical that that would be the end of the story, you breathe a sigh of relief, you just know your scores have gone up and you couldn’t feel better.

2.  You have a couple of credit cards… one is a MonkeyMan Clothing with a limit of $200.  You have only gone over the limit a couple of times, but you always pay before the due date (well except that one time but the amount was only $13) and usually for more than the minimum amount because that is what you have been told to do.  The other is a $500 secured credit card from XYZ bank with an outrageous interest rate but in 2 years it will go to an unsecured status if you show a good usage history.  You have never gone over the limit on this one and are always careful to make at least a payment and a half.

3.  You spent some time out of work because it is seasonal, and decided to see if you could make some settlements on some of your old debts.  You have been paying them, but you have been told that if you threaten to stop or do stop they will take a settlement (after all this is what most “debt settlement” or “debt consolidation” companies do so it must work).  It does (or does it?).  You settle 3 installment accounts for pennies on the dollar, Yippee!

So you spend countless hours on the phone combing through your credit report trying to get your finances under control.  You have done everything that the “so-called” financial experts have said to do and now it is time to pull your credit report again.

Oh, my… I can hardly stand the excitement!  Drum roll please ….WHAT THE #%&!!!!! Your score has dropped by nearly 100 points.  That can’t be right!!!

I would love to know what you, the reader, might think went right or wrong.  I will be back with the answers in a follow up.

However, if this story describes you, don’t wait! We are here to help!

Okay, let’s face it.  The number one reason that client’s come to see me is because the want some THING. Which is all fine and dandy, but let’s look at the reality of the times.  THINGS will not necessarily put a roof over your head or get you that job you really want. (Okay, a house will, but other than that…)

Yes, boys and girls, these are the things (lower case, not italicized) of which I speak.  These are the things that provide stability, security and that warm and fuzzy feeling that we all strive for.  Even the most jaded of people out there know of which I speak.

The one thing that cannot be bought is “peace of mind”.  It can, however, be achieved.

So, to our topic…does bad credit only impact your ability to get a loan?  The short answer “NO“

Some of the things that having good or bad credit affect… insurance rates (both auto and home), renters, health and life.  Ability to get a job in fields such as security, law enforcement, government, banking, education, real estate and the list goes on.  Approval for rentals for an apartment (very much in need in today’s market) or rental home.  Emergency repairs on an automobile.  Doctor’s visits.

There are many other items that are affected by negative credit that I am certain that I have failed to mention.  I am also certain that my readers will let me know what they are and I welcome those insights.

However, I am going to go out in a limb and say that the number one 1 UNO reason that I recommend for improving your credit score (that pesky little 3 digit number) is “PEACE OF MIND”.  It’s being able to know that if the unthinkable happens, you have the ability, financially to handle it.

Let us help you reach your goals.  We are here to help!

Oooh?!? Good question!!! Why yes, I thought so.  I really must stop talking out loud to myself, but when these questions come to mind I immediately want to share them with you.  So this is one of those that EVERY client asks me.  And I realized that not everyone knows this.  So today I am going to let everyone in on a little secret.  As with everything else in credit restoration the answer could be “yes” and/or “no”.

Now, you didn’t really think there was a straight answer to anything having to do with your credit score, did you?  The truth is that there are some rules that can help you know the answer to that.

First, did you pay the debt? (That is assuming that it was in fact your debt…which is NOT always the case as we have seen) If so, the creditor has no reason to report the paid debt to the 3 major reporting bureaus unless you ask them to do so.  Why would you ask them to do so?  Not all reported debt is bad.  For instance your 5 years of on-time car payments should be reported and stay on your report FOREVER.  So as we see, some debts should be reported.  More on this in another post.

Okay, you didn’t pay the debt, either because you didn’t know about it or you weren’t able to pay it at the time.  Most people, if asked will tell you that bad credit has to remain on your credit report for 7 years with a couple of exceptions (Chapter 7 BK or Tax debt).

Pssst, I am going to let you in on a secret, there is no law or statute that states that adverse credit MUST remain on your credit report for 7 years.  That is simply the longest time that it can be reported.  Naturally, a creditor or collection company is going to say whatever is necessary to get money from you, so as stories of Santa Claus and the Toothfairy have become “truth” for some, so has this misinformation.

Now, back to our question.  Maybe you really do owe the debt but you are able to show that it was misreported. Under the FCRA it must be legally and permanently removed.  Yeah!!!….but wait.  Just because it is not on your credit report, does not mean that it does not exist.

Other factors can play into whether or not you MUST pay a debt, such as your state’s statute of limitations.  But, it’s always best to take recent debt, especially less than 2 years old, and try to make arrangements for payment in exchange for removal of the item from your credit report.

Remember that just because you got it removed from a bureau report, the creditor usually has a longer memory.

We’d love to help you with these and any other credit issues.

I love to read all of the differing opinions that flood the internet from the so-called professionals in investing, money management, debt management, etc.  I sift through articles and websites trying to find the best, most accurate information for you, my client.

I do however, have one very significant pet peeve and that is all of those professionals thinking that they know what it takes to do “credit restoration”.  I cannot tell you how many times I will read an article that says that it is so easy a monkey can do it and one recently stated that you fill out a 30 second questionnaire and you could receive your free credit reports.

Time for the truth ladies and gentlemen.  You have EVERY legal right to request your credit report from each of the big 3 reporting bureaus, annually.  What is not told to you is that it takes approximately 30 minutes, standing on your head while twirling a baton in a counter-clockwise motion…for each bureau!!!  30 seconds my aunt Fanny.

I also read that it is a good idea to stagger getting all three reports throughout the year to see if there are any discrepancies.  Well, that would make sense if creditors were required to report to all 3 bureaus if they reported to one.  If there is a mistake on Experian and you order TransUnion, you aren’t going to know for a year if there is a mistake is on Experian, (that’s just common sense).  I advise biting the bullet and getting all three reports from whatever of the three agencies you choose every 90-120 days.

Now you see a mistake on your report (trust me, with the number of errors that is average this is a pretty definitive statement) and you decide to dispute it because you don’t work and have no family or lovelife and nothing better to do with your time.  You decide to go the route of “on-line” disputes.  For all intents and purposes, you send this to the bureau, who sends it to the creditor (who gets 1200/day) and they say “Yep, he/she owes it”.  Guess what, you have reached the end of the dispute process.

However, a Credit Professional knows how to dispute in such a way that we use the laws of the FCRA, the FDCPA and several other consumer protection laws to make certain that you are not stopped before you get started.

I think I will leave the professional money managers, stock brokers, etc. to their profession and I will concentrate on providing the best possible service for the best possible results for my clients.

If you would like more information, please contact us.

Yikes!!! Creditors are calling you from sunup ’til sundown until you hide away in fear of that delightful little ringtone that you paid $3.99 to download to your phone.  Is there a way to stop them?  Should you?

The answers are simply YES & YES!

Depending on the report that you read, the 3 major consumer credit reporting bureaus average either 73, 78, or 79% error rate.  Yes, you read that right.  Regardless of which report or number it may be, the startling truth is anything over 50% means that you are more likely than not to have an error on your report.

That’s a little frightening, but (sigh) a sad truth and the reason I do what I do.

You would think that one way to avoid creditor calls would be to simply pay your bills, and YES that is a very good (great) start.  However, with an error rate as high as our bureaus have, mistakes do happen and it is not only possible but probable that you may end up being called in error.  The collection company is going off of what they have been told and they have been told that you owe them, or if they did not purchase the debt, the original creditor money.

Now it’s time to do a little detective work.  It’s quite simple actually.  You have the right to ask for a “verification of debt” or a “validation of debt”.  The two are not interchangeable. Verification means that the creditor can simply reply that they bought the debt from the original creditor and you owe the $.  Validation requires them to show the original contract, all payments and attempts to contact you prior to any reporting on your credit report.  During the time that the validation is in process all attempts to collect the debt must cease.

It is quite possible that it is not your debt.  Or that it is a paid debt.  Do your “due diligence” before handing over your hard earned cash.

I teach every client I have to say the following phrase “I don’t discuss financial matters over the phone.  Please send any correspondence to me through the USPS.”

Do NOT admit to owing the debt, do NOT believe that they will remove the negative item if you pay them.

I provide a “stop calling” letter to all of my clients.

If you would like to know more about your rights, we are here to help.

Every day I speak with clients that truly don’t understand why they can’t get their credit scores above a certain number.  Yes, that pesky little 3 digit number that has become all important to everyone of late.

The truth is, they were never taught how to get above a “poor” or “fair” score.  These are people that pay on time.  They might be living a little close to the edge, but that is what they have always done.  That is what their parents and friends have always done and the fact is NO ONE TAUGHT THEM HOW TO USE CREDIT TO THEIR ADVANTAGE.

It is my wholehearted belief that every student in America should go through a program before leaving high school that teaches them what can damage a credit score and what can help.  Yes, the things you do can help.

Myth #1 – Even if I max out my credit cards as long as I pay it down when the statement comes, it will help my credit.

EEEEEEE (buzzer sound) While you always want to pay off your credit card debt, what the good folks at the credit bureaus see is this – 90 to 100% usage of available credit on a consistent basis.  While the amount of point that you are LOSING on a consistent basis may vary I have an article from 2009 that I share with every client.  By Jerymy M. Simon for CreditCards.com it has a table in the article that reveales the damage points from common mistakes.  This particular mistake??? For a 680 score 10-30 points.  That is per month/per card.  Add that up!!! Still can’t figure out why your scores aren’t going up?

Solution:  Pay the debt down until you are no more than 30% of your available credit limit.  Example: for a $1000 credit limit your usage should be no more than $333.  Use the difference to pay cash for things you would normally charge.

The bureau now sees that you are using your credit and using it responsibly.  Not only is this taken into account by the scoring system, but any underwriter looking at a potential loan for you.

This is just one of the many things that clients can do to raise scores.

I’ll be sharing more of these myths in the days to come.  I welcome your questions and comments.

Have a sticky credit question?  Leave a comment!

Regardless of the many ways we try to avoid getting ill or injured, with our antibiotic clothing, and our plastic bubble-wrapped lives, sometimes there is just no avoiding it.

It seems that everywhere I look this time of year someone is suffering from colds or flu and it’s been beaten into our brains as Americans that unless we are laid out on a gurney, we must go on.  So we try.  And sometimes a gurney is just where we end up.

While this may paint us as stoic, it’s also stupid.  A serious illness or injury can not only keep you out of work for unforeseen periods of time, it can affect your credit report negatively far beyond your illness or injury.

Here’s 1 scenario- you break your leg skiing with your buddies (alcohol may have been involved).  While not an illness, still winter related and emergency room related and perfect for our scenario, this gives you an idea of what I am talking about.  The ski resort calls ABC Mt. Rescue to get your stupid butt off of the mountain.  You are then transported the the hospital, by 123 Ambulance services.  The EMT’s on both vehicles have notated every minute they have spent with you, every band-aid they have used, every doctor on the other end of the radio at the hospital, now waiting on your stupid butt (oh, yes, you are already on the clock at the hospital). You arrive at the Little Country Inn Hospital which has been on the radio with EMT’s for an hour already, trying to determine how best to reattach your leg.  The E.R. doc consults with the LCIH surgeon who is not an orthopedic surgeon, who is now being flown in to consult on your case. But wait, alcohol may have been involved, so they have to draw blood, and take urine and make certain that you aren’t intoxicated when wheeled into the o.r. to reattach your leg. Now, in the O.R. we have on anesthesia…WOW!!! You have only been stabilized and how many people are billing you?!?

It is the same with illness or injury and they are interchangeable as to the number of people you will consult with before you are ever even treated.  I have great respect for people in healthcare and frankly think that they wouldn’t be so darned paranoid if we weren’t such a litigious society, but it is what it is and here we are.

If you have insurance, some or most of these will be picked up.  Ironically, the insurance companies usually have a deal with the providers to adjust the costs so that the patient only pays a certain amount.  The only ones that get billed for the full amount are those without insurance.

But, I guarantee that somewhere, someone was missed.  And somehow in your pain induced fog they didn’t get your correct billing address or insurance information.  So you never think about until the day you go to buy a house or car the lender runs your credit.

Now for the $64,000 (your medical bills) question?

Should these bills go on your credit report?  If they do shouldn’t all of your paid medical bills be on there as well?  Should a credit report be used only as a collection tool?

As a consumer you have rights and laws that protect you.

Find out what they are!

So, I was reading this really interesting article on the “deferred maintenance” that a new homeowner was having to put out for a home that was approximately 20 years old.  You know the saying that nothing lasts forever, well that applies to the many components of a home as well.  Average life of everything from carpets to AC is at most 10-15 years.  Chances are that when you buy your home, none of these will be brand new.

This is why when I work with clients I insist that we work together until they are at a minimum 700+ and have the knowledge to continue to raise their scores.  While a 640 FICO and in some cases even lower may qualify you to purchase a home, it really will not get you much else in today’s credit crunch economy.

In case no one noticed, we live in a desert.  It gets hot.  What to do if your AC goes out?  Do you have the cash on hand to replace what could be a several hundred dollar repair?  If not, do you have the ability to get the credit you may need?

It’s not all about how much you make, either.  There are some very specific tips that I share with clients that can increase their scores monthly.  Such as paying a credit card bill prior to the statement date. Try it and see how quickly it increases.

There is never a point where I tell clients they don’t need to watch their credit anymore or that they don’t need to continue to try to raise their scores.  In today’s FICO-based lending system, the power is in the numbers!