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Table of Contents

1. What can my creditors do if I don’t pay them?

2. My creditors are getting very aggressive in their tactics towards me what are my rights?

3. When should I consider filing bankruptcy?

4. What is the truth about Credit Agencies that Promise to completely eliminate your bad credit history by creating an "alternative credit file" for you?

5. Credit Report: Get a 3 Bureau Credit Report. Here

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1. What can creditors do if I don’t pay them?

1) What can creditors do if I don’t pay them?

As you know there is no debtor's prison in this country. This means that not paying your bills will not land you in jail (the IRS may be a different story). In the case of a secured creditor (debt is backed by property), he can foreclose on the property that secures the loan.

Unsecured creditors may get a court judgement and attach your property and become a secured creditor. However, if you have no property of any real value, there is very little chance that your property will be seized. In this case, if you have a job, a creditor can attempt a wage garnishment. This where a percentage of your paycheck (e.g. 25%) is automatically deducted and paid to the creditor who evoked the garnishment. While you have no job and no real assets there is virtually nothing a creditor can do.

Moreover, even if you have a job and some assets, if the debt is for a small amount it may be more expensive for the creditor to attempt to collect than the amount of the debt. Therefore, in many cases a creditor will stop short of any legal action against you and simply write your debt off their taxes as "bad debt." However, if your financial position improves and they find out, they can still come after you later for collection.

2. My creditors are getting very aggressive in their tactics towards me what are my rights?

2. My creditors are getting very aggressive in their tactics towards me what are my rights?

The Fair Debt Collection Practices Act (FDCPA) provides the guidelines that debt collectors must follow when collecting debts. If they use deceptive or harassing techniques in collecting you may sue them in civil court.

First, a debt collector is defined by the Fair Debt Collection Practices Act as any person, who regularly collects debts owed to others, this also includes attorneys who collect debts on a regular basis.

Second, a debt collector working for a collection agency is only authorized call you between 8 a.m. or after 9 p.m unless you agree otherwise.  A creditor may not contact you at your place of employment if the creditor knows that your employer disapproves.  Moreover, the debt collector must not make false or misleading statement, must not make abusive remarks or harass you and a debt collector is not authorized to call your friends and/or family to collect your debt. 

Also, within five days after the creditor first contacted you, they must send you a written statement of the amount they think you owe, name of the creditor to whom you owe the money and what to do if you believe that you do not owe you the money.   If within 30 days after you are first contacted you state in writing to the creditor that you do not owe the money, the creditor must stop contacting you unless they provide you some proof of the alleged debt.

If you do not want the agency to contact you anymore turn the tables on them by:
1)  When they call refuse to discuss anything with them until the debt collector on the phone provides you with the following information: Name and Title, Name of Company, Mailing Address and Phone Number.

2) Write a "Cease and Desist letter to them using certified mail (return receipt requested) telling them such to stop contacting you. By federal law they must stop contacting you with the exception of telling you that their collection efforts have ended or the collection agency intends to take specific action against you (e.g.sue you)

3)  The Cease and Desist letter should contain the following statements:
     (a) Pursuant to the Fair Debt and Collections Practices Act you no longer        want them to contact you and

     (b) Any attempt to do so in contravention of   the law will be pursued to              the fullest extent possible through civil and criminal remedies; and

     (c)  That you intend to use a recording device to document any further              telephone contacts from their agency.

4) Keep close records of when you sent the letter, if and when they called and what they said. If they contact you again (for anything aside from #2 above) they may have violated the Fair Debt and Collections Practices Act and they may liable to you for damages.

(Note that the FDCPA rules do not apply to in-house collection departments. Therefore, you must look to individual state law for protection). See the FDCPA below

4.  What is the truth about Credit Agencies that Promise to completely eliminate  your bad credit history by creating an alternative credit file for you?

Beware of Credit Repair Agencies that promise to eliminate your credit history by creating a new credit identity for you. They may be causing you to commit federal and state crimes. Typically, these agencies market their scheme by giving you a doom and gloom scenario regarding your credit. For instance, they will tell you that your bad credit history will prevent you from getting credit for up to 10 years. Often they will claim that their program is legal and some will even claim that their "program" is affiliated with the federal government. Recently, the federal government has been "cracking down" on these practices and even taking action against the agencies duped clientele.

Here is how it works: Some credit repair agencies promise to create a new credit identity for you so that your bad credit is no longer shown on your credit report. For a fee they promise to hide any unfavorable credit information by establishing an "Alternate Credit File" in your name. They do this by directing you to apply for an Employer Identification Number (EIN) from the Internal Revenue Service. EIN numbers are typically used by businesses to report financial information to the Social Security Administration and the IRS and resemble a social security number. Then they direct you to use your EIN number on credit applications in the space where the credit application asks for your social security number. This way when a potential creditor pulls a credit report using the EIN number that you gave them, the creditor will only see your new untarnished credit history and not your real credit history. . To buttress this scheme, they typically advise you to use a new mailing address and references.

The problem with this scheme is that it is potentially illegal in several ways. For example, when you are filing for an EIN number with the aforementioned intent, you may be committing the crime of false pretenses. Similarly, when you use your EIN number in the space on a credit application where it asks for your social security number you're committing fraud. Further, if you misrepresented your social security by telephone or mail you may also be guilty of wire and mail fraud. In addition, if you ever want to discharge your debts by filing bankruptcy you may not be allowed to if you used false information to obtain credit. Also, many states have laws making the creation of an alternative credit file civil fraud.

As you can see, this short-cut to better credit is typically not worth the risk especially given the fact that if you follow the steps provided by this site, you can reestablish an "A" credit rating again in a relatively short time.

Understanding Credit Reports and Rebuilding bad credit

Table of Contents

1. What role do Credit Bureaus play in me receiving credit?

2. What are the various negative marks that can appear on my credit and how bad are they?

3. How long does information stay on my credit report?

4. I have bad credit, do I have to wait 7-10 years before I can get credit again?

5. How does a creditor decide if you're "creditworthy?"

6. What are common objective criteria creditors use to qualify me for credit?

7. Should I apply for as many cards as I can?

8. What if I’m turned down for credit?

9. Can I get a free copy of my credit report?

10. When writing in for a credit report what information should I include?

11. Can I get a copy of my report online?

12. Sample Letters That Get You Action!

 

1) What role do Credit Bureaus play in me receiving credit?

 

As we Americans sink further into debt and rely on lines of credit for our very livelihood, we become increasingly at the mercy of the gatekeepers of credit; the Credit Bureaus.

The American economy is highly dependant on credit and the ability to purchase goods that are otherwise unavailable to consumers on a cash basis (e.g. car and house). Presently, the average consumer has 3 credit cards and has about $4,000 worth of debt.  In total, we Americans are 3 trillion dollars in debt.

There are thousands of credit bureaus in the United States, but the following three are by far the most prolific in reporting our credit worthiness: 1) TransUnion 2) Equifax and 3) Experian (formerly known as TRW).

Each of these credit bureaus have in their databases credit histories for tens of millions of Americans. The information is gathered and given to the credit bureaus from creditors that have extended you credit in the past such as landlords, credit card companies, IRS, department stores and banks. These histories contain information that creditors use to evaluate and make a determination of your ability and willingness to repay the credit. When a subscriber asks for your credit report they receive such information as your open accounts, credit limits and present balance. Also, included is information on the number of delinquent payments, collection actions, and tax liens and whether you own your home.

The following is a list of most of the negative items that could appear on your credit account. They are listed in order of what many creditors would consider as best to worst.

1. Credit inquiries
2. Credit rejections
3. Late payments
4. Past due and unpaid payments
5. Court judgments
6. Collections
7. Loan defaults
8. Repossession
9. Foreclosure
10.Bankruptcy

3) How long does information stay on my credit report?

1. Delinquent Payments: Even if you later pay off the account in full, payments to your creditors that are made over 30 days past due will remain on your credit report for 3-7 years from the date you first missed your payment.

2. Collection Accounts: After three months of payment delinquency, a creditor can turn your account over for "collections." Your credit report will reflect the collection activity for seven years from the time the first payment you missed was due that led to the collection. Even if you pay off the account after collection activity has commenced, your credit report will still be marked for seven years, but may say "paid collection."

3. Inquiries: Inquiries are notations in your credit report marking a request by an entity to view your credit report. For example, when you fill out an application for a credit card, the credit card company asks the credit bureau for a copy of your credit report, creating a inquiry notation on your credit report. Most inquiries remain for two years. Note that too many inquires on your credit report can reduce your credit rating.

4. Charge-offs: These are when a creditor decides that for whatever reason it would rather write off your debt as a loss than attempt to collect it from you. Such charge-offs remain on your credit for seven years from the time of the first missed payment that led to the charge-off.

5. Bankruptcy: Chapter 7,11,12 bankruptcies stay on credit for 10 years from the date of filing. Chapter 13 bankruptcy stays on your credit for seven years after the discharge, which is usually 3-5 years after filing.

6. Exception: Note that there is a major exception to the above time frame. If your applying for life insurance for over $50,000 or for a job that pays over $20,000, a credit bureau may provide information that is over 10 years old.

4) I have bad credit, do I have to wait 7-10 years
before I can get a loan?

Although negative information stays on your credit for up to 10 years (for exception see #6 above), by following the principles and techniques provided by this web site you can have an "A rated" credit report within 2 years of even a bankruptcy. Creditors are much more interested in your present circumstances than what happened to you 4-10 years ago. Therefore, rebuilding your credit can be done relatively quickly through a systematic plan and little perseverance. Also, keep in mind that positive credit information items stay on your credit report indefinitely.

 

5) How does a creditor decide if your "creditworthy?"

By knowing how a creditor will evaluate you, not only is the mystery removed from the process, but more importantly you can take affirmative steps toward improving your "credit profile" and increasing your chances of getting your credit approved.

When you apply for credit by filling out an application, normally the application provides the creditor with permission to retrieve your credit report from a credit bureau. Once your credit report is retrieved the creditor assesses your credit worthiness based on both objective and subjective criteria.

Many lending institutions will employ a short-term debt to income ratio where they calculate your present short-term debt payments (i.e.excluding long-term debt such as a mortgage) and divide it by your total annual income. Generally, creditors will not lend to you if your short-term debt is more than 20 percent of your annual income.

Similarly, a potential creditor will add up all your monthly bills not including rent/mortgage and utilities and divide by your gross income (before taxes). When using this analysis, creditors are looking for a ratio of under 35%. By consolidating your debt you can usually lower the amount of your monthly payment (even though your debt doesn’t change). This way you can decrease your ratio and increase your chances of procuring credit.

 

6) What are common objective criteria creditors use to
qualify me for credit?

In addition, to these common ratios most lending institutions employ their own version of a credit worthiness scoring system where they assign your credit information points based on objective criteria. Common criteria includes the following:

1. Number of years at your present Job: Creditors believe consistency makes you a better credit risk (this also applies to numbers 6 and 7 below.)

2. The kind of work you do with the following from least to most desirable: 1) Manual work, 2) clerical, 3) self-employed, 4) managerial 5) professional.

3. The number and nature of the "blotches" on your credit history: 1) The following are the worst blotches to have roughly in this order: 1) bankruptcy 2) Charge-offs 3) Collections 4) Court Judgements 5) IRS liens 6) 120 days late payment 7) 90 days late payment etc.

4. The amount of credit you presently have:   Here, they are concerned about how much debt you could go into if you maxed out your present cards. Many times, creditors will judge you as if you had already maxed out your available credit cards. It is a good idea to look through your credit report and find the credit card accounts that you no longer want (e.g. department store cards) and cancel them.

5. Saving and/or checking account with lender.

6. Telephone in own name

7. Length of time at present address

8. Own your home
   
   

7) When trying to get approved, should I apply for as
many credit cards as possible?

Although this may be tempting, avoid it as it decreases your chances of getting approved. For one thing, many creditors will look at your total unused credit line on all of your cards. For example, if you have the ability to charge $40,000 on your credit cards, but in fact only owe around $1000, a potential creditor may look to the $40,000 spending power as if you already owed that money in deciding whether to give you additional credit.

Also, when you apply for credit the card issuer requests a copy of your credit report. These requests show up as inquiries on your report. Since creditors assume that many of the inquiries on your report have resulted in credit being extended to you, they may refuse to grant you more credit based on this assumption. Alternatively, they may assume that since there was an inquiry and no new account was issued that a creditor must have turned you down for credit. Thus, based on this inference subsequent creditors are more likely to turn you down.

Tip: Before applying for credit to several different creditors within a short period of time, find which credit bureaus each one subscribes to. This way you can spread out your inquiries and avoid having too many on one report for it to be a basis for denial. Remember that the credit bureaus don’t normally share information with each other.

8) What if I’m turned down for credit?

By law the creditor must do two things along with your rejection letter:  1) Must provide you the specific reasons why you were rejected; and 2) The name and the address of the credit bureau used to make the decision.

If the reason the creditor gives for your rejection sounds inaccurate immediately get a copy of your credit report from that same bureau that the creditor used and closely scrutinize it for errors. If you find an error follow the steps below to have the erroneous information removed or explained. Next, reapply to the same creditor attaching an explanation and an updated/corrected copy of your credit report.

If you were rejected based on accurate data, you may still appeal the rejection by sending a letter to the creditor explaining why you are a better credit risk than your credit report may indicate. However, most likely you will have to follow the steps provided below to rebuild your credit before they will approve your application. The good news here is that if you follow the steps outlined below creditors will be begging you rather than vice versa.

 

9) Can I get a free copy of my credit report?

If you have been turned down for credit within the last 30 days based on a report issued by a credit bureau, that creditor must tell you this and provide you with the name and address of the credit bureau. By law you can get a free copy of your credit report if a potential creditor used that credit bureaus report to turn you down for credit, employment or insurance within the last 30 days.

Experian seems to extend this period to 60 days. I personally received all three credit bureau reports just by writing in (without being denied credit within the last 30 days). It seems if you write in to all three credit bureaus, there is a very good chance that at least one credit bureau will provide you with a free report, but they are under no legal obligation do so.

The following are the addresses and phone numbers of the major nationwide credit bureaus:

Trans Union
Customer Disclosure Center
PO Box 390
Springfield, PA 19064-0390
(800) 851-2674

Experian
P.O. Box 2104
Allen, TX 75013-2104
(800) 392-1122

Equifax
P.O. Box 105252
Atlanta, GA 30348
1-800-997-2493

If you have been turned down for credit within the last 60 days, call the phone numbers provided and order that way. Otherwise you can see if they will send you a report simply for writing.

 

10) When writing in for a credit report what
information should I include?

If you're writing in you must provide the following information.

Full name:
Current address:
Previous address if moved in the last 5 years
Social security number
Date of birth
Copy of your valid drivers license, billing statement OR utility bill with your current address clearly marked:
Must Sign Letter

If you have a letter turning you down for credit within the last 30 days, include it. Within 10-30 of writing in you should receive your report(s). See sample letter here.

11) Can I get a copy of my report online?

12)  Find out how to get the letters that make the Credit Bureaus Stand up and take notice!

These highly effective letters have been proven over and over to WORK! Because these letters were written by an attorney, they are designed to make the credit law work for you!  When the credit bureaus get these professional letters they are forced to TAKE ACTION or face serious consequences. Like Magic, they stop dragging their feet and show you the respect you deserve!

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We GUARANTEE that these letters along with the book will be the Best, Most Informative few bucks you ever spent OR YOUR MONEY BACK! No questions asked!

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