Financial Education Services - The Six Worst Items To Appear On Your Credit Report

It's easy to make mistakes or experience hardship when it comes to paying your bills. Some mistakes are so detrimental; want to avoid them at all cost. Since future creditors and lenders use your credit report to make decisions about you, it's important to understand how each of these impact your credit file.

1. Charge-offs

Missing your payments for 6 months or more could cause your creditors to deem your account as uncollectible. When this happens, the creditors write that debt off as a loss against their income taxes. Charged-off accounts are allowed to be reported on your credit report for seven years. Just because a debt is charged off (or written off) does not mean the debt is forgiven. The money is still owed. The creditor will usually sell or assign the debt to a collection agency or a lawyer to effect collection.

Some companies continue to charge interest, but most don't. If they do decide to keep charging interest, they have to continue to report it as income. Most companies would rather just write it off and be done with it.

Having charge offs on your credit report usually results in the consumer being denied credit by other lenders. Even worse, it can also affect the interest rate that other lenders charge on current debts even if those lenders were not impacted by the charge off themselves.

If you find yourself late on your payments, you should always try to contact the lender and let them know you are having problems meeting your financial obligations. Ignoring the situation and letting it get to charge off status always makes it worse. You can usually avoid your account being charged off by at least letting them know you intend to pay and by at least making small payments as often as you can.

It's much easier to get a paid charge off removed from your credit report than it is an unpaid charge off. When you dispute the charge off with the credit bureaus, they have 30 days to verify the account with the creditor. If the account is paid, many times the creditor will just ignore the verification request. They really only report charge off so that they can damage your credit hoping that it will turn make you want to pay them off.

2. Collections

Not only will creditors charge-off your account after a period of non-payment, they may also hire a third-party debt collector to attempt to collect payment from you. Your credit report may or may not be updated to reflect a collection status. Sometimes the debt collector places an entry on your credit report or the original creditor places a note on your report indicating the account is in collection status.

3. Bankruptcy

Filing bankruptcy allows you to legally remove liability for some or all of your debts, depending on the type of bankruptcy you file. Your credit report will reflect each of the accounts you included in your bankruptcy. Even though the bankruptcy information can legally remain on your credit report for seven to 10 years, you can begin rebuilding your credit soon after your debts have been discharged.

4. Foreclosure

If you default on your mortgage loan, your lender will repossess your home and auction it off to recover the amount of the mortgage. This process is known as foreclosure. When your home is foreclosed it can severely damage your credit, limiting your ability to obtain new credit in the future. A foreclosure can remain on your credit report for seven years.

5. Tax liens

When you don't pay property taxes on your home or another piece of property, the government can seize the property and auction it off for the unpaid taxes. Even if your home is foreclosed because of a tax lien, you are still responsible for the mortgage loan. Non-payment of the mortgage will also hurt your credit. Unpaid tax liens can remain on your credit report for 15 years, while paid tax liens remain for 10 years.

6. Lawsuits or judgments

Some creditors may take you to court and sue you for a debt, if other collections fail. If the lawsuit is accurate and a judgment is entered against you, it can remain on your credit report for 7 years from the date of filing, even after you satisfy the judgment.

For information on how you can solve these issues as well as potentially remove them from your credit report please visit United Credit Education Services

Also be sure to review our complete FES Protection Plan

Which institutions are already using FICO ’08, and how much will the new version lower my score?

The "selling point" of FICO '08 is broad based. The Fair Isaac Company said, "The strongest improvements in risk prediction over current FICO scores are achieved in key consumer segments such as those opening new accounts or having prior derogatory information. In addition, this newest generation of FICO scores includes refinements to help lenders better evaluate consumers who are comparatively new to credit." Fine, but what does that mean?

A webinar put on by the company in September of 2009 allowed for some interesting interchange. We were told that people with very high scores would be unaffected, but those in the lower ranges could expect to see their scores drop by as much as 10 to 30 points. That statistic is NOT published anywhere, lest you go looking for it. The new version would also identify authorized user accounts that had been set up for the sole purpose of creating the appearance of a long-established trade line. We were told that collection accounts less than $100 would not affect the score, nor would an isolated late payment if the consumer had an otherwise stellar payment history.

7 Ways You can spot a Credit Repair Scam

If you have bad credit and you want to make it better quickly with a low amount of effort then you might be consider a credit repair company. You're exactly like thousands of other Americans who also have bad credit; however, being desperate can leave you vulnerable to credit repair scams.

Credit repair organizations are governed by a law known as the Credit Repair Organizations Act. This federal law requires that credit repair organizations fulfill certain obligations. You should avoid any credit repair service that doesn't follow these rules of law.

You could be getting scammed if any of the following are true:

1. You aren't given a copy of the contract to view before you're asked to sign it. 2. You are not given a copy of the "Consumer Credit File Rights Under State and Federal Law" letting you know your rights to obtain a credit report and dispute credit report information. 3. You contract should contain the following and question it if it doens't: Amount you are being charged Date by which the services will be performed or the time period the service will last Name and address of the organization Details about the services being performed on your behalf Statement letting you know you can cancel the contract within 3 days 4. You're asked for payment before services have been performed. 5. The company asks you to create a new identity with a federal employer identification number or social security number. 6. The company promises to remove accurately reported information appearing on your credit report. 7. You are asked to sign a form waiving your rights under the CROA.

Keith Dienstl is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Ultrafitcredit for more information on Keith Dienstl

Loan mods are unintended "score mods"

A 12/28/09 article in Money.Cnn.com showed that even if you are current on your house payment, a loan modification will sometimes be calamitous to your credit score. How does this happen? First off, most loan modifications have a trial period that you are expected to perform in. If you fail to make timely payments for the first 3 to 6 months, then the modification attempt is terminated and the bank will again pursue foreclosure.

During that trial period your Note has not been officially modified, so you are, by definition, on a partial payment plan. Whether it is a partial payment plan on a credit card or a mortgage, it makes no difference. When the lender enters that data to the credit bureaus it will show negatively on your credit. Next, let's suppose you complete the trial period successfully. Once your loan modification plan is accepted, you may still have a delinquent balance carrying forward. This delinquent balance will also serve as a negative mark against your credit even though you are "paying as agreed" based on the loan modification terms.

I don't think the banks are ignorant of the affect these policies have on consumers. Lower credit scores are the pathway to charging higher rates and fees and a loan modification is just one avenue that provides a bank with that opportunity. There is a lot of give and take throughout the loan mod process along with expressed and implied terms. If you think your score has been damaged by a loan modification - remember this, the burden of proof for reporting correctly is squarely on the shoulders of the credit bureaus. To find out how to "audit" the information on your credit reports please visit my affiliate link site.

George Andersen is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Credit Educationfor more information on George Andersen.

Is Credit Repair Ethical?

Most Americans know that it is possible to have information changed on your credit report, but many are concerned about whether or not it is ethical.

This begs the question: If you were to start up a credit reporting agency, how would you go about it? After all, isn't that what Experian, Trans Union and Equifax have done?

Well what would you do? The process requires that you contact a variety of financial institutions, taxing authorities, collection agencies, etc. and then propose to pool that information into one record source that could be mutually accessed by all participating members. The credit agencies love to say, "don't shoot the messenger", but in fact, they have solicited, finagled, begged, pleaded and bought their way into the "messenger" position. This is the very reason why there are 3 main reporting agencies and not just one – competition for business!

Once you understand that, the Fair Credit Reporting Act makes a lot of sense. You see, since 1971, and with numerous amendments and subsequent Acts passed by Congress, the issue at stake is not their capacity to report, but rather, the privacy of US citizens.

Trust me; these agencies would report your age, sex, religion, bank account balances, health records, blood pressure, driving record, and your grades from elementary school if they thought they could get away with it. The core purpose of the FCRA and other Acts like the Fair and Accurate Credit Transactions Act is to place the burden of proof upon the credit agencies, and NOT the consumer.

It is as if the credit agencies are writing a book on every financial relationship you've had since age 18, and they offer, on the cheap, to sell that book to anyone who wants to join the book club. When a consumer attempts to challenge the information contained on their report, they are merely calling for a "fact check" with the publisher. The FCRA requires that information contained on a consumer report be 100% accurate, complete, and verifiable.

Back to the ethics question. Let's say I own a million-dollar home with a million-dollar mortgage balance. I've never been late. Is it really EVERYBODY'S business to know how much I owe, when the debt was taken out, whom is obligated on the debt, the current balance, which bank, the payment amount – and ALL of that in addition to the payment history? Wouldn't it be sufficient to state "George pays his mortgage on time?" A person inclined to privacy might want to have that information deleted, even IF they pay on time. The fact that someone chooses to challenge the negative information is merely an expression of their right to privacy. Let's hope we never get too cavalier about that.

I am a member of the Financial Empowerment Network Team and Prime Financial Credit Services

Your Credit Score Is Yours to Control

Are you confused by credit, and how to create a better credit score? Don't feel bad, many consumers and business people find it hard to understand why their credit score is low. They pay their bills. And when they are a little late on a payment, they pay extra fees to the Lenders to make up for that. The Lenders enjoy great profits, and yet, the Borrower gets penalized more. Is it fair? I say NO! Enough! It's time for us to take control of our credit scores, and get them to reflect accurately, what kind of people we really are. In fact, the United States government agrees. Toady, there are laws to protect us, and allow us to take back control of our credit histories and credit scores.

Use these laws to make sure you aren't forced to pay more for auto loans, credit cards, mortgages, insurance and utilities. Besides costing you more money in monthly bills, we've been hearing more about people who get job offers that are later taken back, because of a "bad" credit score, a result of having been out of work for a year or longer. They didn't use credit to support a luxurious lifestyle. Ironically, they are penalized by taking away the very thing that they need to get back on their feet and to get back to paying their bills. Is it just me, or does it seem ridiculous to you as well? Credit reporting agencies, and Lenders, seem to believe that it's their right to penalize consumers to any level that they choose. The US government says it isn't their right. It is their right to report late payments and defaults on payment agreements, to the extent that they report it accurately. Is the information on your credit report accurate?

Frits Tessers is a member of the Financial Empowerment Network Team and Prime Financial Credit Services
you can also visit Personal Coaching for more information on Frits Tessers.

Credit Reporting Guidelines

Below are some very important credit reporting guideline that you as a consumer should be aware of.

The Fair Credit Reporting Act (FCRA) was designed to promote accuracy and to ensure that the credit reporting agencies maintain precise information regarding consumer credit.

The Federal Trade Commission (FTC) enforces the FCRA and is the watchdog over the three credit reporting agencies. The FTC enforces fines and may shut down any business that does not operate in compliance with the FCRA.

The FTC stipulates the maximum length of time a negative item can stay on a consumer's credit report is 7 years, unless it is a Public Record. Bankruptcy and other public records may be legally allowed to remain on the credit report for 10 years.

The Credit Reporting Agencies have 30 days to investigate our challenges according to the FCRA. The agencies can verify, modify, or delete a negative item in question. If a creditor takes longer than 30 days to respond back to the CRA for their request for investigation, the information should be automatically deleted.

It is important to note that the agencies are allowed to temporarily delay sending the consumers back their updates by sending a notification within the 30 days that they have received the requests and an investigation is pending.

The FTC also regulates the Fair Credit Billing Act (FCBA), which is designed to protect consumers from inaccurate information by their original creditors. The FCBA states that the consumer is not liable for unauthorized charges and other billing mistakes by their original creditor. The FCBA also states that that the original creditor is responsible for verification of any adverse account that the consumer challenges, and also responsible for any illegal activities by third party collection agencies that the original creditor assigns the account to.

The FCBA bounds original creditors to correct inaccurate reporting of information to the credit reporting agencies.

Fair, Isaac and Company of California originally developed the concept of the credit scoring model for use by financial institutions. Today, most credit agencies and lenders calculate your credit score (FICO) based on their formula.

Credit scores are being used increasingly by potential employers as a considering factor for hiring.

Credit scores are now being used on a small scale to determine auto insurance and utility rates.

The credit score is a computation of many different factors, including payment history, proportion of debt to available credit, and amount of credit used.

The length of a consumer's credit history counts towards 15% of consumer credit scores.

A consumer's payment history counts towards 35% of credit scores.

The type of credit a consumer has open determines 10% of their credit score. The different types of credit include: secured - mortgages, unsecured/revolving - credit cards, installment - car payments and small home improvement loans.

In calculating credit scores, the amount owed is an important indicator of a consumer's credit worthiness, and equates to 30% of their credit score. If a consumer is carrying high balances on many accounts, creditors may see this as a sign of financial overextension, or possibly irresponsible credit use,  and may assign the consumer a high risk. Consumers should make every attempt to keep account balances at 35% of their allowable credit limit.

The amount of newly established credit accounts for 10% of the credit score.

The best way for a consumer with little or no credit history to establish good credit is by applying for a secured credit card and making the payments on time.

For more information go to: Credit Reporting Guidelines

How to Establish Good Credit

When you have little or no credit history, applying for loans and credit can be difficult, if not impossible. Lenders like to see a record of payment history and a current credit score before they extend credit or loans. This information also helps them determine what interest rate to offer. If you do not have a credit history, here are some ways to build it one: Understand What Lenders Are Looking For If you are looking to establish credit for the first time, lenders can't look to your credit score to decide whether or not to lend you money. In these situations they have to examine other factors that can help them decide if you are a good credit risk or not. Here are basic guidelines to follow to establish or re-establish your credit: 1) First and foremost, pay any bills that come your way on time. 2) If you don't have a checking account, open one. You have very little credibility with lenders if you don't have at least a checking account and preferably a savings account as well. Just as importantly, be sure not to overdraw your bank account. Bouncing checks sends a signal to potential lenders that you can't manage your daily finances and are therefore not a good credit risk. 3) Establishing a relationship with a bank will improve your chances in obtaining a loan or credit card through them. If you already do business with a bank, they should be the first place to look. 4) Open a charge card with a local department store or apply for a gasoline credit card. Pay off the entire balance each month. Remember, if you cannot pay off the balance each month, you are spending outside your means. 5) Keep in mind that a lender or creditor may say you are approved for a particular amount, but that does not mean you have the resources to repay it quickly. Borrow only what you can afford to repay quickly. 6) Another important factor lenders look at is your employment history. They want to see if you are able to hold a job or if there are periods of unemployment. Your ability to hold a steady job can improve the likelihood of getting approved. 7) Lenders will also look to see how often you move and whether you rent or own. As with employment history, it pays to have a stable residence. 8) Even without a credit history, it is possible to sign up for many utilities in your own name. Having an electric or gas bill, telephone, cable, or water service in your name also helps. Just having your name on these accounts won't establish a credit score, but it can be helpful for first-time borrowers. 9) Get a secured credit card. To obtain this type of card, you deposit a specified amount of money into a financial institution who will then issue you a bank credit card. The amount you deposit is your credit limit. After you maintain that account in good standing for a while, you may be able to obtain a regular credit card or loan. Establishing Credit is Only the First Step Establishing a good credit history takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of months.

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