Step 5: Commit To A Maintenance Plan

Step 5: Commit To A Maintenance Plan

Everything we do in life revolves around maintenance. We maintain our cars, our homes, and our yards. We maintain our teeth, our appliances, our investment portfolios, and our health. The same diligence should apply to maintaining your credit. To implement strong credit scores for life, you must initiate and adhere to a solid maintenance plan.
The following tips make it easy for you to start strong and stay strong and see your plan through from initial fixes to long-term maintenance that will help you achieve long-term financial health.

Join An Online Credit Watch Program

A credit watch program will give you continued access to your credit reports and scores, and will also notify you when there is any activity—normal or unusual—on your credit reports with all three credit bureaus. There are two reasons to sign up for a credit watch program:
When you set out on a take action plan, you need to commit to seeing it through. This is the most difficult part of the credit improvement process. But the not knowing and waiting part can be very unsettling. Many consumers either pay a fortune to pull their credit reports every 30-45 days or they mistakenly have their credit report pulled several times by lenders because they want to know exactly where they stand. Unfortunately, doing this causes hard inquiries, which can bring a consumer’s credit scores down by several points. By signing up for an online credit watch program you keep the cost to a minimum, you don’t hurt your scores, and you have access to your information all the time.
The second reason to sign up for a credit watch program is as follows: Most people are extremely busy, or they simply cannot stick with a plan. Think about it, if gyms actually had to provide services to everyone who signed up for membership, those services would be so delayed that most people would either complain and ask for their money back, or just go to a more elite club that is not oversold. The reality is that most people who sign up for membership, don’t go. It’s the same with credit. Everyone starts out with the best of intentions, but quickly become lackadaisical after the big points have been regained. However, credit management for life requires a commitment to credit maintenance.
If you are going to make the investment, here’s what you should look for in a program:

• Access to updated credit reports and credit scores for ALL three credit bureaus every 30 days.
• DAILY monitoring of your credit notifying you if someone tries to access your credit for any reason.
• Notification of any changes in your credit profile or score.
• Identity theft insurance.

The cost of a credit watch program can vary anywhere from $ 80 to $ 150 per year. Usually, most offer a trial period for 30 to 60 days for a minimal fee. If you are not happy with the service, be sure to cancel your membership before the trial period ends.
Order your credit reports from the three major bureaus directly every 6-12 months. In addition to joining a credit watch program, you should pull your credit reports from the three credit bureaus directly as follows:

• If you are active with their credit, you should check your data at the bureau level every 6 months.
• If you are not applying for credit and have not received any notifications of unusual activity on your credit watch account, then you should check your data at the bureau level once a year.

This is when you want to look for variations in personal identification and demographic information, accounts that don’t belong to you, check credit card limits, and open/close status. This is the time to give your credit a full check up.
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Step 4: Manage Your Debt Strategically

How you manage your credit card balances is one of the best-kept secrets for improving your scores. There are specific rules that the scoring system uses to rate revolving balances and they are:

1. If you want your scores to improve, consistently keep your balances on all credit cards under 30% of the available limit on statement date.
2. If you want to maintain your scores, it’s okay to keep the balances on all cards between 30%-49% of the available limit on statement date.
3. Once your balance goes over 50% of your available limit, you start losing points. According to Fair Isaac & Co., a maxed-out credit card can cost up to 80 points, even if there is a good history on that account. Logic: Statistics show that individuals who carry a balance of over 50% on revolving accounts month to month, appear to be living off of their credit cards and are more likely to default on their payments. While this rationale does not make sense on low limit credit cards, all accounts are treated the same.

Statement date means the date your actual statement is printed or emailed to you. It is not the due date. What most consumers don’t realize is that in most instances the balance printed on the statement is the balance that gets reported to the credit bureaus and it is the balance to limit ratio that shows in your score. So make sure that you find out from each of your revolving account creditors what date they print your statement, and make your payment before that date.

With creditors lowering limits on even the most credit-worthy individuals today, managing your credit card balances strategically is more important than ever. Here are some to tips to make sure that you manage your limits wisely:

• If you have to charge more than the 30% or 50% of your available limit as defined above, then make sure that you go home and pay that balance down immediately. Don’t take any chances.
• If you cannot pay down your credit card balances to 30% or 50% of your available limit as defined above, even though credit card companies are tightening up on limits, call your credit card companies to ask for a limit increase without pulling your credit. You’d be surprised at how many creditors will oblige if you have maintained a good payment history on the account.
• Pay credit card balances across the board. In other words, it will not help your credit scores if you pay down one card at a time. So if you have 3 cards at 80% of their limit, and you cannot pay them down to 30% or 50% of your available limit as defined above all at once, pay them down in equal increments so the balances all decrease at the same rate.
• DO NOT consolidate your credit card debt onto one low-interest card UNLESS if after the debt transfer the balance on the new credit card is under 30% or 50% of your available limit as defined above.
• Don’t go over your credit card limits, even if by just one dollar–doing so could cause you to lose 100 or more points, the result of a double penalty. The system interprets that you cannot hold to a creditor’s agreement, and also that you are overextended. Both carry very negative impacts to your scores.
• Be careful with American Express cards because they have no available credit limits. As a result, the scoring system will use last month’s statement total as your available credit limit. This means that if you spent $ 5,000 last month, and then $ 6,500 this month, it appears to the system that you are over your limit. The best way to handle AMEX is to make sure that you pay your bill before the statement date, without exception.

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Wait

Two of the most misunderstood aspects of credit reporting are: Statute of Limitations and the 7-Year Reporting Period. It is important to understand both when deciding whether you should wait for the derogatory information to fall off of your report, or not. Most consumers don’t realize that there are two expiration dates when it comes to negative credit accounts. In most instances, charged off debt expires sometimes 3-4 years before the 7-year reporting period is up. What you need to take into consideration:

• If the statute of limitations has expired on a debt, then you are no longer legally liable to pay that debt. You cannot be sued and your wages cannot be garnished. However, the item can still remain on your credit report for the 7-Year Reporting Period and you may be denied credit due to an open derogatory balance on your credit reports. Statutes vary by type of debt and by state. Call me if you have a question about your state.
• Once the 7-Year Reporting Period runs, you can have that item removed from your credit report altogether. There are exceptions to the 7-Year Reporting Period for some public records, but in most instances, when that 7-Year Reporting Period expires, you are free and clear.

It’s a personal decision. If you are a year from the 7-Year Reporting Period and you cannot afford to pay the debt, then wait it out. However, if you are able to pay the derogatory AND negotiate a deletion, you can arrange to have the item removed earlier and get on with your financial goals. Remember, knowledge is key to successful negotiations.

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Negotiate

If your decision is to negotiate on an item, the most important advice I can give you about negotiating is to do your research before entering into negotiations with a creditor or collection agency.

Here are some other great resources to help you get to know the ins and outs of the credit counseling and debt negotiation industry:

• National Foundation for Credit Counseling
• Association of Independent Consumer Credit Counseling Agencies
• The Federal Trade Commission
• National Consumer Law Center
• Consumer Federation of America’s Report: Credit Counseling in Crisis
• National Consumer Law Centers Report: The ABC’s of Credit Counseling

Here are the basics to debt negotiation:

1. Lay your debts out on paper.
2. Validate collection and charge-off debt with the creditor or collection agency.
3. Verify the Statute of Limitations and 7-year reporting period.
4. Figure out how much you can realistically afford to pay.
5. Call the creditors to discuss your options or negotiate.
6. Get the agreement in writing, and then follow through with the payment plan as agreed.

The key to successful debt relief negotiation is to establish clear goals before you start, and be persistent. Many times you may have to contact the creditors or collection agencies several times before reaching an agreement. Be professional even when they are not. Do not let your emotions get the best of you. Be polite, calm, and cool.

I am a true believer in trying to do it on your own if you have the time because no one will have your back like you will. It does not take a specific degree to get the job done. However, there is a clear precedent set years ago by the credit counseling and debt negotiation industry that makes creditors very reluctant to deal directly with consumers. But a precedent is not a law, and if you do your research, and work hard enough, you can definitely do it on your own.

Two important things to remember:

1. Negotiate with confidence that you will win. By doing your research, you will gain the knowledge you must have to successfully negotiate derogatory debts. Knowledge is power, and once the collection agency or creditor realizes that you have done your research, not only will you limit their response options, but they will realize immediately that you are not a pushover. The tactics that they would normally use on a consumer who doesn’t know their rights, will now be useless to them, and they will be more apt to agree to your terms.
2. Get everything in writing. Words mean NOTHING when it comes to agreements with collection agencies or creditors and the terms they agree to on the telephone.

On the other hand, if you don’t have the time or emotional energy to face creditors and collection agencies head-on, you do have options. My best advice is to do as much research and cost comparison as you can before you hire a company to help. Make sure you do the math on the plans they propose. In other words, make sure that at the end of the day, the payment plans, or fees make sense.

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Step 3: Decide & Act: Dispute, Negotiate, or Wait

Now it’s time to take action. This means taking the steps to get the items on your list updated, corrected, or removed. For the purposes of this report, I will outline the basics for each step over the next 3 days. You have three choices, as follows:

Dispute

If your decision is to dispute an item, you must be ready to commit and follow through. Here are some basic tips to get you started:

1. Send a letter to the credit bureaus giving them a detailed explanation of what you are requesting. Attach copies of any supporting documentation that you have (i.e. statements proving your correct credit card limits and proof of payments). Send letters certified, and, to avoid delay in their replies, always attach proof of social security and proof of address right from the beginning.
2. Wait 35 days (allowing 5 days for mail time.) If the bureaus do not respond within 35 days, send a formal complaint letter reminding them that per Section 611 of the Fair Credit Reporting Act they are required to respond within 30 days from the date they received your initial dispute. Also remind them that per Section 616 & 617 of the same Act they are liable for damages, including punitive, and that if necessary you will seek legal representation. Attach your original dispute letter and proof of delivery to the complaint.
3. Just because the credit bureau has determined an item “investigated” does not mean the results are accurate. If you are 100% sure that your claim is true and accurate, and the bureau responds stating that the creditor has verified the information and the item will not be removed or updated, you must request a reinvestigation under Section 611 of the Fair Credit Reporting Act. I highly recommend that you do so within 5 days of receiving the results of their investigation. You can repeat this process as many times as you want, however, after three to four attempts, I would consider moving onto the next step.

If the credit bureau continues to stand its ground on not updating or correcting inaccurate items on your credit report, here are some additional tips:

• Attaching copies of lawsuit verdicts that show how consumers have prevailed against the bureaus can help you convince the credit bureaus to make the necessary changes to your reports. It lets them know that you are well aware of your consumer rights. There are several references to successful lawsuits online wherein consumers who have sued the credit bureaus and creditors with punitive damages have been awarded hundreds of thousands of dollars and even millions.
• Look for other consumer stories on the web. There are many credit repair blogs in which consumers share their strategies. Be careful not to take advice as blind trust, but instead, look for helpful hints that pertain to your situation.
• File a complaint with the Federal Trade Commission Consumer Response Center. You may be able to have your case added to a class action lawsuit against the bureau that is reporting the inaccurate information. You can access the FTC Complaint Wizard at http://www.ftc.gov/bcp/index.shtml, or you can mail a complaint letter to the following address:

Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW

Washinton DC  20580

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Step 2: Create Your Take Action Plan Checklist

When most people look at their credit reports, they focus on repairing the negative items. It is critically important for you to remember that negative payment history only makes up 35% of your scores. There is another 65% of your scores that has nothing to do with negative payment history but still brings down the scores. It is essential that you make sure that all of your good credit is being reported and being reported accurately.

Before making your TAP Checklist, you will want to create a workable spreadsheet that will organize the data and action plan in a way that will give you instant indication of what action needs to be taken. At minimum, your spreadsheet should include the following columns:

One of the columns in your spreadsheet will be the dispute reason. To help you get started, here’s a list of 30 of the most common dispute reasons. If any of these apply to the information being reported on your credit reports, you should consider the item negative and add that item to your TAP checklist:

1. This account does not belong to me.
2. I was not 30, 60, 90 or 120 days late on this account.
3. This is a duplicate account.
4. I never authorized this account.
5. The balance on this account is incorrect.
6. There is no past due balance on this account.
7. You are not reporting a positive account on my credit report.
8. This account is closed with a $ 0 balance and has a positive history.
9. This account was closed by me, not the creditor.
10. You are not reporting the correct limit on my account.
11. This account was included in a bankruptcy and should have a $ 0 balance.
12. This account was paid.
13. The open date on this account is incorrect.
14. This account is still open.
15. I am only an authorized user on this account. Please remove it.
16. You are reporting my home equity line of credit as a revolving account.
17. I never authorized this inquiry.
18. This public record has been satisfied/released/dismissed/vacated.
19. You are listing the wrong file/released/satisfied date on this public record.
20. This account was charged off in (date). No late pays should be reported after that date.
21. The date of last activity on this account is incorrect.
22. This account never went into foreclosure/repossession.
23. The 7-year reporting period has expired on this account.
24. The statute of limitations on this account expired. You cannot report it or re-insert it.
25. You are reporting someone else’s information on my credit report that has the same name that I do.
26. You are reporting the wrong social security number, birth date, spouse’s name, phone number on my credit report.
27. You are reporting wrong/expired/misspelled addresses on my credit report.
28. You are reporting misspelled/wrong names on my credit report.
29. You are reporting outdated/wrong employment information on my credit report.
30. This student loan account has been deferred.

The key is to make three separate TAP spreadsheets, one for each credit bureau, and to write down EVERYTHING that needs attention. Then, you can decide which action should be taken—Dispute, Negotiate, or Wait.

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A 5-Step Credit Improvement Take Action Plan (TAP)

Here are the steps, plain and simple:

1. Get Your Credit Reports
2. Create Your Take Action Plan Checklist
3. Decide & Act: Dispute, Negotiate or Wait
4. Manage Your Debt Strategically
5. Commit to a Maintenance Plan

 

Step 1: Get Your Credit Reports

Today, you have access to your credit information all day and every day. This is wonderful news. Consumers now have the opportunity to quickly correct and maintain credit reports. It is mission- critical for consumers to seize that advantage by assuming responsibility. Lenders, employers, and vendors judge us based on our credit reports, and they know that we are capable of doing so. The days of excuses are in the rearview mirror.

You can get started by acquiring a copy of your credit reports from each of the three major bureaus. It’s important to get reports from each of the three, not just one. The bureaus do not share data, so you need to get a full accounting of everything that is being reported.

You options are as follows:

OPTION 1: Free Credit Reports – By law, each of the nationwide consumer reporting companies, Equifax, Experian, and Trans Union, must provide a free copy of your credit report, at your request, once every 12 months. To read more about this, a good source is the Federal Trade Commission’s Consumer Alert that you can download at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt156.pdf.

• You can access this program in one of three ways:
• Go to http://www.annualcreditreport.com; or
• Call 1-877-322-8228; or Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can download the form with instructions at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt156.pdf.

A Warning About Imposter Websites. Only http://www.annualcreditreport.com is authorized to provide the free annual credit report mandated by law. Other websites make claims for “free credit reports,” “free credit scores,” or ”free credit monitoring”, but they are not affiliated with the program, and they are likely trying to sell you something.

OPTION 2: Third-Party On-Line Vendor Reports – There are many websites that offer credit reports and scores to consumers (i.e. freecreditreport.com, truecredit.com, etc.). They offer multiple ways to get your reports. You can make a one-time purchase, or join a monthly program. You can get all three reports and one credit score, all three reports and three credit scores, or one report and one credit score. In all cases, the data is taken from all three credit bureaus, and the scores are calculated by applying very general criteria that is not specific to any one use. Here’s the problem with third-party credit report vendors — the scores generated by these companies are not realistic to the lending industry. For instance, many third-party vendors use a score range between 501-990, but the scores used by 90% of the lenders and creditors across the nation are classic FICO scores that range from 300 to 850. So whenever joining an on-line credit watch program, you want to be sure to choose a program that uses a score range as close to the classic fico as possible.

Here are a couple of resources that use a score range that is very close to the FICO range of 300-850. Both of these companies offer memberships that give you access to your updated credit reports and scores as often as you would like, and pulling your reports from these companies do NOT cause a hard inquiry to your scores.

• Credit Keeper – Take advantage of CreditKeeper for the first 30 days at no cost. After that, CreditKeeper is only $ 9.99 per month, until you decide to cancel. This is an Internet-only offer, so you will need to sign up on-line.
• Privacy Guard - Now, you can try PrivacyGuard with the first 30 days for just $ 1.00. After that, Privacy Guard is $ 16.99 per month until you decide to cancel.

OPTION 3: Reports From the Major Credit Bureaus - The reports that you receive directly from the three credit bureaus are easy to read. More importantly, going straight to the source of the data will ensure that you have the most complete information being reported about you. This includes your credit accounts, your credit history, and your personal and demographic information.

But there are a few things to consider with this option. Experian and Trans Union’s truecredit.com, no longer offer FICO scores to consumers. As mentioned above, FICO is the scoring range used by 90% of the lenders in this nation. Point is, that if you purchase a credit score directly from Experian or Trans Union’s truecredit.com, the score will be misleading and will not be realistic from a lender or creditor’s point of view.

What Are Your Options?

• Here’s the good news, Trans Union still offer’s FICO range scores through their website at www.transunioncs.com. This is the only site you should purchase your actual Trans Union report and Trans Union score from.
• As far as Experian, as of February 2009, consumers do not have access to their FICO score based on Experian data at all. So our advice is when using this option of going direct to the bureaus, you should only purchase your Experian credit report (NOT SCORE). The best gauge to determine what your Experian FICO score would be is to compare the information on your Experian Credit Report to your Equifax & Trans Union reports. However, if you feel that you MUST have your Experian score, then we suggest that you go onto the next option.

Here is the information you need to purchase your reports from the bureaus directly:

• Equifax Single Report & Score: Score Power Cost – $ 15.95 (800) 685-1111
• Experian Single Credit Report: Cost – $ 10.00 (888) 397-3742
• Trans Union Single Credit Report & Score – $ 14.95 (800) 916-8800

WARNING: When you log onto each site, they will try to up sell you with many different products, including credit watch programs or 3-in-1 credit reports and scores for three times the price. Make sure that you only purchase the credit report and score from that bureau as outlined above.

If you have been denied credit or insurance within the last 60 days, if you are disabled, unemployed, or on welfare, you may be entitled to a free copy of your credit report. If this is the case, send a written request to each credit bureau.

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