Why Do I Need Credit?

Fix or Get Credit
American society depends on credit for economic growth. Good credit is very important and essential to the American way of life. Credit can open many doors that bad credit closes forever. In most cities across the U.S. a person needs a good credit rating to achieve a decent standard of living. For example you need good credit to rent an apartment. Many employers are conducting a credit check of prospective employees before hiring. You can be turned down for jobs such as Sheriff, Manager or Accountant because of poor credit report. Basic necessities such as writing a check, or renting a car requires a major credit card. You need good credit to obtain an auto loan or a home mortgage. We are surrounded by credit, and many have been denied basic necessities simply because of one or two slow payments. This happens because of The Fair Credit Reporting Act. To many consumers it is the UNFAIR Credit Reporting Act. The reporting of credit information is unbalanced toward the negative reports. Instead of all information being equal the reports tends to show negative information more easily than positive information. For example there are about twenty negative comments that can be on a report. There are three or four neutral comments, but most credit grantors look at some of these neutral comments as negative. If for example you have excessive credit inquiries without a corresponding open account. They say this applicant has applied for credit ten times, and none has granted credit. It could have been during a shopping for a car episode, and every car dealer you went to pulled a credit report to pre-qualify you for a purchase. The positive remarks are limited to only three comments.

  As you can see the chances for positive reporting as opposed to negative reporting is greatly swayed to the negative. The actual reporting is also swayed to the negative. For example your home mortgage, your rent payments, your gasoline credit cards, and your local small bank to name a few only report negative items. If you get behind because of a layoff or illness you are reported as slow pay, or a repo, or a charge off. As long as you pay every month no positive report is made. The report tends to emphasize the negative, and ignore the positive. A national survey shows over 70% of the American adults have some derogatory items on their credit reports. You are not the only person facing this problem. You can use the information presented in this report to improve your credit rating and re-establish your credit worthiness. CREDIT BUREAUS A Credit Bureau operates as a credit information gathering and disbursement center. There are five major bureaus across the country and hundreds of small local bureaus and affiliates. The only source of income for these bureaus is the selling of reports. If the reports are all good the buyers of these reports tend to not purchase as many reports. Obviously the more negative reports they sell the better their repeat business is. They go out of their way to make sure they have the latest negative information. It is up to you to be certain the negative information is correct, and that all positive information is reported. The five Major bureaus are: TRW CREDIT INFORMATION SERVICES. See note below at Chilton. 505 City Parkway West. Orange, Ca 92667 (714) 991-5100 TRANS UNION CREDIT INFORMATION 444 North Michigan Ave. Chicago, Il 60611 CBI/EQUIFAX P.O. Box 4091 Atlanta, Ga 30302 (404) 329-1725 ASSOCIATED CREDIT SERVICES, INC. 624 East North Belt Suite 400 Houston, Tx 77060 (713) 878-1900 CHILTON CREDIMATIC SYSTEMS Now Merged with TRW. 12606 Greenville Ave. Many errors, and duplicate entrys Dallas, Tx resulted from the merge of the (214) 699-6111 files. TRW files may have errors. This list is the main office of each of the credit bureaus, each will have branch offices in the major cities of the areas served. The local independent bureau will usually be affiliated with one or more of the above major bureaus. A little snooping in the local phone book will reveal the local office address. To effectively clean your credit reports you will have to work with as many as five different credit reporting bureaus. The five major bureaus are competitors and each work independently of each other to gather the information. You may purge one of derogatory information, but it can still be on the others. Listed under each major Bureau are states or areas served by each of the seperate bureaus, you need to determine who services your area. Even though one of the major Bureaus does not service your area they may have a file on you if for example you live in Kansas, but have a Mastercard from a bank in Delaware. Both Trans Union and CBI/Equifax do not serve Kansas they both serve Delaware. Granted their files may be small, but they can impact your credit worthiness with another bank in Delaware.
    Normally if you concentrate on the Major Bureaus that serve your area, and a local independent bureau you can be almost certain you have the major impact on your credit taken care of. You must work on all bureaus who serve your area since each works independently they each will have a file, and information or mis- information may be in one file and not on the others. Many financial institutions will pull reports from two or more bureaus before granting credit. This is especially true on larger loans such as a car, or a home mortgage. You can never be sure which bureau any particular creditor will use. HOW DOES INFORMATION GET ON YOUR CREDIT PROFILE The leading institutions subscribe to credit bureaus in order to obtain the credit and payment history of a potential credit applicant. Some of these subscribers report the payment pattern and history of their borrowers to the bureaus. The Bureaus' enter whatever information provided to them by the subscribers into the credit files. Many times the information is inaccurate, erroneous, incomplete, obsolete, misleading, or totally wrong due to entry errors Most time without the bureaus being aware of it. To prevent such errors from ruining the credit of the consumer, Congress enacted the FAIR CREDIT REPORTING ACT for the consumers protection. The act enabled the consumer to dispute the inaccurate information and have them removed or corrected. Credit Bureaus also obtain information from the public court house records. This information includes Judgments, Bankruptcy filings, dismissals and discharges, Tax Leins, Wage garnishments, forclosures, notices of default, divorces and other court proceedings. The Governments do not provide this information to the Credit Bureaus so they send low paid clerks to the court house records to record manually this information. This process leads to numerous inaccuracies being introduced into the system. Errors such as docket numbers incorrect, amounts incorrect, dates wrong, name of defendant incorrect. Possibly even someone with a similar name will find their records mixed together. The only safeguard you as a consumer have is to monitor the information, and make sure it is correct. The FAIR CREDIT REPORTING ACT is supposed to be the tool used to monitor this information. Unfortunately most consumers do not know how to use the Act to protect themselves from obsolete or inaccurate information. Many credit repair companies have come into being to assist the consumer. These are expensive and many times ineffective. Recently credit bureaus have been refusing to investigate disputes they feel are originating from repair companies. As a consumer you have the right to have your credit report as correct as possible. The FAIR CREDIT REPORTING ACT requires the credit bureaus to investigate all legitimate complaints. Use this right. WHO REPORTS AND WHO DOES NOT REPORT TO BUREAUS? Not all subscribers report their clients accounts to the bureaus. Some just limit their relationship with the credit bureaus to ordering reports, others automatically report their clients' credit experience to the bureaus.
    The following types of organizations limit their activities to obtaining credit reports and do not report their clients credit activities. SMALL BANKS HOME MORTGAGES MOST OIL COMPANIES SMALL CREDIT UNIONS SAVINGS OR CHECKING ACCOUNT INFORMATION INSURANCE COMPANIES AMERICAN EXPRESS (A.E. has signed an agreement with one of the smaller major credit bureaus, so may soon be among the automatic reporting companies.) The following financial institutions usually report their clients credit history to the credit bureaus. MAJOR CREDIT CARDS Mastercard, Visa, Discover, Diners club Carte Blanche ect. MAJOR BANK LOANS CONSUMER LOANS OF MAJOR SAVINGS & LOAN ASSOCIATIONS MAJOR DEPARTMENT STORES: Sears, J.C. Penny, Macy's, Montgomery Wards, May ect. COLLECTION AGENCIES FINANCE AND LOAN COMPANIES; Northwest Financials, AVCO Finance, Beneficial ect. In most cases the above non-reporting do not report positive information but will report negative information. In some cases like mortgage investigations the mortgage company will request the credit bureau to obtain reports on the normal non reporting subscribers. In most cases the mortgage company will request the information directly so the loan you get at your local bank may never appear on the report if you pay it on time every month. If you let it get behind, or go into default it will get reported. This is another example of the tendency of credit bureaus to have negative information but not positive information in their files. CREDIT HISTORY You have the report in hand, but what does it say. Each Bureau has its own way of presenting the information, and will usually provide a key of what those acronyms mean. Now what do we look for. Any positive remarks are to our advantage, and the negative are the ones we need to work on. The following are considered POSITIVE. PAID SATISFACTORY/PAID AS AGREED: You paid according to the terms of the loan. CURRENT ACCOUNT no late payments ACCOUNT/CREDIT LINE CLOSED - CONSUMERS REQUEST: You the consumer requested closing of the account not the credit grantor. The following are considered NEGATIVE. CURRENT: with 60, 90 or 120 day late (could have been only one time). DELINQUENT CHARGE-OFF: Account has been written off as bad debt. _BK _LIQ _REQ: bankruptcy liquidation REPOSSESSION/VOLUNTARY SURRENDER: Auto, boat, or plane being repossessed. COLLECTION ACCOUNT: Account being assigned to collection department or agency. PAID CHARGE OFF: You paid off the creditor on a previous charge off. PAID COLLECTION SCNL: Creditor cannot locate debtor indicating debtor skipped town. PAID Was 60, 90, or 120 days late. Paid off but at one time was delinquent. ACCOUNT CLOSED - GRANTORS REQUEST: Grantor stopped charge privileges. BANKRUPTCY - CHAPTER 7 OR CHAPTER 13 - Filed/Dismissed/Discharged JUDGMENTS TAX LEINS EXCESSIVE NUMBERS OF INQUIRIES. Usually over 4 inquiries a year are considered excessive if these do not result in a new account being opened. A high number of inquiries can indicate you have over extended your ability to pay by opening a large number of charge accounts, You have used up your credit line with revolving charge accounts. This is true even though the charge accounts have no or a very small balance.
   The credit grantors feel that you have the potential to charge several thousand dollars on several different revolving charge accounts, then be unable to meet the various obligations. FEDERAL TRADE COMMISSION AND CREDIT BUREAUS The Federal Trade Commission is responsible for overseeing and policing the FAIR CREDIT REPORTING ACT. If a credit bureau has violated your rights or has violated the FAIR CREDIT REPORTING ACT, you should immediately file a formal written complaint with the Federal Trade Commission. HEADQUARTERS: Federal Trade Commission Pennsylvania Ave & Sixth Street, N.W. Washington D.C. 20580 (202) 523-3830 REGIONAL OFFICES 1718 Peachtree, N.W. Atlanta Ga 30367 11000 Wilshire Blvd, Los Angeles, Ca 90024 460 Golden Gate Ave, San Francisco, Ca 94102 26 Federal Plaza, New York, NY 12078 56 East Monroe, Chicago Il 60603 150 Causeway St. Boston, Ma 02114 8303 Elmbrook Dr. Dallas, Tx 75247 1406 Curtis St. Denver, Co 80201 916 Second Ave, Seattle, Wa 98174 118 St Clair Ave. Cleveland, Oh 44114 METHODS OF CREDIT CORRECTION 1. DISPUTE 2. DISPUTE DIRECTLY WITH CREDITOR. 3. NEGOTIATE WITH CREDITOR TO PAY THE BALANCE OR A PORTION OF THE BALANCE. 4. LEGAL ACTION. GO TO COURT ABOUT AN ERROR THE BUREAU WILL NOT CORRECT. 5. FILE SEGREGATION There are five methods of credit correction available to the consumer. The first four use the FAIR CREDIT REPORTING ACT as a basis of removal. They are completely legal using the stipulations of the law and sometimes the loopholes in the system to remove derogatory information from the file. Often they work the first time, sometimes they have to be used repeatedly to get results, and sometimes they never work. In almost all cases some improvement will be made in the credit report. In almost all cases they take time to use, and require time to carry out. If you are desiring to improve your credit rating so you can live a normal life in this credit society, they are worthwhile. With between 60% and 70% of the adults in this country with some derogatory information on their credit report it is worthwhile to improve the situation if you desire to correct your credit then pay in a timely manner to maintain the credit rating. If you have lousy credit because you do not pay your bills, and correct it only to continue not paying your bills, this is not for you.
   Many people have good credit, and for some reason have a bad year and get a lot of bad reports, then things improve but they find the credit system has them labeled as deadbeats. This program is for them. If a person always pays their bills on time, but because of the inaccurate reporting, or the natural tendency of the system to attract derogatory information, this program is for them. By using the methods outlined you can improve your credit rating with the methods allowed by the FAIR CREDIT REPORTING ACT. None of the first four methods work overnight, but with persistence you can make a difference. The file segregation method works almost over night, but is questionably legal, fragile, and can collapse at any time leaving a mess that may take years to clean up. It is mentioned only briefly so you know it exists. It requires an in-depth knowledge of the identification procedures of the credit bureaus and by changing your identity enough to fool the system you can create a complete new file that you can establish a good credit rating in while leaving the old file intact and can take time required to clean it up. The fragile part is any slip-up on any credit application can make the computers merge the two files, and you now have the same problem as before, but possibly worse. You now have a bad file, and a red flag has been waved to the bureaus. Depending on the legal issues you could have some other problems. The first step is to obtain a credit report from each bureau that serves your geographical area. You have to know what to fight. Do not dispute an item if it does not exist on a particular report. You have just told the bureau to investigate something they knew nothing about. If they find it to be fact, then they add it to your report. You need the reports to devise a plan of action. Order the report and pay the fee, or if you have been denied credit in the last 30 days the report is free. The creditor will send you a letter of denial, stating the reason, and the bureau used as a basis for the denial. Send a copy of this letter along with the request to the bureau and they will send the report. Expect from 3 to 6 weeks before you receive the report. Once you have the report, analyze it to determine what is on the report, and what you can do to remove the derogatory information. If you do not understand any of the information on the report call the consumer relations department of the bureau for explanation. Understanding exactly what the report says is crucial before proceeding.
    FLOWCHART OF CREDIT CORRECTION OBTAIN CREDIT REPORT ANALYZE CREDIT REPORT DISPUTE AT CREDIT BUREAU NEGOTIATE WITH CREDITORS LEGAL ACTION FILE SEG. INACCURATE ITEMS REMOVED PAY PERCENTAGE OF BALANCE COURT SYSTEM OR CORRECTED. UNVERIFIED CREDITORS DELETE ACCOUNT COURT ORDER ITEMS REMOVED OR CHANGE CREDIT RATING TO CORRECT IMPROVED OR CLEANED CREDIT REPORT NEW FILE RE-ESTABLISH CREDIT AUTOMATIC REMOVAL All items on a bureau report are automatically removed as stipulated by the FAIR CREDIT REPORTING ACT. The times stipulated are; BANKRUPTCY; 10 years from the date of the bankruptcy. JUDGMENTS: 7 years from the date of the judgment, however the originator of the judgment may have it renewed at least every 10 years, and can have it re-entered as a new item from the date of the renewal. All other items must be removed after 7 years. Policy varies from one bureau to another, but removal may vary from 3 to 7 years depending on the individual bureau. Usually about 6 years is normal for everything except Bankruptcy. Inquiries will be removed anywhere from 1 to 2 years. The FAIR CREDIT REPORTING ACT allows the complete file to be reported including automatic removals if the inquiry is for: Credit transactions for over $50,000 Life Insurance over $50,000 Job Application with salary over $20,000 DISPUTE The dispute is exercising your rights as a consumer under the FAIR CREDIT REPORTING ACT to have inaccurate or incorrect information corrected or removed from your credit report. Once the bureau receives the dispute they have a reasonable time to investigate the validity of the information or remove it. A reasonable time is 4 to 6 weeks. If the information is found to be incorrect it is corrected. If it is unverifiable it is removed. If it is verified it stays. The first step is to obtain a credit report. The procedure has already been outlined. Study the report, and determine the items you feel may be incorrect, inaccurate, or obsolete. Next send a letter of dispute on each item you feel are in question. DO NOT SEND OVER 3 OR 4 ITEMS AT A TIME to do so will only get you a form letter stating the credit bureau feels the disputes are frivolous, or the bureau feels you have contracted a credit repair agency, and the disputes are frivolous. If you receive such a letter do not be discouraged, simply resubmit the disputes and reduce the number of disputes sent in. On occasion the Credit bureau may claim to have not received a dispute. You will not be aware of this unless you use the follow-up letter. Once you decide to correct your credit keep up with dates and follow-up if you have not received a reply. If your follow-up letter gets a reply of not receiving the first letter of dispute, send the dispute again by certified mail with return receipt requested. In this case all future disputes should be certified. It will cost a couple of bucks to certify, but can save 5 or 6 weeks time in the correction process. It is possible they actually did not receive it, but then it could be a method used to avoid investigating disputes. Certifying the first letter of dispute may make them feel you have contracted with a credit repair agency, and get a "Frivolous" dispute letter.
    Certify only if they show a "failure to receive" attitude. It will cost some time, but so will the frivolous letter routine. IT IS YOUR RIGHT TO DISPUTE ANY ITEM ON THE REPORT. IT IS THE BUREAUS' DUTY TO INVESTIGATE THE ITEM. THEY CANNOT LEGALLY REFUSE TO INVESTIGATE. Your dispute must show the item you are disputing. THE WHAT. Your dispute must show the reason for the dispute. THE WHY. Example, Balance incorrect, numbers of late payments incorrect, the account is not yours, the account has always been paid promptly, The payment was lost in their department, and posted late, the payment was incorrectly posted, ect. Make the WHY fit your situation. Keep accurate information on when you send disputes, and what items you dispute. If you have not heard a reply in 4 weeks send the followup letter requesting status and requesting correction or removal. Obtain results of dispute. Most bureaus will send the result of the investigation and a copy of the updated credit report. Wait a few more weeks and repeat the cycle for a few more items. For best results the following suggestions should be followed. Do not use a letterhead. Do not type the dispute, hand write it. Do not photocopy or send a "form letter" look. Do not use "Legalese" write it in your own words. The bureaus feel the consumer is Illiterate, and only credit repair agencies use "Big words" in the disputes. Do not give the impression you are professional. Request dispute forms from the Bureau, and use them. If you are stonewalled by a particular office, use the address of a friend or relative in another area, and apply the dispute technique at that office. using your friend or relatives address as your new address. Some offices are difficult to work with. Generally a smaller office in a smaller town would be easier to work with. There are branch offices, and affiliate offices you can work through. A little investigation may be required to find an office you can work with. It may be necessary to use re-mailing services, but avoid them if possible. Some of them are well known, and many are unreliable. One advantage of going across country to file the disputes is it makes the investigation of the disputed item more difficult for the bureau, and can add enough delay that they may delete some of the derogatory information as unverifiable either through actual reply time being longer, or the lack of sufficient manpower to throughly investigate a disputed item. It is easy to pick up a phone and call a local creditor and verify, but takes longer to write a letter to a distant one and receive a written reply. Another strategy is to pick a busy time to file the disputes.
    For example sending the dispute about the first to middle of November can cause sufficient delay in verifying due to Thanksgiving Holidays, Christmas rush at both the bureau, and the creditors, Christmas holiday, then New Year holiday. The reasonable time clause can catch them before they can properly investigate. All the above methods of dispute are legal, and you can use them to your advantage to get derogatory information removed from your credit report. You are using "Loopholes" in the system to your advantage. DISPUTE FLOWCHART OBTAIN CREDIT REPORTS EVALUATE REPORT DISPUTE ITEMS WITH CREDIT BUREAU CREDIT BUREAU CONTACTS INFORMATION SOURCE TO VERIFY INFORMATION INFORMATION INFORMATION INFORMATION INFORMATION CORRECT SOURCE DOES UNVERIFIABLE INCORRECT AND VERIFIED NOT REPLY WITHIN REASONABLE l CORRECTED TIME PERIOD REMOVED FROM REPORT STAYS ON REPORT PAID ACCOUNT SHOWING NEGATIVE REMARKS If you have paid an account, but it still shows as negative on the report like paid charge-off, or paid collection, you cannot negotiate with the creditor because you have nothing to negotiate. The best method to remove this type item is to dispute with the credit bureau. In many cases on a paid item the creditor has closed the file, and the verification cannot be done. If this fails, it is verified, dispute with the creditor. Appeal to the creditor to change the rating to either paid satisfactory, paid, or delete it totally. The creditor has nothing more to gain from maintaining the negative remark, you have already paid them in full. You can negotiate with them emotionally to have it changed or removed. LEGAL ACTION You can remove certain derogatory items from your credit report through the court system. If you have a judgment against you and you have never been served you may make a motion to vacate the judgment. (There is usually a time limit for filing such a motion. Consult your attorney.) There are other grounds to vacate a judgment. Your best bet is to consult an attorney on these possibilities. After the court has granted a motion send a court certified copy to the credit bureau, and demand they remove the item Immediately. It must be removed, not changed to satisfied judgment. If in your dispute process the credit refuses to investigate a legitimate dispute as "frivolous and irrelevant" you can retain an attorney and file a law suit against the bureau under the FAIR CREDIT REPORTING ACT. While the lawsuit is pending you can ask your attorney to file a motion of injunctive relief since the derogatory information on your credit report may threaten the basic living such as renting an apartment, obtaining employment, writing a check, obtaining loans for your business, The court may grant you such motion. In the motion you should ask the court to order the credit bureau to temporary refrain from including any derogatory items under dispute in your credit report until the trial is over or the case is resolved. If the court rules this motion in your favor, the credit bureau will have to obey the court order. Often times the actual trial date can be up to several years before it is actually heard. It is possible to to locate several consumers who have received the refusal to investigate letters from a credit bureau, and to file a class action suit against the bureau. Individuals who have received refusal to investigate letters may consider filing a suit in small claims court. In any case if you forsee the possibility of filing any type law suit you need to keep all records pertaining to the matter. You may also consider filing a complaint with the Federal Trade Commission.
    They are the watch dogs over the FAIR CREDIT REPORTING ACT. In the effort to improve your credit rating the courts can be your friend. FILE SEGREGATION File segregation attacks the weakest link of the credit bureau, their file identification. Each credit bureau has their own file identification method. Basically they all use the same information, but use different combinations of the information. In order to successfully create a new file you need to know the exact combinations if identifying facts for each of the major credit bureaus. For example one bureau may rely on the social security number, and supplying a false S.S.# may create a new file in one bureau, but will not on another that uses other identification method. You could also pick someones social security number that has a worse rating than yours. There are also some possible legal problems in using this method. The use of anothers number could be considered fraud. The creation of an alternate file can also be difficult to maintain. The slightest slip could cause the two files to merge, and negate all the careful planning to create the seperate files. This method can create a clean new file immediately. If you need to obtain immediate credit it may be considered, but at the present it is not the recommended method for most people. If you are in such a position that you do not have time to clean up the existing file or it is such a mess it might be next to impossible to clean you might consider this method. Usually even the worst files are salvagable if there is time. Most derogatory items will go away given enough time. If you are seriously considering file segregation, Proceed with great caution since some methods of creating new files may be fraud. TIPS TO ESTABLISH OR RE-ESTABLISH CREDIT There are several things you can to establish or re-establish credit. To establish A-1 credit the best time to start is NOW. The sooner you start the sooner you have the credit you need, and deserve. The first thing to do is to START PAYING YOUR BILLS ON TIME. The biggest complaint of persons without credit is they cannot get credit because the have no credit. Without credit they have nothing to pay on time to establish good credit. The ones with a few negative comments have an even more difficult time of having anything to pay to establish a good credit rating. Both of these groups need to follow a plan to establish good credit. Open a checking and savings account. The opening balance makes no difference. Keep the checking account in check. Don't start bouncing checks. They reflect on the credit rating negatively. Put a little in the savings account at every payday. Leave it there, don't pull it out for a new hat. I have found that opening the savings account at a bank that is inconvenient to go to will tend to keep the savings account intact. Deposits may be made by mail. That nest egg will give you a feeling of security, and make it feel worthwhile to maintain it. Start some credit by applying for some secured credit cards. The savings account can be used as the security for the first credit card. If the bank where you have the savings account does not offer the secured credit cards. use the dollars you have saved to open a security account at a bank where they do offer the secured credit cards.
   Most people say they cannot afford the $300 to $500 required for the secured credit card. By saving for it in a savings account it will be easy. Once this credit card is obtained, pay it every month, do not overuse it. Any payment made monthly will build your credit so do not feel you have to use it to the limit every month. Once you have a Mastercard or Visa you can take it to many stores that offer "INSTANT CREDIT" and make a credit purchase using the Mastercard or Visa as your credit rating at the store. Do not overextend your re-payment ability. Keep in mind negative remarks are easy to obtain, but positive remarks require work and diligence. Go to a major bank and deposit $1000 or so dollars in a CD or if you cannot come up with a $1000 to purchase the CD put what you can in a savings account. can be the same account you started above. Then apply to the bank for a loan with the savings account or CD as security. Alternatively borrow $1000 to be placed in a CD or savings account as security. Most any bank will be happy to do this. Explain to the loan officer you are attempting to establish your credit. They have the best security for the loan possible. They have their money in their bank for security. You pay the loan on time usually in 6 months to 1 year, and when you pay the loan off you have the $1000 security in a savings account, and an A-1 credit rating with the bank, and an A-1 rating on your credit report. Do this at as many banks as you can afford to repay at one time. This can be used to establish many A-1 credit remarks in a short time. Several good recent credit remarks can overshadow older negative credit remarks. This process can establish good credit because the time involved to establish the good payment records allow the older negative remarks to age enough to be good candidates for the dispute method of removal due to creditor purging of records. The credit grantors usually will consider new good credit much stronger than older poor ratings. They feel if you are paying good now you are a good risk.
     A consumer comment can go a long way toward making the good payment record better. A comment like "Prior to [date] payments were not made as promptly as they could have but since that time a great deal of effort to improve the credit standing has improved the report. I plan to continue to improve the credit rating." The best of credit reports take time. Have patience, and pay everything on time and the credit rating will improve. FINANCIAL STATEMENT In any attempt to improve your credit rating you need to know how much you earn, how much you spend, and how much you are worth. To successfully plan for credit improvement you must be able to determine how much you can afford to pay out each month in installment payments. If you do not know, you can easily overextend your payment capabilities, and create a situation where you can not make the payments as scheduled, and start receiving negative remarks on your credit report. The first and easiest to fill out is the personal financial statement. You add up the value of everything you own including savings accounts, cash value if checking accounts, and the approximate value of your tv, stereo, car, furniture ect. You then subtract the amount of everything you owe. Bank loans, credit card balances, car loans, ect. The balance or total is your financial net worth. It can be positive or negative depending on how you have managed your assets. If you rent, are just starting out, have early marriage style furniture the total may be negative. if that is the case do not be discourged. Almost all your income is used to provide the necessities of life. You must purchase many "consumables" groceries, fuel both for transportation and to keep warm or cool depending on the season, clothing, and other things that are of no value once we purchase and use them. This combined with the fact that almost everything we purchase for use like the automobile, appliances and furniture have a lower value once we purchase them. This is one of the evils of this throw-away society we live in. To obtain any real cash value to improve our financial net worth requires both time and planning. For example the purchase of a home on credit allows us to leverage our down payment into a large investment, that when the market value appreciates it has a higher net worth. Not something we can spend on a new coat, but actual cash value in your home. At the same time it provides one of the necessities of living, shelter. The monthly mortgage payment goes just like rent because the interest and taxes are most of the payment at least for the first few years. Over the period of several years hopefully the resale value of the property goes up, and improves your net worth. The savings account you contribute to each week will help offset any negative net worth over a period of time. The second and more difficult form you need to fill out is your Income statement. You put your monthly income on the positive side, and your monthly expenses on the other. The income minus ALL your monthly expenses will show you your net spendable income. You can safely apply only a portion of this to payments on loans and credit cards. True some of the monthly expenses can be placed on the credit cards, but doing that may give you a false sense of having more than you can afford to spend, and over extend your ability to pay. If you do not pay the full amount on your charge cards each month you are extending todays living expenses into the future. This will eventually spell disaster in your credit report. If you charge living expenses on the cards, pay them in full. An example is you charge your gasoline purchases on your Visa and then pay the minimum monthly payment on the Visa. Continuing to do this will in short time leave you with a staggering Visa bill, no credit limit left, and you still have to buy gasoline and pay the Visa bill. This can overextend you. The best attitude is never charge living expenses on a credit card that allows extended payments.
    If you desire to charge gasoline, get a credit card from an oil company where you have to pay the balance in full each month. Of course if Aunt Harriet dies, and you have to go to the funeral you may have to charge on the Visa if you do not have the ready cash for an unexpected occurrence. This is not normal everyday living expenses. Charging everyday living expenses like gasoline can help improve your credit rating if you pay in full every month, and do not over charge your expenses. Do not say I have to eat, so it is living expenses, and go the finest restaurant every day on your Visa card. You can over-spend your living expense budget like that. Another handy credit planning tool that comes from the income statement is a budget. Know how much you have to spend, and plan how to spend that amount wisely. You can establish good credit by establishing good spending habits. If you have established a spending budget and stick to it you can avert an impulse to overspend on an impulse purchase. If you want something, plan for it. If you have a good budget and stick to it, and plan wisely a good credit rating is almost automatic. Remember GOOD CREDIT IS SOMETHING YOU HAVE TO WORK AT, BAD CREDIT COMES NATURALLY. LOAN GRANTING CRITERIA Many banks and other lending institutions use a point system for granting a loan. Each category is given a numeric value, and your getting the loan, or not is determined by your score. To determine your score they look at your credit application, and credit report. By knowing how they grade you, you will know what areas you need to improve. In a numeric point system your score is determines on such variables as stability, income, credit history, expenses, outstanding debts ect. The following example shows a typical scoring method. Over 18 points Pass 15-17 points Borderline Below 15 Fail POINTS Age 18-25 1 point 25-64 2 points Over 65 1 Dependents None 0 1-3 2 Over 4 1 Years at residence Less than 5 1 Over 5 2 Years at previous address Less than 5 1 Over 5 2 Employment None -2 Less than 1 year 1 1-3 years 2 4-6 years 3 7-10 years 4 over 10 5 Spouse employed (Applying Jointly) 2 Telephone listed in Applicants name 2 Credit Experience Current or good paid loan at this bank 5 Current or good paid loan at another bank 3 Account with this bank 3 Account with another bank 2 Work Professional or Executive 4 Skilled worker 3 Blue Collar 2 Other 1 Monthly obligations Less than $500 2 Over $500 1 ITEMS ON AN APPLICATION THAT ARE NEGATIVE The following list of items should never appear on your application. They make the loan officer nervous about the loan. Bankruptcy. High debt to income. Foreigners without permanent residence status. Post office boxes. Frequent changes in address. Frequent changes in employment. Self Employed. No Telephone or telephone not in applicants name. Unskilled laborers. Poor paying Prestige positions. Excessive number of credit cards, or revolving credit accounts. Employers with un-verifiable telephone number. No checking or savings account.
     TO FILE OR NOT FILE BANKRUPTCY The consideration of whether to file bankruptcy or not is a very traumatic process. It is made more complicated by the ignorance of a consumer on the complicated bankruptcy law. There are times when one has incurred such tremendous debts and does not have the income to meet the payments that bankruptcy is the only alternative. If you are struggling with the decision now keep in mind your primary responsibility is to your family, and secondary responsibility is to your creditors. Bankruptcy is a drastic step, It will affect your credit for up to ten years, It will affect your life for up to ten years. Do not consider bankruptcy for a small amount. Many legal types are promoting bankruptcy as a cure all. Usually it lines the lawyers pockets, and causes the debtor grief. Many people are not ready for bankruptcy mentally, even though financially it may be a good move. They may morally not feel it is right, and be unable to accept the reality of the situation. It depends on whether they are able to accept the hassle of constant harassment by collectors or the knowledge that they have legally discharged the debts, but still feel they owe the creditors. If you or members of your family have these feelings, consider alternatives such as consumer credit counseling. Most Credit grantors view bankruptcy as the worst of all evils. Many have a policy of absolutely no credit granted to anyone who has bankruptcy on record. Usually this policy stems from the fact the credit grantor has lost accounts to bankruptcy in the past and even considering you are not responsible for the other accounts they have lost, they will not grant credit to anyone who has filed bankruptcy to discourage others who may be current accounts from filing bankruptcy and having their current accounts discharged. If credit were easy to obtain after bankruptcy, then there would be no penalty for filing bankruptcy and it would become more common. A few view it from the point that once a person has filed bankruptcy, they have discharged the old debts, and cannot file again for 6 years, so they are not a bad credit risk. They have very few current debts, and are unable to file bankruptcy again for quite a while. This is the exception, not the rule. If your credit is in such bad shape that bankruptcy will not make any difference, and you are willing to accept the additional time period before automatic removal, it may be a solution. Consider the alternatives, and weigh the consequences. If your situation is bad enough, Bankruptcy may be the best answer. Usually do not consider it unless the dollar amount is at least equal to your annual income, and the number of creditors is large. Bankruptcy will usually allow you to keep your home, and vehicles and your essential household items, but "Luxury" items can be sold or repossessed by your creditors. You will still be liable for payments for your mortgage, and vehicles, so keeping them keeps those debts as well. Considering this the bankruptcy can be smaller in value than the actual amount you owe. Most taxes, Child support, and alimony are not discharged. Consult with your attorney on exactly what will be discharged. There are three types bankruptcy, but for most purposes there are only two. The most common is Chapter 7, or Straight Bankruptcy. The Chapter 7 bankruptcy discharges all non exempt debts, and you never have to repay them. This allows the debtor to start anew without the pressure or obligations of previous debts. This along with the relief of harassment by creditors collectors, garnishments, and lawsuits gives the debtor complete relief from financial headaches. The negatives of bankruptcy are credit report listing of the bankruptcy for ten years. Unable to file bankruptcy again for 6 years. The disposition of assets. Any property belonging to the debtor except some exempted items are subject to liquidation and distribution among the creditors. Any monies you make after filing the petition are exempted, and yours to keep. You do not have to wait until the actual discharge takes place to begin again. Less common is Chapter 13 Bankruptcy. It is also called "Wage earners" or "reconstruction" bankruptcy. Chapter 13 stops all collection action, allowing the debtor the time to repay debtors. This is all monitored by the courts through a court appointed trustee. Morally it allows the debtor to re-pay over an extended period, and not be pressed by creditors. There is no liquidation of assets. The advantages of Chapter 13 are non-exempt property may be kept, Non Dischargable debts may be paid over extended periods while giving the debtor protection from enforcement of these debts. A person may file Chapter 13 even if he has previously filed chapter 7 on the last 6 years. The debtor may not feel the sense of guilt associated with chapter 7. Chapter 13 does not carry quite the evil stigma associated with chapter 7 with creditors. Any co-debtors, or co-signers are protected while under chapter 13 protection. Interest charges are stopped under chapter 13 protection so the debts do not continue to increase because of interest charges Except in extreme cases requiring protection of co-debtors or protection for cases of repayment of embezzled monies to protect the debtor from other legal action the effects of chapter 13 protection can be had by either direct negotiation with the creditor, or with the help of a consumer credit counseling service. Most creditors are willing to work with the debtors and can lower the monthly payment to as little as 3% of the balance due and suspend all interest charges. You can also negotiate that as long as your lowered payment is made on time each month the creditor will not report you as delinquent or under collection with the credit bureau. In most cases you can negotiate these terms if you are willing to try. If you do not want the hassle, or embarrasment of contacting the creditors directly for this you can seek the aid of a consumer credit counseling service. They will contact your creditors and arrange for the lower payments, and stop the intrest for you. There is usually a charge for their services, and they do the same thing you can do. Their experience with creditors can sometimes make it easier for them to negotiate terms. Creditors know they also require the debtor to sign agreements to stop using credit and not apply for any new credit while the terms are in effect. With these exceptions you can do the same things the credit counseling services can. The fact you can do the same things the councelors can for free it makes more sense to try this approach, and apply the monthly fee normally paid to a counseling service to your creditors...