Everything you need to know 2 have outstanding credit..

Discussion in 'Economics' started by Bigpipn, Jan 18, 2008.

  1. I am a former a Mortgage Broker and due to the tremendous size of the Subprime Market I worked with several Credit Repair companies and attended numerous credit repair seminars and have helped hundreds of people improve their credit scores several hundred points. I wish to share this information with my fellow ETers.

    Keep in mind that credit has a major impact on insurance premiums as well.

    So, here you are.

    Steps to a 720 Credit Score

    I. Keep credit card balances under 30% of the limits.
    Example: $10,000 credit limit.. NEVER let balance go over $3,000
    You have 4 options:
    1) Ask Credit Card Company to increase your limit
    2) Transfer funds to different cards
    3) Open another credit card (never open multiple cards in 6 month span)
    4) Pay the debt

    II. Have at least 3 revolving credit lines.
    Have at least 3 credit cards at all times of Visa, AMEX, MC, Discover
    Banks and Bureaus like to see that banks have given you credit and you haven’t used it even if you don’t plan on using the entire limit.
    18-24 months of no use the card becomes inactive!
    Secured Credit Card will be given to ANYONE! (Make sure it reports to all bureaus and make sure the secured card converts to a normal credit card after 18 months)
    Do NOT close ANY accounts!
    The oldest cards with HIGHEST credit limit have THE GREATEST impact on your credit.

    III. Verify accuracy of your reported credit limits.
    Credit limits are not reported because CC companies want to protect you as clients, they do not want you to be stolen away by another credit card company. If your credit report isn’t showing your proper limits your utilization rate will be out of wack. This accounts for 30% of your credit number!

    IV. Have at least 1 installment loan on your credit.
    Installment loans are auto, leases, furniture, and personal property
    This is vital if you are in the rebuilding phase of your credit; HUGE impact.
    V. Remove all errors from credit.
    85% of Americans have an error on their credit report.
    25% of the credit reports have an error that stopped them from getting a loan.
    Concentrate on high priority errors that have happened in the past 24 months
    Types of errors to fix:
    Incorrect limits
    Duplicate listings of collections or past due accounts
    Accounts in the last 24 months

    VI. Negotiate for a letter of deletion before paying a bill in collections.
    Your recent payment history is more important than your PAST payment history. Stop paying bills until you can pay them in full! A letter of deletion is a letter that states “This collection for Mr. or Ms. Jones should be deleted from the credit report”
    ***A paid current collection is worse than an unpaid collection past 24 months*** (If you pay an old collection it reinstates the collection and makes it active)
    When negotiating your deletion letter determine whether it is in the collection phase or the charge off phase.
    If in collection:
    Never admit any guilt! For two reasons:
    1) Admission restarts limitations by the creditor
    2) Not likely to get letter of deletion because you’re admitting debt

    DON'T say things like “I realize I have been late, it’s my fault”

    Say this exactly..... “I’m calling regarding this account number, it shows that it is a charge or collection and I am concerned because I am careful about my credit”
    Once you do negotiate the debt you need to write
    “By cashing this check you agree that account number is paid in full AND you will provide a letter of deletion” (This is called a “restrictive endorsement”)
    Make copy of check and send through certified mail.
    3 possible answers from collections
    1) Yes
    2) No
    3) Only provide you with letter of payment

    Hang up before you say “yes” to 2 or 3!!! Call back another day until you are able to get a commitment to a deletion letter and have it faxed to you immediately.

    Don’t get angry! Don’t let them talk to you about payment plans or your responsibilities.

    If you have a charge off do the following:
    1) Send verification form and letter to verify that the debt is yours
    2) Send validation letter to prove account belongs in collections (proof of late payment, copy of original signed agreement)
    If this does not happen within 30 days the item will be removed off your credit!
    Collection Companies may only contact you from 8am-9pm, must respect your right to contacted in writing only, and must be honest with you.

    VII. Create a structured plan to protect your credit.
    10 points:
    1) Create budget—Write down and log your expenses! Account for every penny! Write down everything in your monthly expenses. It is better to be a realist than an optimist!
    2) If in debt live like a rich person—Be frugal. How much money do you have left at the end of a month?
    3) Use technology to keep bills current—Many banks offer online payment options, make use of it!
    4) Review monthly statement—Each month review them and make sure you’re not exceeding 30% utilization rate, look carefully at all charges, this is where identity theft starts!
    5) Pull credit once every 6 months—Inquiries hurt your credit ONLY when you go to multiple locations and have your credit pulled. Look for late payments and misreported credit limits.
    6) Use same name when applying for credit—Same first, middle, and last name each and everytime!
    7) Avoid being cosigner—This is critical to your credit! It has the same impact on your credit in either event!
    8) Keep accounts active—It does no good to tuck credit cards in drawer and not use them, eventually cc will show inactive and it takes away from the average age of your accounts. Even if you have to pay a utility bill on your CC, DO IT.
    9) Protect credit during and after divorce—Refinance your home and cancel ANY joint cc accounts!
    10) Review steps regularly!
  2. Pekelo


    Slight contradiction:

    If credit limits are not reported, why do we have to keep the usage under 30% of the limits???
  3. Interesting. I know of a lot of these. I have somewhere between 740 and 760 FICO. Does this info reflect the changes for 08 in FICO score rating?
  4. SOME credit limit increases are not reported. The algorithm that makes up your FICO takes into consideration your utilization rate.

    The reason credit limits aren't reported is because when your credit limit gets updated the credit agencies SELL YOUR INFO to other CC companies. That's right. Why would they do this? Simply, these are GREAT, QUALIFIED leads to offer you 0% introductory rates for balance transfers.

    Notice how when you apply for credit somewhere, you receive CC offers in the mail soon there after.
  5. The changes are going to take even MORE consideration in the utilization rates. The mean credit score in the US will lower 50-60pts on this recalculation.
  6. Go to www.7stepsto720.com and sign up for free so you can access the forms to challenge debts. Even if you did apply for a debt chances are the debtor will not respond in time and the debt will be removed from your credit.

    I want to make this perfectly clear, I am not selling anything, I have no financial gain from doing this, I am just trying to give back to ET. I am new to trading and my commentary isn't incredibly valuable yet so, hopefully this will help some.

    I have taken a 392 middle score (we used middle score in mortgage financing) to over 700 in a little under 6 months and took a 645 to a 770 in 4 months.

    Do not hesitate to ask any questions.

    I hope this proves to add to your prosperity in the coming years.
  7. balda


    what are your recommendations on protecting good credit.
    permanent credit frees?
  8. Thank you for the information.

    I was under the impression that too many active and inactive cards were detrimental, and should be closed.
  9. Use your credit cards AT LEAST once every 6 months, even if you fill up your tank once(of course be sure to pay the bill on time). Keep them active, the longer an account is in good standing the higher your score goes. Account age is VERY important. Don't EVER close an account!!!!
  10. clacy


    Thanks that is all good information. I happen to have very good credit but I do have a question about how mortgage rates are calculated.

    Obviously the fed will be lowering soon and probably for some time into the future. Since I purchased my home 2.5 yrs ago, mortgage rates have come down and I'm trying to determine if I should refi or wait until there are even more attractive rates. So I guess that's my question. Will mortgage rates continue to fall for the immediate future?

    Currently, I can take a 30yr to a 20 yr and only see a slight increase (<10%) on my monthly payment which is attractive to me.

    Thanks in advance.
    #10     Jan 18, 2008