Credit repair isn’t necessarily the easiest thing to do. So, when you have taken the time to dispute an incorrect item on your credit report, and it suddenly re-appears, needless to say it can get really frustrating. As consumers, we are needing to monitor our credit reports on a regular basis in cast the creditor re-inserts the negative item. The credit repair process is only the beginning of the process, you must monitor and keep a close eye on that report.
Sometimes reading your credit report can be incredibly confusing. One of the most confusing phrases you can find on a credit report is “Charge-Off.” I remember the first time I was looking over my credit report and saw charge-off, I had no clue what it even meant. If you have struggled at any time in your life to make payments on time, there is a good chance you may have an item on your credit report that has those two infamous words.
When you are repairing your credit, one of the important things to understand is how your credit score is calculated. There are two main credit rating systems calculating your score, the Fair Isaac Corporation’s FICO score and the VantageScore. I want to make sure that you understand each of them, so this week, we are discussing the VantageScore.
When I first started working on repairing my credit and raising my credit score, it was because I wanted to buy a home. Let’s just say that my credit score was far from where it needed to be to be approved for a home loan. In full disclosure, my credit score was a 411, nearly as low as it could get. What I didn’t understand, was how my credit score was calculated. And had I understood that, it may not have taken me as long to get my score high enough to obtain my goal.
Debt collectors purchase accounts from companies for pennies on the dollar and then pursue collecting the full amount from the people that owe the money. When dealing with debt collectors, most people are uncomfortable with negotiating, but it is one of the most important skills to develop. In most cases you can also negotiate the debt for pennies on the dollar as well, especially if you can come up with a lump sum to give them.
From 2006 to 2010 I was constantly receiving phone calls and letters from collection agencies for mistakes I had made. One agency had purchased my debt from Compass Bank and Bank of America for what I would assume at the time was a fraction of what was actually owned. Most of the time I just ignored them because I couldn’t afford to do anything. As I began to get my financial life back in order in 2010, I received another letter from the collection agency. I called the number that was listed on the letter to discuss the payments that were being offered. The monthly payment was pretty reasonable compared to what they were initially offering over the last couple of years. The problem was, I had already scheduled some debts to be paid off or had set up some payment plans, so I couldn’t offer the minimum amount they were asking for.
Have you ever been denied credit? Maybe even denied a job because of your credit? We have always been told that having a high credit score is important. One of the most obvious reasons for having a high credit score is purchasing a home, or applying for a loan. So, what does our credit score have to do with any of that? Basically, credit scores were created to help those issuing a line of credit to a consumer a way to assess the risk of giving a line of credit. They want to see if you are going repay your debts on time, and they can see that by viewing your past credit history.
- Request a Credit Report
First and foremost, obtain a copy of your credit report after you have been denied credit. In fact, by law, you are to be given a copy at no cost.
Recovering from a job loss can be incredibly draining; mentally, emotionally and of course financially. In last weeks post I spoke about losing a couple of jobs in a short period of time and the toll it took on me and my family. This past week a client who had been unemployed for several months found a new job. During his unemployment his family had accumulated a large amount of debt, maxing out two of three credit cards. He asked me for advice on what I had done or wish I had done to recover from losing my jobs. Here are the six things that I shared with him:
- Request Your Credit Report
You may ask why requesting your credit report is important. Sometimes we don’t have all of our accounts/debts on our budget. It is critical when you are in this stage to know exactly what you are up against. By requesting a copy of your credit report, you know where you stand credit-wise. Be sure to examine your report for any mistakes and negative information. If you find a mistake, you can dispute them yourself. Be sure to make a note of all the negative information so you know where you need to focus some of your time. The Fair Credit Reporting Act allows for you to get a copy of your credit report once a year from all three credit bureaus (Experian, Equifax and TransUnion). You can obtain your report by going to AnnualCreditReport.com or Credit Karma.
Losing a job can be very taxing on a person. If you were to tell me a couple years ago that I would have to deal with a job loss, I would have laughed. I loved my job and never even saw it coming. Losing one job is bad enough, but I lost two jobs in the span of just under 18 months.
Leading up to the first job loss, we had been doing really well at budgeting our money. We were ready to purchase a home, so we were really diligent. We purchased our home about 8 months prior and just had a baby before we got the bad news. We hadn’t even started building our savings back up. We had committed a huge crime in the financial world and even tapped into our emergency fund to help with the down payment. We didn’t have much saved up when I lost the job, so we did what the majority of people do in this situation. We used our credit cards. We quickly found ourselves in a huge amount of debt. I was drained mentally and emotionally from this situation. I felt worthless, and at the same time too proud to ask for help.
There is good credit and bad credit in the world that we live in. One lesson that is important to learn is to know how to minimize bad credit and responsibly use good credit to our advantage. Having good credit can mean the difference between getting a loan or not.
What if you didn’t learn the lesson on minimizing your bad credit? Do you need to work with a credit repair company? Or is it possible to repair your own credit? I can tell you that it is possible to repair your own credit and save money while doing so. During this process people (especially couples) become overwhelmed. My goal is to give you 7 strategies that you can use now to begin repairing your credit.