Page 4 – Improve Your Credit Score, Now!

NOT KNOWING THAT FAIR-ISAAC COMPANY (FICO) WILL TELL YOU WHAT YOU SHOULD DO TO IMPROVE YOUR CREDIT SCORE

Yes, FICO will tell you why you have the credit score which you obtained! This is so simple yet so very important.

You can obtain your credit scores from FICO at WWW.MYFICO.COM and this report will give you any guidance as to how to improve your credit scores.

I ADVISE and URGE you to go to www.myfico.com because at this site you will get the reasons or reason codes as to why you have your present credit score. This information is invaluable because it is “directly from the horse’s mouth” what you need to do to improve your credit score.

You could get your reason codes and simply throw them in the trash and not pay much attention to them. THIS IS COMPLETELY THE WRONG APPROACH. Listen to them!!

When you access your credit score, you do so with a User ID which is your email address and a password. You should print out all your credit reports and you will have at least 20-40 pages of information. Also, once you have login to the site, I would urge and implore you to read all the pages from the MYFICO website. You cannot read these pages unless you have purchased your credit score.

NOT KNOWING THE ‘SCORING FACTORS’ OR ‘REASON CODES OF YOUR FICO SCORE’

CODE REASON/FACTOR

1. No adverse factor
2. Excessive amount owed on accounts
3. Delinquency
4. Proportion of loan balances to loan amounts too high
5. Lack of recent information on installment accounts
6. Too many accounts with balances
7. Too many consumer finance accounts
8. Account payment history too new
9. Too many recent credit checks or recent applications
10. Too many new accounts
11. Proportion of revolving balances to revolving credit limit is too high
12. Excessive amount owed on revolving credit history
13. Insufficient length of revolving credit history
14. Delinquency date too recent
15. Insufficient length of credit history
16. Lack of recent information on bankcard accounts or lack of bankcards
17. Lack of recent information on revolving accounts
18. No recent non-mortgage balances
19. Frequent delinquency
20. Date of last credit check too recent
21. Recent derogatory public record or collection
22. Past due balances
23. Serious delinquency, derogatory public record or collection
24. Industry of newest account not ideal (No longer use)
25. No recent revolving balances
26. Insufficient number of satisfactory accounts
27. Too many accounts
28. No recent bankcard balances
29. Insufficient time since most recent account set up

Amount owed on delinquent accounts

NOT UNDERSTANDING YOUR DIVORCE CAN HURT YOUR CREDIT SCORE

One very common mistake which people make when obtaining a divorce is the misunderstanding about the division of debt. This misunderstanding creates credit score havoc.

Here’s what I mean. You and your ex-spouse have joint credit cards and only one of you really used the card. Therefore, an order is entered that the spouse responsible for the credit card debt will pay the debt and hold the other party harmless. The party who is supposed to pay either cannot pay, won’t pay, or is late on payments. This will kill your credit score.

And the innocent party stammers, “But the judge said he/she was to pay on the debt!” “What can I do?” You can bring a Motion for Contempt, but this is costly and time-consuming. And if the person is unemployed and does not have any assets, it is a study in frustration because the Court must weigh the equities. Further, you will ask, “How can the credit bureau report that you are late on the payments?”

The answer is that it was a JOINT DEBT and the credit card company was not A PARTY to your divorce. The judge’s order is only between the Husband and Wife and is not an order to the Credit Card Company. I have never seen a credit card company as a party-defendant in a divorce action. The divorce is legally irrelevant to the credit card company. Further, a credit card contract which was legal at the time it was entered into is not subject to modification by the court, even if the credit card company was a party-defendant in the divorce.

You can close the accounts but the outstanding balance still has to be paid and if it is not paid or if the payments are late, this will negatively affect your credit score.

Ideally, there are many strategies to avoid this result but the problem is that the parties usually do not have enough money to pay off their joint debts. But if you can have the debt transferred into the name of the person who is to pay for the debt, then this is the way to handle the problem. Many times this cannot be done and divorce is one of the major triggers for bankruptcy as the only practical means to resolve this problem. Many times even when you completely understand how to divide the debt and effectively maintain your credit score, you won’t be able to implement the appropriate strategy because you simply won’t have the FINANCIAL MEANS to pay off the debts.

NOT APPRECIATING A SIMPLE STRATEGY OF ASKING THE CREDITOR TO HELP IMPROVE YOUR CREDIT SCORE

If you have been a good payer on your line of credit, I recommend that you simply call the credit card company and ASK FOR AN INCREASE IN YOUR CREDIT LINE. The worst the creditor will say is “no”. But this type of inquiry does not affect your credit score and if your credit line is increased, it will boost your credit score.

I had a client who paid for his home heating fuel via a credit card because the company insisted that he pay via credit card. He paid the bill off immediately and without him soliciting the credit card, they offered to increase his line of credit. He just improved his credit score.

NOT KNOWING YOUR RIGHTS UNDER THE FCRA OR HOW TO ENFORCE YOUR RIGHTS

Most consumers do not know that their credit reports are governed by the law called the Federal Credit Reporting Act or FCRA. Once you know your rights and how to exercise those rights, you’ll be empowered to attack ‘outdated, erroneous and inaccurate’ information on your credit reports.

And contrary to what the Big 3 Credit Bureaus tell us, credit reports are loaded with errors and it’s very important to have them corrected. Why? Your FICO scores are derived from your credit reports and if there’s ‘outdated, erroneous and inaccurate’ information on your credit report, it will kill your credit score.

Jurisdiction for the Federal Credit Reporting Act comes under the Federal Trade Commission. My PennyWatchers website has a complete e-learning course on the FCRA and it starts as an entry level secretary in my office training you in the Federal Credit Reporting Act and goes all the way to advanced para-legal studies. I put into the site the actual law itself and opinion letters or legal position papers from the attorneys who work for the Federal Trade Commission and interpret and apply the law. Also, I have taken all my materials and procedures in my office which I would train an entry level secretary and put them into a user-friendly “how to” book entitled, The Fast Track to Credit. Also, I have even gone so far as to write a “Commentary on the FCRA” for those who want to become para-legals on the subject. The site for my website and materials is WWW.PENNYWATCHERS.ORG.

I also want to inform you that once you have used our program and the credit bureaus won’t correct your credit report, I am able to recommend an attorney who will be willing to review your case, at no charge. And if you have a valid cause of action, that attorney will file a complaint in Federal District Court against the credit bureau and will bring a lawsuit on a contingent fee basis which means that there’s no money out of your pocket. And if the attorney does not win the case, you don’t owe any money and if the attorney wins the case, the attorney will be paid by the credit bureau. I challenge and dare you to find any attorney who will offer you the same terms.

NOT UNDERSTANDING WHAT CONSTITUTES A ‘FRESH START’ WHEN YOU FILE FOR BANKRUPTCY

Most attorneys will tell you that if you file for bankruptcy, you’ll get a “fresh start”. But this is really inaccurate. I define a “fresh start” as a ‘good credit score’ and that the filing of bankruptcy is the first major step toward a good credit score but it’s not in and of itself a good credit score.

I compare the filing of bankruptcy to the old farmer who burns the field to get rid of so much of the thick brush so he can break the soil and plant a crop. Don’t confuse the burning of the debts or the field with a fresh start or a crop.

Attorneys have been trained as excellent technicians in the preparing and filing and presenting of a bankruptcy petition in order to obtain a discharge of your debts. But a discharge of your debts doesn’t result in a good credit score. And you need a good credit score to qualify for a mortgage or car loan, and today it’s affecting your car insurance rates.

Also, there are many, many consumers who file for bankruptcy and they don’t understand how important reaffirmation agreements are in re-establishing their credit score. All of my clients get a handout where I explain this important issue and I have a staff person who works specially on reaffirmation agreements.

NOT UNDERSTANDING THE COMMON MISTAKES WHICH APPEAR ON CREDIT REPORTS AFTER YOU FILE FOR BANKRUPTCY

What do I mean by this? Let me give you an example from one of my War Stories: A client files for bankruptcy and gets a discharge of his debts. He goes into a car dealership and applies for a loan. He’s denied the loan. He calls my office and he’s irate,

“Hey, Falvey, you told me that my debts were discharged but I’m here at the car dealership and they can get me a loan because my credit reports says my debts aren’t discharged. What gives? You told me that these debts were discharged!”

All of his debts were discharged and there’s no court or attorney in the land who would even think of trying to force him to pay those debts. So what was the problem? The credit bureaus were misreporting the status of his debts. And your bankruptcy has no control or affect on your credit report. The creditors stopped reporting him and the credit reports were being terribly misconstrued.

Almost with any exception, anyone who files for bankruptcy will subsequently have on their credit reports, ‘inaccurate, erroneous, and outdated’ information. You just have to take my word that my experience has found this to be the case. You file for bankruptcy and your credit reports will not accurately reflect the status of your debts. Many times your credit report reads, ‘charge off to bad debt’ which doesn’t mean that you don’t owe the debt. It should state, ‘discharged in bankruptcy’. This is just very, very common problem.

Many clients believe that when their credit report reads “charge off to bad debt” that the debt is no longer owed. This is a common mistake. “Charge off to bad debt” is an accounting phrase used for tax deductions. It doesn’t mean that legally the debt is not owed.

NOT KNOWING HOW TO TURN THE NEGATIVE OF BANKRUPTCY INTO A POSITIVE OR TRIUMPH

There are people who have filed for bankruptcy and it seems like within months they are running around and happier than ever and everything is going great for them. They’re buying cars, houses and taking trips. And there are people who file for bankruptcy who for years are going around with a dark cloud hanging over themselves. They mope and say, “I filed for bankruptcy and it’s the worst thing I could ever have done”.

Either knowingly or unknowingly the people who believe that everything is “coming up roses” after they have filed for bankruptcy probably have a good credit score. And they’re probably saving money. You see one secret of a successful bankruptcy is found in turning the negative into a positive. You should challenge yourself to save all the debt that you discharged in a bankruptcy. You should pretend that you still owe the money but “to yourself” and make repayment to yourself, one penny at a time. Then go for 2 pennies, and 3 pennies. My question is: are you saving any money or are you trying to save money? The PennyWatchers program is designed to have you start saving, one penny at a time until you increase it to nickels, quarters, and then dollars.

I know this is difficult but as long as you say that you can’t save a penny, then that’s it. You can’t save a penny. But as soon as you start putting a penny in your “piggy bank” then you will have begun to turn the negative into an opportunity. And once you put 1 penny in the jar, I’ll ask if you can put 2 pennies in the jar.

NOT DEVELOPING NEW HABITS TO IMPROVE YOUR SCORE IMPROVEMENT

The best and only approach for improving your credit score is a “holistic approach” and not just concentrating on credit reports or credit scores. Your credit reports and credit scores are the result of the following:

FINANCIAL HABITS and Financial PERSONALITIES are developed from:

1. Motivation – Simply put, do you want or desire to be positive or negative?
2. Understanding – That you have to control or budget your finances if you are to obtain a higher credit score and this begins with developing the specific HABIT of recording your expenses.
3. Focus – A willingness to work everyday and with every penny at developing the HABIT of recording your expenses.
4. Discipline – The consistent determination in developing the HABIT of recording expenses and not missing one day or one penny for 90 days.

Lasting change will not result from using a “silver bullet” to fix your credit reports nor will the use of financial steroids to pump-up your credit score bring about a lasting improvement in your financial condition. The slow and steady and methodical building of new habits is what will ultimately improve your financial condition for many years to come.

Your credit score didn’t take a plunge overnight and it can’t be rebuilt in a month or two. If you have a poor credit score, it takes 12-24 months in order to obtain a good credit score. But for some people that’s not fast enough. They want something quicker and they don’t want to have to work at developing new habits. They want a 24 hour turn-around time from a poor score to a good credit score. And even for some that’s a little too slow.

Well let me repeat loud and clear: If you have a poor credit score, it takes 12-24 months to obtaining a good credit score. And to really do it right, you should take a “holistic approach”. You should look at the entire financial body and not just one organ.

I call our PennyWatchers.org website a ‘CONSUMER UNIVERSITY’ and I would urge you to consider becoming a PennyWatcher student.

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