In part one we discussed the importance of repairing and maintaining your credit report. It is of the utmost importance if you are considering making any large purchase; be it a home or a car, that you are a ware of your credit standing. All types of lending are being affected by the banking issues that we are plagued with right now; it is not only home mortgages but car loans, credit cards, and standard installment loans as well.
So if you have ordered your credit as suggested in part one and have done all the disputing you can do but there are still some blemishes that are going to hold you back, what do you do now. Part two will help you figure out what to do next. Again it will take time but remember this is a plan; it needs to be worked. You will be successful you just need to commit to working your plan and keep your eyes forward; on that house you want to call your home.
Unpaid collections are worse than paid collections. You can negotiate a pay-off settlement that reduces your bill, plus request that all derogatory remarks are removed from your credit report. At the very least have them report the account as paid in full. Be sure to get verbal agreements in writing before sending off your payment. Once the payment has been sent in get a copy of the cancelled check and another letter from that agency stating that you paid as agreed in the settlement letter. It is very important to hang on to this documentation for at least 7 years.
Slowly close out unneeded or unused credit accounts. Most experts recommend carrying between two and four credit cards. But, be cautious when canceling because closing accounts can negatively impact your credit score. The scoring mechanism considers the ratio of total debts to total available credit. A good rule of thumb is to keep your revolving debt to 50 percent of your available credit.
Getting rid of credit cards the smart way.
Once your account has a zero balance, you’re ready to start the process. It’s important to know that the credit card company reports the account closing to the credit reporting agencies, not you, and they have two ways of doing it:
1. “Closed at customer’s request” — This tells the credit reporting agency that it was your request, the bank isn’t forcing you to close the account; it’s what you want on your report
2. “Closed by creditor” — This tells the credit reporting agency that bank doesn’t want your business any more; it’s what you don’t want on your report.
Closing a credit card account takes time, patience and organization. It is crucial to log every call you make I would suggest using the last bill showing the zero balance; it contains all the information you need to have to discuss the account so you probably would have it handy anyway. Use it as your note pad. You want a record of exactly who said what and when, so you’ll have the facts at your fingertips should there be a problem down the line.
- For each bank, look for the customer service number on your monthly statement. If you can’t find it there, get it by calling the toll-free information number: (800) 555-1212 Call each bank; verbally confirm your zero balance, and verbally cancel your card. If you’re a good customer, expect the customer service representative to try to convince you not to close it; you may be offered perks, such as a lower interest rate. Stand firm. Tell the rep you will send a letter to confirm the cancellation and ask for the department and address to send it to. Record everything pertinent to the call.
- Write your letter to the bank. Make sure you include the account number and your name and address on the account. It wouldn’t hurt to attach a copy of the last statement showing the zero balance, and the pertinent account information. Include in the letter: (1) please cancel my account (2) please notify the credit reporting agencies that the account was “closed at the customer’s request.” Make a copy of the letters and attachments for your files.
- Mail the letters by certified mail with return receipt requested. When a return receipt comes in, staple it to the appropriate letter in your file and post the date received in your log.
- A month after your last return receipt comes in, check your credit reports to make sure all accounts are reported as “closed at the customer’s request.”
- If the credit report is correct, you’re done. If it’s not, start all over again: Call the bank to report the mistake, request that they fix it and follow up with a certified, return-receipt letter.
- Keep going until the job gets done.
- Other tips:
- Close out your newest accounts so that you don’t lose your longer credit history.
- Close out accounts slowly over several months.
- Verify that all accounts you’ve closed are reported as “closed by consumer” for the best report.
- Even if creditors offer to raise credit limits, allow yourself only moderate credit limits.
- Keep your balances low and avoid revolving balances
- You can also work to add positive information and show stability in your credit file.You may have been denied credit because of an insufficient credit file, yet you have credit. Some creditors — such as, travel, entertainment, gasoline card companies, local banks and credit unions — may not report your credit history to the credit bureaus. You can try asking the credit grantors to report your account information and monthly payment history to a credit-reporting agency. Not all will do that. So, in the future, before opening a new account, ask if this account will be reported monthly to a credit-reporting agency.If you have really bad credit — perhaps even filed bankruptcy — don’t let your credit status go dormant. “The faster you begin to re-establish good credit, where you pay on time, every time,” says Craig Watts, consumer affairs manager of the Fair Isaac Corp., “the faster you’ll improve your credit score.”
- Build a solid credit history. Secured credit cards offer people with no credit and those repairing their credit this opportunity. Shop around for the best deal available, but limit your applications. Credit bureaus look at how many new accounts you’ve opened, and the number of “inquiries” for new accounts that are listed. A rash of new inquiries results in reducing your score, because many times people knowing that money problems are coming will increase their credit lines to get them through whatever situation is coming.
- Lastly, open a savings account at your bank. Demonstrating the ability to save money tells creditors that you are working within a budget and that you have reserves to repay debts.
I know that all seems like a lot of work. You are right it is. There are many credit repair companies out that there that charge a good fee to do this for you BUT beware of credit repair scams. Many people have fallen prey to companies promising to remove all negative information from your credit report. I have never had a client that has utilized one of these companies that benefited at all from the program; they just threw that money out the window. So make a commitment to help your self get your credit report buffed and polished before you think about any major purchase. If you think you may be ready now to purchase a home, contact me. Let me take look at your situation, I will do my best to put you behind the wheel of a U-Haul. If things are quite right, I will give you some guidance on what needs to happen for you to become qualified. Like I said in Part One, I am not a professional credit repair person, I am an originator who has been looking at credit for over 13 years helping people purchase or refinance their homes. I have seen issues that hold them back and I have seen the things that work to fix their credit. I would be more than happy to share.