Best way to understand your credit report

READING YOUR CREDIT REPORT

Credit scoring is complicated to say the least. When you are born you probably had a credit score of (450) The highest credit scores we have seen exceed (800) In the lending arena and the Federal Government Home Loan Guaranty process, we know that a credit score of (620) or higher can get you a mortgage approval. Now, if your credit scores are lower than that, yep, you can get approved, but guess what? At a much higher rate. So knowing that credit scores affect the amount of your payments is important.

What we are going to tell you now about your credit report is SHOCKING. The single most item that will lower your credit scores is a RECENT LATE PAYMENT. We have seen credit scores plummet from (690) down to (590) in one day because an account was recently (30) days late. It does not matter the amount of money. Even if the account was for $50.00 and you were recently late, your credit scores plummet drastically. Credit scores are NOT determined by the dollar amount of the entry but by the record of payments.

This is perhaps one of the most important documents that you will come across in your lifetime. It is more important than a, marriage license, drivers license, social security card, paycheck, bank statement or any other documents. This document determines how much you are going to pay in interest when you want to buy something. If you do not care nor understand anything about your credit report, okay, just keep paying high interest.

A little bit about interest. Lets say that two twin brothers live across the street from each other. Both work for the local power company. Both have worked there for (25) years. Lets call one Bob and the other Fred. Now, Bob decides to go to the local dealer and buy a new pickup truck. He comes home one Saturday morning driving that new pick-up and wow Fred is really curious. He asks, Bob how much he paid for the shiny new pickup truck. Bob says I paid 27,550 for it.

Fred goes inside and his wife is also more than curious, she is antsy. She says to Fred, If your brother can buy a new pickup and drive it home, only to show off, we can do the same. So, Fred and his little wife (Mary) drive down to the local dealer and even though, Bob has a red one, Fred and Mary pick out a white pickup truck. They make a deal and drive it home. They pull up into Bobs driveway and honk the horn. Bob comes out and, Mary says See, we can also drive a new pickup truck. Bob asks his brother, How much did you pay for the truck? Fred says I paid $27,550 for it. Now here is where the elephants are separated from the giraffes.

Bobs monthly payment is $475.00 and his brother Fred has a monthly payment of $675.00. WHY? Because, Bob has better credit than Fred. Same price but different interest rates. Fred will pay over $200.00 per month or $ 2,400 per year more for the use of money. Multiply that times (6) years and Fred is paying $ 14,400 MORE for his white truck than his brother. Is this fair? Sorry, but that is the system and that is a perfect example as to WHY you should understand your credit report. There are many stories like this and virtually millions of Americans that do not understand their credit reports.

Lets get into what is a credit report. It is a history of how you pay your bills. Are credit reports accurate? Congress has always known that over 70% of credit reports have some type of an error. After all, the credit reporting agencies only report the information that is reported to them from the creditors. Pay attention here, because we will later refer to creditors as furnishers of information.

How you pay your bills is data entry into a computer by the HUMAN ELEMENT. Do humans make mistakes? You answer that one. Credit Reporting Agencies do not care about your credit. They, are supported by merchants that pay a small fee to find out about your bill paying history. Lets just say that out of three hundred million people, everyday over one million credit reports are provided. Now, multiply that times $12.00 and you have Twelve million bucks to divide between THREE major companies daily. If that doesnt wake you up, nothing will.

When something is wrong on your credit report and you get frustrated attempting to get it taken off or corrected, you usually give up. After all, there are NO CREDIT COPS. Sure, we have the Federal Trade Commission to look after us. But they are a bureaucracy and if you believe in BIG BROTHER looking out for you, you need to get your thinking readjusted.

In order to understand how to understand your credit report you MUST READ ALL of the information on the report. Do not just glance at it. It contains many codes that are very confusing to say the least. I have talked to Bank Officers, Attorneys, Mortgage Lenders, CPAs, Brokers, Realtors, Underwriters and just about every expert in the credit field. I can say this from a personal experience. Over (90%) of the so called experts that I talk to are NOT aware of Federal Laws and how they affect how much you will pay for the cost of borrowing money.

Lets get started:

Look at your entries on your credit report and look very close at the little lettering above which says DATE OPENED. This is always the single most cause of high credit scores and we want you to become an expert in knowing when an account was opened. Why? Well, the Fair Credit Reporting Act, Section 623(a)(5) says the period of reporting derogatory information in a credit report is for (7) years. That means YOU are in credit prison for (7) years for being late on a payment or having one charged off or placed for collection.

How would you feel IF, someone came into your credit prison and added (5) years to your credit prison sentence and you did not even know it? Well, friend, it happens EVERY SINGLE DAY. That is called AGING and is a violation of Federal Law. How would you know this, if you did not know where to look and what to look for?

Here is how it works. Lets say that you bought a refrigerator from Honest Harry and for whatever reason it stopped working and decided you were not going to pay for it until Harry fixed it. He wouldnt fix it, so now he reports it to your credit bureau that you quit paying in June of 2003. Remember, your (7) year period of being in so called credit prison starts in June of 2003. BUT, here it is 2006 and Harry decides to turn your account over to Happy Landings Collection Agency.

When did they get the account? Well they got the account in June of 2006. So, they report to the credit bureau that this account was OPENED with them in June of 2006. My new friend/s GUESS WHAT has just happened? Happy Landings Collection Agency has just added (3) years to your credit prison sentence and this derogatory item is now on your credit report for (10) years. Fair? NOT AT ALL. What can be done? Without any knowledge or what to do about it, or how to find it, NOTHING. BUT, if you understand everything that you have read so far, you can notify the credit bureaus and the furnisher of information that the account is AGED and Federal Law prohibits that.

Do creditors react to this? It all depends on the knowledge that you have and how you communicate with them.

Now, since we understand aging and how long an item can remain on your credit report, lets look into another item or entry. Federal Law says that a furnisher of information MUST report the date in which an account was first late and that triggers the commencement of the initial delinquency. There is a National bill collection agency by the name of NCO. In the summer of 2004 they were found guilty by the Federal Trade Commission of this violation and fined $ 1,500,000. Thats right! I said ONE POINT FIVE MILLION SMACKEROOS. Is that heavy? You bet your brother Freds new white pickup truck that is heavy.

Why would they intentionally do this? Guess? With all of the millions of folks that are in their files, they can use this phony date to scare the daylights out of people. They can even turn the files over to the legal profession and they in turn scare you into paying..

Look at the far right column. It has a 30,60 and a 90 day paying history. This is supposed to let you know how often you were 30,60 or 90 days late. This is an area of constant errors. Look at your own credit report now. Some times it will report a consumer being 90 days late (4) times and 60 days late (2) times. Now, lets use some common sense. How can you be 90 days late before you are 60 days late? Not possible. So, in order to be 90 days late (4) times, it is numerically impossible if you were not 60 days late at least (5) times. Sorry, cannot get to third base without passing second base.

You will also find that the majority of bill collectors do NOT report the opening date of an account. WHY? Because they do not know it. If they report the date that they received the account as we described earlier, than they are aging the account. This is to your advantage because the law says they MUST provide 100% accuracy.

Another entry that we want you to be aware of on your credit reports are items that truly do not belong to you. There are many cases where the same name or similar names cause information to be entered into the wrong files. Sometimes this can be disastrous when applying for a loan. The underwriter, banker or lender ONLY has the information that is front of them.

Here is a favorite trick of collectors/creditors in entering the same account but with a different account number. Now you might owe someone $1,500 and they turn it over for collection. Well, the collection agency simply puts their in-house account number on it and that is what they report. For example: Lets say you had a credit card with Capital One. The account is turned over for collection and you cannot figure out why you have two accounts with virtually the same amount. Guess what? Neither, can most mortgage brokers, realtors or counselors understand this. Most of all, they do not know how to figure this mess out.

Again, its the law. The account number of the original account and the 1st time that you were late AND NEVER GOT CAUGHT up is the determining factor. If pressed, the creditors always respond. Sorry to say, but they only respond when you have knowledge and press your point. The greatest weapon to get their attention is through Small Claims Courts. Do not believe this garbage that IF you make a partial payment it will help your credit. That is absolutely wrong and is a favorite old ploy by bill collectors. This does NOT restart the seven year clock. The ONLY way that the seven year clock is re-started is IF YOU BECOME CURRENT. That means paying off all of the late dates. That is your choice. We do not advocate not paying your bills. We simple teach your rights under the law.

Most entries in any credit report have information that is not accurate or information that is critical for you is missing. Be very aware, as I mentioned earlier about the opening date of an account and when you were first late.

Now that you have learned the most important parts of your credit report, just remember, getting a better credit report is not like putting a new coat of pain on a room. It is not easy but with a little practice you can understand your credit reports better than most people today.

Remember your rights under the Fair Credit Reporting Act. All information MUST be 100% accurate. If you attempt to dispute with the Credit Reporting Agencies, be very careful that you do not write frivolous letters. (means letters that dont mean anything). If you have documentation to back up your claim or you have a copy of your credit report and you underline those items that you know are not accurate, you stand a very good chance of getting your credit straightened out.

As we mentioned earlier, if bankers, attorneys, mortgage lenders do not understand the law, how do expect anyone else to help you. There are NO credit counselors out there that can help you to understand your legal rights.

They are wonderful people that get paid (by you) to teach you how to budget your paycheck. They then make deals with creditors to take payments. IF THAT is knowledge, than I am the Eiffel Tower in France.

The last thing that we want you to pay close attention to is the reporting of the late dates. Now we talked about paying history earlier. Now lets talk about reporting of late dates. The law is specific. A furnisher of information MUST report the commencement of the initial delinquency that led to the action (charge off or collection). Without this critical data, no one can determine how long an entry will remain in your files. Look closely at the reporting of late dates. This is a common practice. Late dates: (120) June (120) May, (120) April, (120) March. Now is this accurate reporting? NOT AT ALL. Where is the commencement of the initial delinquency? When was this account first late? This is powerful stuff.

We have personally assisted folks just like yourself to attain higher credit scores, once they understood their credit reports. We have a number of clients that came to us with credit scores below 550. Within (6) months and a lot of work, we have seen their credit scores jump up to 650 and higher.

Finally, there is a major industry that has brewed in the past couple of years and you are a part of it, whether you want to be or not. When credit cards can no longer be legally collected many law firms and private investors have gotten together and purchased these (debt barred) accounts for .02 -.05 cents on the dollar. Now, when they send you that nasty letter and you get intimidated because it is from an Attorneys office you fall down, ask for forgiveness and pay as they tell you to. Folks, you cannot believe the profits these bottom feeding characters are making. After all, if they bought a product for .02 cents and sold it for .50 cents, would you think that is unfair? Well when they buy your TIME BARRED DEBT and collect on it through intimidation, they win BIG PROFITS and you are the victims. Even bank robbers have the benefit of the Statute of Limitations. Another reason to keep listening.