Extra Credit

I just received my credit report and need to review it.  Where do I start? 
A credit report might look alien to you upon first glance, but don’t worry!  It’s easy to get started.  First, grab a highlighter pen so any inaccurate information you find can be marked.  Start by reviewing the entries in your personal information section.  Check your name, date of birth, present and past addresses, current and past employers and Social Security number.  Within your credit report, look for the following discrepancies:

DISCREPANCIES REGARDING ACCOUNTS AND INQUIRIES
- unauthorized users
- customers listed as deceased
- former spouse’s name
- inaccurate accounts from your divorce
- inaccurate negative cosigned accounts
- unauthorized inquiries
- illegally re-aged collection accounts reporting an incorrect last date of activity
- foreclosure attempts
- consumer credit counseling loan indications

DISCREPANCIES REGARDING BALANCES AND ACCOUNTS
- incorrect balances
- credit limits listed incorrectly
- duplicate collections
- accounts listed incorrectly
- credit lines not listed
- paid accounts still showing that you owe
- closed accounts shown as open
- closed accounts should say ‘closed by consumer’ and not ‘closed by creditor’.

DISCREPANCIES REGARDING INACCURATE TRADE LINES
- late payments of 30, 60, 90 and 120 days
- collections
- charge-offs
- tax liens
- judgements
- debt consolidation marks
- bankruptcies not saying withdrawn or dismissed
- repossession indication when it should say ‘voluntarily surrendered’

If you discover inaccurate information in any of these sections, the next step is composing and sending dispute letters to whichever credit bureau’s report contains the discrepancy.  Check out the sample dispute letter form at the bottom of this page – that's a good place to get started! 

I’ve got several inaccuracies on my credit report – which one do I dispute first? 
If you reviewed your credit report and found multiple inaccuracies, you might be confused or overwhelmed with which you should tackle first.  Let us help you!  Dispute the easiest items first, then move on to the hardest ones.  Contact us if you have questions about an inaccuracy you’re unsure of.

EASIEST ITEMS TO DISPUTE
- outdated accounts
- inaccurate late payments
- inaccurate accounts that were late but are now paid off
- inaccurate charge-offs and settled accounts
- inaccurate authorized user accounts
- accounts that do not belong to you

HARDEST ITEMS TO CHALLENGE
- inaccurate bankruptcies
- inaccurate foreclosures and repossessions
- inaccurate unpaid tax liens and judgements
- inaccurate recent charge-offs and new collections
- inaccurate new late payments of 30, 60, 90 and 120 days
- inaccurate late child support payments

HOW TO KNOW IF AN ITEM IS DISPUTABLE
- the account is not yours
- you have no record of being late
- the trade line displays the wrong amount
- the account number is incorrect
- the accounts are unverifiable
- the original creditor is wrong
- the charge off date is inaccurate
- the date of last activity is wrong
- the credit limit is incorrect
- the status is wrong
- the high credit is wrong
- the charge off amount is wrong
- the balance is wrong
- the items are questionable or misleading
- the accounts are erroneous
- outdated
- inaccurate or incorrect

TIP!  In order for the credit bureau to start a NEW investigation after they have verified that the inaccurate account is yours, you must give them a new reason to investigate if you feel that the account is wrong.  When you do this, it prevents the bureau from marking your disputes as frivolous or irrelevant.

So how can you as a parent help your teenager build their credit score?

- Parents can leverage THEIR good credit by adding their teen as an authorized user on an existing credit card.  This option entails very clear boundary setting between parents and teens in addition to diligent credit card account balance monitoring by the parent. 

- If the teenager is employed, guide them through the process of researching - then opening a credit card in their name.

Mistakes to avoid?

- Always control the limits on the cards. 

- Maxing a card out, then only paying the minimum.  This is a habit teens should be taught to avoid from the start.

- Make it clear: just because you have a credit card, that doesn’t mean you should use it.  Set a budget, only buy what you need – and ultimately what you can afford to pay off IN FULL each month.

What is a credit monitoring service, anyway?

Credit monitoring is a service offered by the main credit bureaus and other organizations.  For a monthly fee, the companies will alert you by phone, text or email to changes or suspected fraud.  In addition, most services give you unlimited access to your reports and offer free credit management education.

Why should I use a Credit Monitoring service?  I can check my own credit report.

Let’s say you check your credit report the recommended every 2 months.  On January 1, you pull your report and everything looks fine.   On January 2nd, you are the victim of identity theft and fraudulent activity begins.  Fast forward to March 1st - with 2 months of time to open credit cards in your name, a thief could rack up a lot of debt.  Guess who’d be responsible for paying the bills or risk taking a hit to their credit score?  You – until you can prove to them that you were a victim.

Am I at risk of identity theft?

Identity theft is a damaging, ongoing threat for anyone who makes purchases online, uses online banking or makes in store purchases with credit cards.  Even secure websites can be compromised and your information can quickly end up in the wrong hands.  A quality monitoring plan will let you move forward using credit cards with peace of mind - knowing that in the event your information is part of a hacking scheme or data breach, you would be alerted almost immediately.  Credit monitoring allows you to be proactive and gives you the power to stop the fraud quickly.

Is my credit score negatively affected by things other than identity theft?

Sometimes suspicious information on people's credit reports is not the result of a scammer or identity thief, but the result of an error. Errors cause all the same negative effects as identity thieves, only without a malicious person to blame. With credit monitoring services, people can respond to misinformation on their credit report quickly, before they feel the negative effects

Where can I find more information about the different Credit Monitoring services available?  

More information including trial period specials, price and ratings can be found here. 

Credit cards are a great utility in helping consumers build their credit score because they establish a revolving credit line.  By having an open account and keeping it in good standing, you will begin to establish positive credit history.  

So how will this help my credit score?

If you have a credit card open for 1 year, you will have 12 positive payments attached to this account on your credit report.  With each positive payments added, the trade line becomes more beneficial to your credit score.

How can I use credit cards to improve my credit score?

To maximize the full benefits, you should keep your monthly balances between $10 to $20.  Speak with your credit card provider to find out the day of the month when your balance is reported to the credit bureaus. With a little diligence, you can time your payments so that they are applied before the full balance is reported.

Where can I find credit card offers to help increase my credit score?

There are many sites that have credit card offers however Cornerstone Client Solutions specifically chooses the offers designed to improve credit scores.  Check out their offers at www.cornerstoneclientsolutions.com

So...what exactly is a credit score, and how is it determined?  A credit score is a number based on the information reported by credit grantors in your credit file.  The higher the score, the easier your access to lower cost credit is.  How does your credit measure up?

• EXCELLENT 770 and above

• GOOD 700-770

• FAIR 640-700 

• POOR 580-640 

• ACCESS TO CREDIT UNLIKELY 580 and below

Your credit score is determined or derived from how you use you open lines of credit using this weighting system:

• PAYMENT HISTORY 35%

• AMOUNT OWED 30%

• LENGTH OF CREDIT HISTORY 15%

• NEW CREDIT 10%

• TYPES OF CREDIT USED 10%

Your credit score can affect you when applying for insurance and even a job!  Casualty Insurance Companies  (home and auto) view the way you use and access credit as a predictive measure for the likelihood that you will have a claim.  Some jobs require a credit check as part of the job application process.  Yet another reason to mark it on your calendar - monitor your credit report annually!

Learn more in the Credit Education section of our web site.

If you have late or negative items on your credit report, in general expect them to remain for a span of seven years.  There are, however, some exceptions:

• Bankruptcy information can be reported for 10 years.
• Information reported because of an application for a job with a salary of more than $20,000 has no time limitation.
• Information reported because of an application for more than $50,000 worth of credit or life insurance has no time limitation.
• A lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out (whichever is longer).
• Default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.
• Tax liens stay on your credit report for 7 years from the date PAID.

If your situation doesn't match any of those exceptions - during the 7 years when the negative item is on your report we've got a big tip.  Be sure to order a free copy of your credit report once a year and review it thoroughly - checking for any inaccuracies or accounts that appear to be fraudulent.   That's the best way to avoid any detrimental credit surprises!

Learn more in the "Credit Education" section of our website.

MORTGAGE PAYMENTS

First, what is considered a bad or challenged credit score?  That would be anything below 640.  Using industry averages, your monthly payment on a $200,00 home loan  would be $1136.  Excellent credit (750+) pays just $955, saving $185 a month.  That's a yearly savings of $2220! 

AUTO LOANS

Shopping for a new vehicle?  On a $30,000 car purchase,  a buyer with challenged credit would be looking at a monthly payment of $601, versus $525 with an excellent score.  That's a monthly savings of $76 and an annual savings of $912.

HOME & AUTO INSURANCE RATES

There are similar savings regarding insurance.  Taking both home and auto rates into consideration, with a poor score your combined monthly total would be $196.  With an excellent score, your rates would drop to a total of $125.  Putting $71 dollars back into your wallet monthly and saving you $852 a year. 

Combined yearly savings for mortgage, auto and insurance rates would add up to $3981 a year!  That's a nice chunk of change we're sure you could find a better use for!

1. Verify all of your accounts are correctly reported to the three major bureaus. If you find inaccuracies, you should challenge the errors.  Here is a link containing all the information needed to dispute an error.  http://www.consumer.ftc.gov/articles/0151-disputing-errors-redit-reports
   
   
2. Pay down all credit card or revolving debt balances as close to zero as possible.
   
   
3. Negative items on a credit report are a credit score killer!  Act quickly before an account becomes delinquent.  Talk to your creditors to see if they have programs that provide temporary relief.
   
   
4. If your credit report contains negative items (i.e. accounts in collections), allocate financial resources to resolve the most recently reported negative events first.
   
   
5. If you have a limited budget, negotiate for what credit professional call "payment for deletion".  In this type of agreement, the creditor agrees to mark your credit report positive after receiving the final payment on the remaining balance.
   
   
6. Protect yourself - ALWAYS ask for a deletion letter when negotiating payment or settlement of negative events or collection accounts.
   
   
7. Add positive trade lines to your credit report.  We recommend establishing three credit cards and use them responsibly.  If you are unable to qualify for traditional unsecured credit card, start with a secured card.
   
   
8. Never close credit accounts randomly.  Closing the oldest account on your credit report could cause your credit history to appear shorter, which may actually harm your credit score.

Get more details about how to repair your own credit scores on our Credit Education page.

Start small!

Apply for a small loan or open a credit card with a local business, community bank or credit union. They typically have lower credit history requirements than some of the larger lenders.  Another option is to get a secured card.  Before applying for any of these options, make sure the account will be reported to at least one of the major U.S. Credit Bureaus; Equifax, Experian, or TransUnion.

The Bureaus use payment history to calculate credit scores therefore it may take 6 to 9 months to build your file. In order for your score to be in the 700-800+ range, make sure all of your payments are on time and keep the balance on your credit card below 50% of their card limits.

There are several companies that offer credit cards on their sites. We suggest starting with Cornerstone Client Solutions - their focus is on credit cards that assist people looking to establish or rebuild their credit scores.

Also, the FAQ section of our website contains other helpful tricks for people looking to do DIY credit repair.