Credit 101 - How to Get It, How to Use It, How to Keep It

Understanding Your Credit ReportNurturing Your Good Credit, Healing Your Bruised CreditA Seminar Created and Presented By:

MortgageMan Chris Cruise, SMC, CRML, LA, CA, GaL
Cruise & Company
Mortgage Planners

The Homebuyer/Homeseller Education Center
1525 Union Cross Road
Kernersville, North Carolina 27284
336.993.3040/336.993.7291 (Fax)
e-mail: Mortgmoney@aol.com

Credit 101

Did you know that what is on your credit report determines your insurability, your employability, whether you can get a mortgage, rent an apartment, lease, buy, or rent a car, get a job, or even get a security clearance? Some potential spouses and significant others are also using it to determine if they want to continue their relationship with you.

As important as a credit report is, then, it is staggering to note that most Americans have never even seen their credit report and some don’t even know that one exists and that there is a record of their bill-paying. And with the advent of credit scoring, knowing what is in your credit report and how that report is compiled and used is important now more than ever.

In this seminar you will learn:

what a credit report is;

what is included in a credit report;

how credit reports are compiled;

who compiles your credit report;

what is reported and what isn’t;

how to decipher your credit report;

what credit bureaus and credit repositories are and what they do;

how to establish good credit;

how to develop a spending plan;

how bad credit develops;

the causes of credit problems;

the cost of bad credit;

the cost of bankruptcy;

how to repair your bruised credit without getting ripped off;

how to challenge inaccuracies in your credit report;

how to add a 100 word statement to your credit report;

creditors’ needs and wants;

where to go for help building, maintaining, and repairing your credit;

how credit scoring works;

what counts and what doesn’t in credit scoring;

what are PRMs, inquiries, chargeoffs, judgments and letters of explanation;

what federal laws govern credit reporting;

what book, software, and internet resources are available;

what community resources are available

Ready?

Credit Reports – establishing credit, compilation (applications)

Credit Reports - uses: employment, housing, insurance, security clearances

Credit Reports – deciphering them, RMCR vs. soft copy

Credit – good credit, bad credit; intentions vs. results, judgments

Credit Scoring – use of scores, how scores are computed

Cost of Credit – how bad credit costs you money

Credit Bureaus, Credit Repositories – who they are, what they do

Creditor’s Needs and Wants – how creditors evaluate a credit report

Maintaining Good Credit – spending plan, getting out of debt, compulsive shopping

Community Resources – Credit Bureaus, CCCS, Cooperative Extension Service

Other Resources – books, manuals, software, internet

Credit Repair – challenging inaccuracies, adding a 100 word consumer statement

Credit Repair Clinics – strategies they use: constant challenging, file segregation

Laws Concerning Credit Reporting – October 1 changes in FCRA, ECOA

Dealing With Creditors and Collection Agencies – your rights, their obligations

Bankruptcy – effects on housing, employment, and credit
 
 

www.mawent.com

www.creditrepair.com

www.ftc.gov

www.bbb.org

www.fastresults.com

members.aol.com/creditmedic.html

www.fix-your-credit.com

www.angelfire.com/biz/allamerican/

www.repaircredit.com

www.creditcorrect.com

Number of "Hits" on Various Internet Search Engines When "Credit Repair" is Entered

Although creditors usually consider a number of factors in deciding whether to grant credit, most creditors rely heavily on your credit history. To learn how you have handled credit in the past, most creditors obtain a report from your local credit bureau. Credit bureaus gather and sell credit information about consumers and are a principal source of information about your credit history. Your credit bureau report is based on information supplied over time by your creditors. It also provides information on where you live and work and may note other matters of public record such as judgments or bankruptcies. Your report records payments you have made on credit cards, installment loans, and other credit accounts and helps creditors predict whether you are likely to be a good credit risk. A history of timely credit payments helps you get additional credit.

Some creditors are reluctant to grant credit to consumers who have not established a "track record" with other creditors first. In addition, many creditors will not extend credit to consumers with a history of delinquent payments, repossession, judgments, or bankruptcy. If you are in either situation, be wary of ads that promise you "instant credit" or "a major credit card regardless of your lack of credit history or your past credit record." The fact is that all legitimate creditors want to know whether you are likely to be a good credit risk. Whether you get credit will depend on whether your qualifications meet the creditor’s criteria.

Before a creditor makes a loan, its underwriters are going to look at your credit history to see how well you paid everyone else from whom you borrowed money. They don't want to make a loan - especially not a mortgage loan - to someone who doesn't pay creditors back. They will "pull" a credit file from one or more of the three major, national reporting agencies to see what each one has on your record. They will report back to you any negative items that appear. Don't panic if you have a few items - you will likely still be able to get a loan. If you have never established credit, the creditor can "build" a credit file out of other items. For instance, if you are currently renting they can use your rental history. A phone that is in your name or gas, electric or water bill that you pay is also a form of credit.

If you have some late payments on your credit report, the creditor may want letters from you explaining why you were late. They look most favorably on those who were late due to medical problems or loss of employment or other situations beyond your control. Underwriters understand that if you have a medical problem and everything is not covered by your insurance company, you will probably not be able to handle all of your bills in a timely manner. They also understand that if you lost your job you may not have been able to keep all of your accounts current.

If you have a bankruptcy that has been discharged and have started to reestablish credit you may be able to qualify for a loan.

So you went to college, bought a car, refinanced the house, and charged up your credit cards to the max. Now, you're repaying your student loans, the car is in need of repair, and the house needs a new roof, partially because your credit card interest rates just went through it. And here you are already living from paycheck to paycheck, siphoning away your savings and still having trouble meeting the minimal financial obligations of your amassed debt. You're not alone. Today, Americans owe more money than ever before, and millions are having difficulty paying their bills.

According to the American Collectors Association's (ACA) 1996 Cost of Operations Survey, an estimated 383 million new accounts, totaling $117.4 billion, were placed for collection with professional third-party collection businesses in 1995. And during the first few months of 1996, personal bankruptcy filings made their sharpest increase ever, and are projected to average one filing for every 105 households by the end of the year. For the financially strapped, overextended, concerned consumer, ACA offers the following advice:

Take stock of your finances. Determine exactly how much you owe to your creditors, and then review your specific obligations to be sure they are accurate. Mistakes on reports do happen. If you dispute a debt contact the creditor directly to resolve your questions.

Figure out what your payments will be for this month. If your income - minus what you will need for necessities such as food and shelter - does not meet the required amount you owe, decide which bills to pay first.

Contact the creditors for those payments on which you will be late. Be frank about your financial situation, and make a firm commitment about how and when you will pay the bill.

Regain control. Getting your payment schedule back on track may not be as daunting as it first seems. Once you have determined your total debt and monthly obligations, itemize your necessary expenses and your optional spending (necessities vs. niceties). Reduce expenses by cutting out unnecessary spending such as eating out and expensive entertainment. Consider taking public transportation rather than owning a car, check the paper for free entertainment listings, clip coupons and purchase generic products to reduce monthly grocery bills, and avoid impulse buying.

Most important of all - stop incurring new debt. Pay down debt even further by using savings and other low-interest assets to settle high-rate loans. Selling a second car not only improves immediate cash flow, it also reduces insurance and maintenance expenses.

Get help if you need it. If you are still unable to get a handle on your debts, there are organizations that can help. Consider calling the non-profit Consumer Credit Counseling Service (CCCS) or other non-profit budget counseling services in your area to help you resolve your financial difficulties. For a free informational brochure on getting out of debt, write to:

If you're like most Americans, you've rented a video, bought a car right off the lot, purchased concert tickets with a credit card or opened an instant charge account at a department store. You've probably never seen your credit report, though, or really understood how credit reporting works. In this seminar we are going to give you some of the basics of credit reports and credit repair. Among the topics we’ll be covering are:

A consumer credit report is a factual record of an individual's credit payment history. It is provided for a purpose permitted by law, primarily to credit grantors. Its main purpose is to help a lender quickly and objectively decide whether to grant you credit. If you are one of the 190 million people in the United States with a charge account, car loan, student loan or home mortgage, then information about you probably is stored in a consumer credit database. Most of the information in your consumer credit report comes directly from the companies with which you do business, but some information comes from public records.
 
 

The typical consumer credit report includes four types of information:

- Identifying information: your name, nicknames, current and previous addresses, Social Security number, year of birth, and current and previous employers. This information comes from your credit application, so its’ accuracy depends on your filling out the forms clearly, completely and consistently each time you apply for credit.

- Credit information: specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment and payment pattern during the past several years. The report also states whether anyone else besides you (your spouse or co-signer, for example) is responsible for paying the account. This information comes from companies that do business with you.

- Public record information: federal district bankruptcy records; state and county court records, tax liens and monetary judgments; and, in some states, overdue child support. This information comes from public records.

- Inquiries: the names of those who obtained a copy of your credit report for any reason. This information comes from the credit reporting agency, and it remains up to two years, consistent with federal law.

Most credit reports do not contain - and credit bureaus generally do not collect - data about race, religious preference, medical history, personal lifestyle, political preference, medical history, friends, criminal record or any other information unrelated to credit.

Federal law specifies how long negative information may remain on your credit report. To prevent past errors from haunting you forever, most negative information must be erased after seven years. This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against you in court - even if you later paid the account in full. The length of time a bankruptcy remains on your credit report depends upon which chapter of bankruptcy you file. Chapters 7, 11 and 12 remain for 10 years. By policy of credit reporting agencies, a Chapter 13 bankruptcy, in which you repay part or all of your debts under a court-approved payment plan, remains on your credit report seven years.

Credit reporting agencies use the date of original delinquency or, in the case of public records, the date of filing to determine when negative information is deleted. Positive information remains on your report indefinitely. Inquiries remain on your credit report between six months and two years, depending on the type of inquiry. (If the FBI accesses your credit report in connection with an investigation of issues such as counterintelligence, no record of that access will appear on your report.)
 
 

Federal law specifies who may obtain a copy of your credit report and how it may be used. Specifically, you may request a copy at any time, but no one else may legally review your report unless they do so in connection with one of the following:

An amendment to federal law, enacted in 1996, allows the FBI to access consumer credit reports in connection with an investigation of issues such as counterintelligence. Anyone who knowingly and willfully obtains a credit report under false pretenses may be fined and imprisoned.
 
 

Before the advent of national credit reporting agencies, consumers could obtain credit only in communities in which they were known and had lived for years. If they moved to another town where they were unknown, credit was virtually unobtainable. Now, automated credit reporting systems enable a consumer's good credit reputation to make credit possible no matter where that consumer decides to live. For example, if a consumer with a good credit history moves across the country for a new job, he or she typically can obtain - within a day of getting off the plane - a loan to purchase a new car and approval on an apartment application. Because of automated credit reporting agencies, Americans enjoy the widest access to credit at the lowest interest rates in the world. Credit information enables lenders to either avoid consumers who don't pay their bills or to lend to them on special terms. Credit losses, which ultimately get passed on to consumers who do pay their bills, are therefore minimized. Credit reporting agencies also foster intense marketing battles among financial services providers. This competition brings you reduced annual fees, special toll-free customer service phone numbers, customer recognition and incentive programs, and purchase protection plans.

JONATHAN QUINCY (CONSUMER)

10655 NORTH BIRCH STREET

BURBANK, CA 91502

HOW TO READ THIS REPORT: AN EXPLANATORY ENCLOSURE ACCOMPANIES THIS REPORT. IT DESCRIBES YOUR CREDIT RIGHTS AND OTHER HELPFUL INFORMATION. IF THE ENCLOSURE IS MISSING, OR YOU HAVE QUESTIONS ABOUT THIS REPORT, PLEASE CONTACT THE OFFICE LISTED ON THE LAST PAGE. AS PART OF OUR FRAUD-PREVENTION PROGRAM, ACCOUNT NUMBERS MAY NOT FULLY DISPLAY ON THIS REPORT.

YOUR CREDIT HISTORY:

THIS INFORMATION COMES FROM PUBLIC RECORDS OR FROM ORGANIZATIONS THAT HAVE GRANTED CREDIT TO YOU. AN ASTERISK BY AN ACCOUNT INDICATES THAT THIS ITEM MAY REQUIRE FURTHER REVIEW BY A PROSPECTIVE CREDITOR WHEN CHECKING YOUR CREDIT HISTORY. IF YOU BELIEVE ANY OF THE INFORMATION IS INCORRECT, PLEASE LET US KNOW.

FOR YOUR CONVENIENCE, INSTRUCTIONS FOR REINVESTIGATION ARE INCLUDED ON THE LAST PAGE OF THIS REPORT. AT YOUR REQUEST WE WILL INCLUDE THE FOLLOWING STATEMENT IN ALL REPORTS OF YOUR CREDIT HISTORY.

"MY IDENTIFICATION HAS BEEN USED WITHOUT MY PERMISSION ON APPLICATIONS TO OBTAIN CREDIT. VERBAL CONFIRMATION FROM ME AT (my phone number) IS REQUESTED PRIOR TO CREDIT APPROVAL."

*US BKPT CT MD

101 W LOMBART ST.

BALTIMORE MD 21002

DOCKET #08511002

VOLUNTARY BANKRUPTCY CHAPTER 13

DISCHARGED ON 05/23/92. PETITION ON 06/01/90.

RECORDED ASSETS: $100,000, LIABILITIES: $8,000.

YOU ARE SOLELY RESPONSIBLE FOR THIS PUBLIC RECORD ITEM.
 
 

* HOPKINS COUNTY COURT

MADISON CNTY CTHOUSE

MADISONVILLE KY 42111

DOCKET #2005355267

BK PG SEQ #1386520381

SMALL CLAIMS JUDGMENT SATISFIED ON 02/23/93. ORIGINAL FILING DATE 06/28/92. AMOUNT: $4,100. PLAINTIFF: WILSON AND MCPHERSON. YOU HAVE JOINT RESPONSIBILITY FOR THIS PUBLIC RECORD

* LEE CO CIVIL COURT

P O BOX 408

FT MYERS FL 33403

CERTIFICATE #211412123

BK PG SEQ #COUNTY TAX LIEN ON 12/08/91. AMOUNT: $2,000. YOU ARE SOLELY RESPONSIBLE FOR THIS PUBLIC RECORD ITEM.

* WELLS FARGOBANK

P O BOX 2096

CONCORD CA 94520

BANKING

ACCT #200543445667XXXX

THIS CREDIT CARD ACCOUNT WAS OPENED 02/05/91 AND HAS REVOLVING REPAYMENT TERMS. YOU HAVE CONTRACTUAL RESPONSIBILITY FOR THIS ACCOUNT AND ARE PRIMARILY RESPONSIBLE FOR ITS PAYMENT.

CREDIT LIMIT: $5,000.

AS OF 02/22/94, THIS CLOSED ACCOUNT WAS CURRENT AND ALL PAYMENTS WERE MADE ON TIME. BALANCE: $0 ON 04/30/94. MONTHS REVIEWED = 59.

*** ACCOUNT CLOSED-CONSUMER'S REQUEST-REPORTED BY SUBSCRIBER.

* CHEMICAL BANK

300 JERICO QUADRANG

JERICO NY 11753

BANKING

ACCT #456920095206XXXX

THIS CREDIT CARD ACCOUNT WAS OPENED 05/04/79 AND HAS REVOLVING REPAYMENT TERMS. YOU HAVE CONTRACTUAL RESPONSIBILITY FOR THIS ACCOUNT AND ARE PRIMARILY RESPONSIBLE FOR ITS PAYMENT.

CREDIT LIMIT: $3,500, HIGH BALANCE: $2,512.

AS OF 12/15/95, THIS OPEN ACCOUNT IS 120 DAYS 2+ TIMES PAST DUE. BALANCE: $1,695 ON 12/15/95. SCHEDULED MONTHLY PAYMENT IS $73.

MONTHS REVIEWED = 99.

PAYMENT HISTORY: 44332211CCCCC

5443221111CC

CCC-CCCCCCCC

CCCCCCCCCCCC

999999999999

CCCCCCCCCCC

999999999666

NUMBER OF TIMES LATE: 30 DAYS = 6, 60 DAYS = 4, 90+ DAYS = 11, DEROG = 21.
 
 

YOUR CREDIT HISTORY WAS REVIEWED BY:

THE FOLLOWING INQUIRIES ARE REPORTED TO THOSE WHO ASKED TO REVIEW YOUR CREDIT HISTORY.

CELLULAR ONE

651 GATEWAY PL.

SAN FRANCISCO A 94082

UTILITIES

07/24/95 INQUIRY MADE FOR CREDIT EXTENSION, REVIEW OR OTHER PERMISSIBLE PURPOSE.

METROPOLITAN ATL BK

406 8TH STREET

OAKLAND CA 4206

FINANCE

06/15/95 INQUIRY MADE FOR REAL ESTATE LOAN OR 30 YEARS REPAYMENT TERMS. THE AMOUNT S $200,000. THIS INQUIRY WAS MADE ON BEHALF OF ABC MORTGAGE.

THE FOLLOWING INQUIRIES ARE NOT REPORTED TO THOSE WHO ASK TO RVIEW YOUR CREDIT HISTORY. THEY ARE INCLUDED SO YOU HAVE A OMPLETE LIST OF INQUIRIES.

EXPERIAN

P O BOX 2103

ALLEN TX 75013

06/20/95

INQUIRY MADE FOR CONSUMER DISCLOSURE OF YOUR CREDIT HISTORY.

PLEASE HELP US HELP YOU:

WE KNOW HOW IMPORTANT YOUR GOOD CREDIT IS TO YOU. IT'S EQUALLY IMPORTANT TO US THAT OUR INFORMATION BE ACCURATE AND UP TO DATE. LISTED BELOW IS THE INFORMATION YOU GAVE US WHEN YOU ASKED FOR THIS REPORT. IF THIS INFORMATION IS NOT CORRECT, OR YOU DID NOT SUPPLY US WITH YOUR FULL NAME, ADDRESS FOR THE PAST FIVE YEARS, SOCIAL SECURITY NUMBER AND YEAR OF BIRTH, THIS REPORT MAY NOT BE COMPLETE. IF THIS INFORMATION IS INCOMPLETE OR NOT ACCURATE, PLEASE LET US KNOW.

YOUR NAME:

JONATHAN QUINCY

CONSUMER

SOCIAL SECURITY

#: 526603388

ADDRESS:

10655 NORTH BIRCH ST

BURBANK CA 91502

YEAR OF BIRTH:

1951

OTHER ADDRESSES:

8 PARK AVE HUDSON NH 03051

SPOUSE:

SUSAN

IDENTIFICATION INFORMATION:

THE FOLLOWING ADDITIONAL INFORMATION HAS BEEN PROVIDED TO US BY ORGANIZATIONS THAT REPORT INFORMATION TO US.

Social Security #:526-10-3388, 526-60-3388

Addresses:

1314 SOPHIA LANE

SANTA ANA CA 92708

GEOGRAPHICAL

CODE=123-4632-7

THIS SINGLE-FAMILY DWELLING ADDRESS WAS FIRST REPORTED 11-93 AND LAST REPORTED 12-95 BY UPDATE. LAST REPORTED BY CHEMICAL BANK. ADDRESS REPORTED 11 TIMES.

Employers:

AJAX HARDWARE

LOS ANGELES CA 90019

FIRST REPORTED 6-94 AND LAST REPORTED 6-95 BY INQUIRY. LAST REPORTED BY METROPOLITAN NATL BK.
 
 

SOCIAL SECURITY NUMBER YOU GAVE WAS ISSUED: 1950-1953

Unless the dispute is frivolous or irrelevant, credit bureaus will reinvestigate any item you believe is incorrect. Keep in mind that a credit report is a history of how accounts were paid; therefore, even a paid collection would not be deleted. Missed payments and most public record items remain on the credit report for seven years, except Chapter 7, 11 and 12 bankruptcies which remain for 10 years. Complete this form, or one like it, or just write out the nature and details of your dispute and mail it to the three major credit repositories.

The credit repositories will contact the source of the information you questioned. When they complete the reinvestigation process, they will send you an updated credit report. You will hear from them within 30 days of receipt of your request.

Send them the following information:

Social Security Number: ____________________

Creditor Name:_____________________

Account #: _________________________

_ Not my account

_ Included in my bankruptcy

_ Never paid late

_ Paid in full

Other: (please explain) __________________________________________________

At your request, credit bureaus will send the results of the reinvestigation to organizations who reviewed your credit report within the past six months to employers who inquired within the past two years. Please indicate your choices:

Your credit report contains important information about you. It generally includes facts about where you work and live and your bill-paying habits. It also may state whether you've been sued or arrested or have filed for bankruptcy. Companies called credit reporting agencies or credit bureaus compile and sell your credit report to businesses, which use it to evaluate your applications for credit, insurance, employment, and other purposes allowed by federal law. Therefore, it is important that your credit report contain complete and accurate information.

Some financial advisors suggest that you review your report every three or four years to check for inaccuracies or omissions. You also may want to check your report sooner if you are considering a major purchase, such as buying a home. This information explains how to obtain a copy of your credit report and how to dispute errors. It also provides resources for additional credit information.

If you have been denied credit, insurance, or employment because of information that was supplied by a credit reporting agency, the Fair Credit Reporting Act requires the report recipient to give you the name and address of the credit reporting agency that supplied the information. If you contact that agency to learn what is in your file within 30 days of receiving the denial notice, your report is free. If you simply want a copy of your report, call the credit reporting agencies listed in the Yellow Pages under "credit' or "credit rating and reporting." Call each reporting agency listed since more than one agency may have a file on you, some with different information. You may have to pay a reasonable charge for each report.

You have the right, under the Fair Credit Reporting Act, to dispute the completeness and accuracy of information in your credit file. When a credit reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a "reasonable period of time," unless it believes the dispute is "frivolous or irrelevant." If the credit reporting agency cannot verify a disputed item, it must delete it. If your report contains erroneous information, the credit reporting agency must correct it. If an item is incomplete, the credit reporting agency must complete it. For example, if your file showed that you were late in making payments on accounts, but failed to show that you were no longer delinquent, the credit reporting agency must show that your payments are now current. Or if your file showed an account that belongs only to another person, the credit reporting agency would have to delete it. Also, at your request, the credit reporting agency must send a notice of correction to any report recipient who has checked your file in the past six months.

If a reinvestigation does not resolve your dispute, the Fair Credit Reporting Act permits you to file a statement of up to 100 words to explain your side of the story. The credit reporting agency must include this explanation in your report each time it sends it out. Credit reporting agency employees often are available to help you word your statement. Be aware, however, that when negative information in your report is accurate, only the passage of time can assure its removal. Credit reporting agencies are permitted by law to report bankruptcies for 10 years and other negative information for 7 years. Also, any negative information may be reported indefinitely for use in the evaluation of your application for:

- $50,000 or more in credit;

- a life insurance policy with a face amount of $50,000 or more; or

- consideration for a job paying $20,000 or more.

You must make your dispute directly to the credit reporting agency. Although the Fair Credit Reporting Act does not require it, the Federal Trade Commission staff recommends that you submit your dispute in writing, along with copies (NOT originals) of documents that support your position.

In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, explain why you dispute the information, state the facts, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled.

Send your dispute by certified mail, return receipt requested, and keep copies of your dispute letter and enclosures. By doing so, you can document what the credit reporting agency received.

Your credit file may not reflect all of your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to credit reporting agencies. Those not reporting to credit reporting agencies include, for example, some travel, entertainment, and gasoline card companies, local retailers, and credit unions.

If you have been told that you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that do not appear in your credit file, you can ask the credit reporting agency to add this information to future reports. Although they are not required to do so, many credit reporting agencies will add other verifiable accounts for a fee.
 
 

* Your credit report records your payments on credit cards, installment loans, and other credit accounts. It helps creditors predict whether you are likely to be a good credit risk.

* Be wary of ads that promise you "instant credit" or "a major credit card regardless of your lack of credit history or past credit record."

* If you are rejected for credit, find out why. You can get a free copy of your report if you request it from the credit bureau that provided it, within 30 days of being turned down.

* Check to see whether the information in your credit report is accurate and complete. You are entitled by law to correct inaccurate information that appears in your credit bureau file.

If you are having problems getting credit or paying your monthly bills, you may be tempted to turn to businesses that advertise quick and easy solutions to credit problems. But do not be misled. There are no instant solutions. Although some credit counseling businesses "guarantee results or your money back," you may find that there are hidden strings attached or that the company is gone when you want your money back.

There are steps you can take to help solve your credit problems. However, solving them takes time, patience, and some understanding of the law. The information that follows may help you. It explains why your credit history is important, how to build a credit history and establish credit, and what can be done to improve a bad credit history. It also suggests ways to help deal with debts you may have, possibly by using a nonprofit Consumer Credit Counseling Service.
 
 

Although creditors usually consider a number of factors in deciding whether to grant credit, most creditors rely heavily on your credit history. To learn how you have handled credit in the past, most creditors obtain a report from your local credit bureau. Credit bureaus gather and sell credit information about consumers and are a principal source of information about your credit history. Your credit bureau report is based on information supplied over time by your creditors. It also provides information on where you live and work and may note other matters of public record such as judgments or bankruptcies. Your report records payments you have made on credit cards, installment loans, and other credit accounts and helps creditors predict whether you are likely to be a good credit risk. A history of timely credit payments helps you get additional credit.

Some creditors are reluctant to grant credit to consumers who have not established a "track record" with other creditors first. In addition, many creditors will not extend credit to consumers with a history of delinquent payments, repossession, judgments, or bankruptcy. If you are in either situation, be wary of ads that promise you "instant credit" or "a major credit card regardless of your lack of credit history or your past credit record." The fact is that all legitimate creditors want to know whether you are likely to be a good credit risk. Whether you get credit will depend on whether your qualifications meet the creditor’s criteria.

Building a good credit history is important. If you have no reported credit history, it may take time to establish your first credit account. This problem affects young people just beginning careers as well as older people who have never used credit. It also affects divorced or widowed women who shared credit accounts that were reported only in the husband's name. If you do not know what is in your credit file, check with your local credit bureaus. In Winston-Salem there is the Datamax Credit Bureau on Coliseum Drive. For eight dollars they will give you a copy of your credit report.

If you have had credit before under a different name or in a different location and it is not reported in your file, ask the credit bureau to include it. If you shared accounts with a former spouse, ask the credit bureau to list these accounts under your name as well. Although credit bureaus are not required to add new accounts to your file, many will do so for a small fee. Finally, if you presently share in the use of a credit account with your spouse, ask the creditor to report it under both names.

Creditors are not required to report any account history information to credit bureaus. If a creditor does report on an account, however, and if both spouses are permitted to use the account or are contractually liable for its repayment, under the Equal Credit Opportunity Act you can require the creditor to report the information under both names. When contacting your creditor or credit bureau, do so in writing and include relevant information, such as account numbers, to help speed the process. As with all important business communications, keep a copy of what you send.

If you do not have a credit history, you should begin to build one. If you have a steady income and have lived in the same area for at least a year, try applying for credit with a local business, such as a department store. Or you might borrow a small amount from your credit union or the bank where you have checking and savings accounts. A local bank or department store may approve your credit application even if you do not meet the standards of larger creditors. Before you apply for credit, ask whether the creditor reports credit history information to credit bureaus serving your area. Most creditors do, but some do not. If possible, you should try to get credit that will be reported. This builds your credit history.

If you are rejected for credit, find out why. There may be reasons other than lack of credit history. Your income may not meet the creditor's minimum requirement or you may not have worked at your current job long enough. Time may resolve such problems. You could wait for a salary increase and then reapply, or simply apply to a different creditor. However, it is best to wait at least 6 months before making each new application. Credit bureaus record each inquiry about you. Some creditors may deny your application if they think you are trying to open too many new accounts too quickly.

If you still cannot get credit, you may wish to ask a person with an established credit history to act as your co-signer. Because a co-signer promises to pay if you don't, this can substantially improve your chances of getting credit. Once you have repaid the debt, try again to get credit on your own.
 
 

A sudden illness or the loss of your job may make it impossible for you to pay your bills on time. Whatever your situation, if you find that you cannot make your payments, contact your creditors at once. Try to work out a modified payment plan with your creditors that reduces your payments to a more manageable level. If you have paid promptly in the past, they may be willing to work with you. Do not wait until your account is turned over to a debt collector. At that point, the creditor has given up on you.

Automobile loans present special problems. Most automobile financing agreements permit your creditor to repossess your car any time that you are in default on your payments. No advance notice is required. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not

wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.

If you are having trouble paying your bills, you may be tempted to turn to a company that claims to offer assistance in solving debt problems. Such businesses may offer debt consolidation loans, debt counseling, or debt reorganization plans that are "guaranteed" to stop creditors' collection efforts. Before signing up with such a business, investigate it thoroughly. Be sure you understand what services the business provides and what they will cost you. Do not rely on oral promises that do not appear in your contract. Also, check with the Better Business Bureau and your local consumer protection office. They may be able to tell you whether other consumers have registered complains about the business.

Consumers who turn to such businesses for help sometimes encounter additional problems. For example, debt consolidation or other large short-term loans may have high hidden costs and may require your home as collateral. An unscrupulous company may misrepresent the terms of such loan agreements; if so, you could end up losing your home.

Businesses offering debt counseling or reorganization may charge substantial fees or a percentage of your debts, but fail to follow through on the services they sell. Some may do little more than refer indebted consumers to a bankruptcy lawyer, who charges an additional fee. Businesses advertising voluntary debt reorganization plans or "Chapter 13" relief may fail to explain that Chapter 13 debt adjustment actually is a form of bankruptcy. To qualify for it, you must have a source of regular income and a plan for repaying your creditors that meets the approval of the bankruptcy court. Businesses that sell bankruptcy-related services may not tell you all that is involved or assist you through what can be a complex and lengthy legal process. Debt problems can be distressing, but be careful when selecting a solution. Some "solutions" may only add to your problems.
 
 

If you need help in dealing with your debts, you may want to contact a Consumer Credit Counseling Service (CCCS). This is a non-profit organization with more than 850 offices located in 50 states. CCCS counselors will try to arrange a repayment plan that is acceptable to you and your creditors. They will also help you set up a realistic budget and plan future expenses. These services are offered at little or no charge to you. You can find the CCCS office nearest you by checking the White Pages of your telephone directory or by calling from a touch-tone phone 1-800-388-2227 to get the telephone number. However, if you have other questions, contact:

In addition, non-profit counseling programs are sometimes operated by universities, military bases, credit unions, and housing authorities. They are likely to charge little or nothing for their assistance. Or, you can check with your local bank or consumer protection office to see if it has a listing of reputable, low-cost financial counseling services.
 
 

Q: My current credit report is very bad because of an event that happened five years ago. I am currently trying to repay six accounts if the creditors agree to "hard delete" the negative entries on my credit report. I don't know if this is possible. My question is: if a negative entry on my credit report first appeared five years ago, and if I paid off the account today, when your subscriber, who is my creditor, changes the status of the entry, does this add new life to the credit entry? The problem is that if a credit entry has a life of seven years, changing the status after five years would add an additional seven years (making the entry's life 12 years!!!). Even if the status showed a $0 balance and used terms like "Paid Satisfied," the entry is considered to be negative for another seven long years. Help!

A: Sorry, but credit grantors will not "hard delete" accurate negative information from your credit report. But it's still a good idea to repay your delinquent accounts because doing so demonstrates that you take your financial responsibilities seriously. When you apply for credit in the future, the lender will look more favorably upon your request if you pay off your previous accounts. Yes, paying your bills late is considered "bad." But never paying your bills is even worse. Don't worry about a change in account status "adding new life" to a particular account. It doesn't happen that way. It's true that federal law allows reporting of the account for seven years from your last payment. But credit reporting agencies recognized that doing so would punish responsible consumers trying to pay their debts. Therefore, credit reporting agencies -- by policy --remove references to missed payments seven years from the date they first occurred. Specifically, if your account has a "delinquent" status for five years, then you pay the bill today, the status will change to either "current, was delinquent (however many number of days)" or "paid, was delinquent (however many number of days)." "Current" means your account still is open and that you may use it again. "Paid" means your account is closed and that you never will use it again. Two years from now, all references to the account will drop off your credit report if the account is "paid" (closed). If the account is

You are entitled by law to correct any inaccurate information that appears in your credit bureau file. If a creditor rejects your application because of negative information in your credit bureau report, it must identify the credit bureau involved. At your request, the credit bureau must disclose the contents of your credit file. If you act within 30 days of being turned down, there is no charge for this service.

Check to see whether the information in your credit report is accurate and complete. You have the fight, under the Fair Credit Reporting Act, to dispute the completeness or accuracy of any information in your report. When you do so, it helps to tell the credit bureau, in writing, why you think the information is not correct. Unless your dispute is frivolous or irrelevant, the credit bureau then must reinvestigate the matter. The credit bureau must correct any information that it finds is not reported accurately. Information that cannot be verified must be deleted. If you disagree with the results of the credit bureau's reinvestigation, you may file a brief dispute statement explaining your side of the story. At your request, the credit bureau will note your dispute in future credit bureau reports.

Be aware that when negative information in your report is accurate, only the passage of time can assure its removal. Credit bureaus are permitted by law to report bankruptcies for 10 years and other negative information for 7 years. There is nothing that you (or anyone else) can do to require a credit bureau to remove accurate information from your credit file until the reporting period has expired. Don't be misled by ads aimed at people with bad credit histories, judgments, or bankruptcies. Promises to "repair" or "clean up" a bad credit history can almost never be kept.

Federal law regulates how long accurate negative information can remain on your credit report. If the negative information on your credit report is accurate, you can't remove it. However, negative information doesn't stay on your credit report forever. With the exception of Chapter 7, 10 and 11 bankruptcies, all negative information automatically drops off after seven years. Bankruptcies remain 10 years. Does that mean you'll never get credit if you have negative information on your credit report? Not at all. Over time, you can change the damage negative information does to your ability to get credit. If you've had credit problems in the past, remember that your credit report is continually evolving. A positive credit history can begin today. Whenever you use credit responsibly and pay your bills on time, you build up your credit history. When a bank or credit card issuer considers your application for credit, it often pays much more attention to your bill-paying pattern during the most recent two years than to your record of five years ago or longer. Therefore, negative information on your report will not prevent you from obtaining credit in the future. You just need to keep the negative information in the past. By paying your bills on time over a period of 18 to 24 months, you'll demonstrate that you're a good credit risk.
 
 

Some consumers pay so-called credit clinics hundreds and even thousands of dollars to "fix" their credit report, but only time can heal bad credit. Most credit reports contain easy-to-follow instructions for disputing information at no charge. Inaccurate information will be changed or deleted. Federal law mandates the time periods that accurate negative information remains on a credit report. If you need help repaying creditors, managing debt or setting up a personal budget, consider a nonprofit credit counseling organization that is a member of the National Foundation for Consumer Credit. For the office nearest you, call 1 800 388 2227.

Want a second opinion? The Federal Trade Commission also warns consumers against credit repair clinics:

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

"Credit problems? No problem!"

"We can erase your bad credit -- 100% guaranteed."

"Create a new credit identity -- legally."

"We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!"

Do yourself a favor and save some money, too. Don't believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report. Here is how you can improve your credit worthiness, along with a list of legitimate resources for low or no-cost help.

Everyday, companies nationwide appeal to consumers with poor credit histories. They promise,for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they cant deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply

vanish with your money.

If you decide to respond to a credit repair offer, beware of companies that:

Want you to pay for credit repair services before any services are provided;

Do not tell you your legal rights and what you can do - yourself - for free;

Recommend that you not contact a credit bureau directly; or

Advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution. You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. Its a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security Number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. Thanks to the new Telemarketing Sales Rule, it's also a crime for telemarketers who offer credit repair services to require you to pay until six months after they've delivered the services.
 
 

No one can legally remove accurate and timely negative information from a credit report. But the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act:

You are entitled to a free copy of your credit report if you’ve been denied credit within the last 30 days. If your application for credit, insurance, or employment is denied because of information supplied by a credit bureau, the company you applied to must provide you with that credit bureau's name and address.

You can dispute mistakes or outdated items for free. Ask the credit reporting agency for a dispute form or submit your dispute in writing, along with any supporting documentation. Clearly identify each item in your report that you dispute, explain why you dispute the information, and request a reinvestigation. If the new investigation reveals an error, you may ask that a corrected version of the report be sent to anyone who received your report within the past six months. Job applicants can have corrected reports sent to anyone who received a report for employment purposes during the past two years. If the reinvestigation does not resolve your dispute, have the credit bureau include your version of the dispute (up to 100 words) in your file and in future reports. Remember, there is no charge for a reinvestigation.
 
 

Accurate negative information generally can be reported for seven years, but there are 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;

Information concerning a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer; and default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.
 
 

Many states have laws strictly regulating credit repair companies. States may be helpful if you've lost money to credit repair scams. If you've had a problem with a credit repair company, don't be embarrassed to report the company. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance. You also may wish to contact the FTC. Although the Commission cannot resolve individual credit problems for consumers, it can act against a company if it sees a pattern of possible law violations. If you believe a company has engaged in credit fraud, send your complaints to:

The National Fraud Information Center (NFIC) also accepts consumer complaints. You can reach NFIC at 1-800-876-7060, 9 a.m. - 5:30 p.m. EST, Monday - Friday, or at http://www.fraud.org on the Internet. NFIC is a private, nonprofit organization that operates a consumer assistance phone line to provide services and help in filing complaints. NFIC also forwards appropriate complaints to the FTC for entry on its telemarketing fraud database.

Just because you have a poor credit report doesn't mean you won’t be able to get credit. Creditors set their own credit-granting standards and not all of them look at your credit history the same way. Some may look only at more recent years to evaluate you for credit, and they may grant credit if your bill-paying history has improved. It may be worthwhile to contact creditors informally to discuss their credit standards. If you cant resolve your credit problems yourself or you need additional help, you may want to contact a credit counseling service. There are non-profit organizations in every state that counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These counseling services are offered at little or no cost to consumers. You can find the office nearest you by checking the white pages of your telephone directory. In addition, nonprofit counseling programs sometimes are operated by universities, military bases, credit unions, and housing authorities. They’re also likely to charge little or nothing for their services. Or, you can check with your local bank or consumer protection office to see if it has a list of reputable, low-cost financial counseling services.

Even if you don't have a poor credit history, its a good idea to conduct your own credit check-up, especially if you’re planning a major purchase, such as a home or car. Checking in advance on the accuracy of the information in your credit report could speed the credit-granting process. Credit bureaus usually are listed in the yellow pages of your telephone book under "credit reporting agencies." Three large national credit bureaus supply most credit reports: Experian (formerly TRW), Equifax, and Trans Union. You may want to contact each of them for a copy of you report.

The Federal Trade Commission enforces a number of federal laws involving consumer credit, including the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Fair Credit Billing Act, and the Fair Debt Collection Practices Act. It also provides free brochures explaining these laws. For these or related publications, such as Credit Billing Blues, Building a Better Credit Record, Credit and Divorce, Credit Billing Errors, How to Dispute Credit Report Errors, Scoring for Credit, Solving Credit Problems, Straight Talk About Telemarketing, Women and Credit Histories, write to:

Public Reference

Federal Trade Commission

Washington, D.C. 20580.
 

Although the Commission cannot solve individual problems for consumers, it can act when it sees a pattern of possible law violations develop. If you have a complaint that may involve a violation of consumer protection law, write to:

 
Correspondence Branch

Federal Trade Commission

Washington, D.C. 20580.