Understanding Your Credit Report Part 2

From the desk of Rob Ruston:

CREDIT: Part Two; Fixing Errors in Your Report.

This edition of Robs Report is the second of a three part series on Credit.

One of the most commonly asked questions in my training classes is “How does the credit scoring system work?” This series of reports is an attempt to shed some light on the mysterious and often misunderstood world of credit scores.

Today we want to look at how you can go about fixing errors that you find in your report.

According to a survey conducted in June 2004 by The U.S. Public Interest Research Group; “One in four credit reports contains errors serious enough to cause consumers to be denied credit, a loan, an apartment or home loan or even a job…the big credit bureaus and big business tolerate big mistakes in credit reports,” said Ed Mierzwinski , U.S. PIRG Consumer Program Director. “But those mistakes ruin the financial reputations of hardworking Americans.”

U.S. PIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy. Key findings include:

- Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;

- Seventy-nine percent (79%) of the credit reports contained mistakes of some kind;

- Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;

- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.

SOURCE:U.S. PIRG; One In Four Credit Reports Contains Errors Serious Enough To Wreak Havoc For Consumers, US PIRG Press Release 06/2004

http://uspirg.org/uspirgnewsroom.asp?id2=13650&id3=uspirgnewsroom

If you found errors in your report it may be in your best interest to make repairs on your own. The Federal Trade Commission for Consumers posted a warning in their report called; Credit Repair: Self Help May Be Best. In the report the said, “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 can’t deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money”. The TFC went on to say “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…you can improve your creditworthiness…no one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation 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.”

SOURCE: The Federal Trade Commission for Consumers; Credit Repair: Self Help May Be Best. http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm



Take time to look over your report, make sure the following information is correct: Your name; or names if you are or were married; Social Security number; Date of birth; addresses of places you’ve lived; names of places you’ve worked; pending accounts and accounts that have been closed.

The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. If you find errors in your report you can have them corrected by following these steps;

Make a copy of the report and circle the items you are questioning. Keep your original copy for your own records.
Prepare a letter to the Credit Reporting Agency (CRA-their address will be in the report) that provided you with the report in question, and request to have the erroneous items removed. If you have proof of payment for an item in question, include a COPY of that documentation.
Prepare a letter to the creditor reporting the problem, especially if you feel you are a victim of fraud or identity theft. Inform the creditor that you are disputing an error reported to the CRA, state why the claim is inaccurate, and include any relevant documentation to prove your point.
Send your correspondence via certified mail.
Below is a Sample Dispute Letter that you can use as a template

****************************************************

Date

Name

Address
Your City, State, Zip Code

Complaint Department
Name of Company Address City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

****************************************************************************

Credit repair is a simple process if you know what you are doing. And you can do it yourself. In fact, no one can do as good a job in repairing your own credit as you can. Best of all… Fixing your credit can be done for free.

There is a resource that I would recommend. It is a classic and is the best book on the market, detailing exactly how to do it, absolutely FREE.

Whether you have good credit, bad credit, or no credit, your credit can be improved. There are tricks and techniques you can use that can dramatically increase your credit score. You can find this resource at: http://tinyurl.com/gftbq


Next week I will talk about strategies you can use to improve your credit score. In the mean time I highly recommend MYFICO.com. They provide a service that will monitor your scores and coach you on how you can repair your credit and improve your score. Just ckick on the logo below.

Contributed By: Rob at www.Loanofficerfortune.com
Thanks again from your friends at NAMP.

Closing Tips...

As I was developing my training courses and seminars, I interviewed as many Real Estate Agents as possible to find out what they are looking for in an originator. I heard the expected responses of “deliver what is promised,” “be available when we need you,” and of course, “give me referrals,” but there was one conversation that has stayed with me as a very simple and powerful way to become a trusted advisor with Realtors and borrowers.

When asked what made him loyal to his loan officer, one Realtor I interviewed stated that his lender always makes sure the numbers at closing are the same or lower than the original good faith estimate. The agent knows his buyers will be satisfied at closing, making the transaction end on a positive note. The lender pays for unexpected fees rather than charge the borrower more than was expected.

At the closing table, (where the loan officer is always present), he takes a copy of the original good faith estimate and makes a point to explain that the costs have come in at or below the estimate. I guarantee that most consumers have either had a bad experience of being charged more than expected or know of someone who has, but then felt pressured to close because they could not delay the closing. This small act has created raving fans out of Real Estate Agents as well as borrowers, making this lender a consistent top producer with a business fueled by referrals.

I am always looking for marketing ideas that help create an image that will survive through the next donut-bearing or cost-cutting LO that comes through the Realtor’s office. This idea is a fairly simple, hopefully low-cost (it will sure make you be aware of what you are disclosing at application!) way to market your skills as an originator.

Bliss Sawyer
www.loanofficerfortune.com

Understanding Your Credit Report Part 1

From the desk of Rob Ruston:

CREDIT: Part One; Understanding Your Report.
This edition of Robs Report is the first of a three part series on Credit.

One of the most commonly asked questions in my training classes is “How does the credit scoring system work?” This series of reports is an attempt to shed some light on the mysterious and often misunderstood world of credit scores.

Credit scoring is a crucial part of the lenders decision on whether a customer will get approved for a mortgage or not. The credit score system used today has evolved since the 1960’s. In 1971 Congress passed the Fair Credit Reporting Act (FCRA). This law was designed to promote accuracy in reporting and protect the privacy of consumers. In 2003 the Fair and Accurate Credit Transactions Act (FACTA) was signed into law as an amendment to the FCRA. This amendment provides each American the ability to obtain one free credit report every 12 months from each of the three main credit reporting agencies. www.AnnualCreditReport.com is the only service authorized by Equifax, Experian and TransUnion for this purpose. Please note that, as a security precaution, consumers should never provide their personal information to any other company or person in connection with requesting free annual credit reports under the FACT Act. www.AnnualCreditReport.com will not approach consumers via email, telemarketing or direct mail solicitations.

Credit bureaus obtain their information from three major sources:
Consumers supply information, primarily from filling out application forms for credit.
Public records provide information on such matters as bankruptcies, court judgments, foreclosures and agreements.

The major credit grantors and collection agencies regularly send their credit files electronically to the credit bureaus, resulting in files that include the account number, outstanding balances, and a nine point scale indicating whether a payment was made on time or late.

The credit scoring model seeks to quantify the likelihood of a consumer to pay off a debt. Credit scores can range between a low of 300 and a high of 900. Most consumers have credit scores between 500 and 800. The higher the score, the better it is for the consumer, a high score translates into a low interest rate.

Credit scores are comprised of five factors. Points are awarded for each component. The factors are listed below in order of importance.

1. Payment History: 35% impact.
Paying debt on time and in full has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Missing a high payment will have a more severe impact than missing a low payment.

2. Outstanding Credit Balances: 30% impact.
This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible. Balance lower than 30% will have a positive impact, a balance at 50% will have no impact and a balance higher than 50% will have a negative impact.

3. Credit History: 15% impact.
This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.

4. Type of Credit: 10% impact.
A mix of auto loans, credit cards and mortgages is more positive than a concentration of debt from credit cards only.

5. Inquiries: 10% impact
This percentage of the credit score quantifies the number of inquiries made on a consumer's credit within a six month period. Each hard inquiry can cost from two to 25 points on a credit score. Note that if you run a credit report on yourself, it will have no affect on your score.

Remember that the credit score is a computerized calculation. Personal factors are not taken into consideration when a credit is generated. It is merely a snapshot of today's credit profile for any given borrower, and it can fluctuate dramatically within the course of a week.
Your credit score is based on credit-related information, both positive and negative, in your credit bureau file, including;

-Payment history
-Outstanding debts
-Credit history
-Inquiries and new account openings
-Types of credit in use

Your credit score is not based on information about your race, color, national origin, religion, gender, marital status, or age. It also doesn't use information about your income or assets. However, income, assets and other factors are used in other ways by lenders to help them decide whether to lend you money.

Credit repair is a simple process if you know what you are doing. And you can do it yourself. In fact, no one can do as good a job in repairing your own credit as you can. Best of all… Fixing your credit can be done for free.

There is a resource that I would recommend. It is a classic and is the best book on the market, detailing exactly how to do it, absolutely FREE.

Whether you have good credit, bad credit, or no credit, your credit can be improved. There are tricks and techniques you can use that can dramatically increase your credit score. You can find this resource at: How to Make Your Credit Sparkle Website.

Next week I will talk about how to dispute an error on your report.

By: Rob
www.loanofficerfortune.com