Professional Credit Expert’s Insight

If you know anything about credit repair and the Fair Credit Reporting Act, you know the bureaus are allowed 30 days to verify whatever minuscule details we are requesting. This protects you from dying of old age before getting a response, which no doubt would happen if they could get away with it. Let’s take a quick minute to examine the advantages we have with this 30-day response policy.

What’s actually happening behind the scenes is the bureaus are playing the middle man waiting for a response back from the creditors about a particular investigation.

It’s ultimately the creditors that have 30 days or less to respond to the bureaus, who in turn determine if that response is appropriate. We continuously see indications through our clients’ results that either no work or attempted work was done on our investigations. Simply, the account is now deleted, without any argument.

Was it because they discovered they dinged the wrong person, or they couldn’t find the details we were asking for, or perhaps they just didn’t get around to it in the timeframe they were allotted? They don’t divulge that information; but as office paperwork tends to stack higher than the Himalayas, letting documents age 30 days would appear to be the salient issue.

Also, consider government-related accounts such as judgments, bankruptcies, and tax liens: in your opinion, does the government operate at lightning speed, or are they slow as snails (like the DMV)?

It’s easy to see that when given only 30 days to complete a series of exquisite investigations into their misinformation–well, you can only guess what the result might be.

Many thanks to Jay O’Connor at National Credit Care for this insightful post.

National Credit Care
1499 W 121st Ave #300, Westminster, CO 80234
866-595-6313


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Getting a Home Loan: The Three Basics

When I purchased my little white house with smelly carpet and beat-up walls, I felt a sense of power and accomplishment nothing could ever take away. This place was mine! I tore out the carpet, painted, and turned a run-down place into a charming bungalow. I’ve been a fan of home ownership ever since.

If you would like to stop renting and own your own home, here are the three basics you need to qualify for a mortgage.

BASIC 1: Income

You need to be able to afford the new house payment as well as all of your current monthly obligations.

For monthly obligations, the lender goes by what shows on your credit report: auto loans, student loans, any other loans, and credit card minimum payment due. Do not include cell phone, transportation costs, or food.

Use your gross income, before any deductions. Use the minimum payment required, even if you pay more. The debt-to-income ratio (DTI) must be under 50% for conventional and FHA loans. (VA can sometimes go higher.)

BASIC 2: Down Payment

You will need 3% of the purchase price for the down payment on a conventional loan. 3.5% for FHA. 0% for VA.

If the purchase price is $300,000, then $9,000 down payment is the minimum for a conventional loan.

There are down payment assistance programs, which vary by state. Your mortgage broker can advise you on qualification and availability.

In addition to the down payment, there are closing costs. Closing costs can be paid by the buyer, the seller, or a combination.

Down payment and closing costs can also be a gift from family.

BASIC 3: Credit

Credit requirements have become stricter due to the effect of the pandemic on the economy. Most lenders are looking for a credit score of 680+ now. The credit score used is the middle score from the three credit bureaus. The lowest score is thrown out.

There are exceptions, of course. People with large down payments can get a loan with a lower credit score, depending on the lender.

For the best interest rate, you want a score of 740+.

If your credit needs some help, check out these guides here and here.

Home ownership is both financially and personally rewarding. Three years

Photo by Scott Webb

after purchasing the little white fixer, I sold it for a profit and purchased a nicer home in a better neighborhood. Making the effort to save money and establish clean credit is very much worth the work and patience.

Why Goodwill Letters Rarely Work

If you got behind on bills and have late payments showing up on your credit report, you may have read that it’s a good idea to send a goodwill letter. A goodwill letter is a letter in which you say you are sorry for the late payment and ask them to please remove them from your credit report. Big mistake!

Rarely, will a creditor remove a late payment simply because you are a nice person and they are a nice company — and with everyone being so nice and all — let’s just erase that bad mark on your report.

Who do you think they are, your mother?

Put yourself in the place of a large company, say someone like Capital One. You go to work and open 100 envelopes. 98 of those are letters asking you to remove the late payment for no valid reason other than “goodwill.” What are you going to do?

Are you going to sit right down, compose 98 letters to the three credit bureaus and send them off just so you can do 98 good deeds today? And the same thing tomorrow and all five days of the week? Are you going to remove thousands of late payments simply because the customers said “sorry”? Are you going to send messages to thousands of people, in essence, telling them that failing to pay on time is no big deal?

Capital One is one of the creditors that does not respond well to goodwill letters, and maybe now you can see why.

This is why in Repair Your Credit Like the Pros, I say, “throw those goodwill letters into the trash bin.” Most of the time they don’t work. But wait, there are exceptions.

One of my book readers had recent late payments due to a natural disaster that caused her music business to flood; which, in turn, prevented her from conducting music lessons. She drove into her bank and spoke with the branch manager. She explained the reason why she temporarily lost her income and ability to pay, and that now with the water gone, she was again teaching music and receiving income.

The manager not only removed the late payments, he also reversed the late fees!

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The two elements of success to this story is that the cause was a natural disaster and that the woman had taken the initiative to speak with the manager who had authority.

While the general goodwill letters for removing late payments are usually a waste of time, if you have a valid and verifiable reason why you, as a perfect paying customer, were temporarily late and are now back on track, you should make a sincere effort to ask for grace (in person preferably, but on the telephone if distance prevents). You might be surprised, as another reader in Florida who had been victim of a hurricane was, when the late payments are removed.

Check Your Name on Your Credit Report

Are you overlooking an important step in building an accurate credit profile? Many people are.

Maybe no one has ever told you that your name matters, or that the name you use when applying for credit is important. I’ll explain.

Let’s say your name is Carolyn Warren. But one time when you got a credit card at Macy’s, the clerk typed in Carolynn with two n’s. And another time while getting a car loan, the finance guy shortened your name to Carol.

Now you’ve got credit for a Carolyn Warren, a Carolynn Warren, and a Carol Warren on your credit report.

These three name variations can cause problems. (And we’re not even counting the variations of the middle name or misspellings of the last name.) You don’t want the Carol Warren who was late on her Macy’s card reporting you as being late. Nor do you want the Carolynn Warren’s auto repo showing up on your credit report.

One time, I saw a credit report where the woman had 16 variations of her name. Not good!

You want only one legal name on your credit report: the one you are using for important purchases, such as your mortgage and your automobile. If your legal name is Carolyn N Warren, that is the only name you want to see on your credit report.

This was confirmed at CreditCon 2020 earlier this month. Three different professional speakers (a representative from one of the credit bureaus, an expert witness in court cases involving credit, and a successful credit repair business owner) all spoke about the importance of having correct and accurate identifiers on your profile. Your name is one of the identifiers.

Three Reasons Why You Should Remove Incorrect Names

1) Name variations open the door to having your credit mixed with another individual’s credit. “Mixed files” is a major problem that can ruin your credit score and put your debt ratio out of acceptance when buying a home.

2) If you have many variations of your name, it opens the door to the question “why?” There is no positive answer to that question.

Were you trying to open credit cards in name variations to circumvent credit scrutiny? Were you trying to hide bad credit? Were you trying to create multiple identities? Are you simply sloppy and careless about your name? And if so, are you also sloppy and careless about paying your bills on time?

3) Having too many names on your credit profile can negatively impact your score. You’ve never seen that on a pie chart of credit scores, but let me tell you a secret from inside the credit business. All three credit experts mentioned above confirmed that personal identifiers do impact your credit score.

The next time you order your free annual credit report, take time to look at your name. If there are misspellings, nicknames, or other inaccuracies, you want to write to the credit bureaus and get that fixed.

And while you’re at it, check your name on your cell phone bill, your electric bill, TV/Internet bill, and your bank accounts for consistency and accuracy. Fix what needs to be fixed. Create a true and accurate profile for yourself.

Available on Amazon

“A good name is rather to be chosen than great riches.” ~ Proverbs 22:1

Message from a Book Reader and Author

Many thanks to David Simone for posting this on Facebook:

Two of the absolute best easy to work DIY books in America for building or repairing your credit. I’ve had so many wonderful credit repair mentors along along the way who helped me achieve results… namely Jesse RodriguezJesse, Jorge BuenoJorge, and Carolyn Warren. I’m within a month or two now of qualifying for a quarter million dollar mortgage to buy a house for Rosie Tesorero Cocal and me.

This stuff works.Books.jpg

There are no more credit secrets. I have them all now.

Just note that if you aren’t paying attention to the insane effect of interest on your life, it may explain why your bank accounts look the way they do.

Also, its just not a good idea to ignore the 3 credit bureaus anymore. They control your life in a far bigger way than you now realize.

Being a good steward of money and converting to an investor mentality instead of consumer mentality can and will change your life.

What I’ve personally accomplished in two months is so exciting that i couldn’t sleep last night, i mean not one wink. I’ve been up all night watching my own dreams come true.
~ David Simone, author of The Motivational Book

Record Low Interest Rates! 💰🏡

Mortgage interest rates are the lowest in 50 years. But not everyone can get that 2.9% advertised rate.

Take this yes/no quiz to see if you qualify for the best interest rate on your home loan.

1) Is your true mortgage credit score over 740? (Credit Karma is not your true mortgage score.)

2) Is the property your primary residence? (A loan for a rental property is a higher risk to the lender, so the rate is higher.)

3) Do you have 30 percent or more equity? (Loan-to-value ratio is a major factor in the interest rate. However, there are loan programs that include monthly mortgage insurance that come with the lowest rate. Your loan officer can advise you further.)

4) Is your home a detached single family residence? (A condo, townhouse, co-op, or multi-unit property may have a higher interest rate, depending on equity. A condo with significant equity can still get the lowest rate.

5) Do you need a jumbo loan? (Jumbo loans are classified as high risk, especially now during the economic downturn due to the coronavirus. A jumbo loan carries a higher interest rate to offset the risk to the lender.)

Even if your loan doesn’t qualify for the lowest rate, it might still be worth refinancing.

As a general rule, you need to lower your rate by at least .5% to consider refinancing. In some cases, such as a small loan, your rate reduction needs to be more in order to make sense.

Loans are very much individualized to a person’s specific situation. The purpose of this post is to make people aware that the lowest advertised rate might not apply.

Additionally, interest rate is not the only factor. Lender fees and a possible buy-down fee are items you want to ask your mortgage broker about.

 

If You are Denied Credit

Have you been disappointed by a denial of credit? Have you felt confused as to why? Here’s how to handle the situation.

If a creditor rejects your application, they must provide you with a Notice or Letter of Adverse Action explaining why. Instead of ripping it up in disgust, take the time to read the reason stated, then you will know how to proceed.

Possible Reasons for a Credit Denial

  1. You have too much credit.

Yes, there is such a thing as having too much credit, even if all the accounts are paid on time. If you have a half dozen credit cards and they are all maxed out, that would be an example. Maxed out credit could mean you are living beyond your means. It could mean you are living off your credit cards, which is a slippery slope into financial trouble.

The cure is to stop using credit and work on paying down your balances.

2.  You have late payments.

If you paid more than 30 days late in the past year, that could cause your denial. Especially now when creditors are concerned about people getting laid off work, they are not willing to take a risk on you if you paid late to another creditor.

The cure is to establish a perfect record of paying on time before applying for more credit. You should also read your credit report to make sure it is accurate. You have the right to receive one free credit report each year. Send your request through the U.S. mail to:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281

Simply write: Please mail my free annual credit report to me at (your address). Include a piece of identification such as a copy of your driver’s license and an electric bill showing your name and address. That way, they will know it’s you and not a scammer.

3. You don’t have established credit.Book cover 3D

Everyone has to start sometime. If you are a young adult or new to the United States, how can you establish good credit if no one will give you an opportunity?

The cure is to open a secured credit card with your local bank. You deposit funds, often $300 to $500, that guarantee the creditor will be paid. Use the credit minimally, keeping your balance below 30% of the limit. Pay off the entire balance each time the bill comes in. After six months, they will convert the secure account to a regular account and refund your deposit.

For more ideas on how to establish top tier credit in the easiest and shortest way possible, pick up a copy of Build and Protect Your Credit Like the Pros here.

 

How to Block Negative Accounts that are a Result of Identity Theft

If you are the victim of someone using your name or social security number to open an account without your knowledge or consent, this article is for you. (If it was someone you know, be sure to read about that at end of this article.)

The Fair Credit Reporting Act (FCRA), section 605B states that the credit bureaus are required to block any and all information from appearing on your credit report that is a result of identity theft or fraud.

The problem some people have had is that after they’ve written a letter to the bureaus instructing them to remove a certain collection account because it is not theirs, the bureaus (who don’t actually bother to investigate) send back a letter stating the account has been (so-called) verified and remains.

This, of course, is illegal and a violation of the law. They are not allowed to post negative information on your credit report that is false.

Steps to Take to Permanently Block Fraudulent Negative Accounts

In a nutshell, you first file a report with a government agency, such as your local police department that says you are the victim of ID theft.

Second, send a copy of the report with a letter to the credit bureaus demanding that, according to FCRA 605B, they must permanently block the account that you are not responsible for.

You can read the entire set of instructions here.

You can also get a letter template here.

Don’t Use 605B to Lie or Commit Your Own Fraud

It is illegal to file a police report that is false. It is illegal to claim you are a victim of identity theft if you are not. Only use 605B if you are truly a victim.

If Someone You Know Opened an Account in Your Name

I have been shocked and dismayed at the large number of people who have written me saying an ex-spouse, an ex-boyfriend or ex-girlfriend, or a parent or an adult child has used their name and social security number to open a credit account.

It makes sense that the people closest to you have the easiest access to your personal information — especially family members. It’s heartbreaking when your son or daughter opens an account in your name and then doesn’t pay for the item so then it ruins your credit score.

Oftentimes, the victim tells me they are reticent to file a report, because it was a loved one who did the damage.

Listen, my friend: You do not give up your self-respect, your reputation, and your good name in the business and credit community for anyone! This is the same as if that person had broken into your bedroom at night and beat you up and broken your body. They have done the same to your finances.

Your credit score affects everything from the interest rate charged on credit cards to your auto insurance premiums. It is not okay for someone to violate your credit. No exceptions.

You must defend yourself and make this right! If you had a broken bone, you would go to the doctor and get it set and healed. Now you must go file a report and write to the credit bureau so your credit profile can be restored. You can use the easy letter template in the link above.

Please pass on this essential information to others who may be victims of identity theft. Thank you.

 

 

How to Prevent Your Credit Limit From Being Reduced

When your credit card limit is reduced, it might lower your credit score for two reasons:

  1. Your balance-to-limit ratio is reduced.
  2. Your overall credit usage-to-available-credit ratio is reduced.

“Can They Do That?”

Creditors have the right to reduce your limit. This can happen with a credit card and with a Home Equity Line of Credit (HELOC).

Three Reasons Why Your Limit May Get Reduced

  1. When a creditor sees that you have several credit cards maxed out, they get nervous. They think you are using credit cards to live off of and are getting into financial trouble. So to minimize their risk (and possible loss), they will reduce your limit asap before you borrow even more.
  2. If you pay late on one card (or worse, on several cards), a different creditor will see that by monitoring your credit. They fear you will also pay them late and quickly lower your limit so that you can’t charge more.
  3. In the case of a HELOC, a downturn in the mortgage market can result in the lender lowering your line of credit, even if you have paid perfectly on time. This happened to a lot of homeowners in 2007-2009 who were taken by surprise. This is why you need to read your contract and understand all the terms.

The best remedy is prevention.

The way to keep your credit limit is to pay on time every month on all your accounts. Also, pay the entire balance due to show you can afford your charged purchases and that you are not living beyond your means. (This applies to credit cards.)

If you’ve read Build and Protect Your Credit Like the Pros, you know that charging more than 50 percent of your limit will hurt your score; and that maxing out your credit cards will severely dock points off your credit score.

Thank you for reading and I hope this tip helps you get top tier credit that speaks well for your name.

 

Is Student Loan Forgiveness Real?

A young woman who works in my office received an offer for student loan forgiveness. Here’s what happened.

First came the emails saying there were issues with her student loans and to please call.

After repeated emails, she decided to call in. The person identified themseves as from the student loan provider asked where she worked and how much did she owe on her student loans. They wanted to know, because it looked like she qualified for student loan forgiveness.

But wait, shouldn’t the student loan servicer already know how much she owed?

“That is private,” she replied, wisely suspicious.

The person quickly hung up on her.

Next, she called the Dept. of Education to see if it was legitimate.

“We never make calls like that. There are a lot of student loan frauds right now,” the real student loan advisor said.

Beware if you (or someone you know) has a student loan. Any emails or calls asking for information (innocent at first, then proceeding to more personal) are from liars and scam criminals.

There are genuine student loan forgiveness programs, but they are included in the written contract of your original student loan. It tells you what the requirements are. There are no new forgiveness programs due to Covid-19 or anything else you don’t already know about.

As always, I’m watching out for your best financial interests. Thank you for reading and passing along to others who can benefit.
Carolyn Warren