The qualification for any major loan such as a mortgage or an automobile loan depends heavily on having a healthy credit history. Not having used credit much in the past may mean that you do not have a comprehensive credit history that tells the lender whether or not you are capable of handling credit. Not having used any credit in the last six months may also mean that you will not have a credit score at all. Different credit scoring models require accounts to be updated and current data to reported at least once in a certain period of time which can range from 6 to 24 months. If you happen to use credit marginally and infrequently you may find that your credit score is marginal as well. This may prevent you qualifying for a mortgage or an automobile loan.
In case you are now interested in raising your credit score to you can qualify for the loan that you want you should first consider getting a copy of your credit report and a credit score from the National credit bureaus in order to determine which and what factors affecting your credit rating the most. You can get a risk factor statement which your lender may be able to provide. By addressing the risk factors you may be able to better your credit score. Remember that time is of essence if one is looking to improve the credit rating.
Any change that you make in the way that your debts are being reported such as paying down the balance on your credit card may not have an instant effect on your credit score. It is also possible for the credit score to actually dip get before it increases. This is because a credit score also considers the consistency in the pattern of positive payment history. Any change in your pattern of consumer data may cause the credit score to reduce initially before it stabilizes and becomes more positive.
While paying down the balance on your credit card is a change that you can make quickly in order to enhance your credit score, low balances and other indicators of response will credit use are necessary to have a good credit score. You should also remember that if there are other negative factors affecting your credit score such as late payments, collection accounts and other credit mismanagement issues then paying down the balance on a single account may not affect your credit score much as it is being influenced by other negative factors as well.
If your credit score is marginal due to the fact that you have not used credit much in the past then you can start to build a healthy credit history from the day on by showing a responsible and moderate use of credit. Using your credit cards every month, keeping a low balance and paying the balance of every month will soon have your credit report showing favorable information.
However, if the reason for negative and marginal credit score is that you have unpaid debt and face problems with repaying the money you have borrowed then you should reconsider applying for further loans. Especially loans that are substantially large sums such as a mortgage for a home or an automobile loan. Before taking a very large debt to buy a home or an automobile you should try building up savings or the purpose of either making a down payment or building a security net financial emergencies..
If it is only a matter of limited credit history which isn’t comprehensive enough then you may get the lender to approve you for your loan application by providing other proofs of income and assets that are show that you are financially sound incapable of repaying a large debt.
You cannot file a dispute for an account that you find is missing from the credit report from one of the National credit bureaus. The fair credit reporting act provides that each creditor can choose to report its consumer data to the credit bureau or not at all. Additionally, a creditor can choose to report its consumer data to 1, 2 or of the credit bureaus. If you discover that one of your functioning, healthy and active accounts is missing from a particular credit report whereas it is listed on another from some other credit bureau, it is likely that your creditor is not report to all the National credit bureaus. While it is a common misconception that National credit agencies collect consumer gaiters from credit providing financial services, in reality it is quite the other way round. It is the lender’s and credit financing services that choose to report consumer data to the credit bureaus. They usually do this for the mutual benefit that they receive by gaining access to the credit reports for potential consumers and credit applicants. If a creditor chooses not report to any particular credit agency he is well within his right as provided by the fair credit reporting act and there is nothing that the National credit agency can do about it. It is extremely unlikely that an account will go missing from a credit report in spite of having been reported by the creditor.
The primary step that you can take in such a case is to check with your creditor whether they report to the particular credit bureau who’s credit report is in question.
Hence, if your account is missing with one of the National credit bureaus you cannot file a dispute asking for the account to be listed.
The disputes that you file with the credit bureau regarding incorrect or inaccurate information does not get recorded on your credit report. Since our credit score is solely dependent on the information that is present on your credit report, filing disputes does not affect the credit score in any way.
If anything filing disputes is a way to ensure that incorrect or inaccurate data does not cause unnecessary harm to your credit score. You should not hesitate in filing a dispute for information that you believe is listed in error. It is the best and perhaps the only way of making sure that the credit bureaus list only the up-to-date and correct data on your credit report.
Also disputing a particular account or transaction does not cause that transaction or accounts to disappear from your credit report. Only after the investigation is over is the account updated or deleted as may be the result of the investigation. This is one of the reasons why people think that disputing an error has an effect on the credit score. What happens when dispute is filed with the credit bureau is that the credit bureau contacts the source of information, your lender, and asks him to verify its records. The time allotted for a dispute to be resolved according to the fair credit reporting act is 30 to 45 days. During restoration the account continues to reflect on the persons credit report. No information is deleted during this period. Depending upon the response received from the creditor and the conclusion reached at investigation the information in the account is updated, deleted or remains unchanged.
In case the lender fails to respond within a period of 30 days as is mandated by the fair credit reporting act, the disputed information is deleted from the credit report. It should also be pointed out here that any credit repair organization claiming to temporary negative information from a credit report by disputing it incorrect in their claims.
The credit agencies are constantly trying to make their credit scoring model as accurate as possible. They are trying to develop a system that effectively reflects the creditworthiness of a consumer. Reporting disputes about incorrect information on your credit report helps to accomplish this.
Any and all negative information on a credit report has a fixed period for which it will continue to show. This has been fixed by the law and nothing can remove it before that. The only exception is when the information is disputed and resolved in the favor of the consumer, in which case it will either be removed or deleted or updated as is required. If the lender fails to respond within 30 days of the dispute as he required to by the FRCA, the information about the concerned account will be deleted.
Under no circumstances will disputing information make it stay longer on the credit report.
It will go away after the time that is required by the federal law. Delinquent accounts and late payments stay on the credit report for a period of 7 years from the date that the late payment was first reported to the credit bureau. so do hard enquires. Tax liens stay for a period of 15 years. If an account goes in to collection, the collection agency is required by the law to carry the original date of delinquency in their records which means that even accounts that reflected as being collection will be deleted from the credit report after 7 years.
Deputing information on a credit report will not alter the original date of delinquency and nor will making payments on a delinquent or a collection account. It may change the status of the account or activity history of the account. But the date of delinquency will remain intact and so will the record of it till the period mandated by the law is over. After that it will automatically be deleted from your credit report.
In the scenario where you file a dispute with a credit bureau and have the dispute resolved in your favor, the credit bureau only update states own copy of your credit report. Each does not inform or notify the other credit bureaus of the dispute results or the changes made to your account. The onus to do this rests on the lender. The reason for this is perfectly clear. Only the lender has information about all the credit agencies that it reports the data to. The fair credit reporting act gives each credit the choice to report to one, all or none of the credit bureaus. Each credit bureau has no way of knowing whether the creditor is reporting to any other credit agency owner.
Hence whenever a dispute is resolved in the favor of the consumer and the information needs to be updated, the same fair credit reporting act requires the lender to report the updated information to all the credit agencies that it reports your account to.
In case he fails to do that you need to file disputes with the remaining credit bureaus as you did previously.
You should have also note that credit agencies apart from the National credit bureaus. Your lender is the best source of information to update all these records.
In order to correctly determine whether your account information has been updated with each credit bureau or not wait for 30 days and then maybe even a couple of weeks more before checking your credit report from the other National credit bureaus.
As extra information, you should know that National credit agencies are now trying to work together and have put the system in place that automatically has the lender apprise the three National credit bureaus whenever dispute is resolved with any one of them and information on the credit report needs to be deleted or updated.
Fixing your own credit by changing your spending and saving habits is probably the best way to repair a flagging credit score.
Contrary to what you may be led to believe by extensively and popularly advertised credit repairing services, no one can legally remove negative information from your credit report that is true and accurate. The only negative information that can be removed from a credit report is what is erroneous or outdated.
If you feel that the damage to your credit has been done by reckless spending and the lack of a good financial plan, then you can start preparing your credit today by becoming more responsible about your spending. It can be a difficult process to cut out certain expenditures from your habit. You may have to make changes like cutting down on having dinners outside and going shopping. These choices may seem hard to manage in the beginning. But the reward of getting out of debt and enhancing your credit will prove to be worthwhile in the long run.
You must try and remember that because your past financial management has caused damage to your credit report, it is not something that has to last forever. Delinquent accounts and reports of default remained on the credit report for a period of seven years. If during this time you start handling your credit responsibly by cutting down on your expenditure and paying off your debts as you go along, you stand an excellent chance of having a shining credit report by the end of this period with no negative items present.
A good idea is to procure the recent copy of your credit report from all the three credit bureaus. You can get by going to the website www.annualcreditreport.com .
In order to read step-by-step instructions on how to go about getting a free credit report, click here.
See which of your accounts are in the most trouble. Bring these out of default by starting to pay off the lowest amount in full every month while trying to make the minimum payment on all the others. Curtailing on your spending habits and saving money will help you to this. In case you feel unable to come up with a monetary plan that helps you achieve your monthly goal take the assistance of a voluntary credit service organization. Several of these are legitimate institutions run by non-profit organizations and you may well find one close to you if you go through the Yellow Pages. They will go through your financial data such as income and liabilities and come up with a budgeting plan that will save you money while at the same time keep up with your monthly expenditures.
Do not close the credit accounts, as may be suggested to you, unless you feel that you cannot avoid utilizing them and are getting yourself in a tighter financial position. It is better to keep them functional and operating by making responsible use of them.
The Recording of Information on Your Credit Report Is Governed by the Rules Set by the Fair Credit Reporting Act.
This law states who can and cannot record and share information about your credit record. This also lays down the guidelines for the procedure to be followed in recording the credit behavior of a consumer. Credit report is meant to be an accurate reflection of the creditworthiness of an individual based on his past and current credit behavior. Hence it is not permissible under the law to simply delete information from the credit report which you may find unfavorable.
The only information that can be removed from a credit report is that which is updated or wrong. And the only way to do this is by filing a dispute with the particular credit bureau in whose credit report you have spotted this erroneous information. The Fair Credit Reporting Act also dictates that the credit bureau has two investigate every dispute foiled within a period of 30 to 45 days. If you’re dispute is found to be rightful then the disputed transactions are deleted from your credit report.
There are exceptions to this situation. There are times when certain adverse and negative accounts can be deleted from the credit report. One classic example is that of debt collection accounts. When a collection agency contacts you to recover a debt and asks you to pay up, you have the right to ask them to verify the debt. Verification of the debt requires that the collection agency provides you with a copy of the original contract that you had with the original creditor that makes you responsible for the debt. There are also other documents and authorization proofs that it is required to provide. In many situations the collection agency is not able to provide this verification. Especially if the debt has been passed hands with more than one collection agencies. If you dispute such a collection account and it cannot be verified, you can have it deleted from your credit report.
A similar situation is when the creditor does not respond to a request for verification of account to a dispute filed by you with the credit bureau. If the creditor does not respond to the credit bureau query within a specific time frame which is about ten days, the disputed account is deleted from your credit report. Creditors sometimes fail to respond to credit bureaus when disputes are filed. This can be for several reasons i.e. the creditor did not think it worth the time and botheration, he no longer had the paperwork for an old debt, you settled the debt account with him and he agreed not to report it etc.
Different information stays on credit report for different durations of time.
- Personal information such as your name, address, telephone number and Social Security number are a permanent feature of your credit file. They are always mentioned.
- Most of the information including missed payments and defaulted accounts stay on a credit report for a period of seven years. This is why you need to be careful about your making payments on time. A single instance of collection can reflect on your history for a period of seven years even though it may have simply been that you forgot to make the payment on time. The seven years are counted from the date that the incident, e.g. late payment, first occurred.
However, most of the late payments are only reported after 30 days of delay and given for collection if you are found to be unreachable through conventional means like email and phone. Collection accounts also fall off when the original date of the late payment is past seven years. It has nothing to do with the date that the collection account was created.
Reporting of late debt accounts also has nothing to do with the statue of limitation on the debt. The collection account may be reported to the credit file even if the statue of limitation on the debt is over and the collection agency no longer has any legal right to sue you in the court for it. And vice versa. Just because an account falls off your credit report after seven years does not mean that the creditor cannot sue you for it in the court of stop his effort to recover it from you.
- The exception to the rule of seven years is for public records of tax liens and chapter 7, 11 and 12 bankruptcies which remain on the credit report for a period of 10 years. Paid tax liens remain on the credit report for a period of 7 years after they are paid off. Tax liens will continue indefinitely on the credit file if not paid.
- Another item that shows on your credit report are enquires. Every time a creditor or another, such as a potential employer, makes a query for your credit report, the same gets recorded in your credit history. This enquiries stay on for a period of 2 years.
However, not all enquiries have adverse affect. Only the enquiries made as a result of a credit application have a potential for impacting your credit score. Not the ones that are made by other people and for other purpose like employment, by a landlord and by yourself when requesting your own credit file from the credit bureau.
Many people are inclined to spend hundreds and even thousands of dollars on services that claim to radically improve the credit score per person in a short duration of time. It is a well-known fact that the best way to repair your credit history is to display responsible and consistent credit behavior. The most that many so-called credit repair clinics can do for you is to dispute the inaccuracies and errors on your credit report. This is something that you can to yourself and at no extra cost. All the three national credit bureaus have made it very simple to while disputes online. Read law requires the credit bureau to investigate each and every dispute within the required age at the time which is usually 30 to 45 days.
No credit repair clinic or service can simply delete the negative information from a credit report in spite of what they may promise you. In fact the federal law makes it illegal to attempt to do so. The only way that a negative entry in your credit report can be deleted is if it is disputed and proved to be inaccurate or in error.
The best way to fix your credit is to set yourself up for a long term goal of meeting your payments and getting out of debt. In case you need help in doing this you can approach legitimate credit councilor. He/she will help set up a financial plan for you that will in turn increase your disposable income. There are several voluntary organizations that provide credit assistance to people at no extra charge. Even if it is a paid credit counseling session that you opt for, the fee is usually reasonable and less than $50. The professional credit counseling service is usually able to come up with the plan to get you out of debt after just one or two sessions. In case they are not able to crunch the numbers that will enable you to start paying off your debts and meeting your monthly expenses as well, they will recommend other options as well.
Extra caution must be exercised if signing up with a credit repair clinic or service that you have seen advertised online. Many scams and frauds in this arena of work have cropped up with the sole intention of ripping people of their money.
Rapid credit repair is not for everyone. It is true that it can make quick change to your credit report by removing the inaccurate and outdated information within days and weeks. But not everyone should consider as a way of fixing their credit score. This method can be used by people who need money on credit urgently and the loan has been denied to them on the basis of their credit score. However, this system only works when the damage to your credit score is due to anomalies and errors in your credit report. Cases of identity theft are ideal for a rapid credit repair program because it can severely damage the score of a person. You should also be able to support your claims of errors by proper documents and proof.
The way that rapid credit repair works is that you get to work with a credit manager who acts as an intermediary between you and the credit bureaus. This manager is appointed by credit agencies that are subsidiaries of the national credit bureaus. You can easily find one locally in your town by contacting one of the credit bureaus.
This service is a paid service so you should make sure beforehand if you stand to benefit from becoming a part of the rapid credit report program. The first thing that you need to ensure is that there are genuine errors and outdated information on your credit report which can be disputed by you with adequate documented proof. Just saying so will not help matter any. There are, however, instances when the items are removed not because you provide proof to the contrary but because the creditor fails to provide the necessary information to substantiate the negative entry. The creditor is usually given a time for 30 days to provide this information.
Secondly, you should also be aware of the fact that removing the inaccurate negative items from your credit history will not necessitate an increase in your credit score. Discuss this aspect in detail with your credit manager before you decide to sign up for the program.