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If you have attending college in the past 10 years, it’s likely you keenly remember receiving about 20 pre-approval credit card offers your first semester. And gauging by the numerous emails I receive daily on the subject of credit card debt due to college, it’s likely you applied and received a few of those credit cards. In fact, it was the credit card debt I accumulated in college that served as a catalyst for my credit disaster.

Credit card companies, like cigarette companies, are smart when it comes to luring in potential lifelong customers when they are young and vulnerable. They cleverly setup booths on college campuses, give out free stuff like t-shirts and book bags, and mail students letters aimed to create a subtle hint of pride within. The statements usually say something such as, “You’re in college now! It’s time to start building you’re credit history!” How kind of them to notice and look out for my future. It’s quite alluring.

Students are obviously a good target. They are likely far away from their caution-invoking parents, don’t have a full-time job, need money for food and beer, and may or may not be financially educated. I could name a dozen more logical reasons why students are good targets for credit card companies, but I want to put at least some restraint on your ability to write, “duh!” in this article’s comments.

Universities are banning credit card companies from marketing on campus

There are has been some progress to limit credit card companies ability to market directly to student on campus. An article over at Bankrate says that some 300 universities have banned it altogether. While this is mildly encouraging, it doesn’t address any real plausible solution –again, clever marketing folks will find an equally successful way to grab students.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Finding credit help, particularly online, has become systematically (and disgustingly) difficult. As you may recall I expressed my frustration with the lack of honest, responsible resources available for people who want to repair their credit score in my first blog entry, “Why I Am Starting This Blog“. While I did rant about the lack of credit resources in that entry, I cut short of actually evaluating the purpose or mechanism behind this shortcoming. After a couple of nights, deep in thought, and given my experience, I have composed a rather solid argument of why it’s so difficult to find honest credit help.

As a premise for my argument, I am going to assume that there are indeed a substantial number of resources available –they are, however, decentralized and flooded out by a competitive market. This market, of course, includes credit reporting agencies (which have no official status by the way –more on this in another article), debt consolidators, and so-called “organizations” designed to help folks fix their bad credit, etc, etc. These organizations and companies have been extremely successful in capturing the attention of their intended audience, and thus, furthering their ability to skew the playing field.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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One of the first steps I recommend when repairing credit is to pay down any credit accounts where the balance is more than 25% of the account’s credit limit. When your credit score is calculated, substantial consideration is taken on a simple calculation. This calculation is called your “utilization”. It simply means, “How much of your total available credit are you currently using?” In other words, “Is this person spending money without keeping in mind it must be paid back?” Utilization is a huge factor when a credit score is calculated.

Two things are taken into consideration in regards to utilization when your credit score is calculated. First, your overall utilization. This is calculated by adding together the balances of all of your revolving accounts, and then adding together all of the credit limits. Then divide the balance by the limit. Use my credit card balance to limit ratio calculator if you are shy in trusting your own arithmetic (like myself).

Overall Utilization Example

• Credit Card #1 — Balance: $300 Limit: $500
• Credit Card #2 — Balance: $100 Limit: $300
• Credit Card #3 — Balance: $500 Limit: $1000
• Total balance: $900 Total credit limit: $1800
• Utilization = $900 / $1800 = 50% Total revolving utilization

Therefore, as you can see, a credit card with a $0 balance has 100% utilization.

In addition to your overall credit utilization, individual credit account utilization is also taken into account. This basically means that if you have ANY individual account where the balance is over 25% of the credit limit, it is likely hurting your credit. Therefore, even if your overall credit utilization is under 25%, if any one of those accounts have a balance over 25%, your credit score is affected.

It’s about ratio, not actual numbers

I have been asked if the credit limit dollar amount matters. Specifically, if one has a credit card with a credit limit of $200, and every month it’s reported that this person uses 75% of the available credit, does the same (as previously stated) apply. Logic may tells us that it shouldn’t apply because it’s likely that this person can easily pay off a $200 balance every month. However, utilization does apply –the limit does not matter. If you have a credit card with a $200 credit limit, spending over $50 will hurt your credit score.

When you are repairing or building credit, it’s good to have a credit card even if the credit limit is low. However, as you begin to build credit, it is in your best interest to request credit limit increases when the time is appropriate. Remember: keep your utilization as low as possible –preferably at or around 25%.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Many people are under the impression that once they fix (or remove) all of the bad records from their credit report (such as charge offs and late payments), they will have good credit. While ridding oneself of negative credit report records may relieve a great burden, the truth is, until you have gained sincere, long-lasting positive accounts on your credit report, your credit will never be “good” –it will simply be static and hover around 620 – 650. Therefore, an important step in credit repair is building NEW credit.

My mistake, of course, was that I went a little mad and applied for too much credit, too quickly. In my previous article regarding inquiries, I illustrated how this can damage not only your current credit score, but also your ability to obtain new credit. I also mentioned that it’s a good idea to apply for new credit in “bursts”. While this is absolutely true in order to minimize lowering your credit score due to too many inquires (inquires within a 2-week period are counted as one), it does little good if you already have a sour credit. This is true because you have to slowly build the creditor’s confidence.

Applying for multiple credit accounts right after you have cleaned up your credit report will do little good because creditors want to see previous positive accounts. Therefore, you must begin with one credit account (such as a credit card for people with bad credit), keep it for 6 months to get some positive history, and then apply for more credit. This is how to successfully build positive credit history and ultimately increase your credit score.

This may seem ridiculously obvious to you, but trust me, once your credit score begins to improve, you will be presented with an unfathomable urge to apply for more credit. This will hurt you in the end. Get a secured credit card, keep it for 6 months, and then start applying for a “real” credit card.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Even if you have never filed for bankruptcy, I suggest you bookmark this. You never know when tragedy may besiege your innocence.

Removing a chapter 7 bankruptcy from your credit report can be a very painful process (as you would imagine), but it is possible to do if you follow these steps. First, keep in mind that this may or may not work. As I have stated in previous articles, your individual situation will ultimately be the main determinate. Nonetheless, if you didn’t just file, this has a much better chance of working.

The first thing you need to do is dispute the bankruptcy with ALL 3 of the credit reporting agencies. See my article on the best way to do this here. If you’re lucky (extremely lucky), they will be unable to verify it and the bankruptcy will be removed. This is the best case scenario, but unlikely to happen.

If the bankruptcy is verified by the credit reporting agencies, you will need to send a procedural request letter asking them who they verified the bankruptcy with. See my example letters here. They will then respond, claiming that it was verified by the courts. No it wasn’t –the courts do not verify.

Next, as you might have guessed, you will need to contact the courts that were specified by the credit agencies. Ask them how they went about verifying the bankruptcy. They will say they didn’t verify anything. Ask for that statement in writing. After you receive the letter, mail it to the credit reporting agencies, and demand that they immediately remove the bankruptcy as they knowingly provided false information and therefore are in violation of the Fair Credit Reporting Act.

Hopefully this should do the trick and the bankruptcy will be removed promptly.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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In the following article I will explain how credit report inquiries can modestly lower your credit score. Depending on the type of inquiry, your score can lower 3 – 10 points -even more with multiple inquiries. While this should not be the pinnacle of your credit worries, it is helpful information to keep in mind.

What is an inquiry?

As the name suggests, a credit inquiry is the nomenclature used when anyone pulls your credit report for review. There are two main types of inquiries: inquiries that are only seen by you, and inquiries that are seen by everyone who reviews your credit report. Only the latter affects your credit score.

While multiple inquiries make a bigger impact on your credit score, multiple inquiries within the same 2-week period are usually only counted as one inquiry. The credit bureaus started doing this after customers started to complain that their scores were dropping 20 – 30 points in one weekend of car shopping (often when you are seeking financing for a new car, dealerships will make 20+ inquiries).

This brings forth an important tip: when you are seeking credit (filling out credit card applications, for example), do it in “bursts”. If you are going to apply for 5 credit cards, minimize the credit score impact by doing it all on the same day and then waiting a couple of months (if you have no success the first time) to do it again. Multiple credit inquiries indicates to credit bureaus that you are desperately in need of credit because you cannot honor your current obligations. This is why they lower your score.

Types of inquiries that do not affect your score

1. Pulling your own credit report is not seen by anyone but you.
2. Inquiries for pre-approval offers such as those “You’ve been pre-approved!” letters you get in the mail.
3. SOME credit inquiries made by debt collectors.

Types of inquiries that do affect your score

1. Inquiries made by creditors when you apply for credit.
2. Inquiries made by cell phone companies when you apply for a cellphone.
3. Car dealerships inquiries.
4. Other misc. credit applications (such as a home loan).

Hopefully this gives you a better idea of how inquires work. I know I did not list every type of inquiry that can affect your credit score. My attempt is to simply give you a list in which will provide a general rule of thumb to go from.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Hello Ryan,
I mailed your negotiation letter a couple of weeks ago through certified mail. I got the green slip on Monday, but my credit report hasn’t been updated yet. Should I be worried? I haven’t sent them any money.
Thanks
Kenny

Kenny -
You sent them a negotiation letter and you expect them to update your credit report, yet you haven’t paid them anything? Here is how it works, once again Kenny: You send negotiation letter. They send you a letter back saying they are willing (or not) to negotiate. You pay them what you offered. They update your credit report AFTER you pay. This process takes months. Chill.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Student loan creditors such as Nelnet are required by law to report accurate information to credit agencies. This makes dealing with late or defaulted student loans much different than other accounts. Basically, regardless of if you have consolidated, or even undergone a rehab program, the record will remain on your credit report for 7 years.

Please see: http://www.ed.gov/policy/highered/leg/hea98/HR6.pdf for the specific legal mumbo jumbo.

Most other accounts CAN be negotiated

…if you go about it the correct way. I wrote a whole article about the best way to do this. Go here to read about negotiating charge offs, derogatory, late, and a bunch more.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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Often I am asked whether I recommend a secured credit card over a high interest rate credit card for people in the process of fixing their bad credit. The short answer is that I recommend a secured credit card. However, it should be stated that I will only recommend a secured credit card if the provider will do one thing: withhold that the card is secured from the credit agencies. A secured credit card recorded as such will not improve your credit very much –in some cases it can even hurt it.

Luckily, through the wonders of competition, there are very few card providers still out there that will record a secured credit card as secured. As a matter of fact, you will likely find that most secured credit card providers will openly advertise that they do not report the card as secured. This is a big selling point.

How much can I expect my credit to improve?

You can expect your credit to improve substantially if you haven’t had any credit card activity on your account for awhile (ex., if your credit card accounts have been closed or noted as charge offs.). Remember: having positive, recent credit activity is a very important factor in determining your credit score. Simply cleaning up your credit history and removing bad accounts will alone only help your credit score so much.

Secured credit cards require an initial deposit before they will open the account, (i.e., before they will “secure” that deposit). Every provider has their own minimum deposits, but you’ll be looking at around $200 – $300 to start out with. Orchard Bank’s secured card, which I recommend, have a minimum deposit of $200. It’s important not to simply deposit $200 and start using the card. Why? Because a credit card with a $200 balance will do little to improve your credit score.

This will, in fact, hurt your credit if you have other cards with higher balances. Therefore, it’s best to increase the limit whenever you can –deposit another $100, for example, when you have the extra money. This will increase the credit limit recorded on your credit report. After you have had the secured credit card for a year, call them and ask if they are willing to switch it over to unsecured. Most of the time, (if your payments have been good), they are more than happy to make the switch and give you an increased credit limit.

Secured credit card tips

1. Make sure the provider reports to all 3 credit bureaus and they don’t annotate that the card is secured.
2. Be ready to make an initial deposit and keep depositing to increase your credit limit. This is what will increase your credit score.
3. Keep the card for at least a year before requesting that it be switched to unsecured and your credit limit be increased.

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Original article from: The Better Credit Blog – Credit help, Dispute forms, and Fix bad credit

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