3 || Financial Stability

You know the drill! Remember, there is no right or wrong answer: 

1. Is credit necessary? Why or why not?
2. What do you think are the effects of debt on the economy? 
3. How accurate do you think credit reports are on a scale of 1-10? 1 = not at all accurate 10 = spot on  

“If you would like to know the value of money, go and try to borrow some.”
– Benjamin Franklin

Unless you are extremely wealthy and able to pay for everything with cash, you will likely need credit to make major purchases. You may simply need a credit card for emergencies, or you may need a mortgage to purchase a house. Whatever the circumstances, you will likely use credit sometime during your life.

Credit enables you to purchase items that you cannot presently afford. It also provides you the opportunity to stretch payments over a period of time; thus, you are able to enjoy items you purchased without having to wait until you have the cash to pay for them. However, credit almost always comes with strings attached—INTEREST. Interest is the cost you pay for using credit, and it can sometimes greatly increase the total cost of any item purchased on credit. Moreover, credit and interest almost always result in one thing—DEBT!

via GIPHY

Debt is perhaps the greatest obstacle to achieving financial independence. Debt is such a greedy, all-consuming creature that some people lose everything to it. Not only can debt ruin you financially, but it can also ruin your relationships with friends, family, and your spouse.

Debt is a plague that should be thoroughly avoided. However, some claim that there are such things as good debt and bad debt. Perhaps good debt might be the debt that one acquires in order to purchase a house or an investment property—interest paid on a mortgage helps to reduce taxes. And debt is certainly a good thing to creditors because they profit from it. But for the purposes of this course, debt is a critical aspect of finances that needs to be checked, controlled, and eliminated.

The best ways to keep your credit in check are to maintain a good credit history and to establish good sources of credit. It is important to take control of your personal finances, and your credit history is a great place to start.

via GIPHY

A personal credit report (credit history) is simply a record of one’s financial dealings where credit was used. It includes your personal information and details about the accounts you used for loans and credit. Most transactions that affect your credit are kept in these reports. Your credit report is used by financial institutions to determine whether to grant or deny you credit. Your report affects the amount of interest that you are charged on auto or mortgage loans, interest rates on credit cards, and in the majority of states, your insurance premiums. With significant problems in your report, you could be forced to borrow at higher interest rates or you could even be refused new credit. In order for you to control your finances, it is paramount that you monitor your credit report!

Your ability to obtain credit greatly depends on your financial habits that are tracked by creditors. Problems on credit reports are sometimes warranted because the user has abused his or her credit by making late payments, defaulting on payments, causing foreclosures, and filing for bankruptcy. On the other hand, errors can occur on reports that consumers are not even aware of, and such errors can adversely affect their credit ratings. So, in order for YOU to monitor your credit report, you need to know where to find it.

via GIPHY

In the U.S., creditors report your financial transactions (how well you have handled your financial obligations) to three Credit Reporting Agencies (CRAs). They are Equifax, TransUnion, and Experian (equivalent foreign agencies are found worldwide). They are neutral entities—their job is to report credit usage and not represent the best interest of the consumer or the creditor. Their centralized databases contain the credit records of more than 190 million persons. These agencies provide your credit information to prospective lenders, and lenders use this information to rate your creditworthiness—whether you are a good or bad credit risk. (Contact information for the CRAs is listed in the course later on.)

A credit score is an objective summary of the information in your credit report, and it is represented by a number. In effect, your credit score represents your creditworthiness. Credit scoring systems are complex, which generally involves placing numerical weights on different aspects of a credit report. A mathematical formula is then used to calculate the final score.

The score most commonly used by lenders is called a FICO score. It was developed by Fair Isaac Corporation (hence the acronym), and it is used to determine the likelihood that debtors will pay their creditors. The number used to designate a credit score ranges from 300 to 850 (with 850 being the best score). The following shows the rankings for FICO credit scores, and the following table illustrates the national distribution of FICO scores for the U.S.:

Excellent: 750 to 850
Very Good: 720 to 749
Acceptable: 660 to 719
Uncertain: 620 to 659
Risky: 619 or below

Source: The Top Four Things You Should Know about FICO, by Tamera Briones:
The Greentree Gazette, Sept. 2006 (www.greentreegazette.com)

As mentioned earlier, a FICO score is derived from several sources of your credit history. In other words, the score is based upon your rankings in different categories. The chart below gives a graphical illustration of the categories and their corresponding weights (percentages). The categories are discussed in greater detail on the following pages.

Source: The Top Four Things You Should Know about FICO, by Tamera
Briones; The Greentree Gazette, Sep 2006 (www.greentreegazette.com)

If you are not pleased with your credit score, the following are several techniques you may use to improve it: 

Pay On Time

Develop a habit of paying for your purchases on time! These actions should improve your credit score. So, if you are not current with your payments, get current and stay current! The following are some hints about paying your bills on time:

• • Pay your bills WITHIN the week that you receive them.
  • Set up an automatic payment plan where at least the minimum due is debited directly from your checking account each month.
  • Call your creditors and change your due dates. Change the dates to coincide with paydays. Make sure that they are not all scheduled for the same time each month.
  • Do not charge purchases that you know you cannot truly afford. Ask yourself, Can I afford to pay for the purchase with cash? If so, do so! If you cannot, do not buy the item. Also, do not make purchases on credit in anticipation of a bonus or refund. Wait until you have the money—by then, you may find that the impulse to purchase the item has passed!

via GIPHY

Hint: If you are a few days late on a particular bill, for which you have been assessed a late fee, ask the creditor to remove the fee as a one-time courtesy (and to reinstate your previous interest rate if it has also been affected). Most creditors are amenable to such suggestions from good customers. Also, note that a late payment must be a FULL 30 DAYS LATE (or more) to be reported as delinquent to the CRAs.

Avoid Transferring Balances

Transferring balances from one credit card to another might indicate that you are having financial difficulties. If this is true, then work with your creditors to temporarily lower your payments and/or interest rates until you can catch up and become current.

Also, it is typically better to have smaller balances on more accounts, unless you happen to be practicing the art of creative financing—taking advantage of low introductory interest rates by consolidating and moving balances regularly. In addition, make sure you do not close any of your older accounts and be sure to watch the payment due dates carefully—if you miss a date, your low introductory rates might not last long.

 Avoid Closing Accounts that are Paid Off

For reasons previously stated, instead of closing paid-off credit card accounts, cut up the cards and avoid the temptation to use them. That way, you can still produce the illusion of longevity and lower utilization (as closed accounts can potentially have an effect upon 45% of your credit score). However, while it is generally good to have established credit accounts, too many credit card accounts can have a negative effect on your score. Having too many accounts may be viewed as a risk because CRAs know that if you max out all of the accounts, you may not have the ability to pay for all of them. You will have to balance the pros and cons of keeping accounts that are paid off. Listed below are a few ways to handle this situation:

• A good credit mix would be four to eight loans with different kinds of creditors, including a mortgage, installment loan, and several lines of revolving credit.
• Avoid loans from finance companies, as these institutions are generally associated with people with poor credit.
• Department store and gasoline cards are unnecessary. These accounts should be closed unless there exists a specific benefit meriting their usage, such as a discount in conjunction with a purchase. THEY SHOULD ONLY BE USED IF YOU HAVE THE CASH AND DISCIPLINE TO PAY THE BILL IN FULL EACH MONTH IT COMES DUE!

The Fair Credit Reporting Act

The Federal Trade Commission (FTC) enforces credit laws that protect consumers’ rights to obtain, use, and maintain credit. One such law enforced by the FTC is the Fair Credit Reporting Act (FCRA). It is specifically designed to promote accuracy and ensure the privacy of the information in consumer credit reports. Enacted in 1970, and amended in the late 1990s and again in 2003, the FCRA restricts who has access to your sensitive credit information and how that information can be used.

Note: FCRA was amended in 2003 with the Fair and Accurate Credit Transactions Act (FACT Act), which provides more safeguards for your credit reports.

Among other things, the FCRA states that YOU MUST be told what is in your credit report and have any errors corrected. By exercising your rights under the FCRA, you can ensure that the CRAs’ records are both complete and accurate. The following is a summary of your rights under the FCRA:

• The right to find out what information is in your credit report
• The right to know if your credit report has been used against you
• The right to dispute inaccurate information
• The right to have inaccurate information in your report corrected or deleted
• The right to contact (approach) the creditor who is providing inaccurate information to the CRA
• The right to have access to your information limited—not just anyone can access your sensitive credit information
• The right to grant your consent before your report is provided to employers
• The right to have your name excluded from CRA lists for unsolicited credit and insurance offers
• The right to sue FCRA violators
• The right to have your credit score disclosed (upon request)
• The right to be placed on identity theft and active duty alerts

Your Credit Report

If you have poor credit, the first step in repairing your credit is to discover what negative information is affecting your report (with each CRA). If there are any errors in any report, you will need to correct them. It is estimated that 85% of all credit reports contain errors and that 50% of those contain errors that are significant enough to cause the denial of a loan request. For this reason, take the time to order credit reports from all three credit reporting agencies. (Details on how to correct errors begin on on page 47.)

Under the FACT Act, you are entitled to a free annual credit report from all three agencies. Also, the FACT Act requires that the agencies provide a central source from which you can request your reports. You can request all three reports on the Internet at AnnualCreditReport.com (https://www.annualcreditreport.com/cra/index.jsp) or by calling 1-877-322-8228. If you prefer to write, a request form is available at https://www.annualcreditreport.com/cra/order?mail. When you receive your reports, examine them carefully to make certain that they are accurate.

Listed below is the contact information for the three CRAs previously mentioned. You may also visit their websites and order reports from them directly.

Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374
http://www.equifax.com
1-800-685-1111

TransUnion, LLC
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022
http://www.transunion.com
1-800-888-4213

Experian
National Consumer Assistance Center
P.O. Box 2002
Allen, TX 75013-09409
http://www.experian.com
1-866-200-6020

Hint: If you order one annual report from each CRA every four months, you will receive a free credit report three times a year!

The following are three ways to obtain a copy of your free credit report from each of the CRAs:

By Letter

You may send each agency a letter requesting a copy of your report. If you only order one report per year from each agency, based solely upon the FACT Act, each report will be free.

When requesting a copy of your credit report in writing, you need to include the following very specific identifying information: ›› Your full name

• Your spouse’s name (if married)
• Your date of birth
• Copy of driver’s license
• Your Social Security number (a copy of the front of your Social Security card is preferred)
• Your current address
• Any former address (if you have not resided at your current address for at least five years)
• Name of your current employer
• Phone numbers
• Your signature
• A check or money order for the appropriate charges (if this is a subsequent request to your free annual report)

The following page contains a sample letter that you may use to request a credit report. (A template of the letter is available for your use here: Letter Requesting Credit Report)

Letter Requesting Credit Report

April 1, 2008

Doug Smith
1234 Main Street
Farwest, TX 12345

Equifax Credit Information Services
P.O. Box 740241
Atlanta, GA 30374

Attention Consumer Relations:

Please send me a copy of my credit report. I have enclosed a copy of my driver’s license and my social security card to verify my identification.

My full name is: Doug Henry Smith
My spouse’s full name is: Susan Lynn Smith
My Social Security number is: 123-45-6789
My date of birth is: January 1, 1956
My current address is: 1234 Main Street Anytown, TX 12345
My home phone number is: (555) 555-1111
My current employer is Giganticorp, Inc.
Previous Address(s) for last five years: N/A

Please forward my credit report to me at the above address.

Sincerely,

Doug Smith

Enclosures: copy of driver’s license
                  copy of social security card

By Phone

To order your report by phone, use the CRA’s toll-free phone number (listed previously). To save time, make sure that you have the preceding personal information available before you make the call.

Over the Internet

To order a copy of your report online, visit the agency’s website (previously listed). To save time, make sure that you have the preceding personal information available before you engage the website. Also, make sure that you are connected to the correct website (you do not want to offer your personal information to a fraudulent site).

Note: Reports do not generally include a credit score (You will most likely have to pay for the score if you want one and fees may vary with each agency. Fees should be disclosed on each agency’s website.) However, be aware that just because a CRA offers a credit score, it may not necessarily be a true FICO score—each CRA has its own proprietary formulations. The best way to ensure that your credit scores are FICO scores is to purchase them directly from the Fair Isaac Corporation’s website at www.myfico.com.

If you need help dealing with your debts, you may want to contact the Consumer Credit Counseling Service. This nonprofit organization can help you analyze your situation then work with you and your creditors to establish a satisfactory repayment plan. Having a poor credit history may not keep you from future credit, but having clean credit will grant you more options for the future.

If you are declined credit, you are entitled to know the reasons for the disqualification, and you are entitled to a free copy of your report from the CRA that the creditor used. (These requests often include your credit score, which is not normally included with free reports.)

When you receive your reports, review them carefully for inaccuracies. Your credit report will follow you throughout your life and it can either help you or hurt you! Make it a habit to request and study them every year.

Interpreting Your Credit Report
Credit reports can be somewhat confusing to read. To help you better understand a credit report, listed on the following pages are the items you will typically find on a credit report.

Personal Information
This is information that identifies you as the subject of the report. This section will contain your name, address, social security number, current and previous employers, etc. Check this section (as well as all others) for any inaccurate information and report it back to the agency.

Credit Summary
This section lists the credit accounts that you have held for the past seven years (or longer, if they are active). These include mortgage accounts, installment loans, and revolving lines of credit. It also lists all accounts that are closed or inactive, accounts that are in good standing, and accounts that are delinquent and derogatory (those that negatively affect your credit score).

Account History
This section provides with you detailed information about your accounts. Information in this section can generally remain for up to seven years.

 Public Information
This section includes information about your credit that is available to the public. This information is usually listed because it involves legal matters that affect your credit, such as bankruptcies, foreclosures, collections, garnishment, lawsuits, etc.

via GIPHY

Inquiries
This section lists creditors and other authorized entities who have checked your credit (within the past twenty-four months).

Credit reports often contain errors. Listed below are some more common errors that occur on credit reports:

Mixed Information
Mixed information most often occurs when your credit file includes credit information for someone whose name is similar or identical to yours. It may also occur because of social security numbers that are numerically similar.

Incorrect Identifying Information
Incorrect identification often includes mistakes, such as your name being misspelled, your address being outdated, or your social security number being inaccurate.

Imprecise Account Information
Imprecise information could include anything, such as late payments reported on current accounts, incorrect balances, or closed accounts reported as open. Also, look for delinquencies you know to be mistaken or that you were unaware of previously. 

Outdated Information
Outdated information generally refers to items that should no longer appear on your record because their probationary time has passed. For example, a bankruptcy that is over 10 years old should no longer appear on your report. Reports of delinquency or collections must be deleted after seven years.

Unauthorized Inquiries

Unauthorized inquiries note persons, or organizations, that have inquired about your credit without just cause. Check the report for names of businesses or persons that are unfamiliar to you and for the dates of the inquiries. Any inquiry over 24 months old should have been removed. Note that the number of inquiries into your credit accumulates over time and can often be interpreted as a negative factor against future credit approvals.

Unfamiliar Account Information

This is often information that you are unfamiliar with, which could indicate identity theft. Check for accounts that you did not personally open and charges that you did not authorize!

Reviewing each agency’s report is time-intensive, but it is important that EACH agency is reporting the same accurate information. For instance, if you find an inaccuracy with one credit agency, you will want to compare your credit report with the other two agencies to see if their reports contain the same error. After you have corrected an error with one agency, it does not mean that the corrections will automatically appear in the other agency’s reports. It is best to contact each of the three CRAs yourself and report the inaccuracies.

Correcting Errors

As mentioned previously, errors do appear regularly on credit reports; and in some cases, the credit history may be fraudulent, but most of the errors are likely to be caused by mistakes in reporting. If you find errors on your reports, there are simple, albeit time-consuming methods to correct them. Listed below are steps you may take to correct errors on your reports (we shall discuss each step in greater detail on the following pages).

1. Contact the Credit Reporting Agency (CRA)

2. Contact the Creditor

3. Pursue Other Options

4. Follow-Up

Step 1: Contact the CRA

Because CRAs maintain ownership of your credit file, YOU must initiate a dispute directly with the agency that maintains your file. To initiate an investigation, you will need to have a current copy of your credit report that was prepared by that CRA. A dispute is usually handled free of charge; however, check with each CRA to verify how they handle disputes.

Contact the CRA in writing (or over the internet at the CRA’s website) about the information you believe to be inaccurate and explain why you believe it to be incorrect. Your letter should include copies of any documents that support your claim (including a copy of the section of their report with the error highlighted or circled). Relate only the facts. Explain why you are disputing the information, and request that the information be deleted or corrected, followed up with a free copy of the report noting the corrections.

The following page contains a sample dispute letter that you may use when you contact the CRA. (A template of the letter is available here: Letter Disputing Credit Report.)

Letter Disputing Credit Report

February 14, 2008

Ken Graff
87 N Washington Ave.
Anytown, CA 54321

Complaint Department

TransUnion, LLC
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022

RE: Disputes on Credit Report

To Whom It May Concern:

I am writing to dispute the following inaccurate information in my file. The items of dispute also are highlighted on the attached copy of the report from TransUnion.

The following item is inaccurate due to inaccurate information stating that the loan has not been satisfied. I am requesting that the item be deleted in order to correct the information in my file.

Mega-Mart Car Loans
Acct # 987654321

Enclosed are copies of the payment history and car title supporting my position. Please investigate this matter and correct the disputed item as soon as possible.

Sincerely,

Ken Graff

Enclosures: Copy of the entire payment history
                  copy of the car title

After you send written documentation of the inaccuracy, the CRA must (by law) perform the following actions:

• Review your documented dispute.
• Investigate your concerns directly at the source (creditor, collection agency, or courthouse), and provide your documentation and any relevant information that you submitted to the source. The source(s) of the dispute(s) will then review your information, conduct their own investigation, and report back to the CRA. Based upon the investigation, the CRA will then make all appropriate changes to your credit file and notify you of the update to your file and send you a copy of your updated and corrected report.
• Respond to you within 30 days.
• Mail you the results of the investigation.

If you have not received any response from the CRA after 30 days following the CRA’s receipt of your letter, you should follow up your initial request with an additional request for a reinvestigation. Include a demand that (according to the FCRA law) any disputes must now be removed.

Your second letter should be slightly more forceful than your first, and you should remind the CRA that under the FCRA, they are required to respond within 30 days or the information must now be deleted.

The following page contains a sample follow-up letter. (A template of the letter is available here: Follow-up Letter to the CRA. You should modify it to fit your particular circumstances.)

Follow-up Letter to CRA

March 17, 2008

Ken Graff
987 N Washington Ave.
Anytown, CA 54321

Complaint Department
TransUnion, LLC
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022

RE: Dispute letter of February 14, 2008

To Whom It May Concern:

On February 14th of 2008, I sent you a written request for an investigation of inaccurate items on my credit report, which I received from your agency. I have enclosed a copy of the original letter I sent you with the disputed items highlighted.

More than 30 days have passed and I have not received any response from you regarding this matter. Under the Fair Credit Reporting Act, you are required to respond within this period with the results of the investigation. As I have not heard from you, I am now requesting that the disputed items be removed permanently from my credit report.

Please notify me of the status of my request and send me a corrected copy of my credit report noting a deletion of the disputed items.

Sincerely,

Ken Graff

Enclosures: Copy of the entire payment history
                  copy of the car title

Step 2: Contact the Creditor

If you receive notification from the CRA with information that is not to your liking, you may need to contact the appropriate creditor (or lender) directly. (Your credit report should have the addresses and phone numbers of each creditor.)

It is advisable that you call the creditor(s) and find out what standard procedures they require for a customer to dispute items on their account. Always take thorough and accurate notes of any phone conversations. Record the dates and times of contact along with the name of the person you spoke with and include general notes of your conversation (these notes may be used for your letter to the creditor and for future follow-ups).

Follow-up your phone calls with a letter that follows the procedure outlined by the creditor. List each disputed item, and state the reason(s) why you believe the item is incorrect. Attach copies of all relevant supporting documents. Remember to include your full name, account number, and the dollar amount in question. Your letter to the creditor should also provide the name of the CRA that has your dispute on file.

The following page contains an example letter to contact a creditor. (A template of the letter is available for your use here: Letter to Creditor Regarding Dispute on Credit Report. You should modify it to fit your particular circumstances.)

Letter to Creditor Regarding Dispute on Credit Report

May 28, 2008

Mike Hale
5678 State Street
Yourtown, IA 32145

Megaplex Bank
654 N Washington
Megacity, NY 98765

RE: Disputes on Credit Report

To Whom It May Concern:

My credit report from Experian contains the following inaccuracy: Three missed mortgage payments from November 2007 to January 2008.

Since the information is incorrect, I have asked that the entry be removed or corrected. However, the credit reporting agency has informed me that you have verified the incorrect information as correct; thus, the agency will not remove the incorrect information.

On May 28, 2008, at 9:45 am, I spoke with Ann Smith regarding the aforementioned matter. She said that in order to have the erroneous information removed from my credit report, I needed to send receipts of payment for those months.

As shown in the attached supporting documentation, this is the correct information that should be entered into my credit file. Your records should show that payments are up to date and have been made on time.

I am requesting that you immediately contact Experian and request that the agency correct my file regarding my account with you. Please provide me a copy of your correspondence with the Experian requesting the correction of my file.

I am prepared to exercise my rights under the Fair Credit Reporting Act if you do not comply with my request to report the action and verify the correct information to Experian. I expect a confirmation from you within three weeks of your receipt of this letter confirming said action.

Sincerely,

Mike Hale

Enclosures: receipts of the mortgage payment for Nov 2007 to Jan 2008

Note: If the creditor finds that the disputed information is indeed incorrect, the creditor is required under the FCRA to update its own records and provide the correction to the CRA (usually within 30 days). Some small creditors that do not regularly report information to CRAs are NOT required to notify the agencies of the corrected information. In these cases, you will need to contact the agency directly and provide a copy of the letter of correction provided to you by the creditor. It would be wise to follow up with the CRA in any case.

Note: If you are paying a collection agency, talk to the creditor prior to paying off the bill and negotiate with them to remove the collection notice on your file immediately when they receive the total payoff amount.

Step 3: Pursue Other Options

If your efforts to correct your report are not met favorably with the CRA and/or the creditor, there are other options that you may pursue to mitigate the problem. One option is to write and submit a statement to the CRA and another option is to contact the Federal Trade Commission (FTC).

CRA Statement to Credit Report

If the CRA’s investigation does not resolve your dispute the FCRA permits you to file a statement of up to 100 words with the CRA that explains your side of the dispute. The CRA MUST include this statement in the credit report that it provides to creditors.

The following page contains an example of a statement letter. (A template of the letter is available for your use here: CRA Statement to Credit Report. You should modify it to fit your particular circumstances.)

CRA Statement to Credit Report

October 31, 2007

Jody Wilkinson
1313 Elm Street
Frost, AK 43215

TransUnion, LLC
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022

RE: Statement to Credit Report

To Whom It May Concern:

Please include the following statement on my credit report on file with your agency (credit report #123456789): The information on the credit report is not accurate because of the following factors. I was involved in a car accident on July 4, 2007. Local authorities ruled that I was not culpable for the accident. Therefore, the medical bills associated with the injuries received in the accident were to be paid by the other party’s insurance. Due to the prolonged legal process and my inability to work because of the accident, the bills were not paid until the settlement was reached.

Sincerely,

Jody Wilkinson

Federal Trade Commission

If you cannot gain any satisfaction from the CRAs and/or a creditor, and you believe that your rights are being violated, you may contact the FTC and file a formal complaint.

The FTC is the U.S. government agency that oversees the creditors and the CRAs. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace. Even though the FTC cannot act on your behalf as your lawyer in private credit disputes, information about your experience and your concerns about how you have been treated is vital to the enforcement of the FCRA.

In your letter of complaint, explain your credit problem(s) and provide a detailed account of everything you have done to resolve the matter. Include copies of any letters, notices, or other documentation to back up your complaint. In addition, include all of the responses that you have received from the creditors and/or CRAs. You may send your questions or complaints to the FTC at the following address:

Consumer Response Center: FCRA

Federal Trade Commission
Bureau of Credit Practices
Washington, DC 20580

You may use the letter on the following page to contact the FTC about your complaint. (A template of the letter is available for your use here: Formal Complaint Letter to the FTC. You should modify it to fit your particular circumstances.)

You may also file a formal complaint with the FTC over the Internet at http://www.ftc.gov or by calling toll-free 1-877-FTC-HELP (382-4357).

Note: The FTC supplies a credit repair document that might be useful to you. It is entitled Credit Repair: Self-Help May Be Best. You may access this document at www.ftc.gov/bcp/conline/pubs/credit/repair.pdf.

Formal Complaint Letter to the FTC

September 4, 2007

Brett Brown
2121 Center Street
Arid, AZ 32541

Consumer Response Center: FCRA

Federal Trade Commission
Bureau of Credit Practices
Washington, DC 20580

To Whom It May Concern:

I am writing this letter to file a formal complaint about:

Experian
P.O. Box 2002
Allen, TX 75013-09409

I understand that the FTC does not take action on behalf of individual consumers; however, I am writing you to make you aware of the problems I have been experiencing with the above-mentioned company. I have attached documentation and supporting evidence that supports my claim.

My complaint is as follows: I provided notarized statements affirming the payment of a personal line of credit. Regardless, Experian would not remove the claim from my credit report.

Thank you for your help. I would appreciate any advice regarding my situation.

Sincerely,

Brett Brown

Enclosures: Copy of the notarized statement
                    copy of the response I received from Experian

Step 4: Follow-Up

Within 30 days (45 days if based upon your annual free credit file), the CRA should notify you of the results of its investigation and provide you with a corrected copy of your credit report. If the error has been corrected, request that the CRA supply anyone who had previously received the inaccurate information within the past six months (two years in the case of employers) with the corrections that have been made to your file.

Adding Non-Reported Accounts

When you review your credit report, you may discover that it does not reflect ALL of your credit accounts. Although most major credit accounts will be included in your file, not all creditors supply information to the CRAs. Some creditors, such as travel, entertainment, gasoline card companies, local retailers, and credit unions do not provide information to the CRAs.

Therefore, if you were denied credit due to an insufficient credit file or lack of a credit file, and you know you have current accounts with creditors that do not report to the CRAs, ask the CRAs to add such accounts to your file. Although they are not required to do so, most CRAs will add verifiable accounts for a fee. However, you should understand that if these creditors do not report to the CRAs regularly, the added accounts would not be updated regularly in your credit report.

To request that a CRA add accounts to your credit report, you should send a letter requesting the inclusion of additional accounts, along with the verification of the accounts (copies of recent statements). It is also a good idea to contact the creditor(s) directly and ask if they will report your information regularly to the CRAs.

Note: You should send all correspondence to the CRAs and creditors by certified mail, (with a return receipt requested) so you have proof that they actually received your letters.

The following page contains a sample letter that you might use to contact the CRAs and add accounts to your credit file. (A template of the letter is available for your use here: Letter Requesting Addition of Accounts. You should modify it to fit your particular circumstances.)

Letter Requesting Addition of Accounts

November 23, 2007

Larry Mayler
24 Gordon Way
Music City, TN 42424

Experian
P.O. Box 2002
Allen, TX 75013-09409

RE: Addition of Accounts

To Whom It May Concern:

Upon receipt of my credit report from your agency (see attached), I have discovered that not all of my open accounts appear on the report. These unlisted accounts demonstrate prompt and timely payment histories, and I would appreciate it if you would add them to my credit report. Listed below are the names of the creditors, their addresses, and my account numbers. I have also attached copies of my most recent statements from these accounts to verify their accuracy.

Creditor                       Address                                               Account Number
Credit Cards R Us      22 Lending Way Boston, CA 12345     1029384756

Please notify me when this information has been added to my credit report.

Sincerely,

Larry Mayler

Enclosures: Cards R US credit statement

Credit Repair and Debt Settlement Companies

Credit Repair companies are in business for profit. They cannot provide services that you cannot perform yourself. With the proper knowledge and the correct approach, you can repair your own damaged credit within a fairly quick time frame. (It is possible to bounce back from bankruptcy in as little as 24 months and have a decent credit score again.) Time is the key to repairing your credit. The adage, “time heals all wounds” is true for credit.

via GIPHY

The best solution to repairing damaged credit is to pay your bill on time and to stay current. The benchmarks for payment history rise in six-month increments: After paying as agreed for six months (following delinquency) your credit score rises. The same holds true at 12 months and again at 18 months. Then, after two years of paying all debts on time, prior delinquencies (reported as 30, 60, 90 days late, etc.) no longer weigh heavily on your credit scoring (although the score will remain for seven years on your report).

If you are currently working with a credit reparation company that promises to have your credit restored completely in two short years, your money may be better spent in sending it directly to your creditors to pay down your debt.

Debt settlement companies do not always help, and at times may even damage your credit. The idea behind debt settlement is to make an offering to the creditor to settle at a portion or lower percentage of the original debt. You are generally not informed that you MUST have the settlement money to pay in full when making the offering. The negative effect of this arrangement is that none of your creditors are paid WHILE the settlement company collects funds from you every month. The money is held in escrow until there is a sufficient amount to make a settlement offer. In the meantime, you are being hounded by all of your creditors (who are reporting your delinquencies every month to the CRAs), and your credit score is dropping. You may be better off speaking with a bankruptcy attorney, who can either restructure or eliminate your debt within 90 days. This will allow you the opportunity to begin rebuilding your credit from the date of the bankruptcy’s discharge. The process with a debt settlement company could take years, and the effects will haunt you and your credit score for seven years from the time you settle the final debt!

via GIPHY

Conclusion

After having studied this course, you should now know how your credit works and how it is monitored. You should realize that credit is sometimes necessary, but it comes with a hefty, and sometimes debilitating price—interest! In addition, you should know how to read and interpret your credit report, and you should know your rights when using credit. You have been given the tools to monitor and improve your credit score. You should do so until you are completely debt-free and are able to close any unnecessary accounts.

Remember, debt can ruin you. Take the words of William Shakespeare to heart, when he stated this triplet from Hamlet:

Neither a borrower nor a lender is;

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.

It’s time to see what you learned! 

1. What is a credit report?
2. Name the 3 major credit reporting agencies in the USA. 
3. What are the best methods for improving your credit?
4. How many years will delinquent information remain on your credit report?
5. Under what circumstances are consumers entitled to a free copy of their credit report?

Sorry! No answers given today, so go find them!