Sticks and stones may break your bones, but a "derog" (derogatory entry) on your credit report can really hurt you!

It is not particularly difficult to discipline yourself to live within your means, settle old debts, validate debts, or save and invest money for your future.  Individuals with median credit scores below 680 need to reconsider whatever they may have been doing that has already damaged their credit.  Why?  Because everyone has the power to improve their own credit destiny -- and we provide tools necessary to fix your broken credit right here, at no charge!

• Destroying credit repair myths

• How creditors look at you

• Credit restoration techniques

• What credit bureaus do not want you to know

• Where to begin (and the truth about "Free Credit Reports")

• How to restore your good name

• 25 sample documents for download

• Longevity of good and bad news (Statutes of Limitations)

• Quick fix

• Know your rights

• Recommended Services (three excellent choices)

• Suze Orman bashing (with a modicum of praise)

• In summation

Destroying credit repair myths

The first myth is that information in your credit profile cannot be easily changed.  Nothing could be further from the truth!  Not only can inaccurate information be corrected with relative ease, any information that is not verified within a reasonable time must be removed.  The Fair Credit Reporting Act demands it!  Recent FCRA amendments including the Fair and Accurate Credit Transactions Act make it difficult for creditors to reinstate inaccurate information after its successful removal.  The FACT Act also protects victims of identity theft and is a major improvement over portions of the Fair Credit Billing Act.  Sample documents and rudimentary credit repair strategies are indicated below.

The second and truly most dangerous myth is that "file segregation" is a useful method of credit repair.  Where it may appear useful, it is illegal to create or use a false identity such as a new Social Security Number (SSN) or Employer Identification Number (EIN).  Applying for an EIN or SSN under false pretences is a felony, and using false information on a loan application is also a felony.  Yet this dangerous scam continues to be perpetrated in books, on radio & television, via email, in print ads, and on countless websites.  I urge everyone to avoid any credit repair scheme that suggests file segregation as a solution to your credit woes.  File segregation is NEVER an option!  After all, a known felon with squeaky-clean credit is still a felon -- and prison guards are not likely to be impressed by a stack of platinum credit cards! 

The third myth is that paying off an old collection account will improve a person's credit score.  Balderdash!  Paying off an old unpaid collection (without first arranging removal of this negative information) will cause immediate damage to a person's credit.  Why?  Because payment will indicate current activity on what may otherwise have been a dormant (thus benign) collection item.  Recent activity (such as the recorded payment of an old collection item) will cause a ten to twenty point drop in one's credit score.  It is far better to leave drowsy canines undisturbed.  Learn more about the Fair Debt Collection Practices Act here.

The fourth myth surrounds closing inactive revolving credit accounts.  I know of many otherwise competent bankers, loan officers, and real estate professionals who parrot this utterly absurd foolishness without first qualifying the accounts to be closed.  Close the "wrong" accounts and your credit scores will suffer!  Why?  Because closing a long-standing account will shorten your credit history.  Close only the newest inactive accounts, or don't bother closing any credit accounts at all.  Period.

However, you cannot blame these lending and real estate professionals for their ignorance -- at least not entirely.  A couple of years ago I received a CD-ROM of marketing and "educational" materials from a MAJOR mortgage banking institution (which shall remain anonymous).  On this disc was a "Home Buyer's Presentation" that continues to promote the folly of closing inactive tradelines without first qualifying the accounts to be closed.  The sad aspect is that this misleading presentation will be seen by millions of hapless people for years to come and may be taken as "gospel" by most naive brokers, bankers, realtors, and their unfortunate victims ... customers.

Let me be perfectly clear on this point.  Inactive open tradelines pose absolutely no threat whatsoever to a borrower's creditworthiness, although a wildly excessive number of inactive open tradelines should be discouraged.  If you must close any account, begin by closing only those opened most recently.  Long-standing accounts actually help to determine a person's creditworthiness, even if the accounts are currently inactive.  Whenever a long-standing account is closed, there is a strong possibility that the person's credit scores will suffer a ten to forty point credit score decrease.

NOTE:  A year ago I lost the opportunity to "create" yet another 800 score borrower.  According to a three-month-old credit report FAXed to my office, a lovely lady from Ohio had a 799 score.  She had three inactive tradelines with $10K to $33K credit limits.  I would have ordinarily recommended that she show modest activity on any long-standing accounts with the highest credit limits.  A sack of groceries or tank of gas each month is all that it requires. This would have catapulted her scores to 820 or higher within a couple of months.  What did she do the month prior to our introduction?  She closed the three inactive accounts, using the sad excuse that she never used them.  As a result, her mid-score plunged to 760 because she lost many precious years of flawless credit history.  Most importantly, she closed the only tradelines with sufficiently high limits to become her personal point-generating engines.  As a result, all has been forever lost!  It is unlikely that she will have another shot at an 800 score in her lifetime, since she is 69 years old and living on a modest fixed income.  What a shame!

NOTE: In an encounter with "the Credit Union From Hell" (name available on request), I was informed that it was their standard policy to refinance their loans using the same account numbers.  This lunacy must stop!  While this poorly-planned practice may have less effect on customers with sterling credit, it is particularly damaging to the credit scores of those with bruised credit.  I had been working with a gentleman for several months to improve his scores sufficiently to obtain 100% financing.  I had his mid-score up to a 576 when I recommended that he refinance his truck and motorcycle loans to reduce his debt-to-income ratios (a common solution).  As a direct result of refinancing his loans with these lip-strumming idiots, all three of his credit scores fell an average of forty points.  This immediately condemning him to a maximum of 90% financing!   It took months to recover from his Credit Union's practice of wiping out his previous payment history (two years each for two tradelines in this case).  I closed this fellow's 100% loan in December 2004 after his score had finally risen to 575.  I am confident that his credit scores will rise another 100 points over the next year of timely mortgage payments.  I caution all Credit Union members -- and those who bank with small community banks -- to ask about the lender's refinance policies BEFORE refinancing any installment loans.  If the lender routinely re-uses the same account numbers, thereby wiping out valuable payment history, please take your business to another institution.  No one deserves to have their credit history foreshortened due to bad banking policy!

The fifth and final myth to be shattered involves bankruptcy and the notion that it enables a person to simply "wipe the slate clean".  Surely, filing bankruptcy may halt harassing phone calls, but a few well-placed letters to collection agents will produce the same result.  Bankruptcy will liquidate assets to settle debts for dimes on the dollar, but this too is something that anyone can negotiate for themselves.  The worst part is that a bankruptcy will remain as a derogatory public filing on a person's credit report for as much as ten years.  Tradelines that are settled in a bankruptcy will be branded for all others to see as "included in bankruptcy" -- accompanied by all prior damage associated with late payments and non-payment of debts.  After bankruptcy, a person's previous payment history becomes meaningless, no matter how timely it may have been up to that point.  Thus, the bankrupt individual's credit depth effectively drops to zero.  Secured credit cards and high interest auto loans are the only 'risk' that most future creditors are likely to find acceptable until someone else paves the way.  Nevertheless, the very worst thing that any bankrupt individual can do is to NOT reestablish their credit.  Without reestablished credit you will remain as a pariah to any potential creditor!

It should be noted that there are legal methods to remove bankruptcy filings from a credit profile long before the ten year statute of limitations.  Some are very costly.  Others are not.

How creditors look at you

I advertise that I can lend one day out of bankruptcy -- indeed, I often lend within the first year after a bankruptcy discharge.  However, it is usually advisable for a borrower in such a position to be prepared to come to the closing table with stack of cash or significant equity in their property (10% to 20% down), because my investors are not easily convinced that another bankruptcy might be just over the horizon.  Many lenders prefer at least two or three years of reestablished credit before lending to a formerly bankrupt borrower.  Nevertheless, reestablished credit is essential, or you will never be viewed as creditworthy by prospective creditors.

Foreclosures carry even greater uncertainty.  Nevertheless, I will fight to convince my investors that the event was an isolated occurrence, and frequently lend to the recently bankrupt or those facing foreclosure.  Recent foreclosure proceedings will usually keep the borrower's LTV (loan-to-value) at or below 80%.  Do not expect miracles for the first three to four years after any foreclosure proceeding has begun.  Again, reestablished credit is key to your future borrowing power.  Keep in mind that the issuance of an NOD (notice of default) is all that it takes to label a borrower as having been foreclosed upon.  Even when you redeem the property by bringing your payments current, you will be considered as risky as someone who lost their home.

There are many other myths, untruths, and bald-faced lies surrounding credit -- far too many to list here -- often parroted by the best intentioned but ill-informed loan officers.  But, I have digressed.  Repairing your credit or removing errors is not nearly as difficult as one might think!

Credit Restoration Techniques

The techniques that I discuss here will assist in restoring your credit profile. These are the very same techniques that credit restoration attorneys use, and for which they charge thousands of dollars to perform.  Their sole advantage is that they have a law degree -- and you don't!  Attorneys generally perform their magic more quickly and more efficiently than you can.  However, I must advise you that not all credit restoration professionals are alike.

Some credit restoration attorneys offer programs that feature low, affordable monthly payments.  While this may sound inexpensive, it is usually a trap!  In reality, they have absolutely no motivation to correct your records quickly, nor do they have any reason to stop billing you!  Suddenly, a retainer fee and fast results holds clear advantage when purchasing or refinancing real property.  I much prefer the latter approach, and can refer my customers to a competent and ethical credit restoration attorney (of which there are very few) or credit restoration company staffed with certified debt counselors.  (see Recommended Services below)

When a person decides to repair their own credit, it is crucial for them to direct their energies to each of the three major credit bureaus (listed below).  It is possible, for example, for a single derogatory entry to deny your loan or disqualify you from obtaining a revolving credit account.

What the credit bureaus do not want consumers to know

You can challenge each derogatory entry in your credit report at any time.  The credit bureaus must investigate the matter at your request and validate the debt.  The bureau is compelled by law to remove the derogatory entry from your file whenever they are unable to establish its validity within a "reasonable period" (thirty days).  The validation process soon becomes costly, but only to creditors and consumer credit reporting agencies.

Each derogatory entry in your credit report must be proven as accurate; otherwise, it cannot remain on the report.  Whenever a credit bureau is unable to validate the entry, it must be removed from your file.  Score one for the consumer.

Many creditors find it difficult to validate a derogatory entry within the allotted thirty days.  Almost as often, the credit bureau may be unable to handle your dispute quickly or properly.  In either case, the derogatory entry must be deleted from your file.  Overworked administrators, lethargic clerks, and slow mail service have unexpectedly become your dearest friends.

The older the derogatory entry, the more difficult the validation process becomes.  It becomes near impossible to verify a derogatory entry when critical records have been misplaced, archived, or destroyed within the previous year.  Bumbling bureaucrats, clumsy geeks, and misdirected email have just joined your inner circle of friends.

Something that will frustrate even those with good credit is the vile practice of collectors who purchase "junk debt".  Junk debt is a collection that may have been due to innocent mistakes on the part of a creditor (e.g., failure to record payment, failure to close an account, etc.), or an honest mistake on the part of the consumer (e.g., sent payment after item went into collection, simple misunderstanding of payment terms, etc.).  This "debt", which may already have been settled, becomes the property of the collector who purchases it.  The collector now owns the bad debt and will vigorously attempt to seek payment (whether it is due or not).  When one collector fails to get paid, they may resell their non-performing debt to another contingency collection agent, and the harassing telephone calls and threatening letters begin again.

In many instances the unscrupulous collector will report unpaid collections in a most divisive manner.   Many collectors will report their collection activity on a single account from three separate offices to each of the individual credit reporting agencies.  This will result in three collection items on a tri-merge credit report for one outstanding debt.  All of this is intended to clutter your credit report with collection items and to devastate your credit scores.

Please consult my Junk Debt page for further information.

Where to begin:

Order a tri-merge credit report from one of the major credit bureaus (links provided below) to see what your creditors are saying about you behind your back.  The average cost is $30 to $35, with lots of optional choices.  You can also obtain a FREE Annual "Credit Report" (consumer disclosure) by clicking this link.  Although useful to identify problem areas, a Consumer Disclosure does not reveal your actual credit scores.

Essentially, the "Free Annual Credit Report" concept, codified by FACTA, is little more than a clever marketing scheme created by credit reporting agencies solely to improve their bottom line -- not YOURS!  Integral to your mortgage application, however, I provide one tri-merge credit report (with scores from all three credit bureaus) at no cost -- a $15 to $50 value depending upon who is doing the billing.

Closely scrutinize your credit report to identify any erroneous entries and all derogatory history.  I routinely perform this inspection during the mortgage application process and draw your attention to any obvious errors, duplicate entries, and serious derogatory items.  I will provide constructive criticism, when required.  Many so-called "credit counselors" may charge hundreds of dollars for such services.

In a recent survey (Mistakes Do Happen 2004) conducted by the National Association of State Public Interest Research Groups, there are serious errors on 79% of all credit reports.  Minor errors usually pose no threat to obtaining a loan approval.  Serious errors and duplicate entries, on the other hand, can make a person appear much less creditworthy and definitely places your loan approval at risk.  At the very least, it will cost you money in the form of higher interest rates.

NOTE:  I have recently observed an alarming deviation from traditional scoring techniques. One major consumer credit reporting agency is currently selling credit reports to consumers (for a handsome price), which do not accurately portray credit scores being reported by their own agency!  The deviation is 50 to 60 points higher than reality.  The credit reporting agency attempts to conceal their deception by stating that the overstated scores used in its report are "for educational purposes only".  Unfortunately, this worthless disclaimer appears some forty or fifty pages into the faux credit report, so it is very easily overlooked.  This serves only to mislead the consumer into believing that their credit is much better than it is.  This may encourage "shopping" for an unattainable interest rate, which in turn may lower the consumer's score.  "Educational" indeed!

We have also seen various self-anointed "credit gurus" running off at the mouth about CBC-Innovus as being some sort of secret "fourth credit bureau".  We have used CBC to obtain consumer credit reports for years before they purchased Innovis.  A few years ago, these conspiracy theorists with way too much time on their hands had labeled CSC as the infamous fourth bureau.  Were that the case, I can name another dozen credit bureaus that the overly paranoid should ponder.  I wonder what these crackpots will have to say if I toss a little accelerant on the raging flames of debate?  Here goes: CITI, Credit Technologies, DCI, FactualData, LandAmerica, and LandSafe.  Loan origination software systems such as Point contains links to more than 100 credit bureaus.  That ought to keep these fools busy into the next Century.

More importantly, truly paranoid individuals should probably be aware of another important repository of personal information, namely the CLUE (Comprehensive Loss Underwriting Exchange) database.  You can obtain your personal records (employment or public record search), background checks, personal property, insurance losses & scoring, credit reports, lawsuits, healthcare professional ratings, and more.  They also sell buyer's and seller's property disclosures that Realtors^® find useful.  As with the THREE traditional credit reporting agencies mentioned above, you have a right to review and dispute the information in your personal profile under FACTA.  Go to ChoiceTrust by ChoicePoint Asset Company for further details.

How to restore your good name

Dispute in writing each error or unexplained item in your credit report.  You must send separate letters to each of the three credit bureaus (indicated above).  Use the downloadable example letters provided below and adapt them to your specific needs.  Never use pre-printed dispute forms!  Never use letterhead paper either.  Disputed items will be corrected or removed within 30 to 60 days.  Derogatory entries that cannot be verified must also be removed by the credit bureaus.

Negotiate with your creditors and any collection companies by telephone.  Their contact information is usually listed on your credit report.  Ask them nicely to remove their derogatory entries or to change them to positive feedback (on all three credit bureau repositories) upon receipt of your settlement.  If they agree in principle, the ask the creditor's representative to put the terms of your negotiations in writing -- ON THEIR LETTERHEAD.  In this way, you have their express intentions in writing which may be forwarded to the three major credit bureaus in the event that they fail to live up to their part of the bargain.  If the creditor objects to putting anything in writing, you can remind the creditor or collection agent that without their signed letter, you have absolutely no incentive to fulfill your obligation.  Escalate your request to the next level by asking for a supervisor and repeat your generous offer to settle the debt on your terms.  Above all, be polite.  Never become argumentative or belligerent when discussing the matter, no matter how unreasonable the party at the other end may seem.

This strategy only works with unpaid collections and late payments on open active accounts.  You have lost all leverage on paid collections and closed accounts.  It is generally advised to wait at least two years in order to dispute paid collections and late payments on closed accounts (since it probably will take that long for the creditor to archive or misplace your records).

Lastly, it is advisable to increase your credit limits on all revolving credit accounts periodically, once you have cleared up the most pressing issues.  If you have a good track record with a particular creditor, they may even increase your limit without pulling a fresh credit report.  The reason that it is important to increase your credit limits is that it reduces your debt ratio on the account in question and, as a result, it will increase your credit score!  Always maintain current balances below 30% of the high credit limit to maintain a high credit score.

Documents for download (Microsoft Word format)

Here are twenty-five examples of useful dispute and request letters that some "credit repair gurus" charge huge fees to process for you.  This "do-it-yourself credit repair kit" enables you to achieve the same results for hundreds of dollars less.  However, this must not be construed as any manner of legal advice.  These are simply examples which we cheerfully supply for educational purposes.

1. Sample initial debt collection dispute letter

2. Sample debt collection dispute follow-up letter

3. Sample debt collection dispute with new collection agent

4. Sample unauthorized credit inquiry removal letter

5. Sample unauthorized hard inquiry removal letter

6. Sample CRA 100-word explanation addendum letter

7. Sample disputing credit denial letter

8. Sample credit report request letter

9. Sample request to re-schedule debt letter

10. Sample request to raise credit limit letter

11. Sample debt payment agreement letter

12. Sample debt settlement offer letter

13. Sample expired Statute of Limitations notification letter

14. Sample final payment warning letter

15. Sample "judgment-proof" notification letter

16. Sample request to close inactive account letter

17. Sample payment agreement (financial hardship) letter

18. Sample disputed account believed invalid letter

19. Sample credit card error dispute letter

20. Sample request to stop debt collection calls letter

21. Sample opt-out letter

22. Sample previously settled debt letter

23. Sample script for negotiating lower payments

24. Sample credit report correction letter #1

25. Sample credit report correction letter #2

Remember to mail all communications with creditors and collectors Certified or Registered Mail with a Return Receipt Request.  Maintain a detailed log of any telephone conversations and keep copies of all letters mailed.

Here is another self-help resource that you may find useful:

• Debt and credit FAQ

Longevity of Good and Bad News

Below is a definitive list of exactly how long information can remain on your credit report. Most items will have a seven year Statute of Limitations (SoL), but there are a few exceptions that vary from one State to another.

• Delinquencies (30 to 180 days) may remain seven years from the date of the initial missed payment.

• Collection accounts may remain seven years from the date of the initial missed payment which led to the collection.  Whenever a collection account is paid in full, it should be marked as a "paid collection".

• Charge-offs may remain seven years from the date of the initial missed payment that led to the charge off, even when payments are later made on the charged-off account.

• Closed accounts accounts may or may not have a zero balance, but they are no longer active. Closed accounts with delinquencies may remain seven years from the date they are reported as closed, whether closed by the creditor or by the consumer.  Positive closed accounts may remain up to ten years.

• Credit cards reported as lost will continue to be listed for two years from the date the card was reported lost, provided that there were no delinquencies before that date. Delinquent payments that occurred before the card was lost are reported for seven years.

• Chapter 7, 11, and 12 bankruptcies may remain for ten years from the filing date.

• Chapter 13 bankruptcies may remain seven years from the filing date.

• Accounts included in bankruptcy may remain seven years from the date they were reported as being "included in bankruptcy".

• Civil or small claim judgments may remain seven years from the date that the judgment was filed.

• Child support judgments may remain seven years from the date that the judgment was filed.  Certain State Statutes will extend this period.

• Foreclosures (or transfer of deed in lieu of foreclosure) may remain seven years from the filing date.

• Unpaid tax liens may remain fifteen years from the filing date.

• Paid tax liens may remain seven years from the date paid.

• Inquiries listed on your credit report will remain for a minimum of one year from the date that the inquiry was made, although some may remain as long as two years.  Inquiries that you initiate or those required for employment will be visible only by you and will not detract from your scores..

• Paid positive accounts may remain ten years.

• Positive open accounts may remain indefinitely.

• Negative account information is generally purged from your credit report after seven years if not overridden by an exception indicated above. It is a common practice of junk debt buyers to re-age collection accounts to maximize damage.

Timing is everything.  You may not want to take on a high-interest, high-risk loan today, knowing that a long-standing derogatory item may be coming off your credit report within the next year or two.  Please keep in mind that serious derogs such as bankruptcies and foreclosures severely hamper your ability to borrow only for the first three to four years after filing, but it is imperative that you reestablish credit and timely payment histories. 

Quick Fix

Several quick fixes may be found on my downloadable Stupid Credit Tricks flyer or in my newsletters.  Here is one that I created years ago and have shared in confidence only to those in need of a rapid score improvement.  It is a variant of Stupid Credit Trick #8, and it requires that you own clear title to a vehicle or boat in order to attempt this.

On second thought ... we do not think that it is prudent to reveal this trick to the general public.  We need to keep a few "secrets" to maintain our competitive edge.

We also have the ability through the credit agency through whom we pull credit, to correct or remove erroneous tradelines.  Documentation is required (e.g., receipts, canceled checks, statements, etc.).  The cost to correct a single tradeline is, on average, $30 per credit reporting agency.  In other words, if we need to correct only one tradeline entry that reports to only one credit reporting agency, the cost is minimal.  However, if the tradeline reports to all three credit bureaus, the cost is about $100.  It ordinarily takes only a couple of days for the changes to populate into your credit profile.  Some corrections may not improve your scores at all, while others can move all three scores significantly.  I provide "Rapid Rescore" services only for when my personal borrowers request it.  If you have numerous derogatory entries on your credit report (inaccurate or dead-on), especially if you have been the victim of identity theft, it may be less expensive to pay an experienced credit restoration company to clean up your credit profile.

Know your rights!

Below is a disclosure required by the Credit Repair Organizations Act that every legitimate credit restoration organization must provide.  Run, do not walk, from any credit repair organization that does not require acknowledgment of the following CROA-mandated disclosure!

Consumer Credit File Rights Under State and Federal Law

You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ''credit repair'' company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over seven (7) years old.  Bankruptcy information can be reported for ten (10) years.

You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding sixty (60) days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next sixty (60) days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud.

You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations.

 You have the right to cancel your contract with any credit repair organization for any reason within three (3) business days from the date you signed it.

 Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur.

You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau.

 If the credit bureau's reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.

The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact:  The Public Reference Branch, Federal Trade Commission, Washington, D.C. 20580

This shall not be construed as any indication that we are any sort of credit repair agency or credit repair organization.  Now, go out there and take charge of your credit to improve your future.  Make no excuses.  Just do it!

And if you wish to apply for a  pre-screened secured or unsecured credit card, to assist you in this endeavor,  please consult my Credit Card Offer page.

Recommended Services

If you have neither the time nor the patience for fixing your own credit, below are three credit restoration organizations that we have trusted to perform repairs to our valued customer's credit.  Each has performed honestly and favorably.  Your results will vary depending upon the complexity of your case.

Please mention that you heard about their services on Mechanix of Credit, and remember that Scott Secor will credit the cost of your credit restoration (up to $1000) through any of these designated services whenever he is able to close your home loan.

• Credit Restoration Ltd. (employs former certified debt counselors)

• Morris, Carlson, & Hoelscher, PA (ask for Troye Downs or Rick Ogram)

• Jamison Law Group (a breed apart from high-profile Internet law firms)

We are not compensated by any of the above organizations (for those who may be wondering).  It should be noted that many credit repair companies offer illegal kickback schemes to loan officers.  This is a violation of RESPA.  Scott does not play that game.

We invite any atypical "credit repair" organization to contact us to prove your worth to our customers.  Be advised that we are exceedingly suspicious of your genre, and we are very critical of your kind in general.  We expect favorable results for our customers backed by a rock-solid guaranty.  What we refuse to tolerate is some manner of fast-buck artist that lacks credibility, or has no incentive to stop billing their unsuspecting victims.

In some areas, you might find that Lutheran Social Services or Catholic Charities are suitable debt and credit counselors.  Otherwise, consult this comprehensive knowledgebase of credit counselors approved pursuant to the new bankruptcy laws.  This too, is not an endorsement of any of these organizations.

Thoughts on Suze Orman:  Certainly most of you have heard of Suze Orman.  By and large, she offers practical advice on matters of personal finance.  Perhaps you have seen her on Public Television fund-raising marathons, or you may have caught her talk show on CNBC, or read her column in Oprah's magazine.   Suze entertains callers and on-camera guests by providing (often biting) commentary on a guest's inabilities to manage their personal affairs.  It is informative "reality TV", but NOT a good source of mortgage-related information.

We have tried to overlook her blatant misuse of the term "FICO^® Score" when referring to the general topic of credit scores.  FICO^® is a very specific reference to the Fair Isaac Corporation, and to their products and services.  Words mean things, Suze!  More recently, she lectured to the camera some nonsense about "FICO" being the ONLY credit score, ad nauseam.  Semantics aside, it is certainly worth noting that Suze turns out to be on Fair-Issac's payroll.  Perhaps now one can better understand her vulgar display for which she is being paid handsomely.

On or about June 25th 2005, a segment of the Suze Orman Show was aired on which she truly displayed her ignorance of certain aspects of credit scoring as they relate to mortgages.  In this televised segment, Suze publicly embarrassed herself when she told a guest that lender managed impounds (escrow funds) can adversely affect their "FICO^® Score" (sic).

COME AGAIN?  The only time in which lender management of escrow funds (or impounds) could possibly impact a person's credit score would be if the lender were to breach their fiduciary responsibilities by failing to pay property taxes or homeowner's insurance -- and only when the taxing authority or insurer then placed the overdue amount for collection.  The borrower certainly would have been independently alerted by the taxing authority or the insurer long before any collection proceeding had been initiated, and certainly before any judgment or lien had been filed.  It is very unlikely that non-payment of impounds would go unnoticed by both the lender and the borrower.  If the borrower failed to heed any such warning, however, all damage to their credit score is likely well-deserved.

Late payment of property taxes or homeowner's insurance are not generally reported to credit reporting agencies unless the non-payment is extensive or excessive.  So how is it that the average borrower's scores might be damaged?  Sorry Suze girl, you cannot create "victims" where they do not exist.  FICO^® illiteracy is so unbecoming of you.

But wait, her lame advice gets even dumber.  The downside of insisting to pay your own taxes and insurance (waiving escrows/impounds), in most instances, will result in a 1/8 to 1/4 percent hit to your interest rate.  Alternately, it may be expressed as a partial discount point (prepaid interest) at closing, which is rewarded only with a potential tax deduction.  Several years ago it used to cost money for the lender's relative inconvenience of having to administer impounds.  Unfortunately, unpaid property taxes and unpaid insurance policies on properties on which borrowers had defaulted made it necessary for lenders to rethink their policies.  Thus the reversal of fortune.

In the same televised segment Suze enthusiastically oozed her ignorance across millions of televisions screens when she misinformed a caller with the bold statement that "only time" can heal a damaged "FICO^® score". 

EXCUSE ME?  While time is certainly an element worthy of serious consideration, did Suze imply by omission that it is futile to dispute inaccuracies or correct any errors?  What the heck was she thinking? Incidentally, she missed out on the perfect opportunity to sell her own silly "FICO^® Kit".

Fabulous marketing strategy, Suze, we dare say!  So if any of you were contemplating squandering your hard-earned cash on Suze's wares relating to score improvement techniques, you may wish to reconsider.  While it might contain some useful information, it just might contain a tad more of her own brand of FICO^® illiteracy.

In the months since June of 2005, Suze Orman has repeatedly displayed her ignorance of mortgages and the mechanics of credit, but I shall not go into further detail.  Again, I shall defend her as being one "smart cookie" in other areas of personal finance, but she would be better served by limiting the scope of her feigned expertise.

In Summation:

The best approach to repairing or restoring your credit can be summed up as follows:

1. First and foremost, find out what creditors are saying about you behind your back!  Order a credit report (NOT the free "credit report" (consumer disclosure), but a REAL tri-merge credit report.  It will cost $25 to $35 from most sources.  Scott Secor of InspiredFinancing.net will provide one as an integral portion of your loan application and will review it with you, citing sundry methods of improvement.
2. Compare the various Reason Codes on your credit report (or any Score Disclosures you may receive) with the Reason Code matrix on this website.  Some credit reports will provide their own explanations, while others will not. Study these codes so that you know which tradelines require attention during any credit restoration being performed.
3. Target any "charge-offs" that may be reported. These indicate that a creditor has given up collection of the original debt and has written off the loss. If charge-offs are not removed, your scores will continue to suffer.
4. Reconcile any subsequent collection activities with the original debt and attempt to settle the debt (begin by offering 50% of the original amount due).  Contact each charge-off creditor and ask that the debt be re-instated prior to settlement.  Then ask that the creditor provide you with a written agreement that the account will either be indicated as "paid as agreed" or removed from your credit report altogether.  Make this request before sending any settlement payment, or the tradeline may be branded as "settled for less than full amount", which does little good to your reputation.
5. Seek out any indications of late payment in each tradeline reported. These are often easily changed by the creditor.  Simply contact the creditor and explain the circumstances leading up to the late payment, and indicate that the circumstances were an isolated occurrence (if, indeed, they were).  Request that the creditor remove the late payment entry once you have made continuous timely payments for at least four to six months.  Most creditors will happily make the change as long as you have not made it a practice to pay late.
6. Judgments and liens must be paid in full before you can request their removal.  Contact the creditor and make arrangements to pay the amount due with a written agreement that the judgment will be removed and any associated account reported as closed once full payment is received.
7. Tax liens are another matter.  They must also be paid in full, but are often difficult to remove by the individual.  Wait at least one year after satisfaction before seeking professional assistance in having the liens removed from your credit report.
8. Bankruptcies and foreclosures are also difficult (but not impossible) to have removed from your credit profile.  These will also require the assistance of a competent attorney or true credit restoration professional to have removed.

If you have not been successful in correcting information on your credit report or removing inaccurate information, please avoid omnipresent credit repair organizations.  Most will do little to improve your credit, but will gladly take your hard-earned money.  Consult any of the organizations mentioned within this forum, since each has been critically reviewed and their record of performance closely scrutinized.

There is help ... but you must avoid the many incompetents and scam artists along the way.