Big Mike's Credit and Finance Blog

Discounted Credit Repair for Public Servants

In an effort to thank those who work tirelessly as a public servant, we are offering a substantial discount for our professional credit repair services for anyone in this field, including teachers (K-12), police/fire, active duty military, and any state or federal government worker.

We will only be able to take on a limited number of cases due to workload, so act quickly.  You can email us directly where we'll respond to give you a special code to enter when signing up on our website to receive the discount.  Be sure to let us know you qualify for the special pricing, we're not giving it to everyone!

 The service being offered is our Platinum package, normally $429.  The discounted rate will be $129, which is barely enough to cover our most basic costs and gives away all labor and expertise for free.  We wanted to do this to thank you all for your hard work.

You can find out more about our service in general on our website at www.kbpcs.com, or by emailing us.

Mike

New Credit Card rules coming soon

Finally, legislation has been passed which will enforce some long overdue rules on the credit card industry.  This new legislation is designed to protect the consumer from being rate hijacked, or mislead into a new credit line.

The new set of rules are effective July 2010.  The quick version of what they will limit and prohibit: 

• Misleading offers of new credit
• Double-cycle interest accrual/billing
• Exorbitant fees or deposits for new card applications
• Limiting fees when going over your credit limit in certain situations
• Unreasonable time periods for a payment to be considered as late

You vs. the Collection Companies

If a collection company is demanding payment you should always start with the basics.

1. Conduct everything in writing.  Never, ever by phone.  Send all written correspondence via certified return receipt mail.
2. Always respond within 30 days of receiving their notice.  This is a must in order to prove to a court at a future date you challenged the debt in a timely fashion.
3. Ask them to validate the debt, proving that you are contractually bound to repay it and to account for where the balance is coming from.  This is also referred to as debt validation.
4. Determine the Statute of Limitations.  Each state has its own time frames for the SOL's and the law is different depending on if it is a oral contract, a written contract, or an open ended contract.

Their is a process that will allow you to prevail with collection companies.  Many of them pay only cents on the dollar for the right to attempt to collect the debt. 

Make them jump through as many hoops as possible, and either they will realize a) they have no valid case to make you repay, or b) you are more hassle than you are worth, and move on.

Of course those are best case scenarios.  If you are served with a lawsuit and they threaten a judgment, the same rules still apply (items 1 through 4 above). 

If you make it through to the end with everything in order, then there is a good chance a judge will rule in their favor.  It would be in your best interest to settle before going to court, if you can.

Defending yourself against collection companies can easily consume dozens and dozens of hours of your time... researching laws, drafting correspondence, tracking their responses, etc. 

Dealing with the collection companies is like dealing with a 5 year old who wants to be naughty... you have to be diligent, persistent, and show no fear! 

Or you can just hire me and my credit repair business.  It's what we do.

Paid collection account remains on my credit

Nearly every day my company talks with customers who want to know how it is possible that after they've paid a collection company, the item they paid still remains on their credit report.

The fact is, paying a collection account does not improve your credit.  There are exceptions to every rule, but overall this is completely accurate.

First, the account may be re-aged and show a new date (the payment date).  This causes it to look like a brand new collection, which will significantly impact your credit (in a negative way) and lower your scores.

Second, once paid, the collection remains on your credit.  It just shows paid.  It is still a collection.  It can remain on for up to 7 years.

Now I always encourage my clients to pay their debts.  But, you need to be well informed, and know that paying a collection won't help your credit.  There are always alternatives, however.

The better course of action would be to first verify the debt is collectible.  Has the statute of limitations expired?  Can the debt collector prove validity of the debt, through the debt validation process?  Is this debt still valid and current?

If the debt collector can't prove these things, then they have no claim and can't report any negative info to your credit report.  If the debt collector can prove the debt is yours, then you should reach a settlement.

I recommend you contact a professional, such as my credit repair business, to help you when it comes to collection accounts.  Then you can decide how to proceed and make an education decision.

Debt Validation: Consumer Rights vs Collection Agencies

Debt Validation is a tool used when the validity of a debt needs to be confirmed.  Under law, the collection agencies must be able to prove the debt is valid otherwise they have no legal means in which to collect it.

Here are a few key bullets regarding debt validation.  My professional credit repair service routinely uses debt validation and it is a very effective tool.

1. Is the debt collector (collection agency) legally authorized to collect the debt?
2. Is the collection agency using the correct dollar amount?  What was the original amount of the debt, what fees and interest have been added?  Are these legitimate?
3. Do you contractually owe the collection agency money?  Or was your agreement solely with the original creditor?
4. Does the FDCPA (Fair Debt Collection Practices Act) come into play?  Is this a debt collector, or is the original creditor taking action against you to collect?

What does a debt collector need to provide to satisfy debt validation?  At minimum, they should provide supporting documents proving you are contractually bound to the debt and that they are legally authorized to collect it.  They should also provide account statements where they can prove the balance they are collecting matches the statements.

Here is the actual text from the FDCPA regarding validation:

FDCPA Section 809.  Validation of debts   [15 USC 1692g]

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

If a debt collector (collection agency) is unable to satisfy debt validation, they:
- Cannot legally collect the debt,
- Cannot legally report the debt to a credit bureau (Equifax, Experian, TransUnion),
- Cannot contact you about the debt.

In addition, if a collection agency does report the debt to a credit bureau falsely, the FCRA (Fair Credit Reporting Act) states you can sue them for $1,000 in each instance.  Small claims court here we come!

If a collection agency tries to intimidate you by sending you a summons to appear before a judge it means they are trying to place a judgment on you regarding the debt.  However, there is a precedent established in the case Spears vs. Brennan that states the collection agency cannot file suit if they've not first validated the debt within 30 days of your request to do so.

If you are in need of professional help repairing your credit, my credit repair company provides this service and more with our expert staff.

Credit Monitoring

There are many sites you can use to monitor your credit.  But none are as affordable as TrueCredit, which is why I recommend it so much.

With TrueCredit you pay only $ 14.95 a month to be able to pull all three (Equifax, Experian, TransUnion) credit reports and view all three credit scores (FAKO, but still).  You can also pull a fresh copy of the report every 24 hours, which is great for bumpage (b* as the kids call it these days).

FAKO scores basically are approximations designed around a similar model as FICO.  FICO is expensive, so FAKO was born to simulate the score but without the expense.  It is a useful tool to simulate "is my credit getting beter" or "is my credit getting worse" over time. 

Bumpage (or b*) is the act of pulling your credit reports over and over in order to delete old inquiries.  Basically, the outdated systems used by Equifax, Experian and TransUnion can only hold so many inquiry requests on your credit file.  Once the system fills up, the oldest entries start getting deleted, thereby reducing the number of inquiries on your credit.  Bumpage is probably not legal, so I don't recommend it.  However, if you are simply fanatical about monitoring your credit on a daily basis, them bumpage is really just a side effect that you have no control over.

My professional credit repair service recommends TrueCredit to our clients because it is inexpensive and can really help you monitor credit repair progress on a regular basis.  If you are in our credit repair program you will also notice that with TrueCredit you will get email updates as things change on your credit report (such as deletions by our credit repair service).

Identity Theft

Identity theft affects millions of people each year, with billions of dollars lost to theft and fraud. 

Will you be the next victim?  Are you prepared to defend against identity theft?  What happens if your identity is stolen?

You can place security freezes and fraud alerts on your credit reports (Experian, Equifax, TransUnion) yourself.  Depending on where you live, there may be a cost involved.  With this freeze/alert on your record, no creditor can pull your credit and if you open a new account (which will be difficult to do with a freeze on your account) you'll have to go through a fraud check by providing additional forms of identification to the bank.

You can also opt-out of the pre-screened credit offers, which will reduce the amount of mail you get, which might lessen the chance that some of your mail is stolen --- along with your identity.

If your identity is stolen then basically your life is over.  LOL!  No, seriously, it is a major pain that you wouldn't wish on your worst enemy.  Well, maybe your *worst* enemy...  Basically, you will spend every waking moment defending your name and reputation, being accused of making charges and opening accounts that you didn't and having to provide countless supporting "proof" to the creditors that you didn't actually buy ten 50" plasma's.  You will likely lose some money, but probably not much.  The most costly item is your time, and your reputation.

Enter LifeLock. With LifeLock they'll take preemptive action to guard your identity and back their service with a $1 million service guarantee, so that if your identity does managed to get stolen while a member of their program then they will cover any monetary loss up to $1 million.  LifeLock also will handle dealing with all the creditors on your behalf so that your precious time is not wasted.  But, prevention here is key -- LifeLock is basically 50% prevention and 50% peace of mind so that if something were to happen you'll be protected.

My professional credit repair service is a partner with LifeLock.  Basically it is insurance for your credit reputation, protecting what you've worked so hard on all your life.

Make the time to take care of your credit and your life

Today while I was making my usual follow up phone calls for my professional credit repair business, one very clear pattern emerged and made me start thinking.  People find all sorts of excuses to not take care of themselves.

Make the time.  Help yourself.  Repair your credit.

Some of the prospective clients I spoke to today had contacted me two months ago but have yet to send me the paperwork to get started on their account.  That's two months of wasted time.  Two months of work my service could have performed.  Two months of improved credit.  Two months of paying more interest, more for their house loan, more for their auto loan.

Make the time.  Credit repair is similar to eating healthy and working out.  If you put it off, you are just hurting yourself.  But, as soon as you do it you start feeling better about yourself.  Customers that have been through our program can tell you how much stress is relieved, how much money they've saved, and how it is just a spiral effect --- credit controls so much of our life, once you fix it so many other pieces start falling into place and can really help you enjoy your life.

Help yourself. If your credit is seriously screwed up then stop procrastinating.  You can make it better.  You have the power.  If you don't have the time to do all the work yourself then hire it done from a professional service like mine.  Either way, the power is in your hands.  You can make your credit better.

Repair your credit.  House payments, car loan payments, insurance rates, credit cards... all based on your credit.  But what about deposits for your cable company, and electric company, water bill, etc?  What about getting a new cell phone, did you have to drop a couple hundred bucks extra because your credit is in the gutter?  Even your job:  up for a promotion and have your company run a credit check, then decide against promoting you?  Yup, it happens, and how much money did that promotion cost you?

The point is, take the time to take care of yourself.  Be smart about your choices in life and don't let something as simple as a credit score keep you down.

Student Loans

Q:  What happens if you default or stop paying on a student loan?
A:  Nothing good, and likely a whole bunch of bad...

You can expect steep collection fees and penalties from the collection agency, plus you'll likely be stuck footing the bill for the commission that collection companies can charge the Department of Education.  Not to mention, of course, the original loan amount.  The collection agency can also accelerate the loan schedule making the entire balance due in a single payment.

The tax refund you were expecting from the IRS might not be coming -- the collection companies can get the IRS to use the refund to pay the loan.  The federal government can also garnish your wages up to 15% per paycheck.  Oh, and you can still get sued as well!

Student loan accounts that go into default can remain on your credit indefinitely.  Yes, that is correct, forever.  They will only be removed from your credit seven years after they are paid.  Also, student loans can't be included in a bankruptcy (technically they can but it is extremely rare).

You need to work with your lender and do everything possible to ensure you never default on your student loan.  Take immediate action to work out a payment plan that works for you.

Credit Card Utilization

I always offer my credit repair clients some advice on how they can improve their score, other than just getting negative items deleted from their credit report.

One such way is by knowing and understanding utilization...

Let's say you have four credit cards.  Let me list them in an example, and we'll label them as Visa (card 1), MasterCard (card 2), Discover (card 3), and American Express (card 4) so we can talk about them.

 

Visa:  OK good job with the $ 0 balance. The 0% utilization is the best you can get, it will help your score the most.

MasterCard:  Not good.  You have maxed your card, and 100% utilization is the worst you can get (unless you go over your credit limit!) and it will hurt your score badly.

Discover:  Well with only 19% utilization, your score is only slightly being impacted negatively.

AmEx:  Yikes.  You've exceeded your credit limit by 10%, so now you have 110% utilization.  This is red zone bad, it will nuke your score.

Utilization is the amount of money owed on the credit line vs. the credit limit of the account.  Utilization is measured for each revolving account, plus is also measured across all revolving accounts as an average.  So using the above example for instance the average utilization is 65%.

Creditors will look at your average utilization to determine how healthy you are.  If you are using most of your lines, it signals you are having problems.  If you have low utilization it means you have the ability to charge much more, but have not, showing you are responsible.

Now!  How do we improve our scores?

Let's say you had no extra money to pay down cards.  You can still improve your score by balance transferring from one card to another to help the utilization.  Ideally, you should pay down the balances instead of balance transferring.

The scale is something like this:

0% utilization:  Optimal
1-19% utilization:  Minor negative impact
20-49% utilization:  Medium negative impact
50-89% utilization: Significant negative impact
90-100% utilization: Major negative impact

Another way to improve your scores is to raise your credit limits.  If you can get a 10% credit limit increase on average, then there is 10% more to work with on utilization, without making a single payment.  This is also a key reason to not close your paid off credit card accounts.  Keeping them open will help your utilization.

Need some help?  Let me know.