Credit Bureaus & Credit Reports

Now since we’ve mentioned the credit reporting business, let’s talk about the Credit Bureaus. There are 3: Experian, TransUnion, and Equifax.

They all do pretty much the same thing, but you can have discrepancies between the 3 bureaus. Not all credit reports are created equal. Infact, 70% of you probably have errors on your credit reports. They may be minor errors, such as a wrong address, or they can be major errors like accounts you have no idea are there.

You are entitled to one free annual credit report from each bureau per year. You can do this by going to www.annualcreditreport.com. All of the other companies you hear about offering free credit reports make you enroll in their program in order to get it, so avoid them. This one really is free - without a program to join. The only thing to remember is that this will not give you your credit score (or FICO score). You can pay a small fee to get that, but for your purposes it isn't necessary to have to get it. We are just looking at what's on the reports - not so much what the score is.

And what is a FICO score? The Fair Issac Company Score (FICO)tells prospective lenders how well you manage your debt. Essentially, it is an "I love debt" score. Many people (even financial "professionals" will tell you how important it is to keep that FICO score up, but in the ever-constant persuit of that all mighty FICO score, many people have come to financial ruin. And for what? Something that doesn't matter in the long-run. You do not have to have a FICO score to survive. You do not even have to have one to get a mortgage. Yes, it is another myth that we’ve been fed so often, loud and long that we take it to be truth. So many people run themselves into the ground trying to attain that all-powerful FICO score, when really….it is something we can all live without.

Many rich people, who are debt free, do not even have a FICO score. Why? Because they don’t borrow money. Even without being wealthy, you can get a home mortgage without a FICO score. It’s called manual underwriting, and if you SHOULD get a home, you CAN get a home. See me if you want more information on this.

Now you may be asking, "Well, if we shouldn't care about your FICO score, then why bother checking our credit reports?" The number one reason to stay on top of your credit report is to make sure that you aren't a victim of identity theft. That is the number one crime in America today, so it is vitally important to make sure that you aren't numbered among the victims. Another important reason to check the credit reports is to make sure that the information on your accounts is reported correctly. Wouldn't it be a bummer to get a call 3 years down the road saying you owe, $5,000 (due to some computer glitch) and it could have been fixed by checking your report when the information was current? It's just one more way to stay on top of your financial situation. For some, you may be able to find out who you owe money to, and how much. That's another good reason to check these things.

So, let’s talk about our credit reports.

Information remains on your credit report for 7 years from the date of last activity. This means that if you have a 5 year old account and then a new collections agency comes along and picks it up and calls you and ends up reporting it to the bureaus again – the clock starts all over at day 1. Sometimes things will fall off, but most of the time they just keep coming back because they are set to be bumped back up.

Places that offer to clean up your credit report or remove the bad stuff from them are SCAMS! Stay away from these places as you would the plague. It is easy to clean up your own credit report for FREE, and no one can remove negative stuff that is correctly reported.

The only way to get rid of the bad stuff is to pay those debts off. If you have old accounts that are sleeping because they are so old, my suggestion (and Dave’s too) is that you take care of your current debts (the ones that are bothering you now) in your debt snowball, and then have a second debt snowball to take care of paying off the sleeping ones. Just wake one at a time and make some settlement offers.

Settlement Offers

The very first thing to remember is Get It In Writing! If you do not get it in writing, you do not have a deal. If you are talking to Bob on the phone and he agrees that you can pay them $3,000 for a $7,000 debt as payment in full, and you don’t get it in writing. Guess what. You still owe the other $4,000 because either Bob will conveniently have amnesia or he will “no longer work there” and there’s no record of that agreement. So if you’re offering a big chunk of money as settlement for the debt, then you need to get it in writing on company letterhead before you send them a single solitary dime. And NEVER give them your bank account information or post dated checks. NEVER.

Next, you need to understand that when you settle a debt, it is a gray mark on your credit report. A black mark is where you don’t pay it at all. A white mark is where you pay it in full, and so a gray mark isn’t great, but it isn’t as bad as it could be.

Now I want you all to hear this. Do not settle your debts if you have the money to pay them. This is where integrity comes in. You have to be honest and moral when it comes to finances or you will not win. If you have old debt that you have the money to pay (or it won’t be impossible to pull the money together over time to pay it off) then you need to pay it in full. Maybe knock off some outrageous fees, but at least pay what you legitimately owe. Now if you are struggling and come into a couple hundred bucks to settle a debt, then go ahead and do that.

The final thing to remember is that if you get a settlement (in writing) and the company writes off the difference, you will get a 10-99 form come tax time, and you must claim the difference that they wrote off as unearned income. So, if you saved yourself $3,000 by settling an old debt, then you have to claim that $3,000 as income and you will have to pay taxes on that. Of course, paying taxes on $3,000 is much less than paying $3,000, so you still come out on top, but just be aware that you HAVE to claim it

Clearing Up Inaccurate Information

Now if you have inaccurate information (and 70% of you do), then you can get that cleaned up pretty easily. Here’s how:

1. Send them a letter requesting that the account in question be proven accurate. Make sure the letter is sent certified letter, return receipt requested. That way you know exactly when the clock starts ticking for them to get this taken care of. They have 30 days to get the information from the creditor to back up the information on the report.

If it is a mistake, it will be corrected (or possibly removed entirely).

2 If there is something wrong on the creditor’s end, then you need to speak with them to resolve the issue. Once it has been resolved, and if it is resolved in your favor, you need to request that they update this information with the 3 credit bureaus. It is then helpful to follow up in 30 days with the credit bureaus to make sure that they actually did what they were supposed to do. If you have a feeling that it is an error on the creditor’s part, then contact the creditor to hash out the details BEFORE you contact the credit bureaus to fix something. That way, you only have to deal with them once.

3. If the creditor has not responded within 30 days, the entire account will be removed from your report. They will remove accounts that they cannot verify. I had a very old joint Home Depot account. I was removed several years ago from the account, and a couple months later, the card holder was late on a payment. It dinged my credit report and it showed that it was an open account. It took me 5 calls to Home Depot credit services to get it fixed. Because I was no longer on the account, they couldn’t tell me anything about the account. If you find yourself in this situation, my suggestion is to call the creditor and ask them to pull up any information they have on you based on social security number. If they do not have your social security number in the system, then that means you owe them nothing and are not one of their customers. Because I worked through that, when the credit bureaus tried to verify the information, it showed as an invalid account and was removed entirely from my credit report. It may not happen like that all the time, but even a slight mistake like that is something to dispute.

Now if the debt is legitimately yours and if the creditor just didn’t respond in enough time, then it can come back if the creditor reports it again. Sometimes things will be removed and then re-reported and end up back where it was. So it’s always a good thing to do all of your follow up.

Opt Out

One great feature with credit reports and credit bureaus is that you can now opt out of pre-screened offers. You know, all that junk mail that fills your mailbox….it can all be gone. By calling 1-888-567-8688 (1-888-5OPTOUT), you can have your name removed from pre-screened offers for insurance and credit. This is good for 2 years.

To permanately opt out, send a letter to each credit bureau, requesting to be premanently removed from pre-screened offer lists, and they will never bother you again. I highly suggest doing this - especially since we're all planning on living a debr free life. A life without chains.
























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