Credit Industry Insiders Black Book into Credit Repair and Credit Scoring

Background In recent years we have heard a lot about credit reporting, credit repair and credit scores. Yet, there has been very little if any at all on how to read a credit report, how to repair your own credit and how to manipulate the credit-scoring model to receive the maximum score possible. What you have been told, taught and instructed to do is pay other people for this advice when in fact you could have done it all yourself if only you knew how. Thats what this volume is about. First of all, you need to know who I am, what makes me a credit insider and most importantly, why should you pay any attention to me in the first place. My name is Ryan Nickel and Im a Certified Family Financial Counselor and Credit and Divorce Planning Specialist. Over the past 6 years Ive sat in counsel with hundreds if not thousands of families and taught them about finances and credit. Early on it was apparent to me that the credit information that I was giving them wasnt correct and wasnt working, not to mention was conflicting with other credit advise out there. I decided to hire a credit restoration attorney for $15,000 to learn his secrets of credit repair. I was surprised at how little the amount of information he actually had to offer me. In fact, I wasnt surprised I was all out shocked! I was stunned almost to the point of vomiting. I couldnt believe that I had just invested $15,000 for what I thought was a joke a 7-page document on how to repair credit. Truth be told, everything in this little portfolio has proven to be 100% accurate. Who would have known? From there I was introduced to John Ulzheimer, one of the main insiders for Experian and FICO and other credit industry experts, who I converse with on almost a daily basis. That wasnt enough for me. I then decided to go undercover. The nations largest credit repair firm hired me. It didnt take long to become abreast to their manipulation secrets. I learned from the best how to strong-arm a client into a credit repair WITHOUT addressing their main issues. This careless attitude toward their client resulted in years if not a lifetime of repeat clients. Credit and Divorce 2010 www.creditanddivorce.com

How sad! Instead of teaching them where they were going wrong financially, they just cleaned up the mess waiting for the next go around to do it again. Needless to say, I was subsequently fired for lack of production. I knew how to permanently fix reoccurring credit problems and this is not what I was hired to do. I was hired to create lifelong clients for the company. This brings us to more current events. In 2003, the Fair Credit Reporting Act (FCRA) had an amendment added to it that gave every American one free credit report annually. This amendment was passed because of the number of errors on individual credit reports. An independent research firm found that over 73% of all credit reports contained errors substantial enough to cause denial for credit. However, what most people didnt know was that the FCRA was originally passed by congress and has been in effect since 1970. It wasnt until 2003 that we had access to those records to actually verify that things were correct or not33 years later!! One of the most important things to keep in mind is that over those 33 years when we didnt have access to our credit reports, creditors have adopted and set in place policies that have become sloppy, archaic and dishonest. Without anyone to police or even verify their actions it was only a matter of time before they all became corrupt. After hearing years and years of complaints, congress to finally got fed up and did something about it. However, as were learning, having access to your report doesnt do you a whole lot of good unless you know what it is that youre looking at. In other words, unless you know how to read the reports once you get them it does you no good. This is the most important reason for you to have this report in your hands at this time and to follow its advice. You need to protect yourself and your credit and heres how to do it How to Get Your Report You will need a copy of your credit report. You can get a copy of it at several places. 1.) If you have been denied for a home mortgage lately you can obtain a copy of your report from the institution that denied you. 2.) Youre entitled to one free credit report annually and can go to www.annualcreditreport.com 3.) You can purchase it at www.myfico.com/12. The cost for this report is $50. This site not only gives you your score but it gives you the 12 reason codes why your score is what it is. I advise everyone to purchase this type of report at least once every 24 months or 6 months prior to a major purchase.

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How to Read Your Report

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OK, so what you see above may look like a lot, but its really not. First off, what you see is the score and reason codes for the score given by all three credit bureaus Equifax (EXF), Experian (XPN) and TransUnion (TUC). Let me break one down for you

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These are the findings from Equifax. Here the score is 586. After the score are the Factors. These are the reason codes for the score being what it is. Below the score and factors are again the reason codes with their definitions. You will see that the reason code 38 for Equifax is for serious delinquency and so on for each of the 4 reason codes for each of the 3 credit bureaus.

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Above you will see something similar on your credit report. The way to read this part of the report is rather simple once you know what youre looking at. Whats important to know?

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This is the name of the creditor that is reporting on your credit report along with your account number. No need to worry about privacy issues here, this is a collection account. Im sure the owner of this account would love for this account to be used in error somewhere so that he could remove it completely from his file for good.
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This J is one of the Equal Credit Opportunity Act (ECOA) Codes. This J signifies to you and the credit bureaus that this is a Joint account and that it is also reporting on someone elses report as well. If you look under account 2 there is an I. This means that this particular account is an Individual account. Below is an ECOA break down for each of the 3 Credit Bureaus

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What you want to do is make sure that youre being reported for Joint and Authorize User debt. However, if you are being reported as an Authorized User and that account is maxed out or delinquent in any way. You want to get that account off your report as soon as possible. You are able to have your name removed from that account simply by calling the company that is reporting it. This is something you want to do immediately, because it negatively impacts your score. Some companies will have to speak to the primary cardholder in order remove your name. Dont let them bully you if youre not able to have that person contact them. Hang up and keep calling back till you find someone who is willing to work with you and help you out. So far the record is 6 subsequent hang-ups and call backs. Will you be more or less? Below is the account history.
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Because all of these numbers can get overwhelming and tricky, here is what the reporting history numbers mean

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Now What? Go through and mark everything that youre unsure about with words or phrases like incorrect, out dated, inaccurate or dont know. Once youve completed this step its time to write your letter of dispute to the bureaus. The credit bureaus contact info is found on the last few pages of your credit reports. However, just incase of any misunderstanding I have again provided them here for you Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374-0256 Experian P.O. Box 2002 Allen, TX 75013 Trans Union Consumer Relations P.O. Box 2000 Chester, PA 19022 You will need to provide the account name, account number and the reason for the dispute. You MUST be specific or you will not get the desired results.

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I have included a sample dispute letter for you. The simpler the letter the better; keep in mind that theyre looking to flag credit repair agencies. What Youll Need to Dispute What you need to provide 1.) 2.) 3.) 4.) Full Name Social Security Number Date of Birth Current Address

The best way to do this is to use your Social Security Card to verify your Social Security Number and Full Name. Use your Drivers License to verify your Date of Birth and use a Utility Bill to very your current address. If you dont have your Social Security Card handy you can use a pay stub or W-2 to verify your SSN. Note only mail in copies of each document. You will have to mail all of these documents in along with your first dispute letter to each of the 3 Credit Bureaus. Once youve sent these documents in there will be no need to resend them in the future. If you do not send them in the first time, you will get a letter from the Credit Bureaus stating that they were unable to investigate your claim because they werent able to verify your identity.

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Sample Dispute Letter Your Name 123 Your Street Address Your City, ST 01234 The Credit Bureau Bureau Address Anytown, State 56789 Date Dear Credit Bureau, I recently requested my credit report and after reviewing it found several items incorrect on it. I am upset that this has happened. I expect you to correct these items immediately and to send me an updated credit report showing me that the incorrect items have been taken care of. Sincerely, your signature Your Name SSN# 123-45-6789 Attachment included. Items in dispute: CREDITOR AGENCY acct. 123-34567 This is not mine, Never late or More than 7 years old.

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What to do if your dispute didnt work Often the case is that you will receive back a credit report from one of the 3 Credit Bureaus and there will be little to no changes made. This is normal and should be expected. The first dispute is a probationary dispute. The Credit Bureaus perform a very basic and informal investigation of your creditors. If there is an obvious error or no response from your creditors those are the items that get fixed first. You will have to continue to write and dispute the items not corrected several times. On average when disputing for my clients I have to dispute 4 times before we see results. Maybe theyll go away if I ignore them This is the mentality of your creditors. The way the FCRA is written is that if you dispute an item with one of the credit bureaus, they will then contact the creditor in writing to verify the claim. The creditor then has 30 days to respond back in writing to the credit bureau their findings. If the credit bureau does not receive their response back in time they will send you an updated credit report with the item deleted. However, the creditor can just re-report the item the following month. So you will have to re-dispute. This time the investigation that is performs is very similar to this Credit Bureau: We have a dispute from Mr. SoandSo whose account is 123ABC. Creditor: Yes, we have that account from Mr. SoandSo. Credit Bureau: They say they werent late. Creditor: No, they were late. We have it in our system that they were. Credit Bureau: Ok, well continue to report it as you say. This is the nonsense that continues on and on until about the 4th letter or so. The creditors philosophy is that maybe youll go away if they ignore your letters. What you will have to do is to progressively get more aggressive in your letters to the Credit Bureaus. Credit Scores Weve been reduced to a 3-digit number. Credit is used for just about everything. If you want to activate your utilities, begin a cell phone contract or even acquire insurance it is ALL dependent on your credit. Your credit score will indicate if you have to pay a deposit or not and how much your monthly premium will be for insurance. Gone are the days that you will only need to have credit for a home or auto purchase. It is everywhere. Credit scores range from 300 to 850. The following will help you understand where you stand with your score. Credit and Divorce 2010 www.creditanddivorce.com

850 720 680 620 500

= = = = =

Highest Outstanding! Good Danger! Needs Work

Forget about having an 850, they dont exist. The highest Ive seen has been an 842 and no its not mine. However, if your credit score is less than a 680 you and I need to talk at some point if youre unable to utilize the information in this report to your advantage. What factors the score? 35% 30% 15% 10% 10% = = = = = Credit History Debt Ratio Credit Length Credit Type Inquiries

Let me break down what each of these 5 categories mean to you and why you need to know them. Credit Historythis portion of the score reflects your on-time payments. Most of us have this section under control. A late payment is only when you pay 30 days after the due date not when you pay extra because youre a few days later than the due date. So what happens if you missed a payment by 30 days accidentally? This happens from time to time and can cost you as much as 70 points. Not to worry. If this was an isolated occurrence you can call your creditor and say that it was an isolated occurrence and ask them to remove the late payment based on your past performance and payment history. Nine out of ten times they will work with you. Debt Ratiois the next largest portion of what goes into the score and is the least understood. Debt Ratio mainly applies to those accounts that are revolving such as credit cards or home equity lines of credit. What it takes into account is the ratio between debt being used (your balance) and available credit limit. For example, if you have a credit card with a $1,000 limit and a $500 balance you have a 50% debt ratio. The closer you get to 100% the lower your score will be and vise versa. A side note, this mainly pertains to credit cards and not home equity lines of credit. Equity lines of credit are treated as mortgages and are scored differently. There is a misconception out there that if you dont owe anything on your credit cards and you have a high credit limit that you should reduce the limit or close that account. First off, lowering the limit doesnt change the debt ratio if you have a zero balance. It will Credit and Divorce 2010 www.creditanddivorce.com

definitely hurt your score if you carry a balance and lower your credit limit. By doing so you would have increased the debt ratio. Again in our example of $1,000 limit, if you were to lower it to $800 and keep your balance at $500 you new debt ratio would be 62.5%. Thats a 12.5% increase, which would reflect negatively on your report and lower your score even more. The rule of thumb to live by is to have high limits, low balances. What happens if you close out a revolving account? This too hurts your score. In fact its even more devastating to the score than missing a payment. The reason why is because once you close out a revolving account you not only lose the debt ratio (30% of the score), but also the credit history (35%). Thats 65% from that one account! Credit Lengthis length of time your account has been open. It almost seems impossible for someone to get credit when they dont have any credit. Weve all experienced this at one point in our lives or another. No one is willing to take a chance on them, at least not for normal rates and fees. For this there is the authorized user. You usually will add your spouse as an authorized user to one of your accounts to build his/her credit or give them the ability to purchase with his/her own card. You can do this for your children as well. In fact, you can sign them up as an authorized user and the credit card comes to you as the account holder and you never have to give it to them. In the mean time, your children are able to build their credit under your account. Two words of caution, first, if your debt ratio is high or your payment history isnt clean, this is not a good idea. Second, the credit bureaus have caught on to this little trick and are in the process or fixing the authorized users loop hole. However, whether it helps your score or not, it shows creditors that you have established some credit history which will place them in to a situation where they would be more likely to grant you more credit. Credit TypeWhat types of credit does the credit report like to see? It likes to see a mix. Usually a mortgage, auto loan and some credit card accounts will do. The more in the mix the better. However, you shouldnt go out and acquire more debt just to have a better mix, because new debt lowers the score as well. InquiriesThese are looks into your credit history that you authorize when applying for more credit. Inquiries are looked at as indicators that something financially might be happening one way or the other to other creditors. If youre applying for a home or auto loan an inquiry alerts creditors that youre getting ready to make a major purchase and they will become more competitive. However, on the other hand if youre applying for several credit cards in a relatively short period of time that lets creditors know that something unseen in your financial picture has changed and youre looking for more access to credit to stabilize yourself. This sends red flags to creditors. Credit and Divorce 2010 www.creditanddivorce.com

It is here where the biggest misconceptions lie. The prevailing notion is that the more I check my credit or others check it the more my score will drop. This isnt the case, mainly because it only makes up 10% of the score. Creditors are just less likely to extend it. You are allotted 10 pulls, or inquiries, every 365 days. Any thing from 11-100 dont impact the score if all done in that same 365 day window. However, if youre shopping for a home loan or an auto loan you have a 45-day window where all inquiries are considered the same. You might have been told not to shop around because it would lower your score. That simply isnt true. Its a scare tactic from an insecure sales person or coming from someone who isnt informed. Either way I would steer away from them. Nobody wants do business with a bully or an idiot. Find someone who knows what theyre talking about. A few words about ID Theft Dont be fooled, this can be one of the worst things that can happen to you financially, and its also one of the easiest to clean up afterwards. It amazes me how many companies make a fortune on the fears of others. Because of my disgust for these types of companies Ive included sample letters for your use to dispute any ID Theft issues you might encounter in your life. There is no reason to pay a company $15/mo. or more just to monitor your credit or give the illusion that theyre protecting you in ways that you cant. As a side note, if you find it hard to get a police report from the police department, you can get one from the post master at your nearest post office. Next to family members the most popular way to steal someones identity is through the mail. Ive yet to run into a post master who wasnt willing to help you fill out a report for a claim of ID Theft. Still need more help If you find yourself overwhelmed with the process of keeping track of all the paper work in the dispute process you can hire our firm to help you. It can be overwhelming, we know. This is why we have created an automated service that allows for us keep our fees low. We charge $297 for an individual and $397 for a couple for six months. Youre not paying for our knowledge, since its all in this report, just our time. Because its our time there will be no refunds for this service. Feel free to contact my office at (916) 802-9977 or email us at ryan@creditanddivorce.com.

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