For individuals with already shaky credit, it may mean that the application is denied outright. This is because many lenders would rather avoid any potential risk associated with disputed listings, and won’t take the effort to perform what is known as manual underwriting in order to get a more accurate picture of your situation. To make matters worse, the dispute does not have to be related to the removal of an item on your credit report – if you have an ongoing dispute over the amount of a bill, or fraudulent charges, you may also be rejected by the automatic underwriting system.

So what can you do to minimize the chances that your application will be denied, while still taking advantage of your legal right to a fair and accurate credit report? If you plan on disputing an item, and you already have decent credit, it may be in your best interests to hold off on the dispute until after your mortgage has been approved.

If you have an ongoing dispute, be up front about it with potential lenders – most will be able to tell you right away if they’ll be able to process your loan application while the dispute is in effect. And lastly, if you do dispute an item and the company agrees to make the adjustment, follow up to be sure that your creditor removes the disputed item notation from your credit report. Even if the account is no longer in dispute status in their system, a dispute notation on the credit report could cause your loan application to be rejected by the banks.

If you are currently using the services of a credit repair company, make certain that they are following up with your accounts to ensure that any successful disputes are taken care of, and that the notations are removed from your credit report in a timely fashion. By being vigilant, you can enjoy both increased scores and increased financial opportunity.

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Tip 1: Ask questions to any prospective credit repair company before you sign up for service.

Make certain that you know what you are paying for, and how your credit report will be handled. Be certain that any credit repair company you choose has a privacy policy and security in place to protect your sensitive information. Stay away from any company that refuses to tell you any details about their credit repair services, or that claim they can remove accurate information due to “special relationships” with creditors and credit bureaus. These types of offers are always a scam – there is no credit repair company that can remove accurate information due to special ties with any of the credit bureaus, and creditors do not maintain special relationships with credit repair companies.

Tip 2: Don’t pay large fees up front.

Credit repair companies that charge thousands of dollars up front are almost always a scam. People who pay generally see little if any action on their case, and often these companies disappear as soon as the complaints start to roll in. Charging high fees up front is illegal when it comes to credit repair companies, so if the price seems unusually high, stay away. Additionally, stay away from any credit repair company that does not uphold the legally required grace period when signing up for credit repair services. If you change your mind within the first few days of your contract for their service, you have the right to cancel and not be billed.

Tip 3: Do your research.

Is the company registered to do business in your state? Are they a member of the Better Business Bureau? Do they have any clients that you can contact as a reference? While the answers to these questions may not identify all potential scammers, any company that has problems following state and federal laws should be avoided at all costs. If they don’t follow the laws in regards to providing their service, chances are good that they won’t be working in your best interests. When considering any credit repair company, always check both online and offline sources for any information that may point to a scam – don’t stop at online complaint boards, as an absence of complaints is not a guarantee that the company is trustworthy.

If you follow these three tips when you are looking for a reputable credit repair company, you’ll save yourself time, money, and financial security in the long run. By weeding out the scammers from legitimate credit repair businesses, you can rest assured that your investment in your financial future is a sound one.

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Under the new credit card regulations, companies are forbidden to change interest rates on pre-existing balances for fixed-rate credit cards. However, many credit card companies are switching to variable rate cards for most of their customers. This means that as the prime interest rate rises, so will the amount of interest you pay on your credit cards. This ultimately leads to higher balances which are harder to pay off, and in turn can damage your credit score by causing you to utilize more of your available credit limit than you normally would.

If your credit card company switches you from a fixed-rate credit card to one with a variable interest rate, you can reject the change. However, in most cases this means that your credit card will be canceled at the end of the current agreement cycle. When this happens, if you’re still carrying a balance on the credit card your credit scores will drop due to the fact that your credit report will show a balance higher than your available limit on that card.

When dealing with a credit card that has been switched to a variable interest rate, it’s generally in your best interest to continue making payments until you have paid the balance of that credit card entirely. Then, if you decide to cancel the card you can do so without having as much of a negative effect on your credit report. Currently, because interest rates are generally low, you may even be able to save money versus your fixed interest rate, assuming you can pay the card off in only a few months.

Another option which may help you to keep your credit scores healthy is to pay off the variable rate card, and then use it for purchases that you can pay in full each month. This will help to prevent any reduction in your credit limits, as well as avoid ‘inactivity’ penalties that some banks have begun to assess. If you have credit cards that you haven’t used in several months, now is the time to do so. Make a small charge to keep the account active, and pay it off as soon as possible. Otherwise, you run the risk of owing fees due to inactivity, which can pile up and cause late payments and higher interest rates overall.

Regardless of whether you decide to keep the account or close it, the important thing to remember is to keep the account open until the entire balance is paid off. In this way, you’ll avoid a major hit to your credit scores, which will save you money on any new credit that you apply for.

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Protecting Your Identity

Because credit repair companies must handle sensitive information in order to help you improve your credit scores, it pays to find out exactly how they secure your information, and what type of policies they have in place to protect your identity. Stay away from credit repair companies that don’t have a clearly visible privacy policy, and/or don’t have any method of contact other than email. Ideally, you want to be able to contact the company via telephone and an actual physical address – not just a P.O. Box. By establishing a physical presence that is easily located, a reputable credit repair company is one that will be around for the long-term.

Online Precautions

You should be able to get answers about the methods used to secure your data, about encryption on the company’s website (if they have one) and who has access to your data, and when. You should also be able to revoke access to this data at any time, if you choose to end your business relationship with the company. Check the security certificates of the website – they should be current, and they should match the name of the website and the credit repair company. Be wary of any company that has an invalid or expired security certificate – without a valid certificate, your information is not safe.

Company Policies

Different credit repair companies will have different policies when it comes to how your information is handled. You should find out who will have access to that information before you sign up for service. While the credit repair company may take appropriate security steps, third-party vendors with access to your information may not, and this can cause troubles with identity theft down the line, if unauthorized people are able to view your information.

The Final Choice

When deciding on which credit repair company to use, always factor in the security of your personal information. Credit repair can benefit you in many ways, including improved credit scores, lower interest rates and better rates on insurance to name a few. Always make sure that your final choice for credit repair is one that protects these benefits by protecting your identity as well.

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However, some borrowers are discovering that these mortgage readjustments and loan modifications are having a detrimental effect to their credit scores. This is because loan modifications are reported as partial payments, and may even be reported as late payments by lenders. Under the Credit Data Industry Association rules, loan modifications are typically reported as a partial payment, which can lower your credit score 50 to 100 points, or more, depending upon your particular situation.

Unfortunately, lenders are not required to tell you that they will report your loan modifications as a partial payment or a late payment. You may not find out about the damage to your credit scores until you attempt to apply for new credit or see lower limits on the credit that you are to have. Even if you make all agreed-upon payments under the new loan modification consistently on time, you may find that your credit report shows you as delinquent with regards to your mortgage payments. The only way to correct this is to contact the lender directly — the credit bureaus have no control over how your loan modifications are reported to them.

So what can you do to protect your good credit score if you need to have your mortgage modified? Your best option is to speak directly with the lender and find out how your loan modifications will be reported. By working directly with your lender upfront, you may be able to avoid the damage to your credit scores. If you are already taking advantage of a loan modification, it’s in your best interests to check your credit report and be sure that your timely payments are being ported accurately by your lender. If your bank has a policy of reporting loan modifications in a manner that is detrimental to your credit scores, you may wish to try to negotiate more equitable terms for your particular situation. Some banks are willing to work on a case-by-case basis with borrowers, so you may be able to get your credit report adjusted if you speak directly with the lender.

A final option is to place a notation on your credit report, detailing your situation. While this may not make a big difference in your actual credit scores, lenders who pull your credit report will have a more accurate picture of your current financial situation, as well as an understanding of your commitment to pay your creditors on time. By being aware of the potential damage to your credit scores before you enter a loan modification agreement, you can take steps to minimize the negative effects.

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Most, if not all, of these offers are scams — you pay the money and you receive nothing in return. The most famous of these “no FICO” credit card companies is a known scam, and the Attorney General has made an arrest in connection to the fraudulent credit scheme.  London Exchange, based out of Santa Ana California, has allegedly scammed consumers out of hundreds of thousands of dollars. The owner of this company is currently under arrest; however, there are no details about whether or not the consumers who were scammed can expect to see any of their money returned.

However, even if some of these “no FICO” arrangements are legitimate, they do nothing to help you improve your credit score, and in fact may only cause more financial troubles down the line. Because you essentially sign an agreement to be responsible for the trade line, you could be held responsible for other individuals’ payments on the same trade line. So if one individual on the agreement racks up debt and then defaults, everyone else using the trade line may then be charged and held accountable for that default.

Assuming that everyone pays as agreed and no one defaults on the trade line, there are still problems – namely, that all of your timely payments are doing nothing to improve your credit scores, or help you to reestablish a solid history of repayment on your credit report. The bank issuing the trade line does not report these payments to the credit bureaus, as the credit is never applied for in your name. While some individuals may see this as a benefit, due to the fact that it will not show up as a financial obligation when someone pulls the credit report, it still must be listed on any applications for new credit, and failure to do so could be considered fraud.

Credit troubles are becoming more common in the current economy, as individuals who may have had excellent credit scores in the past struggle with unemployment, rising housing costs, and other financial issues. As credit limits are lowered even for individuals with an excellent history of repayment, and people continue to look for alternative methods of financing, one can expect these types of scams to continue. Your best option when it comes to evaluating any potential extension of credit is to be vigilant with your research, and to turn down any offer of credit that requires high fees up front.

Source: http://ag.ca.gov/newsalerts/release.php?id=1813

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Last Minute Interest Rate Hikes – Many credit card companies sent out notifications detailing higher interest rates and other terms in advance of the new credit card laws. Some of these notifications may be confusing to consumers, due to the fact that the listed changes may not take effect for several months. Here’s the bottom line: if you received a notice of a change to your credit card’s terms before August 20th, you only have 15 days to opt out, even if the proposed changes don’t take effect until months later. Don’t wait to take action, and be sure to read the fine print in order to avoid having your account closed, or assessed additional fees.

Changes to Minimum Payments – Some credit card companies are also raising the amount you have to pay each month if you carry a balance – up to 5% from the typical 2-2.5% seen in years past. While you can’t always opt out of these changes, in some cases you may have the option to write in and retain your old rates. Be careful with this option, however, as some companies will close your account if you opt out of their new terms.

Increased Penalties for Late-fees and Over-limit Fees – While these types of penalties are easy to avoid if you pay your bills on time and stay within budget, credit card companies are also reducing consumers’ credit limits without providing any notice. Because the credit card companies aren’t required to inform you about changes to your credit limit, you could rack up over-the-limit fees without realizing it until your statement arrives in the mail. Your best defense against this is to sign up for alerts that will let you know when you are approaching your limit, coupled with regular vigilance through online access or customer service, so that you always know your limit before you go shopping.

Another way to avoid paying extra: Opt out of over-limit purchasing altogether.  Companies are now required to allow you to do this, but you will have your credit card declined for any purchase if that purchase would take you over the limit. If you typically keep your balances low, but aren’t sure about your credit limit, this is one way to avoid getting hit with additional fees.

Most credit card companies allow for automatic payment of your bill, either in full or the minimum balance, monthly. By taking advantage of these programs, you can eliminate the chance that you’ll be charged a late-payment fee on your accounts as well. Just keep track of your due dates and be certain that you have the funds readily available to cover the automatic bank draft, or you could wind up paying just as much, or more, in overdraft fees from your bank.

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While changes in interest rates require a notice, these reductions to your credit limit can come without warning, leaving many uninformed about the reduced limits until they receive their monthly statement. Reductions of hundreds or thousands of dollars are not uncommon, and can really put a dent in your credit score, regardless of how responsible you are when it comes to making on-time payments each month. What’s worse, you may be hit with over-the-limit fees on newly reduced balances, when your original spending was well-within your old credit limit.

Many consumers are surprised to realize that unlike interest rate changes, changes made to the credit limit can be done at any time, without informing the consumer. This means that even if you have a $1000 credit limit today, there is nothing stopping the credit card company from lowering that limit to $800, or even $500 tomorrow. The only way to stay informed is to check your account information regularly. If your credit card company offers online access to your account, it may be helpful to check your credit limit in this way.

Another option is to set up an alert that will send you an email or text message when you are approaching your credit limit, but this may not be as helpful in terms of saving your credit. Why? The ratio of how much you spend on your cards, versus your available credit limit is a factor in calculating your credit scores. If you wait until you are only a few hundred dollars away from your limit to set an alert, the damage to your credit score may already be done. While you will avoid any sneaky over-limit fees, you won’t be able to prevent the hit to your credit score that comes from over-utilization of available credit.

If one credit card company reduces your balance, others may follow suit as your available-credit-to-debt ratios will now categorize you as a higher risk. While the logical option would seem to be avoiding the use of your credit cards altogether, this choice can backfire, as many credit card companies are actively closing accounts that do not have any activity after a few months. Your best option is to continue using your cards, and pay off the balances each month if at all possible. This will keep you from having an account closed for inactivity, and it will also keep you from being targeted for credit limit reductions due to carrying a balance each month.

While there is no law that requires your credit card company to keep you informed about your credit limit, you can remain informed by keeping a close eye on your balances, either online or via customer service. Don’t let surprise credit limit reductions derail your good credit – set up alerts, check your balance regularly, and pay off as much as you can to avoid unpleasant repercussions.

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Your credit score is not determined by any one type of credit. Loans, credit cards, and other financial obligations all play a role. In general, credit cards are an important aspect in boosting credit scores because credit cards are an ongoing gauge of how well you pay back your debts, how you manage debt, and how responsible you are when it comes to spending. If you can maintain low balances, pay your credit card bills on time each month, and maintain a solid history of repayment, your credit scores will rise.

Getting rid of credit cards in an attempt to boost your credit scores will backfire. A better option is to choose one or two cards with a decent interest rate, and keep those accounts open and current. You don’t need to charge much – it’s actually better if you keep your purchases anywhere from 10% – 30% of your overall credit card limit. This demonstrates to creditors that you can be responsible with the credit you are given. It also makes it easier for you to pay off the credit card in full each month, which is another way to rebuild your credit scores.

If you have several credit cards, you may wonder which cards are best to keep, and which accounts (if any) you should close. In general, keep your credit card account open if:

You’ve had the card for several years. Having a long credit history is more beneficial than having a short one.

You have a balance on the card. Canceling an account while you still have a balance can wreck havoc on your available-credit-to-debt ratio.

The interest rates are low. Lower interest rate cards can not only save you money, but they can make it easier for you to stick to your repayment goals as well.

When should you cancel a credit card? In general, if the interest rate is high, or if the credit card company uses double-billing, it’s probably a good idea to get rid of that card as soon as the balance is paid off. The only exception to this is if the credit card is one with a long credit history. You don’t want to cancel your oldest cards, so in this instance, your best option would be to charge a very small amount on the card each month, and then pay it off again as soon as possible to avoid the extra interest hit.

If you are trying to rebuild your credit, you don’t currently have a credit card, and don’t think you can qualify to get one, try a secured credit card instead. With a secured card, you put down a deposit for a specified amount (usually anywhere from $200-$500) and in exchange you receive a credit card with a limit equal to the deposit. Charge only a small amount on the card, and then pay it off each month – this will let you build your credit, even if you don’t initially qualify for a regular credit card.

Regardless of which route you choose, getting and maintaining a credit card account is an essential part of any credit repair plan. Don’t assume that all credit is “bad” credit. If you want to be successful in increasing your credit scores, you’ll definitely need a credit card – just be sure to pick one that’s easy to manage, and don’t let the balances get out of hand.

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Your first and likely best option is to write your creditor and request a pay-for-deletion arrangement. In the letter, offer to pay a percentage of what you owe provided that the creditor agrees to remove the charge-off from your credit report. If the debt is fairly recent, you may need to offer the full amount as payment in order to get the creditor to agree. Not all creditors will agree to this type of arrangement, but if they do, be certain you have the pay-for-deletion agreement in writing before you send in your payment. You will have to use certified funds in this type of an arrangement, so be prepared take the extra step of purchasing a money order or cashier’s check. This option works best, because the derogatory credit history will be gone from your report as if it never existed.

Your second option is to arrange for the debt to be listed as ‘Paid in Full’ on the credit report, in exchange for payment. Just as with a pay-for-deletion agreement, you must be certain to get this in writing, especially if you work out a payment arrangement that is less than what you owe. The ‘Paid in Full’ listing will improve your credit score, but not as much as having the derogatory information removed entirely. What you do not want is a listing of ‘Settled’ on the account, as it indicates to other creditors that you do not fully meet your credit obligations.

Your last option, if you cannot work with your creditors in any other way, is to pay off the debt in full, with appropriate account numbers, reference numbers and any other necessary information included with the payment. Make copies of everything, and once the payment clears, you can dispute the listing on the credit report to have it updated as ‘Paid in Full’. Keep in mind that you must provide proof that the debt was entirely satisfied in order for this method to work, so you won’t be able to make a payment that is less than the full amount owed if you want this to be successful.

One final note: charge-offs remain on your credit report for up to 7 years. If the date for the charge-off to be removed from your credit report is close, you may wish to wait for it to be removed from your credit report entirely. This is true whether or not you ultimately decide to repay the debt, because repaying older debts can cause your credit scores to drop temporarily.

Getting your credit repaired can take some time if you have several charge-offs. Be patient, wait for the written agreement, and make the payments in certified funds in order to obtain the best results.

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