Just recently FICO released data showing that over 25 percent of consumers now have a credit score of 599 or below. That’s a whopping 43 million people that are considered subprime and what’s even more startling is those numbers continue to climb.

Credit scores play such an integral role in our country’s credit system and more consumers need to be aware of how today’s financial decisions will impact tomorrow’s borrowing potential.

In FICO’s world ‘damage points’ are applied to a consumer’s credit score when there is evidence of financial hardship or patterns of risky behavior. Some ‘damage points’ can cause a minimal 10-20 point drop in your scores while others can downright cripple your chance of getting any credit because of a 200 point drop.

Now the real question that plagues consumers is what types of mistakes or patterns trigger ‘damage points’ and how can they go about avoiding the most common mistakes.

The closest thing to address this widespread confusion is by using FICO’s score simulator which basically allows you to see what type of drop or increase you will have on your credit score if you take certain actions.

While it does prove to be helpful it barely scratches the surface when you compare all the other scenarios that you may encounter.

To help you gain a better insight into FICO’s scoring model I have assembled some key tips and strategies that you may find useful.

Leverage your highest credit score

Find out what your credit scores are with Equifax, Transunion and Experian. Once you identify which score is the highest use it to your advantage when applying for credit.

For example, let’s suppose you have an Equifax score of 680 but only a 650 and 645 with the other two agencies. Apply for credit with a creditor that pulls from Equifax so you get the best available rates. It’s that simple!

Lower Overall Debt to Credit Utilization

You can lower your overall debt to credit utilization by paying down your balances and increasing your credit availability. By increasing your credit utilization you can raise your credit scores in a matter of weeks.

Avoid Excessive Inquiries

You can drop your credit score a few points with excessive credit report inquiries. Be sure to review what ‘hard inquiries’ are listed on your reports and take the necessary steps to remove unauthorized ones.

Dispute Inaccurate, Erroneous or Obsolete Information on Credit Reports

Review your credit files and if you uncover any information that is incorrect be sure to file a dispute with the consumer credit agency and repair your credit. A single derogatory item that is incorrect can cost you ‘damage points’ towards your credit score and may end up costing you thousands of dollars in unnecessary interest.

There are many other ways you can maximize your credit scores but one in particular that the majority of business owners need to pay close attention to is business debts reporting on their personal credit files.

This has a dramatic impact on your personal debt to credit utilization ratios along with a host of other factors that can hurt your chances of obtaining personal credit. It’s just smart business to separate your personal credit from business credit otherwise your scores will reflect an entirely different picture of you financially.

Ready to repair your credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to personal credit recovery services, vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners build small business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Out of the 88 negative rating factors that can hurt your credit score one in particular that I would like to cover in this post are inquiries.

In the credit scoring system inquiries are given two types of classifications one being ‘soft inquiries’ and the other ‘hard inquiries’. Let’s cover these two briefly:

Soft Inquiries

These inquiries do not affect your credit score so don’t be alarmed if you see a lot of these on your file.

There are three main types of credit checks that fall into this classification.

1. Personal – When you order your own credit reports or scores directly from the major consumer credit agencies or myFICO.
2. Promotional – Businesses that check your credit for promotional purposes use the data in order to solicit its products or services such as those pre approved credit card offers you find in your mailbox.
3. Procedural – As part of its procedure a company or lender that you currently have an established account with may periodically check your credit in order to either extend additional credit or look for signs of financial distress.

Hard Inquiries

A hard inquiry is what negatively impacts your score and according to myFICO one additional hard inquiry for some people may take up to but not more than 5 points off a credit score!

This credit check occurs when a creditor pulls your report as a result of you applying for credit. One important thing to remember is when you apply for credit with multiple lenders in order to search for the best rate on a mortgage, auto or student loan FICO will consider all these inquiries within a 30 day period to count as a single inquiry.

Unfortunately there’s no way to determine what impact a hard inquiry will have because it varies from consumer to consumer and is based on different credit histories.

Even though hard inquiries can stay on your credit files for two years FICO’s scoring model only factors in those inquiries from the last 12 months. So be selective where you apply for credit because too many recent hard inquires can signal a red flag with creditors.

If you identify any unauthorized hard inquiries on your credit file then you will need to prepare an inquiry dispute letter and submit it to both the consumer credit agency and creditor. This is different than disputing information like a late payment and currently none of the consumer credit agencies offer an online dispute option for credit report inquiries.

I also suggest you send the letter via Certified Mail Return Receipt Requested so you can properly track the dispute submission and response time.

Remember the Fair Credit Reporting Act was put in place to protect you from unfair credit reporting and this includes the use of unauthorized hard inquiries.

Ready to improve your credit scores? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides personal credit recovery services, access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit builder system providing no personal guarantee business credit.  He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Last year the FTC and federal banking agencies passed the  Fair and Accurate Credit Transactions Act Furnisher Rules which imposes major new responsibilities for lenders, servicers, collectors and other financial institutions that report information to credit bureaus like Transunion, Equifax and Experian.

On July 1^{st, 2010} these new rules go into effect and needless to say they are long overdue. Here’s a quick overview of what it consists of:

Accuracy and Integrity Rule

This new rule requires that all companies who supply data to consumer credit bureaus must establish written policies regarding the accuracy and integrity of data it furnishes to the credit bureaus.

In particular I am happy to see that finally the issue of ‘integrity’ of information is being addressed. For far too long consumers have had specific information like credit limits absent from their files. When some creditors do not supply this important data it provides misleading information in evaluating the true creditworthiness, credit standing and credit capacity of an individual.

This lack of ‘integrity’ in data has for many years impacted debt-to-credit utilization ratios, credit scores, financing ability and interest rates.

This newly revised “integrity” provision requires that furnishers provide a credit limit to the consumer credit bureaus, if applicable and in its possession, in order for the furnished information to have “integrity.”

However, on the business side many suppliers and servicers supplying data to the business credit bureaus fail to report the credit limits of businesses.

Unfortunately, this provision does not address the data being supplied to business credit bureaus and the ‘integrity’ of information being supplied in this industry needs to be regulated as well.

Direct Dispute Rule

This rule now allows consumers to take their disputes directly to the company that supplied the data rather than having to deal solely through credit bureaus.

In addition, the rule also includes a debt collector that provides information to a credit bureau as well. It only makes sense because many times a company may sell its debt to a third party collection agency and consumers need to have the ability to initiate a direct dispute with them too.

Now if you are a data furnisher, you are ultimately responsible for the ‘accuracy and integrity’ of your data. Non-compliance has legal consequences so you should prepare your company to meet the new compliance requirements that go into effect on July 1^st.

You may want to check out The Consumer Data Industry Association which has a repeat broadcast event with Mr. Stephen Van Meter, Assistant Director of the Community and Consumer Law Division at the Office of the Comptroller of the Currency, and Mr. Andrew Smith, Partner at Morrison & Foerster, for a key discussion on the requirements of these NEW rules.

In their discussions they will cover the new policies and procedures that each data furnisher must establish and implement as well as direct disputes and the required content of a direct dispute notice.

Looking to maximize your consumer and business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A corporate credit builder system providing business credit services for business owners. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

In the business world, a strong FICO credit score rating is necessary during the early stages of business financing especially if your small business credit reports are not strong enough.

Due to the current economy and credit markets, banks and lenders are looking at both personal FICO scores and business credit scores. Now keep in mind that if your business credit report can stand on its own they may not require a personal guarantee but can still check your credit scores as part of their underwriting process.

By raising credit scores for both you and your business, you can expect to have much more cash credit and resources available to your company at better interest rates and terms.

One particular product that I suggest to clients in my business credit practice has proven to increase a FICO credit score rating 95% of the time in as little as 60 days, which you and I know is pretty fast.

I’m sure you’ll agree that there are quite a few services out there that promise to raise credit scores, but this is one of the few that really does get the job done.

So how does it work?

First you will need to decide what amount of credit you are looking to add to your personal credit files. Remember the larger the credit line the greater the impact it will have on dropping your debt to credit limit ratios. Currently the unsecured line of credit options range from $5k, $6k, $7,500 and $10k.

Next step is simply opening an account and making a small advance purchase based on the amount of credit you want. For example, if you select the $5k line of credit then you will need to purchase $295 worth of products.

What I really like about this program is that from your advance purchase you get to select from thousands of dollars of merchandise items on their website. So for simply purchasing $295 worth of products you are automatically receiving a $5k unsecured line of credit that reports to your personal credit report with two of the major consumer credit reporting agencies.

Now that’s what I call a solid offer for raising credit scores! Imagine if a store like Best Buy offered its customers a $5k line of credit if they made an initial purchase of $295 at its store. I know that sounds far-fetched but I’m just trying to make a point.

Once your set up you can continue to use this line of credit towards the purchase of over 4,000 books and 5,000 music selections and it’s important that you do so you can continue to build positive payment history.

I also like the fact that they offer a payment option if the $295 is a bit of a stretch for you. You can pay $195 down and $20 a month for 10 months.  Once you enroll you’ll receive a welcome package which includes a bonus cd and payment coupons if you select the payment option.

You can apply for this $5k line of credit online but if you want a greater amount then you will need to fax or email a full credit report first.

By taking advantage of this program and optimizing your scores with the credit rating bureaus the benefits for you on a personal and business level can be very rewarding. Your credit report and scores have the power to lower interest rates, give you better terms on loans and put more money back in your pockets.

Ready to raise your credit scores? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to credit repair, credit building services, vendor lines of credit, fleet cards, merchant cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A building business credit membership helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Understanding Credit Scores

Recently Corporate Experian made history by unveiling the industry’s first ever Triple Score Business Report. While this clearly marks the beginning of a new trend in business credit scoring I’m curious to see if there will be another business credit bureau that introduces its own version of a triple score business report.

Credit scoring is big business and companies like FICO have been providing its risk assessment technology for years. What really matters is whether or not lenders decide to use one specific platform over another and clearly your FICO score is the choice among most. Or is it?

When it comes to business credit scores each bureau uses its own internal scoring formula. When a lender pulls a business credit file the bureau provides a score. DNB’s score is called paydex while Experian has intelliscore and Small Business Equifax uses a Small Business Credit Risk Score.

It may come as a surprise to you but currently there is no leading business credit scoring system used in the lending industry today.

As a result lenders use FICO as another risk assessment tool in making its business lending decisions along with business credit scores. But will this strategy soon change?

I’m sure you’re aware that the three consumer credit bureaus, Equifax, Experian and Transunion formed Vantage Score Solutions as a joint venture in 2006 to offer choice and competition in the credit score marketplace.

FICO responded with a lawsuit against the credit bureaus for trademark infringement which I covered in my post FICO vs. Credit Bureaus. It was no surprise that Vantage Score Solutions had a complete legal victory over FICO in this lawsuit.

It was interesting to read Vantage Score’s President and CEO Barrett Burns’ congressional testimony on understanding credit scores yesterday. It was evident that he wanted to show the advantages that Vantage Score provides over all other scoring models.

In particular he was addressing segments of the population who has a hard time obtaining credit because they are unable to have a credit score calculated with the current scoring models.

This was broken down into the following categories:

  1.     Consumers who have less than three accounts in their credit file are considered to have a ‘Thin File’. Between 35 and 50 million consumers in the United States – 18 to 25 percent of the adult population – may be considered thin file; and, therefore, often underserved; 

  2.   Infrequent credit users, who may not be eligible for a credit score because there has not been new activity on any credit account for six months; and, 

  3.   New consumer profiles that are just establishing credit relationships and have not had credit open for more than the six months which is required by some of the traditional scoring models. 

What was exciting was the Vantage Score model showed an 8 percent increase in credit scores for 10 million consumers after doing a random score check. What’s even more impressive was 2.5 million consumers from that study were considered a much higher credit quality than subprime.

Since Vantage Score was introduced they have made some significant gains in the marketplace that not only benefits consumers but also small business owners as well. Here is a quick overview of the lenders now using Vantage Score:

• 4 of the top 5 financial institutions
• 8 of the top 10 credit card issuers
• 3 of the top 10 mortgage originators
• 7 of the top 50 auto lenders

With literally hundreds of credit scores and scoring models used by lenders it’s important for you to be fully aware of where you and your business stand across the most widely used models. Be sure to check your FICO score , Vantage Score, Paydex Score, Intelliscore and Small Business Credit Risk Score so you can be fully prepared when applying for financing.

Do you want to access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus?  Become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. A business credit services membership helping small business owners build business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Bad Credit Problem

Having a bad credit problem is something we’ve been hearing now more than ever before and it’s a label that knowone wants to be given. Some people would argue that bad credit scores are caused because of too many people living beyond their means and living paycheck to paycheck. Once the economy went south and paychecks were cut along with thousands of jobs being eliminated everything else spiraled downward including personal credit ratings.

I believe not everyone who has bad credit should be considered a bad credit risk.

What I mean by that is some people have gone through serious financial hardship during the recent economic downturn and only because of a job loss or wage cut have they started becoming late on payments or skipped payments or exceeded card limits.

But those same individuals may now be back on their feet with a new employer or maybe have taken on two jobs to make ends meet and catch up on back payments. So, a bad credit problem can be a temporary setback but never a death sentence.

There are also those who moved out of state for employment and had no choice but to walk away from their homes because they couldn’t sell it for what was owed. Some have had job offers out of state but can’t make the leap due to the eroding values of homes.

One man, who requested anonymity, had a job offer in Colorado that he can’t take because he can’t default on his $470,000 mortgage on a house now worth $220,000.

Bad credit is not only affecting consumers who have had job losses or cutbacks but small business owners have also seen their good credit fall to the wayside as well. Declining sales and scarcity of credit has also caused many to resort to using personal credit cards, personal loans and savings.

Now when it comes to getting bad credit personal loans or business loans larger banks have stiffer lending procedures compared to smaller banks, community banks and credit unions. These smaller banks provide more one-on-one access to a loan officer and put more emphasis on a borrower’s character rather than just applying a credit-score model.

There’s a combination of factors that affect your profile in a positive or negative way like payment history, balance chasing, debt to credit limit ratios, new credit, derogatory items, inquiries and so on but one of the key risk assessment tools that lenders use to determine whether you are a bad risk or a good risk is based on your FICO score.

Your FICO credit score can range from 300 to 850 with 720 or above being considered top notch credit. There are also non-FICO credit scores offered by some of the major credit bureaus like Vantage score which was created to compete with FICO but that particular scoring model has not been widely accepted by the lending industry.

Anything below a 680 is considered “sub-prime”, or a bad credit score. So the higher your credit score, the better, especially if you want to apply for a loan or business line of credit. But, each of the three major credit bureaus records your credit score a little bit differently because not all lenders report to all three credit bureaus. So you want to make sure to leverage your highest score!

A real quick example of this was one of my clients was preparing to apply for a small business loan from his local bank and prior to applying we ordered each of his credit reports and scores from all three main bureaus. His Equifax file had a 720 fico score while his other two scores were 40-50 points lower. We checked with his banker to see which bureau they pulled from for loan qualification and sure enough that particular bank pulled from Equifax. This allowed him to get approved for a loan with the best available bank rate.

Now keep in mind that in addition to FICO many lenders use their own internal scoring systems as well.

Remember, a bad credit problem is temporary and you can recover from it when you have a personal credit repair plan and a solid strategy.

Business Credit Resources

» Start Business Credit

» Business Credit Help

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

All across the country I have heard stories like Joanna Fridinger, owner of a limo company in Baltimore, who had the credit limit on her American Express card cut to $1,400 from $19,500 after getting just a single late fee on another credit card.

You’ve probably seen headlines like…

‘2009: The Coming Meltdown. Part Four: Consumer Credit’ ~ Bankruptcy law network

‘U.S. Consumer Credit Card Debt May Crash Economy’ ~ Fox News

‘Credit card hike fright: Banks raising rates, even if you’ve paid on time’ ~ Daily News

‘Some Credit Card Companies Profiling Customers’ ~ ABC News

‘Consumers’ Credit Card Limits Slashed as Companies Try to Reduce Risk’ ~ the Washington Post

With all this circulating the media it’s easy for some people to be influenced to believe that there is no hope and no way to get back on track.

In my opinion that’s a bunch of hogwash and stinking thinking that does nothing but perpetuate negative results.

There is no challenge that you can’t overcome!

When it comes to personal credit challenges there are several alternative solutions that each and every individual should consider.

In this particular post I am going to cover one of the many viable solutions for individuals undergoing personal credit challenges.

First, let me say that this is my personal opinion and after working with thousands of consumers on personal credit issues over 18 years one of the most commonly asked questions I hear is ‘ How can I get my personal credit restored?’

Before I get into this highly misunderstood service called ‘credit restoration’ or ‘credit repair’ let me be the first to tell you that if you are an entrepreneur or small business owner that has experienced personal credit issues don’t be alarmed when it comes to obtaining business financing.

One of the major benefits for entrepreneurs and small business owners is the ability to build a business credit profile separate from your personal credit profile.

Be sure to read ‘The Eight Steps to Building Business Credit’

This post is intended to fully educate you on answering two main questions:

Is Personal Credit Restoration Legal?

Are Credit Restoration Companies Legal?

Let’s get started shall we?

Personal credit restoration

The Federal Trade Commission which is a federal agency created to investigate and eliminate unfair and deceptive trade practices in business, initiated a specific body of legislation which was put in place to regulate the credit reporting agencies and protect YOU the consumer from unfair credit reporting. This legislation is called the Fair Credit Reporting Act.

Take a look at the FCRA

Now look at section 611 of the FCRA which outlines the procedures in case of disputed accuracy on your credit reports. The FCRA empowers YOU the consumer the right to dispute and verify the accuracy of questionable items on your personal credit reports.

So, this means you can in fact repair your own credit in accordance with the Fair Credit Reporting Act.

But here’ the catch!

The underlying problem for the consumer is that this is a self policing law. It’s completely up to you the consumer to police your own personal credit reports. It’s up to you to find any errors and it’s up to you to monitor any and all activity on your personal credit files with all three main credit reporting agencies.

In the justice system you are innocent until proven guilty but in the credit reporting system you are guilty until you proof yourself innocent.

If you haven’t seen your personal credit reports recently keep in mind that you are entitled to one free credit report per year which can be accessed at http://www.annualcreditreport.com

Now don’t worry this won’t count as an inquiry when you order your free annual reports.

Credit Restoration Companies

 
Despite the massive efforts of the credit reporting agencies (which are privately held companies) to convince you otherwise, there are many credit restoration companies that are no different than most other services. Like all industries, less-than-honest companies do exist and are damaging to their clients and to the credit restoration industry as a whole.

For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.

This doesn’t mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies.

Let me take you back a little bit first because the credit restoration industry was completely unregulated in the mid to late 1970s, hundreds of credit restoration companies sprung up all over the place. Most of them were dishonest and were interested only in stealing money from gullible consumers. As a consequence, thousands of consumers were milked out of millions of dollars while receiving little, if any, of what was promised to them.

As a result the FTC initiated another legislation called the Credit Repair Organizations Act (CROA) that outlines how these companies may legally operate.

Take a look at CROA

This Federal regulation is proof that the industry as a whole is legal and not a scam. I think the reason why there has been this general negativity about credit restoration companies is because of the few bad companies that have given the industry as a whole a bad name.

The Federal Trade Commission regulates credit bureaus and credit repair organizations.

Take a look at the definition of a Credit Repair Organization (look at Sec. 403 Definitions)

(3) Credit repair organization. — The term ‘credit repair organization’–

(A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of

(i) improving any consumer’s credit record, credit history, or credit rating; or

(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and

Now let’s look at Section 404 Prohibited Practices.

Specifically look at definition (b) payment in advance.

(b) Payment in Advance–No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.

Basically, a credit restoration company cannot charge you for credit restoration upfront! So if you decide to hire a credit restoration company don’t pay for the fees up front.

But, there are specific organizations and institutions that DO NOT fall under the definition of a credit restoration organization and are therefore exempt from prohibited practices.

This means that there are a very select few credit restoration companies out there that can charge for credit restoration upfront.

Take a look at Sec 403 definitions under description (B) does not include-

These organizations and institutions include any nonprofit organization which is exempt from taxation under section 501(c) of the internal revenue code and any depository institution (as that term is defined in section 3 of the Federal Deposit Insurance Act) or any Federal or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such a depository institution or credit union.

So if you decide to enroll in a credit restoration service do not pay for the service upfront unless the company you decide to hire falls under Sec 403.

The best credit restoration company that I personally recommend and have used for my clients over 10 years is United Credit.

Also check their rating with the BBB at http://www.bbb.org/

If you decide to promote a credit restoration service to your clients be sure to ask the right questions which you now know.

Remember – Improve your business, your life, your relationships, your finances and your health. When you do the whole world improves. ~ Mark Victor Hansen

To Your Success!

Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

FICO

It’s not a surprise that Fair Isaac, the creator of the good ole FICO® score got the go ahead from the court to pursue it’s lawsuit against the credit bureaus for trademark infringement. If credit score terms like beacon, empirica, and FICO® are not confusing enough consumers have to also figure out what role Vantage score (Created by America’s three major credit reporting companies) plays in the overall landscape when it comes finance.

The majority of business credit lenders acrosss the country continue to use FICO® as the their overall risk assessment tool for credit decisions but many of also adopted their own internal scoring system to compliment FICO®. In addition FICO® recently launced FICO® 08 to the mix leaving consumers in the dark as usual.

From debt to credit limit ratios, date of last activity, open accounts, closed account, new credit, old credit, payment history, credit profiling, mathematical algorithms, and on and on I’m starting to wonder if the credit system will soon be just as complex as our tax system.

So how does this lawsuit affect you?

In a nutshell FICO® is asserting that Transunion and Experian are misleading consumers with Vantage score.  (Equifax has already settled out of court with FICO®) It will be very interesting to see the outcome of this court battle. In my opinion the easier the credit scoring system can become the better it is for you and I.

CLICK HERE to read more

To Your Success!

Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle.  He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  Start business credit for your company and obtain the financing you need by joining BCIC today!

While the majority of the media is focusing on credit lines being reduced, bank failures, and so on I want to address something that knowone seems to know about or pay attention to. Back in 2007  only after numerous consumer complaints nationally Capital One finally started reporting the true credit limits of it’s customers after years of only reporting the maximum balance used on consumer’s credit cards.

These credit limits showing on your personal credit profile have an important impact on your credit score because it reflects your true debt to credit limit ratios.

Unfortunately, some creditors like American Express have not adopted this practice and as a result millions of consumers are left out of the dark when it comes to ensuring their own true credit limits are being accurately reported on their credit reports to this day. This of course impacts the credit score and impacts what type of interest rate and/or loans a consumer qualifies for.

American Express and HELOC

American Express and HELOCS (Home Equity Lines of Credit) are known for not reporting the accurate credit limits of an account. For example, the American Express green card does not have an actual credit limit so the limit reported on the credit report of the consumer is actually the maximum amount that you have ever spent on that card. So if all you have ever charged on your AMEX was $3,000, and you paid it in full when the statement came and then you spend another $3k the following month, the $3,000 limit reported would show that you are using your card at 100% of your credit limit.

So what’s the solution?

Until AMEX comes to their senses and starts reporting the true credit limit of it’s customers you have to meet them at the court and play the game.

You basically have the power to set your own credit limit with AMEX on your credit reports. The question is what’s the percentage you want to shoot for on your debt to credit limit ratio with AMEX? No more than 30%! So, if you know that you regularly charge let’s say $3,000 per month on your AMEX then you want to make sure that the true credit limit reporting for your AMEX account on your credit reports is $10,000 or more. Why? Because if your limit reporting is $10,000 for AMEX and your charging $3k monthly then you are right at 30%, therefore your score will boost tremendously!

How do you set your own credit limit?

To increase and leverage that AMEX credit limit higher on your credit report, you should use your AMEX card and spend over $10,000 such as travelers checks or something like a TV then pay it off when the statement comes. Be sure to only set your limit if you know you can pay the balance in full when your statement comes in! The last thing you should do is go into debt simply for the purpose of raising your true credit limits with AMEX.

So once your statement comes in pay it in full. Next, go back to spending $3,000 again like normal. Your AMEX credit reporting limit would then increase to $10,000 as your limit and your regular spending habit of $3,000 would be below 30%.

You will need to reset your limit again in about 7-8 months so keep that in mind. This insider secret is priceless and this strategy alone can build credit fast and boost your credit scores 25 or more points!

Another option to offset your debt to credit limit ratios and boost your scores is by adding new credit lines with large limits and no balances. If you’re interested in adding a $5,000 to $10,000 tradeline on all three personal credit bureaus guaranteed then CLICK HERE.

Remember – Life is ten percent what happens to you and ninety percent how you respond to it.  ~ Lou Holtz

To Your Success!

Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club.  Are you interested in separating your personal credit from business credit? Join our business credit community and start building business credit today and Click Here.

For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.

This doesn’t mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies.

As for credit repair- do your homework. Is the company you are selecting a non-profit organization or credit union service organization? Are they claiming that they can delete accurate negative information? Do they provide you with consumer rights information? Do they charge outrageous fees?

Consumers should take these things into consideration when hiring a credit repair company to help them with their credit issues.

To better understand the credit repair business some background on the industry is necessary. Beginning in the mid to late 1970s, many unscrupulous entrepreneurs realized that millions of Americans have damaged credit report ratings and that they could make money by convincing these people they could remove all negative information from their credit files.

Because the industry was completely unregulated, hundreds of credit repair companies sprung up all over the place. Most of them were dishonest and were interested only in stealing money from gullible consumers. As a consequence, thousands of consumers were milked out of millions of dollars while receiving little, if any, of what was promised to them.

Federal and state authorities received numerous complaints about credit repair companies, and as a result, both federal and state governments began passing laws regulating the credit repair industry. In addition, credit repair companies must contract with all clients in writing before work begins and cannot collect any upfront fees unless they exempt from CROA. 

Be sure to read ‘Credit Repair Fix’ for more details regarding laws governing credit repair companies or watch my compliance video below.

Despite such regulation, dishonest credit repair companies still operate. This bit of knowledge is used by dishonest credit repair services to perform credit repair for their clients. Their aim is to either overwhelm the Big Three with reverification requests (letter writing) with the goal of getting as much negative information removed as they possibly can, or hoping that a few requests slip through and result in the removal of negative information.

It is important to note that not all credit repair companies are dishonest. Some companies offer a valuable service to those who find the whole process of credit repair too boring or complex, or just don’t have the time to learn about credit repair. A Credit Repair Service is as legitimate and worthwhile as a tax preparation service — the IRS claims that everyone can do their own taxes, but most people hire someone else to do them.

There are a number of credit repair companies offering to give consumers a “fresh start” with their credit histories. These companies seek to obtain a second Social Security number or federal ID number for their clients. This is commonly referred to as “file segregation”. File segregation is a fraudulent practice and violates many Federal and State Laws.

I strongly oppose the abuse of consumers by companies and individuals which direct you to commit fraud in order to obtain “clean” credit reports. In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect, especially if you’re afraid that you won’t get any credit as long as bankruptcy appears on your credit record. The problem: “File segregation” is illegal. If you use it, you could face fines or even a prison sentence.

If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet.

If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs – which resemble Social Security numbers – are used by businesses to report financial information to the IRS and the Social Security Administration. After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. They’ll also tell you to use a new mailing address and some credit references.

To convince you to establish a new credit identity, the credit repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new credit identity, should alert you to the possibility of fraud. You’ll probably hear:

Claim 1: You will not be able to get credit for 10 years (the period of time bankruptcy information may stay on your credit record).

Each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you credit shortly after you filed for bankruptcy. And, given a new reliable payment record, your chances of getting credit will probably increase as time passes.

Claim 2: The company or “file segregation” program is affiliated with the federal government.

The federal government does not support or work with companies that offer such programs.

Claim 3: The “file segregation” program is legal.

It is a federal crime to make any false statements on a loan or credit application. The credit repair company may advise you to do just that. It is a federal crime to misrepresent your Social Security number. It also is a federal crime to obtain an EIN from the IRS under false pretenses.

Further, you could be charged with mail or wire fraud if you use the mail or the telephone to apply for credit and provide false information. Worse yet, file segregation likely would constitute civil fraud under many state laws.

All the information in this post is provided to help clear up those “questionable” items on your credit reports. “Credit repair” is a general term usually used to describe a systematic process of rehabilitating an individual’s creditworthiness, or financial credit reputation.

The process is generally started by obtaining copies of the individual’s credit report, reviewing the credit report for errors, omissions, and misleading information, and requesting corrections to such information by means of a formal dispute letter. Many laws, regulations, and practices govern this process, and many organizations exist that will assist in guiding individuals through this sometimes complex process, though much, if not all, may be accomplished by individuals by their own efforts.

When you identify inaccurate, erroneous, and obsolete entries on your credit reports and bring it to the credit reporting agency’s attention they must do one of two things by law. Correct it or delete it!

If you are in the process of applying for a mortgage, immediately notify your lender of any incorrect information in your report and you may be able to do a rapid rescore. 

Remember - The direction in which education starts a man will determine his future life.   ~ Plato

Click Here for a reputable credit repair service that  I have been personally using for my clients for over 18 years.

P.S. Do you have any credit repair scams or stories that you would like to share?

To Your Success!

Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club.  Click here to visit his blog and signup free to get strategies, resources, and credit building tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.