Contents
Introduction............. 1
Section I: The Basics of Credit.......................3
Chapter 1: How Does Credit Affect You?.................5
Joanne’s Story.........................................5
Everyone Has a Credit History/Rating...................5
Three Big Filing Cabinets—The Credit Bureaus...........6
Who Regulates the Credit Reporting Agencies (CRAs)?....7
Chapter 2: How to Build Credit if You Don’t Have Any...9
Steve’s Story..........................................9
No Credit is the Same as Bad Credit.....................9
Situations Ripe for Building Credit.....................10
Before You Apply Yourself...............................10
Four Ways to Add Positive Credit to Your Credit Report..11
Credit Lines That Won’t Help..........................12
Section II: Your Credit Report........................13
Chapter 3: Obtaining Your Credit Report...............15
Susan’s Story.........................................15
Why Would You Want to Obtain Your Credit Report?......15
Contact Information for the Three Bureaus.............17
Merged Credit Reports.................................18
Innovis, the 4th Credit Bureau.............19
Other Credit Bureaus..................................20
Chapter 4: Analyzing Your Credit Report...............23
More of Susan’s Story.................................23
What Does All That Information Mean?..................23
Each CRA Has Its Own Information and Layout...........24
Those Ugly Blemishes on Your Credit Complexion........24
How Long Do Negative Items Stay on Your Credit Report?....27
Chapter 5: Credit Scoring..........................29
John and Marie’s Story................................29
What is a Credit Score?...............................29
What Exactly Factors into Your Credit Score?......30
Things You Can Do to Improve Your FICO Score........34
Federal Government Publications..................35
The Use of Your Credit Score to Predict Other Kinds of Behavior..................35
Section III: Credit Cards.....37
Chapter 6: Credit Card Types......................39
Wayne’s Story.....................................39
Which Card Should You Get?........................39
Basic Credit Card Types...........................40
ATM Cards and Debit Cards.........................42
Contacts for Credit Cards.........................44
Chapter 7: Good and Bad Deals in Credit Cards....45
More of Wayne’s Story............................45
Factors to Consider.............................45
Tips for Cutting Your Credit Card Expenses......49
Students Beware!................................50
Chapter 8: Making Purchases with Credit Cards...51
William’s Story.................................51
Credit Cards vs. Debit Cards....................51
If Asked for Additional Information when Making a Credit Card Purchase.52
Using a Credit Card as a Check Guarantee........53
Surcharges......................................54
Charge Minimums ................................54
Reservation Guarantees..........................55
Shipping and Payment............................55
Billing Due Dates...............................55
Payments Via Automatic Withdrawal...............56
What to Do When Merchants Aren’t Following the Law....56
Chapter 9: Billing Errors and Overcharges........57
Mischa’s Story......................................57
The United States Fair Credit Billing Act...........57
Act Quickly to Dispute Billing Errors and Overcharges...58
Tips to Remember When Disputing Errors..............59
The Next Step—Asking for a Credit in Writing........59
If You Happened to Pay Your Bill in Full Before Noticing an Error.........60
Unauthorized Charges...............................60
Section IV: Mortgages.................63
Chapter 10: Your Credit and the Mortgage Approval Process...65
More of Joanne’s Story.............................65
Qualifying—A Sure Sign of Sex Appeal...............65
Putting Your Best Bikini Forward...................66
What Income Can You Count?..........................67
What Debts Count Against You?.......................68
The Dreaded Debt-to-income Ratio..................69
Financial Stability...............................70
Cash in Savings...................................70
Qualifying When Your Application is a Tad Tarnished......71
If You’ve Had a Bankruptcy.........................72
Chapter 11: Bankers Versus Mortgage Brokers—Which to Use?...73
Josh’s Story.......................................73
Who Has the Better Deal?...........................74
Bankers............................................74
Brokers............................................75
Chapter 12: Mortgage Costs.........................77
Don and Ann’s Story..................77
Money for Closing Costs and, O Yeah, a Down Payment..78
The Costs of a Loan.................................78
Other Fees You Likely Will Be Charged for a Loan......78
Fees Profiting the Mortgage Company..................81
The Role of the Loan Officer.........................81
Is Your Loan Officer Jacking Up Your Interest Rate?..84
Locking Down Your Interest Rate......................84
Buying Down the Interest Rate........................85
Truth in Lending.....................................85
The Uniform Settlement Statement.....................86
Chapter 13: Second Mortgages.........................87
Norma’s Story........................................87
What is a Second Mortgage?...........................87
Types of Second Mortgages............................87
Why Would You Want a Second Mortgage?................88
Are Second Mortgages a Good Idea?....................88
What Kind of Credit Do You Need?....................88
Section V: Other Types of Loans..................91
Chapter 14: Automobiles..........................93
Martin’s Story.......................................93
Rule #1..............................................93
The Variables........................................93
Financing Options....................................95
Leases...............................................97
Payment Shaver Loans.................................100
Financing Wisdom.....................................100
Chapter 15: Student Loans.........................101
Esteban’s Story.......................................101
Types of Student Loans................................101
Applying for Student Loans............................102
Eligibility for Student Loans.........................104
Defaulted Student Loan Information....................105
Repaying Student Loans Held by the U.S. Department of Education...106
Statute of Limitations................................107
Online Information....................................107
Section VI: Protecting Your Credit.................109
Chapter 16: What You Can Do to Protect Yourself....111
Jennifer’s Story......111
Why Should You Protect Your Credit?...................111
How You Can Protect Your Credit.......................112
Chapter 17: If You Are a Victim of Identity Theft.....119
Michael’s Story.......................................119
What to Do if You Are a Victim of Identity Theft......120
If Someone Fraudulently Changes Your Address..........123
If Your Social Security Number Has Been Misused.......123
If Someone Is Making Phone Calls in Your Name.........124
If Your Driver’s License Number Has Been Misused......124
Other Identity Theft Resources........................124
Chapter 18: Divorce and Your Credit................125
Jack’s Story..........................................125
A Divorce Decree Does Not Relieve Joint Debt..........126
Myths About Divorce Decrees...........................126
What Could Jack Have Done Differently?................127
How to Protect Your Credit During a Divorce...........128
Section VII: Over YourHead in Debt....................131
Chapter 19: Collection Agencies.......................133
Carl’s Story..........................................133
Your Rights When Dealing with a Collection Agency.....133
Common Collections Tactics and Rebuttals .............135
Chapter 20: Overwhelmed With Debt..................137
Jane’s Story..........................................137
You’re Not Alone......................................139
Things You Can Do if You Are Overwhelmed With Debt....139
Chapter 21: Negotiating Your Debts for Less than You Owe..143
John’s Story..........................................143
Which Debts Are Negotiable?..........................144
Statute of Limitations...............................145
The Effect on Your Credit............................147
Getting Ready to Negotiate...........................147
What Makes a Creditor Say ‘Yes’ to a Debt Settlement?..150
What Makes a Creditor Say ‘No’ to a Debt Settlement?..151
How Much Should I Offer?..............................151
Repayment Plans......................................153
Other Negotiation Tips...............................156
Negotiate Your Credit Rating.........................157
Writing the Offer....................................159
Tips on Payment......................................160
Some Legalities.......................................161
Tax Consequences of Debt Settlement...................162
Chapter 22: Nonprofit Credit Counseling Services.....163
Rachel’s Story........................................163
Consumer Credit Counseling Services...................164
Alternatives to CCCS..................................165
Beware of the Wolf in Sheep’s Clothing!...............166
“Nonprofit” Doesn’t Mean No One Makes Money...........166
Debt Relief Companies.................................167
Debt Settlement/Debt Negotiation Companies............167
Chapter 23: Bankruptcy.............................169
Elaine’s Story........................................169
What Elaine Could Have Done Differently...............170
Can YOU Avoid Bankruptcy?.............................170
Chapter 7 Bankruptcy..................................170
Chapter 13 Bankruptcy.................................175
Chapter 24 - How to Budget............................179
Randy and Val’s Story.................................179
So What’s the Secret?.................................180
Finding Extra Dollars in Your Current Income...........182
Comparison to the Average Person’s Expenditures............184
And the Money Left Over?...............................184
Other Online Resources.................................185
Section VIII: Repairing and Rebuilding Your Credit..187
Chapter 25: Repairing Your Credit......................189
Eduardo’s Story........................................189
Can You Really Fix Your Credit?........................189
Basic Strategy.........................................190
If a Removed Item Comes Back onto Your Credit Report...198
Specialized Credit Repair Techniques...................199
Federal Government Information Sources.................199
Chapter 26: Erasing Credit Inquiries...................201
Simon’s Story...........................................201
When Is It Worthwhile to Get Inquiries Removed?........201
Permissible ...........................................202
Basic Strategy.........................................202
Chapter 27: Credit Repair..............................205
Marlena’s Story........................................205
Do Credit Repair Agencies Work?........................205
Credit Segregation—Is It Legal and What is It?...........206
How Do They Do It?.....................................206
Consumers Beware.......................................207
Problems With a Credit Repair Agency?..................207
Marlena’s Solution.....................................208
Chapter 28: Debt Validation............................209
Judy’s Story...........................................209
Debt Validation—The Ultimate Secret Weapon.............209
Original Creditor vs. Collection Agency................211
Step-by-Step Process...................................211
Chapter 29: Vacating a Judgment.....................213
Marianne’s Story.......................................213
Can a Judgment Be Overturned?..........................213
Some Definitions.......................................214
Prepare Your Motion and Declaration to Vacate..........214
File the Paperwork.....................................215
Notify the Plaintiff...................................216
What If They Offer to Settle Out of Court?.............216
What Happens at Court?.................................217
What Happens When You Win?.............................217
Chapter 30 – Suing Creditors, Collection Agencies and Credit bureaus who violate your rights...219
Shirley’s Story........................................219
Will This Really Work?.................................220
I’m Pretty Intimidated by the Court System.............220
So Who Can You Sue and What Can You Sue For?...........221
How Do You Prove Harassment?...........................225
Filing Suit............................................226
The Importance of Documentation........................229
Glossary............................................231
Appendix 1: Fair Credit Reporting Act...............237
Appendix 2: Fair Credit Billing Act.................311
Appendix 3: Fair Debt Collection Practices Act......319
Appendix 4: State Statutes of Limitations............331
Appendix 5: State Statutes of Limitations: Judgments..333
Appendix 6: State Laws Relating to Credit............335
Appendix 7: Sample Letters.......................353
Requesting the Removal of Inaccurate Information........354
Requesting the Removal of Inaccurate Information #2.....356
Getting the Credit Bureau to Update Bankruptcy Accounts..358
Follow-Up After Initial Contact with the Bureau Contact..359
Requesting the Removal of Inquiries.....................361
Credit Bureau Verification Procedure Request............362
An Agreement to Compromise Debt.........................364
Acceptance of Verbal Offer (Debt Settlement)............365
Counter Offer (Debt Settlement).........................366
Unsolicited Offer.......................................367
Settle With Your Credit Card Companies..................368
Cease and Desist to a Collection Agency.................369
Debt Validation..........................................370
Debt Validation Follow Up Letter to a Collection Agency..372
After the Collection Agency Fails to Validate Your Debt/The Letter to
Send to the Credit Bureaus..373
Getting the Original Creditor to Verify Debt............ 375
Asking ChexSystems to Remove a Listing...................377
Notice of Intent to File a Lawsuit.......................378
Request for Credit Report If You Were Denied Credit......380
Request for Credit File from Innovis.....................381
Request for Credit Report If You Are Buying One..........383
Remove My Name from Mailing List........................384
Contact Your Credit Card Companies.......................385
Appendix 8 – Sample Legal Documents......................387
Motion to Vacate.........................................388
Basis of Lawsuit.........................................390
Appendix 9 – FTC Opinion Letters......................393
The Cass-Lefevre letter..................................394
The Wollman letter........................................396
Appendix 10-Budget Worksheet..............................397
Index......................................................399
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