Let’s say you’ve made some mistakes with your credit. With over 35% of the population scoring below 650 on the FICO scoring scale, you’re certainly not alone. But now that you’ve made the mistake, how long are you going to have to live with it?
Each and every negative item has a reportable statute of limitations. That means the credit bureaus can legally report it for some period of time before it must be removed. Let’s dive in…
This one has possibly the most confusing statute of limitations so let’s get it out of the way first. Chapter 7 bankruptcies can remain on your credit files for ten years from the date filed. Chapter 13 bankruptcies can remain on file for seven years FROM THE DISCHARGE DATE. This is important because most people believe 13s have to be removed seven years from the filing date, which is incorrect. It normally takes three to five years for a Chapter 13 to discharge due to the repayment process. That’s when the 7 years begins. The cap on all bankruptcies is ten years so most 13s remain on file for a full ten years, just like Chapter 7s.
This one has the longest statute of limitations and must be broken down into three categories; released, unpaid, withdrawn.
Released Tax Liens – Released liens can remain on file for seven years from the date released. This included liens that have been settled for less than you really owe.
Unpaid Tax Liens – Sit down. Unpaid tax liens can remain on your credit file indefinitely. That’s the bad news. Now the good news…
Paid and Withdrawn Tax Liens – Paid tax liens normally stay on file for seven years, but the IRS announced that they will withdraw the lien if paid in full AND the taxpayer requests a withdrawal. The credit bureaus do not report withdrawn tax liens so they will come off your files almost immediately if you get them withdrawn.
Defaulted Government Guaranteed Student Loans
The amount of time is actually governed by the Higher Education Act instead of the FCRA. Defaulted student loans can remain on your credit reports for 7 years from the date they are paid, 7 years from the date they were first reported or 7 years from the date the loan re-defaults. The point you should take away from this…pay your student loans!
The Seven Year Club
Delinquent Child Support Obligations
Judgments – Seven years from the filing date whether satisfied or not.
Collections – Seven years from date of default with the ORIGINAL creditor, not seven years from when the collection agency buys or is consigned the debt.
Charge Offs – Seven years from the date of the original terminal delinquency.
Settlements – Seven years from the date of the original terminal delinquency
Repossessions and Foreclosures – Seven years from the date of the original terminal delinquency.
Late Payments – Seven years from the date of occurrence.
You’ll notice “terminal delinquency” several times above. The seven year period actually begins 180 days AFTER the original delinquency that leads to a collection, charge off or similarly negative action. So, technically these items remain on your credit file for 7.5 years from the date of the last delinquency before the terminal delinquency.
If you’ve never heard of this term let’s hope you never do. Re-aging is the illegal process of changing the “purge from date” so the credit reporting extends past the allowable period of time. This is not common but when it’s done, it’s usually a collection agency or debt buyer who is breaking the law. It’s a clear violation of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act but the debtor has to know it has happened.
In my daily grind, I come across many real estate professionals trying to lend a helping hand to their clients in helping with credit issues. In some cases it can be considered as “minor” work. But for most, I find that they prefer using the online websites for generating a dispute to the credit bureaus. This is a Big NO-NO! For several reasons detailed below, this online dispute does very little to help you out. Not to mention most real estate professionals, unfortunately, are handling the dispute process incorrectly to begin with. But when they do go beyond their scope of expertise, the following usually happens;
1) Time – The credit reporting agencies do not have to process an online request. The online dispute gets tracked automatically and a request to verify is automatically forwarded to the data furnisher through e-oscar. The restrictive 30 day clock is accomplished easier if everything is automated.
2) Paper trail- with online disputes there is no paper trail to evidence the details of the dispute, and creating a paper trail during credit repair is essential.
3) Limited Dispute Reasons- With the limitations of dispute reasons, an accurate description of the dispute is difficult in most cases. It will all get broken down to its most simple form.
4) Expeditious Dispute Resolution- The Fair Credit Reporting Act section 611a(8) changes the standard requirements and protection afforded to the consumer by the FCRA.
When the Fair Credit Reporting Act was amended, they put in a section for “Expedited Dispute Resolution” Section 611a(8) the on-line dispute system. It reads as follows…
“…the agency shall not be required to comply with paragraphs 2, 6 and 7 with respect to that dispute if they delete the tradeline within 3 days.”
Paragraph 2 requires the CRA to forward your dispute and all related documentation you provide to the furnisher. They rarely forward the documentation.
Paragraph 6 requires the CRA to provide you with written results of the investigation.
Paragraph 7 requires the CRA to provide you with the method of verification on request from the consumer.
What they are doing is…
The Credit Reporting Agency (CRA) can delete a disputed trade line for 30 days, then, the trade line can reappear when the furnisher (creditor or collector) reports it again in the next cycle. That is because the CRA is not required to tell the furnisher you disputed it thanks to section 2 being omitted. This is sometimes called a “soft delete” and it is not permanent.
Furthermore, you lose your rights to request “Method of Verification” (MOV) so you lose this powerful tool in the dispute process thanks to Paragraph 7 being omitted.
Finally, another powerful tool we use often is the five-day written notice of re-insertion. Essentially, what that means is that if a credit bureau is going to re-insert a previously deleted item, they must inform you in writing five days prior to re-inserting it. I have rarely ever seen them give that notice.
That five-day notice is only required if the credit bureau takes longer then 45 days to complete. IF it is deleted via the expedited system, often completed in three days, the five-day written notice is no longer required.
So, let’s let the experts handle their own respective expertise and call a professional credit repair company when help is needed.
Credit Score Recovery…
Wondering how long it will take your credit score to recover from a home foreclosure or short sale? That depends on how good your credit was in the first place, says John Ulzheimer, a credit score expert who blogs on the subject for mint.com.
Somewhat depressingly, the better your credit score was before your mortgage woes started, the longer it will take you to recover. Citing data from credit reporting firm FICO, Mr. Ulzheimer said it would take roughly three years for a consumer with a 680 FICO to recover to that level after a foreclosure, compared with seven years for someone with a 780 score. That’s because high scores require “pristine” credit files, he said, while a middling 680 doesn’t.
Late mortgage payments follow the same pattern. A person with a 680 score who pays 30 days late can bounce back to that level in about six months, compared with three years for someone with a 780 score. His (somewhat obvious) advice? Don’t miss payments.
This is where we can help. Want to get back to that status from earlier? Simply contact us for information on how to get your credit life back on track.
By Cesar Marrufo
ELITE FINANCIAL, LLC
Cesar is an expert in the credit repair field, with over 10 years experience reading and analyzing credit reports. For more information or for help with your credit, visit www.elitefinancialllc.com or call (909) 570-9048
So you would like to take advantage of the current housing market but you don’t know where to begin? Here is a quick 7 step list I discovered that can help you get started. Happy house hunting!
1) Get your credit in as good shape as possible. Your credit score can make a big difference in your interest rate and lenders are a lot stricter than they used to be. You can start by ordering a free copy of your credit report from each of the credit bureaus at annualcreditreport.com as long as you haven’t done so in the last 12 months. One study showed that about 70% of credit reports have errors in them so check to see if there are any in yours that could be hurting your credit score and if so, be sure to have them corrected.
You can also use a site like creditkarma.com to see your credit score for free and more importantly, figure out what steps you can take to improve it. The key things are to make sure you make your debt payments on time, pay off as much of your debt as possible (except perhaps car and student loans, which tend to be relatively low interest), and be careful of closing accounts. If you have a credit card that is charging you an annual fee, see if you can convert the card into a no-fee card rather than close it.
2) Be ready with your down payment. Ideally, you would be able to put down 20% of your home’s purchase price to avoid having to pay PMI (private mortgage insurance). If you can’t put down 20%, mortgage companies will usually offer you a smaller “piggy back loan” to help bridge the gap but those loans have higher interest rates.
Don’t dip too far into your savings though. Try to keep at least 3-6 months of expenses set aside for emergencies. If you don’t have enough money available in your regular accounts, you can access up to $10k without penalties from IRAs for a first-time home purchase and your employer’s retirement plan may allow you to borrow from your retirement account with a longer time to pay off home loans. There’s always the “family and friends” route too.
3) Try to pick a mortgage with a fixed rate for the longest time that you think you’ll be keeping the home. That’s because you could see your monthly payments jump up on a variable rate mortgage when interest rates eventually start climbing. On the other hand, fixed rate mortgages have higher interest rates so it may not make sense to pay more to lock in a fixed rate for longer than you need it.
4) Choose the right loan term for your needs. A 30-yr loan has lower monthly payments and can be advantageous if you’ll make good use of the savings by investing them or paying down high interest debt. You can always make extra payments if you want to pay the loan off sooner. But if you’re honestly more likely to splurge the money you save each month, the 15-yr loan could be better since it will cost you less in interest and be a form of forced savings every month.
5) Shop around for a mortgage. Even a slightly higher rate can mean paying significantly more over the life of the loan so don’t just talk to your existing bank. Consider credit unions, which often offer lower loan rates because they’re non-profit. Some brokerage firms like Charles Schwab offer mortgages and sometimes provide discounts for people who keep a lot of money with them. You can also try Web sites like bankrate.com and eloan.com or an independent mortgage broker who can shop around from multiple mortgage companies to find the one that can offer you the best deal. You can then use this calculator to compare the loans.
6) Figure out how much home you can afford. Remember, just because the mortgage company will loan you the money doesn’t mean you should take it. There are rules of thumb like not spending more than 28% of your income on mortgage payments but every person’s situation is different. Two people may have the same income but one may need to save more for retirement or have to make large private school tuition payments for their kids. Take a look at your current saving and spending needs to see how much you can realistically afford to pay each month and don’t forget to leave some room for the potential “hidden expenses” of home ownership like utility bills, HOA fees if applicable, and repairs and maintenance.
7) Start house hunting. Once you’ve gotten pre-approved on a mortgage, work with a real estate agent experienced in the neighborhoods you’re interested in and look at homes that are within your affordable price range. Make sure you look at several places even if you fall in love with the first one you see as you may change your mind with more perspective. Finally, don’t forget to have fun. If you’ve made it this far, you’ve earned it!
Will Defaulting on Season Tickets Hurt My Credit Score?
Attention sports fans: This answer could prove helpful if your team ticks you off.
We recently received a reader question that was very interesting — something we hadn’t thought of before. This one’s for you sports fans out there:
Does anyone know the impact of defaulting on season tickets will have on one’s credit? Will it have an impact on my car insurance, current loans for cars, or anything else? Please let me know. – Angry Fan
How defaulting on season tickets would impact your credit would depend on whether or not the organization reports the incident to the credit reporting agencies. If the default is reported as a collection, because collection accounts are considered severe delinquencies, the account would have a significant impact on your current credit standing and would hurt your credit scores.
This wouldn’t necessarily impact any accounts you currently have open, but if the impact is significant and your credit scores take a severe hit, it could affect future loans, their interest rates and your ability to qualify for them.
Your question prompted us to make a couple of calls to find out exactly how season ticket holder accounts are handled by major league sporting establishments. Interestingly enough, policies vary depending on the establishment, but what we learned may ease your mind.
According to the two major league establishments I spoke with, season tickets are normally paid for in advance, prior to the tickets being released and issued to the purchaser. Generally speaking, there are no contractual payment plans or financing options for standard individual season ticket purchases.
However, depending on the ticket package, some plans may allow the purchaser to hold their preferred tickets with a deposit, offering them a short grace period before they’re required to pay the remainder of the balance.
In the event the purchaser is unable to pay the remaining balance before the deadline defined by the establishment, the hold is ended and the tickets are re-released to the public for purchase.
In some cases the deposit will be refunded, and in others the deposit may be forfeited. It all depends on the purchase rules outlined by the individual establishment. In either case, defaulting on a season ticket purchase would have no bearing on your credit unless there were a contractual obligation or financing option involved with the purchase.
For corporate packages or purchases where suites are a part of the season ticket package, it’s an entirely different ballgame. Suites are contractual and legally binding. If you sign a contract and default on the purchase agreement, this is when defaulting on season tickets could end up as a collection in your credit reports and hurt your credit scores.
Today, we got word that another client successfully purchased a home after completing just 4 months in our program! This is great news, and is something that we love to hear. This client, came to us from a mortgage loan officer with a 553 credit score. 11 collection accounts, 5 accounts with many late payments and no open credit. With our help, he opened a credit card to start regaining points, paid off several collections, and had 8 accounts deleted from his credit reports. This gave him a boost of over 90 points!!! He ended up having a mid credit score of 647 and was able to qualify for FHA financing and bought a home for his family. This all happened within 4 months!! Do you know someone that needs a life change? Do you know someone that needs a home? Call us today to learn how this can be you. (909) 570-9048
Here is some sound advice on what to do if you feel your credit card has been tampered with. Recent security breach teaches us all a lesson.
This is part 6 in a series of videos on basics of credit, which is Credit 101. What are my avenues of recourse? Where do I file a complaint? How do I challenge this information? Dispute to the credit bureaus and more is explained. This is something that should be taught in high school. A brief explanation of credit. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California. Learn how to fix your bad credit report and position yourself to purchase a home. I do NOT own rights to this music and am not claiming that I do.
10 reasons you can’t get credit
When an application is turned down, you should know why. Here are some of the common reasons, and what you should do next.
If you’ve never been rejected for credit, count yourself fortunate. Somewhere between 25% and 35% of credit card applications are typically approved, “depending upon the pricing value proposition and other factors,” according to Robert Hammer, the president of R.K. Hammer and Associates, a consultant to the card industry.
With some issuers, the approval rate may be a mere 10% or so.
If you’re not turned down for credit, you may be told instead that you didn’t qualify for the best rate. Either way, if a credit score (or credit-based insurance score) was used in the decision, you must be told the main factors that contributed to your score.
Deciphering those reasons can be maddening, though. “What do you mean, I have no recent revolving balances?” Or, “So it says my account balances are too high. What does ‘too high’ mean anyway?”
Here’s a guide to some of the main reasons you may be turned down — and what you can do about them.
Keep in mind that these are just some of the factors that may be used to evaluate your credit. Not all of them will apply in all situations, and there may be variations on these as well.
‘Proportion of balances to credit limits is too high on bank revolving or other revolving accounts’
What it means: The score likely looks at your total available credit limits and compares them with your outstanding balances, individually and in the aggregate. The greater the percentage of your available credit that you are using, the greater the impact on your scores.
What you can do about it: Focus on paying down balances that are close to the credit limits as quickly as possible. What about transferring a balance from a maxed-out card to one with a smaller balance? While that might help, it’s not likely, since you still have just as much debt as before (another factor).
‘Amount owed on accounts is too high’
What it means: This factor may look at your debt in comparison with that of other consumers, and if your debt is higher than optimal, it could show up as a reason why you weren’t approved.
What you can do about it: This one is particularly frustrating because you probably have no idea how much debt is too much, nor do you know which balances to try to pay down first. Typically, though, you’ll get the most bang for your buck, credit-wise, by focusing first on paying down your credit cards with balances that are closest to the limits.
‘Too many recent inquiries in the past 12 months’
What it means: This reason appears when your credit report indicates a high number of credit applications (inquiries) within the past year. But not all are counted the same. Checking your own credit reports doesn’t count; nor do promotional inquiries, inquiries from employer and insurance companies, and account reviews by your current creditors. The impact of inquiries on your credit will vary, depending on your overall credit profile, but the typical inquiry can be expected to affect your score by about five points.
What you can do about it: This reason is more likely to appear when you have a limited credit history or strong credit, simply because there are fewer other significant negative factors affecting your scores. But it doesn’t hurt to lay low for a while. Avoid opening new retail cards. While inquiries resulting from shopping for a mortgage, student loan or auto loan aren’t as likely to hurt your score as the same number of inquiries for credit cards, limit your applications to a short period of time, such as 14 days.
‘Level of delinquency on accounts’
What it means: Delinquency refers to payments that were late. The general rule of thumb is that the further you fall behind, the greater the impact on your credit scores.
What you can do about it: If the information is inaccurate, you can dispute it. If it’s correct, you’re going to have to live with it for a while; usually up to seven years. Focus on making your current payments on time. If cash is tight, remember that all you have to do is make the minimum payment on time to avoid a delinquency on your report.
‘Time since delinquency is too recent or unknown’
What it means: Recent late payments will have a greater impact on your score than older late payments. Typically, delinquencies within a year or two will hurt your scores the most. If an account was delinquent a while ago but the credit report doesn’t indicate the date, this factor can pop up as well.
What you can do about it: The good news is that as time passes, these delinquencies will carry less weight, especially when you are paying current bills on time. But the date is important here. If an inaccurate date (or no date) is reported for a charge-off or collection account, for example, make sure you dispute that with the credit-reporting agency.|
‘Serious delinquency, derogatory public record or collection filed’
What it means: This can mean that your credit report includes a bankruptcy, judgment, tax lien or collection account. Bankruptcy remains on your report 10 years from the date you file (seven years for a completed Chapter 13). Paid judgments can be reported for seven years, but unpaid judgments can stay even longer. Paid tax liens are removed seven years after being paid, but unpaid tax liens can remain on your report indefinitely. Collection accounts may be reported for seven years and 180 days from the date you first fell behind with the original creditor, leading up to the account being turned over to collections.
What you can do about it: If the information is accurate, this is also a matter of biding your time and making sure you have as many positive credit references currently reporting as possible. (A secured card may be an option if you can’t qualify for a regular credit card.) And while paying a collection, judgment or tax lien won’t likely change this factor in the short run, it could result in the public-record item being removed from your report sooner and protect you from being sued for a debt, which could result in additional judgments or collections on your credit reports. If dates are incorrectly reported or payments are not being reported — not uncommon with collection accounts — dispute them.
‘No recent revolving balances (or no recent bank card balances)’
What it means: This reason may appear when your credit report doesn’t include any revolving accounts (usually credit cards), or when all your credit cards closed or are no longer being reported. If you have open credit cards, it may also appear when there are no balances on those accounts.
What you can do about it: Don’t worry. This doesn’t mean you have to have debt to have good credit. As long as you use your cards from time to time, this shouldn’t be a problem. But if you are avoiding credit cards altogether, you’ll have a tough time getting a top credit score. Get a credit card and use it occasionally — even a secured card — pay it in full and on time, and you should be fine.
‘Lack of recent installment loan information’
What it means: Your mortgage was paid off years ago. You pay cash for your cars. You don’t have any outstanding student loans. Guess what? The fact that you’re ultra-responsible here doesn’t help your credit scores.
What you can do about it: The strongest credit scores go to those with a mix of different types of accounts. Does that mean you have to rush out and take out a loan? No. But next time you go to buy a car, you may want to find out if you qualify for 0% financing or a low-rate loan. Or you may want to see if you can get a low-rate personal loan to consolidate some higher-rate credit card debt. On the other hand, don’t go overboard. You don’t want to pay a lot in extra interest charges.
‘Too few accounts currently paid as agreed’
What it means: This reason appears when your credit report does not show enough accounts paid on time relative to the number of accounts with late payments. But if you haven’t been late with payments, this reason most likely means that you need more accounts reported on your file as “paid as agreed.”
What you can do about it: You may want to think about adding a current credit reference, or even a couple of them over time. If you’re having trouble getting approved for a credit card or personal loan, consider a secured card.
‘Too many consumer finance company accounts’
What it means: Consumer finance companies make relatively small personal loans, usually limited to a several thousand dollars, and quite often at interest rates higher than those on most credit cards. Consumers who rely heavily on consumer finance company accounts tend to be riskier to lenders than consumers without such accounts.
What you can do about it: Paying off these types of accounts will not improve your credit immediately, but it’s still a good idea to pay them off as soon as you can, since the interest rates are probably high. Next time you need to borrow, try first to get a standard personal loan through a social-lending website, for example, or from your bank or credit union.
By Gerri Detweiler, Credit.com