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Knowing some basics about credit repair can be essential in this market climate, especially when you want to buy a home home. So where do you get good credit repair informationthat is useful? Usually I recommend to avoid anyone that is trying to sell you something before you can learn about it.
Reading books on credit repair can be an inexpensive way to learn how to do it yourself.
Books are readily available on the subject that are inexpensive and offer an outline of doing it yourself. Today with the accessiblity of the internet, one can often repair a lot on their credit reports online. It is helpful to know a little bit about the subject, so I often recommend buying a book that outlines some techniques on how to go about this. One book I show here in this article, others can be found on my website at: www.justcallmichael.com.
If you want to simply want to hire someone to do it for you, then there is a company called ‘Credit Unlimited’ that I have found to be effective and affordable. There is a link on the right hand side on the first page of my website here.
I usually recommend people try to fix as much as they can themselves, before hiring someone else to do it for them. However, sometimes peoples situations improve and they get busy with a new job, or career, and simply want to hire someone to fix their past mistakes. This company does a good job and they work steadily at it.
Most of the time they can improve your credit scores in the short term of three to six months. However, often 12 months more more is needed if there is a lot to address. The important thing to remember is that credit repair can occur, and with a little help, it can occur faster.
Fixing your credit first is sometimes a necessary action to be able to become qualified for a loan program to purchase a home. This does not have to be a daunting task, but it does require sometimes a little industry to resolve the damage from a bad credit history.
If you have a rocky credit history and perhaps you are in better shape now and are beginning to take on the task of repairing your credit, then you should know about the Statute of Limitation on old debt. Each State in the U.S. has a Statute of Limitations on old debt, and most people I come into contact with are not aware of this.
There is a Statute of Limitations on Old Debt for each of the 50 States.
The reason it is not promoted much in the media is that it is information that banks and creditors do not want too widely known. Essentially each State had defined a time period as to when a debt is considered too old, and is no longer collectable.
What this means is that if the debt passes beyond that defined date, the creditor can no longer collect it legally. They can no longer sue for collection or seek judgment, etc.
An important thing to know about this, however, is that if you discover you have an old debt, and let’s say you live in Michigan. The debt you find out about is 5 years old, so you contact the creditor, and they set up a payment arrangement with you. From the moment you make that first payment, the statute of limitations on that old debt re-sets, and so in
Do not let old debt haunt you. Know the Statute of Limitations on that debt.
the case of Michigan, you have another six years ahead of you where the debt can now be pursued for collection. If you knew in advance that the debt was in its 5th year, you could have had it disappear if you waited another 12 months.
So knowing the Statute of Limitations is good information to have. Other important information to know is that many old debts are often bought by 3rd party collection companies for pennies on the dollar, so they can often be settled for a lot less than was originally owed. So balancing this information with the knowledge of your State’s Statute of Limitations is god information to have in your negotiating arsenal.
Another important accounting information to know, is that when a creditor settles a debt with you for less than full balance, they are required per the IRS tax codes to send you a 1099 on the difference, and you have to report it as income on your taxes. Consult with your tax advisor on this to determine if an old debt is better to let expire or settle.
Here is the statutes of limitations for each state as reported on Bankrate.com in another blog post I wrote on this subject called: The Statute of Limitations on Old Debt.
Have you ever heard of the term ‘FICO’ in reference to credit scoring? You might be asking yourself, ‘What is a FICO Score?’
A FICO score is a credit score developed by Fair, Isaac & Co. (F.I.CO). Credit scoring is a method taking criteria from a
A FICO Score is determined in several ways.
person’s history of spending and bill paying and determining a scale to offer prediction of the likelihood that credit users will pay back the creditors. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation since the 1980’s.
A credit score attempts to condense a borrowers’ credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission after extensive review of this issue has ruled this to be acceptable.
So what does a FICO score have to do with you? Well, believe it or not, you have a FICO score calculated on you based on information reported to three separate credit reporting organizations. These organizations are called ‘Credit Bureaus’ The names of these Bureaus are: Experian, TransUnion and Equifax. Each of these bureaus utilize the FICO scoring system, and calculate a single number that is your credit score.
These Bureaus receive their information from creditors that have had accounts with you, as well as collection agencies, government organizations, etc. Each of the three Credit Bureaus will often have a different number calculated on you identifying your credit score, depending on which creditor reported to which bureau. Some creditors report to all three, others report only to one or two. So the credit scores can vary between the three.
To determine a borrowers’ credit score, credit bureaus analyze a borrowers’ credit history. They examine many factors, including some of the following:
- Late payments.
- The amount of time credit has been established.
- The amount of credit versus the amount of credit available.
- Length of time at present residence.
- Negative credit information, such as bankruptcies, charge offs, collections, etc.
- Types of accounts the borrower has.
What is my FICO Score?
There are as many as 40 different factors that are reviewed when a borrowers’ credit history is analyzed, and few know all the criteria. The credit bureaus keep the exact formulas a closely guarded secret, so there can be many factors that affect a credit score that go well beyond the scope of this book.
The credit score is based on this secret formula that identifies the perfect credit risk to a lender. So the first step undertaken in home buying is to have a lender examine a person’s credit scores to see if they are eligible for a loan under the lenders guidelines, or if they need to improve their score.
As a Realtor in Battle Creek Michigan, I often work with connecting buyers with lenders and helping them get their credit scores improved to become eligible to buy a home. For more information on this, call me directly at: 269-441-8182 or contact me through my website at: http://www.michaeldelaware.com/.
Some of the basic parts of a FICO Score.
Michael Delaware
