Credit Repair Kit For Dummies

Melyssa Barrett is Vice President of Identity Solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. Steve Bucci is a credit-scoring columnist for CreditCards.com and a syndicated columnist for Bankrate. Rod Griffin is Senior Director of Consumer Education and Advocacy for Experian, responsible for the company's national consumer education programs and outreach.

Foreword xvii

Introduction 1

About This Book 2

Foolish Assumptions 3

Icons Used in This Book 4

Beyond the Book 4

Where to Go from Here 5

Part 1: Getting Started with Credit Repair 7

Chapter 1: Introducing Credit Repair, Credit Scores, and Your Life on Credit 9

Repairing Bad Credit 10

Settling debts 10

Resetting your goals 11

Rebuilding your credit by using it 11

Using a cosigner or becoming an authorized user 12

Finding sources of free help 12

Dealing with collectors 13

Weathering a Major Crisis 13

Mortgage meltdowns 13

Medical debt 15

Student loans 16

Car loans 16

Understanding Diversity in Credit 16

Filing Bankruptcy 16

Protecting Your Credit and Your Identity 17

Getting familiar with credit laws 17

Receiving free reports and filing disputes 18

Signing up for credit monitoring 18

Setting alarms, alerts, and freezes 19

Identifying identity theft 19

Maintaining Good Credit Throughout Life 20

Establishing credit for the first time 20

Making credit changes at life’s stages 21

Avoiding pitfalls 21

Managing Credit in Today’s Unforgiving Economy 22

Planning for success 22

Reviewing your credit report 23

Knowing your credit score 23

Considering credit a renewable resource 24

Chapter 2: Turning Your Credit Around 27

Understanding How Your Actions Impact Your Credit Score 28

Using a Cosigner to Raise Your Score 29

Turning Small Purchases into Big Credit 30

Maximizing Your Credit Score with Major Expenditures 33

Leveraging your mortgage 34

Financing your car 36

Paying back student loans 37

Understanding How Good Debt Builds Good Credit 38

Achieving goals with the help of credit 38

Sending a message to potential lenders 39

Giving nonlenders a sense of how you handle responsibility 39

Selecting the Best Tools for Building Your Credit 40

Spending your way to better credit with a spending plan 40

Tracking your progress: Paying attention to your credit report and score 41

Chapter 3: Cleaning Up Your Credit Reports 43

Understanding the True Value of Good Credit 44

Reviewing Your Reports for Problems 47

Using the Law to Get Your Credit Record Clean and Keep It That Way 50

Identifying and Disputing Inaccurate Information 53

Understanding the dispute process 53

Correcting all your credit reports 54

Contacting the creditor 59

Adding Positive Information to Your Credit Report 60

Asking your landlord to report your rent payments 60

Adding your utility and cellphone payments to your report 60

Opening new credit accounts 61

Adding a 100-word statement 61

Chapter 4: Getting the Best Help for Bad Credit for Free 63

Knowing Whether You Need Help 64

Gauging your need for outside assistance 64

Handling situations on your own 65

Identifying Help You Can Get for Free 67

Getting help with your mortgage 68

Considering credit counseling 69

Working with an attorney 74

Chapter 5: Coping with Debt Collection 77

Handling Those Collection Phone Calls 78

Knowing what collectors can do 78

Knowing what collectors can’t do 80

Deciding whether to answer the phone 81

Preparing to answer collection calls 81

Knowing what not to say 82

Taking Charge of the Collection Process 83

Asking for proof that the debt is yours 84

Knowing when debts fade away: Statutes of limitations 84

Negotiating a payback arrangement 86

Keeping your promise 87

Identifying Escalation Options That Help 89

Asking to speak to a manager 89

Approaching the creditor 90

Fighting harassment 91

Communicating with Customer Service Before Being Placed for Collection 92

Contacting your creditor promptly 93

Explaining your situation 94

Offering a solution 95

Covering all the bases 96

Keeping Collectors in Check 96

Calling in a credit counselor 96

Referring the matter to your lawyer 97

Freeing Up Money to Pay a Collector 97

Utilizing a spending plan 97

Cutting the fat from your monthly spending 98

Avoiding Collectors Altogether 98

Getting organized 99

Stopping the paycheck-to-paycheck cycle 100

Chapter 6: Working with Collectors, Lawyers, and the Courts to Manage Debt Obligations 101

Getting a Handle on Charge-Offs 102

So what is a charge-off? 102

Making sense of unpaid charge-offs 103

Making charge-off payments 104

Coming to a Debt Settlement Agreement 105

Considering a debt settlement offer 105

Hiring a debt settlement firm 106

Reaching expiration dates on debts 106

Finding Out about Judgments and What They Mean to You 107

Understanding Wage Garnishments 110

Dodging wage garnishments 110

Figuring out how much can be garnished 112

Stating Your Case in Court 112

Managing IRS Debts, Student Loans, and Unpaid Child Support 114

Handling IRS debts 114

Educating yourself about student loans 115

Putting your kids first: Child support 117

Part 2: Reducing Credit Damage from Major Setbacks 119

Chapter 7: Reducing Credit Damage in a Crisis 121

Assessing the Damage from a Mortgage Meltdown 122

Understanding How Mortgages Differ from Other Loans 124

Spotting a foreclosure on the horizon 124

Counting to 90 125

Knowing Where to Turn for Help 126

Finding good help for free 126

Working with your mortgage servicer 126

Avoiding help that hurts 127

Alternatives to Going Down with the Ship 128

What to do first 129

What to do for more serious problems 129

What to do to end matters 130

Managing a foreclosure 131

Strategic default: Stopping payments 132

Dealing with Deficiencies 134

Preparing for “Credit Winter” 136

Curing Medical Debt 136

Understanding new reporting and scoring rules 137

Reviewing your options for paying medical bills 137

Discovering how insurers get your medical information 138

Monitoring insurance claims for errors 138

Dealing with denied medical claims 139

Managing Student Loans 139

Default timelines 140

Loan forgiveness programs 140

Where to get help 141

The impact of the CARES Act on student loans 141

Avoiding Car Repossession 141

Repossession: What you can do 143

Dealing with auto loan default deficiencies 143

Coping with So-Called Acts of God and Other Things That Are Not Your Fault 144

Chapter 8: Filing for and Recovering from Bankruptcy 145

Deciding Whether Bankruptcy Makes Sense for You 146

Deliberating the bankruptcy decision 146

Adding up the pluses and minuses 150

Considering a debt management plan first 152

Understanding Bankruptcy, Chapter and Verse 154

Qualifying for and Filing for Bankruptcy 155

Qualifying for Chapter 7 155

Qualifying for Chapter 13 157

Managing Your Credit After a Bankruptcy 159

Telling your side of the story 159

Reaffirming some debt 161

Repairing your credit score 161

Establishing new credit 163

Moving forward with a game plan 163

Chapter 9: Repairing Credit Damage in the Wake of Identity Theft 165

Taking Fast Action When Identity Theft Occurs 165

Communicating with the right people 166

Protecting your identity through the FACT Act 169

Sending out a fraud alert 171

Blocking fraudulent credit lines 171

Getting and Using Credit After Identity Theft 172

Closing and reopening your accounts 172

Altering your PINs, passwords, and radio transmissions 173

Changing your Social Security number and driver’s license number 174

Part 3: Rebuilding Credit, No Matter Where or When You Begin 175

Chapter 10: Starting or Restarting Your Credit in Real Life 177

Debunking Misinformation about Banking and Credit 178

Why you need credit 179

Why credit is safe 180

Obtaining Credit: Starting Out on the Right Foot 181

Establishing a credit file without a Social Security number 182

Setting goals before you set out 183

Establishing a relationship with a financial institution 185

Using prepaid and reloadable cards 186

Fattening up your credit file 187

Avoiding high interest, fees, and scams 189

Overcoming Credit Fears and Mistakes 190

Qualifying for First-Time Cards and Lending 192

Getting a credit card 192

Using savings for credit 194

Considering Credit for Students and Military Members 195

Giving credit to students 195

Following military credit rules 197

Chapter 11: Ending Life’s Negative Credit Surprises 199

Keeping Your Credit from Hurting Your Job Prospects 200

Dealing with Rental Application Checks 201

Knowing what’s on your reports 202

Taking action 203

Qualifying for a Mortgage 203

Ordering your credit report and score 204

Looking at your credit file like a lender 205

Preparing to Purchase a Car 205

Arming yourself with information 206

Reviewing what to consider when you’re at the dealership 207

Unveiling the Relationship between Your Credit and Your Insurance Premiums 208

Understanding insurance scores 209

Getting a copy of your insurance score and insurance claim report 209

Figuring out what to do with your newfound knowledge 210

Taking other factors into account 211

Chapter 12: Protecting Your Credit During Major Life Challenges 213

Tying the Knot in Life and in Credit: A Couples’ Guide to Building Good Credit 214

Engaging in prenuptial financial discussions 214

Considering joint accounts 216

Managing joint debt 218

Avoiding money conflicts 219

Protecting Your Finances in a Divorce 220

Taking precautions when a split-up looms 220

Preparing your credit before heading to court 221

Protecting your credit in a divorce decree and beyond 222

Keeping Credit Strong While Unemployed 226

Preparing your credit for the worst-case scenario 226

Using credit when you don’t have a job 226

Protecting your credit lines 228

Curing Medical Debt 229

Reviewing your options for paying medical bills 230

Discovering how insurers get your medical information 234

Monitoring insurance claims for errors 235

Dealing with denied medical claims 236

Resolving Credit Issues After the Death of a Spouse or Partner 238

Understanding what happens to joint credit when you’re single again 238

Knowing exactly what your liability is 239

Building your credit record on your own 240

Fitting Credit into Retirement 240

Budgeting on a fixed income 241

Using credit for convenience 241

Part 4: Making Sense of Credit Reporting and Scoring 243

Chapter 13: Discovering How Credit Reporting Works 245

Grasping the Importance of Your Credit Report 246

What is a Credit Report, Exactly? 247

Revealing the facts about your financial transactions 248

Providing insight into your character 252

The Negatives and Positives of Credit Reporting 253

The negatives 253

The positives 255

Your Credit Report’s Numerical Offspring: The Credit Score 255

Cracking credit score components 256

The reasoning behind risk factors 259

Chapter 14: Understanding Credit Reports and Scores 261

Getting Copies of Your Credit Reports 262

Where to get your reports 263

What you need to provide 264

When to get copies of your credit reports 265

Tracking Down Specialty Reports: From Apartments to Casinos to Prescriptions 268

Perusing Your Credit Reports 271

Identifying information: It’s all about who you are 272

Accounts summary: An overview of your financial history 272

Bankruptcy public records: The most serious element in a credit report 273

Credit inquiries: Tracking who has been accessing your file 273

Account history: Think of it as a payment CSI 274

Your optional 100-word statements: Making sure your voice is heard 281

Correcting Any Errors You Find 283

Contacting the credit bureau 283

Contacting the creditor 283

Getting and Understanding Your Credit Scores 284

Ordering your score 285

Telling a good score from a bad one 287

Connecting pricing to your credit score 290

Knowing the reason for reason statements 292

Chapter 15: Monitoring Your Credit Reports and Scores 295

How Credit Monitoring Really Works 296

Understanding the Types of Monitoring Services Available 297

Making a Case for and against Third-Party Credit Monitoring 299

Monitoring on your own 300

When paid monitoring may be worth the time and money 301

Recognizing the protection you have already 302

Getting Your Money’s Worth from Monitoring Services 303

Setting Alarms, Alerts, and Freezes 304

Alarms 305

Fraud alerts 305

Credit freezes 305

Part 5: Successfully Managing Your Credit for Life 307

Chapter 16: Putting Yourself in Control of Your Credit 309

Determining Your Credit Style 310

Balancing Spending, Savings, and Credit Use 312

Spending on your terms 312

Saving for financial emergencies 312

Using credit to enhance your life 313

Remembering the Importance of Planning When It Comes to Your Credit 313

Zeroing in on the plans others have for your money 314

Developing your own plans for your future 314

Chapter 17: Taking a Sustainable Approach to Your Credit 317

Going Green: Treating Credit as a Renewable Resource 318

Recognizing your credit environment 318

Taking a closer look at the parts that make up your credit ecosystem 319

Sustaining Your Credit Ecosystem for Life 321

Funding college 321

Home sweet home 322

Credit on wheels 322

Steering Clear of Credit Pollution 322

Endangering your payment history 323

Clear-cutting your credit in bankruptcy 323

Outlasting a long, cold credit winter 325

Surviving and Reviving After a Credit Catastrophe 325

Understanding what happened 325

Rebuilding your credit ecosystem 327

Chapter 18: Safeguarding Your Credit with a Spending Plan 329

Appreciating the Benefits of a Solid Spending Plan 330

Deciding on Goals: Imagining Your Future as You Want It to Be 332

Setting the stage for planning 332

Categorizing your goals 333

Putting your goals in order 334

Building Your Vision of Your Future 334

Step 1: Counting up your income 335

Step 2: Tallying what you spend 336

Step 3: Making savings part of your spending plan 341

Step 4: Managing your credit to improve your spending plan 345

Step 5: Looking at your insurance options 346

Step 6: Planning for the IRS 348

Step 7: Planning for retirement 349

Using Cool Tools to Help You Build and Stick to a Spending Plan 351

Web-based financial calculators 352

Budgeting websites 352

Smartphone apps 353

Spending plan assistance 353

Adjusting Your Priorities and Your Plan 354

Chapter 19: Understanding Equity and Diversity in Credit 355

Benefitting from Financial Inclusion 357

Participating in the Financial System 358

Taking or Retaking Control of Your Credit 358

Educating Yourself on How the System Works 359

Tackling Debt 362

Student loans 363

Payday loans 363

Collections 364

Bankruptcy 364

Working Toward the Goal of Homeownership 364

Chapter 20: Knowing Your Rights to Protect Your Credit 367

Why You Have the Right to Credit Protections 368

The CARD Act: Shielding You from Credit Card Abuse 369

The Consumer Financial Protection Bureau: The New Cop on the Financial Beat 372

Safeguarding Your Credit Data through the FACT Act 372

The FDCPA: Providing Protection Against Debt Collectors 375

Controlling the contacts 375

Finding out about the debt 375

Stopping a collector from contacting you 376

Spotting prohibited behavior 376

Suing a collector 377

The CROA: Getting What You Pay For 378

Knowing what credit repair organizations must do 378

Understanding what credit repair companies can’t do 379

Exploring Other Protections 379

The ins and outs of payday loans 380

The details of debt settlement 382

The scoop on the statute of limitations 384

Chapter 21: Protecting Your Identity 387

Keeping Thieves at Bay 388

Getting on the technology train 388

Looking out for phishing scams 389

Safeguarding your computer data 391

Keeping passwords secret 392

Protecting your mail 393

Storing financial data in your home 393

Putting your credit information on ice 394

Shielding your credit card number 395

Catching Identity Thieves in the Act 397

Watching for early-warning notices 397

Early warnings from the IRS 399

Handling a collections call 400

Detecting unauthorized charges 400

Being denied credit or account access 401

Noticing missing account statements 401

Part 6: The Part of Tens 403

Chapter 22: Ten Consumer Protections Everyone Needs to Know 405

The Fair Debt Collection Practices Act 406

The Bankruptcy Abuse Prevention and Consumer Protection Act 406

Your Lawyer 407

Coronavirus Aid, Relief, and Economic Security (CARES) Act 408

Statute of Limitations Laws 409

Your State Attorney General 409

The Consumer Financial Protection Bureau 410

The Credit Card Accountability, Responsibility, and Disclosure Act 411

The Fair and Accurate Credit Transactions Act 412

The Federal Trade Commission 413

Chapter 23: Ten Strategies for Dealing with Student Loans 415

Knowing How Student Loans Are Reported Differently Than Other Loans 416

Dealing with the Collection Process 416

Identifying the Best Repayment Option for Your Situation 417

Taking Your Loans to Bankruptcy 418

Dealing with the Prospect of Default 418

Gaining Student Loan Forgiveness 419

Lowering Your Bill While You’re in School 421

Keeping Up with Your Loans After You’re Out 422

Setting Limits During the Planning and Application Process 423

Getting Help if You’re in the Military 423

Chapter 24: Ten Ways to Deal with a Mortgage Meltdown 425

Knowing When You’re in Trouble 426

Knowing How Your State’s Laws Treat Foreclosures 427

Nonrecourse or recourse 427

Judicial or nonjudicial 427

Deciding Whether to Stay or Go 428

Walking away 428

Working with the lender to exit 429

Staying the course 429

Tightening Your Spending to Stay in Your Home 430

Prioritizing Your Spending to Build Cash 431

Lessening the Damage to Your Credit 431

Knowing Who to Call 432

Beware of Scams 432

Beefing Up Your Credit 432

Consulting an Attorney 433

Index 435