SayEducate

You’ve decided to go ahead with an important consumer purchase, perhaps that new car you always wanted even a vacation home and you receive a nasty piece of information — your credit is awful. “This can’t be!,” you think but according to at least one of the credit reporting services you aren’t even fit to buy a new shirt, let alone a high ticket consumer item.

Some consumers have bad credit because of action they took which caused accurate negative information to be added to their record. But, for many other consumers inaccurate even false information could have found its way into their reports.

How To Fix Your Credit Report

Your credit report won’t fix itself, but with your pro-active work you can take care of each mistake one by one.

To get started you should:

• Retrieve copies of each of the three major credit reports. These are available for free from AnnualCreditReport.Com, a service of the Big Three credit reporting services: Trans Union, Equifax, and Experian. By law, the companies must allow you to access your reports once annually for free.

• Examine the report closely to make sure that your name, social security number, address and other personal information is correct.

• Check your individual accounts as they should each be in good standing. If not, find out the reason why an account isn’t in good standing. If it is due to something you did, then you cannot correct this problem other than making future payments on time. If there is an error with the account, contact the appropriate credit reporting service and explain to them what information you found is incorrect.

Notifying the Credit Reporting Service

If you discover an error, make a copy of the credit report and circle in red what you believe to be wrong information. Then, visit the Federal Trade Commission’s site and copy their sample dispute letter and change it accordingly. You’ll be sending the letter and your credit report to the service.

The credit reporting service must launch an investigation within thirty days, contacting the creditor on your behalf. Please note that the credit reporting service can come to any number of conclusions based on their investigation:

• Information that you dispute which cannot be verified will be deleted from your file.

• Erroneous information must be corrected.

• Incomplete information must be completed.

• Information belonging to another consumer must be removed from your file.

Not all investigations will be ruled in your favor. Perhaps you overlooked an account or after correcting certain information you could still have negative, but accurate details on your report. You do have the right to attach a letter of explanation to your credit file which can help explain your position. Send a copy to the business in question too so that they have your dispute on file.

Wrong information on a credit report isn’t the end of the world, but not responding can be a problem — take control of your credit today and order your credit reports and obtain your credit score (which is an extra charge).

Resources

Check Your Credit

Federal Trade Commission

Financing Tips

You are behind on your mortgage payments and are struggling to keep up with your credit card and car payments. Food and gas have gone up in price and your recent raise at work was a paltry 2% — moreover, your job may be outsourced to China or India in 2009, putting additional pressure on you.

To top it all off, your mortgage rate will reset this summer adding an additional $300 to your monthly expenses. Worse, you cannot refinance at a favorable rate because your creditworthiness has slipped due to your late payments.

Does this scenario sound far-fetched? Unfortunately, it isn’t — at least for some cash-strapped consumers. Indeed, although mortgage rates have dropped and are near historic lows, some consumers are finding that they cannot refinance, putting themselves into a precarious position: should they simply walk away from their homes?

Just Walk Away, Renee

One website is encouraging consumers to walk away, but I’m not going to link to them. There are some serious consequences to abandoning your financial obligations, long term headaches you should know about. Let’s take a look at the consequences and what some options are available for you.

Consequence Of Leaving Your Home Behind

Of course, you can simply pack up your goods and leave your home. But, if you do then you’ll quickly discover:

Your creditworthiness will nosedive. If you walk away, your home will be foreclosed and your credit will plummet. Getting a new job, renting an apartment, or doing almost any other activity which requires someone to access your credit report will become very difficult. If you think that you have problems now, just wait.

Your other creditors will take action. Creditors share information about you with each other. If you walk away from your home, then your credit cards will likely reset to a default rate and you’ll be ineligible for new credit, perhaps for many years.

Smart Action You Can Take

If you aren’t able to refinance your home and you cannot afford future payments, then the following should be considered:

List Your Home. Seek out the services of a real estate agent who can help you sell your home. You can explain your plight to her, but request that your financial situation not be made known to potential buyers. You don’t want a “fire sale” for your home, you would prefer to get out from under this obligation unscathed.

Sell Your Home. Last week, I made mention of one option for getting out of your home — short selling. In summation, short selling allows you to find a buyer who offers to buy your home for less money than what you owe on your mortgage. Although this is something mortgage brokers hate (and aren’t required to accept) there are certain situations where a short sell makes sense. Please read that article for more information.

Do Not Act In Haste

Perhaps the best advice for you is to not act in haste. Take care that you don’t fall prey to scams where someone will offer to lend you money for the short term, but for a high rate. There are people who are looking to entice cash-strapped homeowners into taking out high-rate second mortgages which can only worsen your problems.

Above all else, talk with your current mortgage lender and see what can be worked out. Get help through a credit counselor and only consider personal bankruptcy as a last resort.

Further Reading

Get Above Water: When You Are Struggling to Make Mortgage Payments

Debt Management Tips

Home Refinancing (Tips) 

What was the chief complaint received by the Federal Trade Commission (FTC) in 2007? If you guessed “identity theft” then you answered correctly. Last year, the FTC tallied more than 800,000 complaints from consumers with almost one-third that number naming I.D. theft in their complaint.

Credit Card Fraud Leads The Pack

According to an FTC Report released on February 13, credit card fraud was the most common form of reported identity theft at 23 percent, followed by utilities fraud at 18 percent, employment fraud at 14 percent, and bank fraud at 13 percent.

Consumers said that they lost $1.2 billion due to identity theft, averaging $349 per complaint.

Consumers Aren’t Always Sure When Theft Happens

Although identity theft happens, many consumers aren’t sure how it happens or happened to them. Oftentimes a problem surfaces well after the thief has gained access to confidential information, when the most damage has been done. Errors on a credit report, unsubstantiated charges on a credit card statement as well as dunning letters from creditors often tip consumers off, but by then the worst has taken place.

FTC Recommendations For Consumers

For identity-theft victims, the FTC recommends taking these steps:

• Place a fraud alert on credit reports and review credit reports. Contact any of the three consumer reporting companies to place the fraud alert.

• Close accounts believed or known to have been tampered with. Follow up in writing, and include copies, rather than originals, of documents.

• File a complaint with the FTC, which can refer complaints to other agencies and companies for further action, and investigate companies for violations.

• File a report with local police or law enforcement in the area where the identity theft took place.

You may not be able to stop i.d. theft completely, but you can have a hand in stemming the tide. Make sure that you obtain copies of your credit reports on a regular basis, examine them, and notify the credit bureaus when errors are found.