Credit Repair Action Plan 1

There is a lot of information on credit repair available and I have reviewed a great deal of it on and off the web. A lot of what I found was mostly promotional material for one service or another. I have used the information from the Federal Trade Commission website as the basis for this section because I wanted to present unbiased facts. The FTC information is in italics. The first thing that needs to be said is that the majority of credit repair companies are a scam. But don’t believe me here is a quote from the FTC concerning credit repair.

“The Federal Trade Commission (FTC) says do yourself a favor and save some money, too. Don’t believe these claims: they’re very likely signs of a scam. Indeed, attorneys at the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation making those claims. The fact is there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.”

See the full report at:  http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm

There are many companies that promise to be able to use the dispute process to remove negative items from your credit even temporarily and give you a short term boos in your score so that you can complete a mortgage application using the higher score. I have heard plenty of antidotal evidence about this but I have never seen any real evidence of this working. In addition the credit reporting agencies are well aware of this practice and from reports have taken measures to counteract this.

Step one.

Get a copy of your credit report and go over it thoroughly. To order, click on https://www.annualcreditreport.com/cra/index.jsp

Call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You don’t have to spend any money or sign up for any additional services to get your free credit report. There are many sites that market themselves as having free credit reports but that require you to sign up for a monthly monitoring service before you get your free credit report. This type of service can be useful if you are actively tracking changes in your credit report but it is not necessary.

Step two.

Look for any mistakes on your credit report. If they are any mistakes that you can correct this will give you a quick boost. Genuine mistakes when removed will have the fastest impact on your credit score.

If you find any mistakes you can file a Dispute, a word to the wise, according to many people in the credit field don’t rely on the online dispute format. They recommend that you write a formal letter and keep copies of everything.

Explain to the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of any documents that support your position. In addition to providing your complete name and address, your letter should identify each item in your report you dispute; state the facts and the reasons you dispute the information, and ask that it be removed or corrected. You may want to enclose a copy of your report, and circle the items in question. Send your letter by certified mail, “return receipt requested,” so you can document that the consumer reporting company received it. Keep copies of your dispute letter and enclosures.

 Consumer reporting companies must investigate the items you question within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it is required to investigate, review the relevant information, and report the results back to the consumer reporting company. If this investigation reveals that the disputed information is inaccurate, the information provider has to notify the nationwide consumer reporting companies so they can correct it in your file.

When the investigation is complete, the consumer reporting company must give you the results in writing, too, and a free copy of your report if the dispute results in a change. If an item is changed or deleted, the consumer reporting company is not permitted to put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider. If you ask, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. You also can ask that a corrected copy of your report be sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay for this service.

Here are the web addresses for the three credit reporting agencies:
Equifax – http://www.investigate.equifax.com/
Experian – www.experian.com
TransUnion – www.transunion.com

Part 2 will follow soon

Much has been written since the crisis began about “walkaways” or “strategic defaulters” — mortgage borrowers who abandon their homes, often because they owe more than the property is worth.

But Consumer Credit Counseling Service of Greater Atlanta Inc., which advises debtors around the country, has begun tracking what could be described as the opposite behavior: people filing for bankruptcy protection so they can keep their homes.

Chapter 13 of the U.S. Bankruptcy Code offers powerful protection against foreclosures: filers get automatic stay on the proceedings. They can keep their homes provided they resume making payments on the mortgage (and eventually repay past-due amounts) while their other debts are restructured.

Of the 50,385 people to whom the Atlanta nonprofit provided pre-filing counseling during the second quarter, about 21% cited avoiding foreclosure as the primary reason for seeking bankruptcy protection.

Consumer Credit Counseling began keeping this data in March, so there is no comparable figure from prior periods. But Doug Erickson, a vice president at the agency, said that historically, 25% to 30% of the people who filed for Chapter 13 did so to protect assets of some kind, and that most of the time that asset was probably the home.

Erickson said he was surprised that the home-saver share of filers was not higher during the period his agency began measuring it.

“We’re going to watch that percentage carefully,” he said. “It will be interesting if it starts to climb.”

The most common condition that forced homeowners to turn to bankruptcy to keep their homes, Erickson said, was that they were “overobligated: they owed too much money” to various creditors. The second most common reason was that their income had been reduced; the third, unemployment.

source: American Banker

Samantha Kielar is scrambling to find a house in Colorado before the doors slam shut on an $8,000 first-time buyer’s tax credit she needs for her downpayment or home repairs.

AP

The clock is ticking fast. Qualified borrowers need to have house offers accepted by the end of September to assure lenders enough time to beat the Nov. 30 federal deadline to close deals, industry executives said.

“I am willing to settle for something” to finish buying quickly, said 20-year old Kielar, who works at the Denver County Jail, and is a part-time student. The tax credit carrot “is speeding up the process,” she said, adding that “$8,000 could help remodel the house, redo carpets and cabinets.”

For loans backed by the Federal Housing Administration (FHA), which require a minimum 3.5 percent downpayment, the $8,000 can be also be applied upfront toward the purchase rather than later on tax returns like other mortgages.

The National Association of Realtors projects 350,000 additional first-time buyers will own homes thanks to the tax credit, said spokesman Walter Malony.

First-time buyers are injecting life into the most severely battered housing market since the Great Depression.

Home sales have risen for three straight months, a ray of hope after three years of tumbling sales that swept prices down more than 30 percent on average and drove record foreclosures.

The state of housing is critical to the overall economy. While stabilizing, housing is unlikely to quickly recover as long as unemployment stays at the highest rate in more than a quarter century, most economists agree.

But various federal stimulus offers, mortgage rates that sank to record lows in April and pockets of economic strength make home buying more fathomable.

Odete Gomes, a 30-year old women’s wholesale clothing buyer in New York City living with her parents and six-year old son, said the soon expiring tax credit “kicked me in the butt to not lose this opportunity” to buy her first home.

“Especially now with the government helping you a little bit, you just gotta go for it,” she said.

Affordability, Obstacles

Average 30-year home loan rates of 5.29 percent in the past week were above the all-time low of 4.78 percent set in April, but much lower than 6.52 percent a year ago, said home funding company Freddie Mac.

Rigid credit standards will prevent the type of wholesale lending that fueled a record home sales and price spree early this decade.

Still, distressed prices, plenty of available properties and low borrowing costs should keep housing from falling apart anew once the home buyer credit disappears, said Gregory Miller, chief economist at SunTrust Bank in Atlanta.

“These programs are giving housing a boost,” he said. “When the tax credit expires, the housing market should have even more legs under it” and gain traction on affordability.

“Housing is on a sustainable path,” Miller added. “We have those who wanted to buy before but couldn’t afford the price, and those who would have bought before but couldn’t sell the existing house. Both of those groups are lined up to buy now.”

The real estate industry is making a full-court press to get the Obama administration to extend the program, though health care and other priorities may derail those efforts.

Realtors said many borrowers remain unaware of the credit and its expiration date.

“There needs to be an extra rush by buyers, because the transactions need to close by Nov. 30 and that will put some types of transactions in peril,” said Sherry Chris, president and chief executive of Better Homes and Gardens Real Estate in Parsippany, N.J.

Once aware, some potential first-time buyers, who tend to be younger and have less savings, will be unable to clean up their credit enough to get loans approved for the deadline.

Documentation has intensified since the financial crisis spawned by massive losses on loans made when standards were lax. The process has been prolonged as a result.

Gomes, who with a friend is buying a new $280,000 home in Newburgh, New York with an FHA loan, has an estimated closing date of Sept. 30, almost two months from purchase commitment.

Some transactions, including foreclosures and short-sales, take much longer to complete.

Property owners are also expected to sweeten offers to lure potential buyers to capitalize on demand spurred by the tax credit in its final stages.