Credit Manual
Credit Manual
Notice
This publication and the accompanying materials are designed to provide accurate and authorita-
tive information in regard to the subject matter covered in it. It is sold with the understanding that
the publisher is not engaged in rendering legal, accounting or other professional opinions. If legal
advice or other expert assistance is required, the services of a competent professional should be
sought. (From a Declaration of Principles adopted jointly by a Committee of the Bar Association
and a Committee of Publishers and Associates.)
CREDIT MANUAL
TABLE OF CONTENTS
INTRODUCTION
GLOSSARY
Credit: How to Obtain, Increase and Preserve Credit
INTRODUCTION
TO CREDIT
Credit or one’s ability to pay their obligations has always been a critical component of our system of
exchange. For years, government was on the side of the lender to the extent that people were actually
sent to jail for nonpayment of obligations. Debtors’ prisons were abolished long ago, but it wasn’t
until 1968 that the Consumer Credit Protection Act was initially enacted. For the first time, creditors
had to state the true cost of borrowing.
HISTORICAL PERSPECTIVE
Today to buy a car, home, get a job, or a new TV, most will have to pass the credit criteria of a credit
bureau. With the electronic age, the collection of credit data is a multi-billion dollar industry. The
first known credit bureau was formed by a group of tailors in London, England in 1803. Members of
the Mutual Communication Society of London exchanged information on bad credit risks. The first
US credit bureau was started in Brooklyn, New York in 1869.
For years, consumers were able to obtain credit primarily from their local stores and vendors. Then,
to take advantage of all those eating out and traveling, a whole new set of credit evolved, the travel
and entertainment cards. American Express and Diner’s Club are prime examples. The economy was
booming and banks were anxious to partake in what was the “plastic” revolution in America. Up to
that point, to make a “material” purchase you had to have an account directly with the merchant you
were buying from. Then some banks in California got together and the MasterCard was born.
Credit Tightens
Credit was easy. Credit card companies were determined to sign up as many members as possible.
“You have been pre-approved for X amount of credit,” stated their marketing materials. More often
than not, the annual family income was the only criteria considered.
But consumers went on a spending spree, charging everything in sight; as a result many were unable
to pay, and credit procedures were tightened considerably. The economy went sour, interest rates
went through the roof and numerous consumers fell into a credit “no-man’s” land. Downsizing
became the buzzword in corporate circles and many became unemployed and without credit.
Credit Boom
Then, we came full circle. The economy was booming at a 50-year high and interest rates were very
low. A Time magazine story quoted the Consumer Federation of America as stating that from 55 to
60 million Americans had an outstanding balance of over $7,000 in their credit card accounts, up
$1,000 from the previous year. However, bank profit margins at that time were declining steadily
since the mid-eighties. The article estimated a 300% decline during that period. Where did they look
for additional business?
One way was to further penalize current customers. Some have decreased the grace period from 30
to 20 days. Others actually started charging a fee if the account is not used during a certain time
Introduction - 2
frame. How important is this business to their bottom line? Credit card loans account for 7.8% of
total bank lending, however it represents 12.2% of their loan income. It is very important to them.
Some even instituted a fee for closing an account.
How about those 50 million Americans with poor, or no credit? Many financial institutions are
actually targeting them as a major new source of consumer business, realizing that their stringent
rules have prevented many good and stable people from receiving the credit they deserve. A divorce,
illness, job loss or even a bankruptcy deprived consumers of a record that included years of steady
and faithful payments.
We will identify the nine important pieces of federal legislation that were enacted to protect you in
the marketplace. We will explain the significance of each and review what they mean to you, from
the landmark Truth in Lending Act to the Real Estate Settlement Procedures Act.
Getting Started
If you have no credit, or if you have bad credit, a step-by-step plan will be provided to insure that you
have the financial resources to pursue whatever it is you need. Which cards should you apply for first
and what is the ideal mix?
If you have credit but need more, how can you attain those additional revenue sources and credit
lines? Your goal is a $100,000 line-of-credit. How can you use creative financing while you are
building up your credit resources?
How do you go about restoring credit problems? We’ll show you what to look for, where to you go,
and even provide sample letters you can use for your particular situation. This is the definitive credit-
repair guide.
Now that you are on the road to financial success, what should you consider doing to ensure that you are
not put in a position of losing your gains? We will show you how to shelter what you have from others.
Introduction - 3
WHERE TO FIND HELP
If you need help in solving a problem or in straightening out your debt, we will show you the places
to go for that help, including federal, state and not-for-profit agencies. We will also show you how
and which agency you should contact to report a specific problem with a financial institution.
A summary of all the consumer protection laws pertaining to credit in the market place are also
included for your review.
Protecting your credit is a never-ending process, therefore, we’ll show you what the professionals
recommend you do and how often.
Introduction - 4
Credit: How to Obtain, Increase and Preserve Credit
UNDERSTANDING
CREDIT
CHAPTER
1
Character: Does the person appear to be trustworthy? This is a summary of what was thought about
you as a person.
Capacity: The ability to pay off the debt, based upon earnings and outstanding debt.
Conditions: Are there economic or regulatory influences that would come into play?
Most people automatically assume that credit is the most important factor, but it stands fifth in
importance. Your image, both dress and presence, have a major impact on whether one receives a
loan. Once again, it boils down to stability and how you relate to the particular loan officer.
Credit Scoring
Over the years, many commercial businesses such as department stores, automobile dealerships, and
the like, began to develop profiles on their customers and used them as a determinant as to their
potential for prompt payment of their debt. No one system is perfect and most will not even divulge
their own formula. For every type of business, the potential customer has different traits. One major
factor is that it reduces the importance of their impression of you and is suppose to judge all appli-
cants equally. According to the Federal Trade Commission (FTC), most employ from six to fifteen
factors to determine credit worthiness.
Credit: Understanding Credit 1 - 2
Credit Scores
Different factors that the bureaus consider important are given a point score and the points are then
tallied and the determination made. Here is an example. Those receiving under 15 points will be
rejected for the loan, a score of 16 to 19 points, they will be referred to the credit manager for further
financial data, and those scoring 20 or more will be accepted straight up. The variables that can be
used are endless. However race, sex, martial status, national origin, religion, or age cannot (are not
suppose to) be used as they fall under discrimination laws. Having said that, notice age is listed as
part of the criteria, but the law states that people 62 or older must receive the maximum number of
points for that factor.
Monthly Income:
Less than $400 0
$400 to $659 3
$651 to $800 7
$801 to $1,000 12
$1,200 + 15
Telephone in Home:
Yes 2
No - 5
Age:
21-30 5
31-49 2
50-61 3
61 + 5
Occupation:
Unskilled 1
Skilled 2
Professional 4
You can obtain a credit report from any number of on-line sources with just a few mouse clicks.
FICO
You can go right to the source of all this elusiveness. That’s because the Fair, Isaac & Company, a
firm that developed the formula for rating the creditworthiness of nearly every borrower, opened its
files to the public. The company was founded in 1956 by Bill Fair and Earl Isaac and is considered to
be the most renowned of all the credit scoring agencies. The company preferred to work in the deep
background in servicing lenders. Now, anyone can find out their own personal FICO score — just
like a banker. The FICO score is a three-digit number, ranging from 300 to 900, assigned to your
credit based on a formula developed by Fair, Isaac & Co.
It is in your best interest to know your FICO score because it is a key factor in determining if you get
a mortgage, whether you can refinance your home at a favorable rate, or whether or not you can get a
new credit card. Your FICO score can also determine whether or not you can finance a new car, buy
insurance - or even get a job. For many years, this small company sat in the background of the huge
credit industry controlling the credit scoring business with a secret mathematical formula.
Why Bother?
As we mentioned earlier, your credit score will significantly affect your ability to obtain loans and
mortgages, and will likely affect the interest rate you pay. According to Fair, Isaac & Co., the FICO
score is used in 75% of residential mortgage applications. Moreover, use of FICO scores has in-
creased in recent years as automated loan approvals have become more common among lenders.
According to a U.S. News & World Report article, E-Loan, an online lender that fought with Fair,
Isaac & Co. over making FICO scores public, found that for auto loans, consumers with FICO scores
of 720 or higher were likely to receive interest rates up to four percentage points lower than those
with scores under 640. You can order your own FICO score by logging on at either of these two web
sites: myfico.com or at fairisaac.com. The cost for the survey is minimal and is a relatively inexpen-
sive way to find out where you stand with your credit - much cheaper than not knowing!
This information has always been available, though in the past you might have had to call a credit
bureau’s 1-800 number and then mail in a check. These days you can purchase this information
online. In addition to your credit report, there’s your credit score. When you apply for a loan through
a mortgage bank or other lender, they request your credit report from one of the three major Credit
Reporting Agencies (CRAs), who then calculate your FICO score based on Fair, Isaac & Co.’s
model. Since your credit report might differ among the various CRAs, your FICO scores might differ
as well!
What’s Changing
In response to increasing pressure from the U.S. Congress and consumer groups, and some lenders
such as E-Loan, Fair, Isaac & Co. provides FICO scores online for a fee. In addition, the two compa-
nies will provide additional information about where you stand compared to everyone else, and the
factors that led to your score.
In addition, the reports will likely include four “reason codes,” as Fair, Isaac & Co. calls them, which
are “the top four reasons your score was not higher.” For example, having excessive balances on
credit cards — particularly relative to a card’s credit limit (in other words, don’t “max out”) — or
having balances on too many accounts.
Fair, Isaac & Co. has also explained all the factors they consider when formulating your score, and
how much weight they are given. For example, about 35% of your FICO score is based on your
history of repaying loans!
Car payments, installment loan payments with more than 10 remaining payments, average monthly
credit card payments, student loans, medical/health care payments, and alimony or child support
There are other types of credit categories used mostly by mortgage brokers who issue A,B, C, and D
ratings based on one’s credit history. These vary by the lending institutions. Most use a combination
of mortgage history, major and minor late pays, and loan to value ratios such as the following ex-
ample.
Credit Criteria
CREDIT CARDS
Any explanation of credit must include the different types of credit cards that are available. To rent a
car, shop online, book a hotel room, or for hundreds of other transactions, the use of a credit card has
become almost mandatory for the consumer. Telephone and catalog shopping have carried these
cards on a meteoric increase. You never have to worry about having enough money because you
carry the card. Need something in a hurry? Don’t send a check because it might take weeks to clear
and a month before the product is received.
Direct Cards
Direct cards for credit go back as far one can remember. Merchants have used them far before
anyone ever imagined the concept of a credit card. Major stores have issued credit for their best
customers for years. At first it was a minor line of pre-approved credit that you had to apply for prior
to approval of the sale. Then accounting improved and they were able to have a pre-approved limit
that you could access at the point of sale. At first they were made of paper, but those wore out rapidly
and, with the advent of plastic, a new type of card was made. Today, the term “plastic” doesn’t refer
to the material the card is printed on, but a whole new way of conducting business: the credit card
generation was born. These cards used by oil companies, department stores, etc. are only good in the
retailer’s store itself and are not transferable.
Designed originally with no stated limits, all charges were due and payable the following month.
American Express originally had a number at the end of the card number that identified the status
level of the customer, but it dropped it after it was called a discriminatory practice. Today, all compa-
nies have different levels of credit standing. With the popularity of Visa and MasterCard, some travel
and entertainment cards are offering card combinations with extended payment plans. American
Express only used this feature in the past with travel arrangement; today its Optima card has the
same features as MasterCard or Visa.
Bank Cards
Bank Cards got their start in California with the advent of the MasterCard. Banks saw the way
consumers were using the direct cards and the interest payments that were being raked in. If they
work for a single merchant, how much more powerful a tool they would be if one could use the card
in a majority of stores. At first it was the small stores that signed on. They couldn’t afford to set up
their own system like the large stores could. Predictably, the large stores resisted, but today they
except all cards, still pushing their own as well. Bank Cards are issued in the name of the bank that
signed up the consumer, but process their card through one of the major bankcards, Visa or
MasterCard.
The bank issues the credit card and use their local credit criteria, while Visa and MasterCard are their
servicing bureaus. Each individual has their own credit-limit ceiling. There are different ways to
arrive at the interest payment and annual fee and we will cover them in another chapter.
Debit Cards
We will include debit cards in our discussion even if they are not credit cards in the truest sense of
the word. Many even carry the MasterCard or Visa logo and are processed by them. Similar to a
checking account, the money is taken or debited from your account at the transaction. It is more like
paying in cash, except you do not have to carry the cash with you. There are those who think these
cards are more convenient to the bank than the consumer. Some financial planners are instructing
their clients not to use these cards because the security features have not been perfected as of yet.
Many institutions are substituting these cards for their ATM cards. For those without any means of
credit, they can be of assistance for those establishments that will not accept a check. It is our opin-
ion that a secured card is the better way to go.
Take your borrowed money and turn it into something that will go up in value, for example real
estate. Then take the profits from that investment and pay cash for assets that depreciate and you will
find yourself on the road to building wealth. Now that we have covered understanding credit, let’s
understand your credit rights.
For more information about how to Build Your Wealth call 1-800-741-7877. Ask for our Consulting
Department. The consultation and the call is Free!
YOUR CREDIT
RIGHTS
CHAPTER
2
Then we will touch upon two other acts that have had impact on your consumer
rights:
1. The Truth in Leasing Act
2. The Real Estate Settlement Procedures Act
If a credit card is lost or stolen and you promptly notify the company, your liability is limited by law
for the first time to $50 per card. It is also illegal for a card issuer to send you a credit card unless
you ask for or agree to receive one. If a creditor does not comply with the law you may sue for actual
damages and, in any lawsuit you win, you are entitled to be reimbursed for court costs and attorney’s
fees.
If you find an error or incomplete information in your credit report, contact the credit bureau and
they are required to investigate the items in question. If the investigation reveals an error, the credit
bureau may be required to send an amended report to all those who asked for your report in the last
six months.
There are provisions on how long an item can appear on a credit report:
• Generally seven years.
• Bankruptcy information can be reported for 10 years.
• Information regarding a job application with a salary of more than $20,000, no limit.
• Information for more than $50,000 of life insurance, no limit.
• A lawsuit or a judgment can be reported for 7 years or until the statute of limitations runs out.
The Federal Reserve quotes the law as defining an error as any charge:
• For something you didn’t buy or for a purchase made by someone not authorized to use your
account.
• That is not properly identified on your bill or is for an amount different from the actual
purchase price or was entered on a date different from the purchase date.
• For something that you did not accept on delivery or that was not delivered according to
agreement.
• Errors in arithmetic.
• Failure to show a payment or other credit to your account.
• Failure to mail the bill to your current address, if you told the creditor about an address
change at least 20 days before the end of the business cycle.
• A questionable item, or an item for which you need more information.
You must receive a written explanation of your supposed debt and what to do if you feel you do not
owe the money. The FTC has prepared some excellent guidelines.
False statements:
Debt collectors may not use any false statements when collecting a debt.
Unfair Practices:
Debt collectors may not engage in unfair practices when they try to collect a debt. For example,
collectors may not:
• Collect any amount greater than your debt, unless allowed by law.
• Deposit a post-dated check prematurely.
• Make you accept collect calls or pay for telegrams.
• Take or threaten to take your property unless this can be done legally.
You also have the right to know if your application was accepted or rejected within 30 days. You also
have the right to know why your application was rejected and the reason must be specific.
The act forbids a creditor from requiring a consumer to repay a loan or other credit by electronic
funds transfer (EFT), except in the case of overdraft checking plans. While your employer or the
government agency can require you to receive your salary or government benefit by EFT, you have
the right to choose the financial institution that will receive your funds.
A financial institution may send you an EFT card that is valid for use only if you ask for one, or to
replace or renew an expiring card.
Many states have followed suit requiring that credit repair firms be licensed. The law addressed some
basic issues: It said that the credit repair organizations could not make a statement that was mislead-
ing. More important, they were prohibited from advising their clients to make a misleading or untrue
statement to a credit bureau. Many were guilty of this abuse. They were stopped from advising
consumers how to overlook problems in their records.
Prior to signing a contract, the credit repair organization was required to give the customer a copy of
their credit reporting rights under the law. The customer must acknowledge receipt of this informa-
tion in writing and the firm was required to retain that document for two years.
It gave the consumer a clear three-day right-of-cancellation, which must be on the contract and it
must instruct you how to cancel. The contract must detail the services that will be provided, spell out
any guarantees, give a time frame for the service and a definitive cost to the consumer which would
be paid after the service was performed.
Prior to executing any lease, the firm must provide a written statement of its costs. The written
statement should include the following:
• The amount of any advance payment or security deposit.
• The number, amount, dates of your regular payments.
• The total costs of these payments.
• Amount due for license, registration, taxes and any other fee.
• Lease terms, including insurance, express warranty, who is responsible for maintenance and
what the standards are for wear and tear.
• Any penalty for default or late pay.
• Cancellation provisions, and charges.
• Purchase arrangements and cost.
• You could have an open-end lease where you are responsible for a loss in value, under what
the company feels it is worth. The law provides that you have the right to go to an indepen-
dent appraiser and both sides must abide by the estimate.
The law requires that lenders give all borrowers of federally related mortgage loans a
HUD prepared booklet with information about real estate transactions, settlement services, cost
comparisons, and relevant consumer protection laws. When applying for a loan, borrowers must
receive the booklet along with the lender’s good-faith estimate of the settlement costs they are likely
to incur. One day before settlement, the borrower may request that the person conducting the settle-
ment provide information on the actual settlement costs. At settlement, both the buyer and the seller
are entitled to a settlement statement that itemizes the costs they paid in connection with the transac-
tion.
Kickbacks and referral fees are outlawed, sellers may not designate borrowers’ title insurance compa-
nies, and excessively large escrow accounts cannot be established or maintained. Each borrower must
receive an initial and annual escrow account statement. The lender must disclose the possibility of
mortgage servicing being transferred, and establishes certain borrower rights if the loan servicer
makes errors in paying escrow account expenditures.
CREDIT
CARDS
CHAPTER
3
You would never dream of buying a new or used car without shopping around to get the best possible
deal. Nevertheless the vast majority of people applying for a new credit card have no idea what the
actual credit card terms are.
That’s right, had you shopped around you may have found a card with significantly lower fees. They
differ from card to card and from bank to bank. Some think that all MasterCard or Visa cards are
alike in their fee structure, but they are not. They differ from bank to bank.
You also must be told how much and how often your rate may change. The most common indexes
are: prime rate, one-month treasury bill rate, three-month treasury bill rate, six-month treasury bill
rate, one-year treasury bill rate, federal funds rate, cost of funds, and the Federal Reserve discount
rate.
Transaction Fees
A credit card may also involve other types of costs. For example, some card issuers charge a fee
when you use the card to obtain a cash advance, when you fail to make a payment on time or when
you go over your credit limit. Some even charge a flat monthly fee whether or not you use the card.
Adjusted Balance
This balance is computed by subtracting the payments you made and any credits you received during
the present billing period from the balance you owed at the end of the previous billing period. New
purchases that you have made during the billing period are not included. Under the adjusted balance
method, you have until the end of the billing cycle to pay part of your balance and avoid the interest
charges on that portion. Some creditors exclude prior, unpaid finance charges from the previous
balance. The adjusted balance method usually is the most advantageous to card users.
Previous Balance
As the name suggests, this balance is simply the amount that you owed at the end of the previous
billing period. Payments, credits, or new purchases made during the current billing period are not
taken into account. Some creditors also exclude unpaid finance charges in computing this balance.
An explanation of how the balance was determined must appear on the billing statements the card
issuer provides you, and on applications and pre-approved solicitations the card issuer may send you.
The following organization has a report online that provides a listing of credit cards available. The
report on the Internet is available free of charge but a small fee is charged for a hard copy.
Card Trak
PO Box 1700 Frederick, Maryland 21702
1-800-344-7714 or (301) 631-9100
www.cardweb.com/
Check with magazines that specialize in giving advice on financial matters. For example, Money
Magazine lists the best credit card deals on a regular basis.
For those shopping for the best credit card available, one of the best places to go is the Board of
Governors of The Federal Reserve System. Every 6 months, they publish a report showing the terms
of credit card plans offered by the largest card issuers in the country. This report is available on the
Internet at www.federalreserve.gov. Click on Consumer Information, then Shop: The Credit Card You
Pick Can Save You Money then PDF (www.federalreserve.gov/pubs/shop/tab/wb.pdf) or ASCII
(www.federalreserve.gov/pubs/shop/shop.txt).
THE CREDIT
BUREAUS
CHAPTER
4
The credit reporting agencies are often affiliates or subsidiaries of the credit bureaus, but they
operate as separate entities. It works like this: the Credit Reporting Agency (CRA) gathers informa-
tion from creditors who provide payment data and account balance information – often on a monthly
basis – on their customers. The CRA also gathers information from other sources. This data is then
fed into a credit bureau’s computer. Ideally, the result is an up-to-date record of an individual’s credit
status, including who they owe, how much they owe, what their payment habits are, and whether any
action has been taken to collect overdue bills.
The three major credit bureaus cooperate and share information. The idea behind this policy is to
make sure that an individual’s credit history follows them wherever they go.
But there’s no guarantee that an individual’s file with one credit bureau will match the information
on file with another. As a credit specialist, this is an important point. When you begin working on
cleaning up your credit history, you must work with all three major credit bureaus, not just one.
A MAJOR INDUSTRY
Many people are under the impression that the “credit bureau” (they often don’t even know the
company name) is a government or quasi-government agency. Credit bureaus are private, for-profit
corporations, and the business of gathering and reporting credit information is a $10 billion industry.
But while credit bureaus are not part of the government, the government regulates them. These
regulations came into being as a result of the clear need to protect consumers from errors and irre-
sponsible operations by credit bureaus. The credit bureaus and credit reporting agencies’ customers
are not consumers or the general public, but credit grantors and other companies that may have a
reason to examine individual credit reports. This includes various lenders, banks, credit card compa-
nies, mortgage companies, department stores, insurance companies, employers, etc., who pay the
credit bureaus and CRA’s large sums of money to collect and provide them with information. The
law dictates what responsibilities credit bureaus have to the general public and consumers; but
business practice dictates how they work with their customers, who are, after all, paying the bill.
Experian
Experian National Consumer Assistance
P.O. Box 2002, Allen, TX 75013, 888-397-3742, www.experian.com
To dispute data in your report: P.O. Box 2106, Allen, TX 75013, 1-800-422-4879
TransUnion
TransUnion LLC
P.O. Box 1000, Chester, PA 19022
TransUnion
P.O. Box 34012, Fullerton, CA, 92831
Alaska, American Samoa, Arizona, California, Canal Zone, Colorado, Federated States of
Micronesia, Guam, Hawaii, Idaho, Kansas, Marshall Islands, Mexico, Montana, Nebraska, Nevada,
New Mexico, North Dakota, Northern Mariana Islands, Oklahoma, Oregon, APO Pacific, Palau,
South Dakota, Texas, Utah, Washington, Wyoming
Originally the credit bureaus started and grew regionally. Today, however, the big three are pretty
much national with some fallout from their original base. You will find most of your report will be
A reminder, if you have been turned down for credit based on the information contained on a credit
report, you are entitled to a free copy of that credit bureau’s report on you. Otherwise a nominal
charge might be imposed.
You will also receive, as required by law, a written summary of your rights under the Fair Credit
Reporting Act. They will also provide a research request form assisting you to contest any item.
Let’s take a look at the information in each category, what it means, and how you should review it.
Personal
Name
This includes the full name, and nicknames or aliases, any suffixes such as Jr. or Sr., titles, and
maiden names of married women. If the individual has a common name, or lives with or near a
relative with a similar name, mistakes can occur and the wrong information may be placed in the
file. Always check to be sure the names noted on a file are accurate.
Address
The current address and previous addresses for at least five years are listed. This helps confirm an
individual’s identity and establishes their stability. It also provides credit agencies with the means to
follow up on public records in other states. Make sure the individual has actually lived at each ad-
dress on the report.
Employment History
Current and previous employment information is listed, including the company name, address,
position held, income, dates, and when the information was verified.
Date of birth
The month, day, and year of birth is indicated. This personal information is designed in part to
identify individuals and help keep data from being entered in the wrong file. It also provides pro-
spective creditors with information they will consider in making a credit granting decision. Any
discrepancies in this section of a credit file should be corrected immediately.
Federal law requires that companies have a permissible purpose before examining credit files.
However, it’s not unusual for inquiries to appear on a credit file that you will know nothing about.
Removing this information could be an important part of cleaning up a credit history. Finally, any
accounts placed with collection agencies will also be noted in this section.
Public Records
The third category of information maintained by credit bureaus is public information kept on file by
the county, or counties, where you live.
This includes:
• Lawsuits • Marriages
• Judgments • Divorces
• Bankruptcies • Legal name changes
• Arrests • Convictions
• Tax Liens
It’s entirely possible for this public information to have absolutely nothing to do with an individual’s
creditworthiness, but it still appears on the credit report. It’s also not unusual for this information to
be inaccurate. Review it carefully.
Study the sample credit report that follows to familiarize your-self with the codes, terms and formats
used. This credit report was taken directly from the Equifax website.
Personal Data
John Q. Public
2351 N 85th Ave
Phoenix, AZ 85037 Social Security Number: 022-22-2222
Date of Birth: 1/11/1960
Previous Address(es):
133 Third Avenue
Phoenix, AZ 85037
Employment History
Cendant Hospitality FR Location: Employment Date: Verified Date:
Phoenix,AZ 2/1/1989 1/3/2001
Previous Employment(s):
SOFTWARE Support Hospitality Franch Location: Employment Date: Verified Date:
Atlanta, GA 01/3/2001 01/3/2001
Public Records
No bankruptcies on file
No liens on file
No judgments on file
No garnishments on file
No secured loans on file
No marital statuses on file
No financial counseling on file
No foreclosures on file
No non-responsibility entries on file
Collection Accounts
No collections on file.
Credit Information
Items as of
Account Number Date Last Type of Account High Date Reported Past Date
Company Name and Whose Account Opened Activi ty and status Credit Terms Balance Due Reported
Americredit
Financial Services 40404XXXX
JOINT ACCOUNT 03/1999 03/2000 Installment $16933 $430 $128 $9077 2/2000
REPOSSESSION
Prior Paying History
30 days past due 07 times; 60 days past due 05 times; 90+ days past due 03 times
412174147128XXXX
Capital One INDIVIDUAL ACCOUNT 10/1997 01/2001 Revolving $777 15 $514 01/2001
PAYS AS AGREED
Prior Paying History 30 days past due 02 times; 60 days past due 1 times; 90+ days past due 00 times
CREDIT CARD
423325003406XXXX
Schools FCU INDIVIDUAL ACCOUNT 07/1997 06/1998 Revolving $500 $0 07/1999
PAYS AS AGREED
Prior Paying History 30 days past due 02 times; 60 days past due 00 times; 90+ days past due 00 times
ACCOUNT PAID
CLOSED ACCOUNT
7360300XXXX
Heilig-Meyers Company INDIVIDUAL ACCOUNT 03/1998 07/1999 Revolving $1000 $0 07/1999
PAYS AS AGREED
Prior Paying History 30 days past due 02 times; 60 days past due 1 times; 90+ days past due 00 times
CREDIT CARD
AMOUNT IN H/C COLUMN IS CREDIT LIMIT
806050211XXXX
Sears INDIVIDUAL ACCOUNT 09/1998 07/1999 Revolving $720 $0 07/1999
PAYS AS AGREED
Prior Paying History CHARGED
AMOUNT IN H/C COLUMN IS CREDIT LIMIT
503830276150XXXX
Wells FARGO INDIVIDUAL ACCOUNT 11/1996 12/2000 Installment
PAYS AS AGREED $17146 $401 $4058 12/2000
Prior Paying History
AUTO
Credit Inquiries
■ Your confirmation number is 109933931. Please keep this number in your records for future communication with us.
Civil suits and judgments may remain for seven years or until the statute of limitations expires. In
most civil cases, the statute of limitations is ten years with a ten-year renewal, but generally these
items are removed after seven years.
Accounts placed with a collection agency or that were written off would remain for seven years.
Records of arrest, indictment or conviction of a crime must be removed seven years after the date
of disposition, release or parole.
Most other adverse information, such as late payments, must be removed after seven years. Inquiries
remain for two years.
Credit reporting agencies gather the details on literally hundreds of thousands of transactions every
day, input the data into the appropriate file and store it in the credit bureau’s massive computer
system. Obviously, the potential for error due to the sheer volume of the clerical work is tremendous.
GETTING
STARTED
CHAPTER
5
CREDIT CARDS
Apply for what we refer to as low-risk credit cards, cards with local business establishments that
carry a very small credit limit. These cards are issued by businesses with heavy competition and very
low profit margins. The cards are issued to give you an incentive to shop in their store.
You can usually find a major company in every market, however, over the years certain chains
seemed to have become more regional, probably because of competition and distribution patterns.
Look for the one that seems to dominate your area for convenience sake. Don’t start charging up
your card every time you gas up. Of course, if you operate on a strict budget you can. A technique
you can use is that all these offer low-cost monthly services like emergency towing that can be had
for a monthly charge of only six dollars. Sign up and for that low monthly fee you will have a con-
stant favorable credit report and a valuable service as well.
Some who deal in the credit market advocate getting a consumer card such as Visa or Master Card
first and then looking for a retail card, but if you have a major credit card you don’t need a retail
card. Check the interest rate if you have shopped around at all, your major card will carry a much
lower interest rate. You are pursuing a retail card for the sole purpose of establishing credit. Avoid the
credit card security syndrome.
We recommend that the average person carry an entertainment card with a monthly balance payment
due, and a Visa and MasterCard for the convenience in dealing with merchants who deal with one or
the other. If you do a lot of driving add a gasoline card to the mix. You then have all the credit you
need.
LOANS
Seek a Co-Signer
One of the fastest ways to begin establishing a positive credit history is to obtain a loan by having
someone else co-sign it with you. This works so well that we recommend applying for such a loan
even if you do not need one. Seek out a friend or relative who has good credit and ask that they co-
sign a loan for you. Banks have no problem giving you a loan if they know there is someone with
good credit to back up the loan.
If they are a little nervous about risking their credit with you, tell them that you will even give them
the proceeds from the loan so that they can pay it back. However, make sure that you are on record as
having paid it back or it will not count towards your credit. Have them give you the monthly pay-
ments from the loan proceeds every month, add the minimal finance charge, and you both are pro-
tected. You now have a positive credit history with that institution.
Then go to the first bank where you paid off the loan early and request a signature loan, one without
having to tie up your funds. Since you have a positive track record with them, they in all probability
will give it to you. Then go to another community bank and start the process once more. What have
you accomplished? You now have a credit history with three, four, and five banks or however many
you decide to deal with. Even more important, you have a line-of-credit with each bank. When
needed, you can obtain a signature loan from each bank to do whatever you need the money for.
GO ON THE OFFENSIVE
You can also help create your own positive credit history. Is that possible? Absolutely! In the chapter
dealing with credit bureaus, we told you to obtain copies of each of the “big” three’s credit history as
they pertain to you. Then we discussed looking for items that might be in error. Now look for items
that might have been omitted, especially if you have moved. Like any other type of business, credit
bureaus tend to have regional strengths. Where you now live, they use one service almost exclusively.
But where you used to live, they used another. Provide that service with a recent copy of the report
from the service that covered the area where you used to live. They will update their records. Give
each bureau a copy of the other two reports and they will add the items that they did not have to their
report, further strengthening your rating.
ENHANCING
YOUR CREDIT
CHAPTER
6
CREDIT CARDS
With getting credit easier today than ever before, banks are scrambling to bring more cash customers
into the fold. No one brings more revenue to a financial institution than those paying high-interest
credit cards. Up to now, you have tried to be careful and get the best deal with credit you could. But
the reality is that you were really at the mercy of the banks. Now that you are someone they want for
a customer, the tables have turned. Turned, that is, if you follow our guidance and are as tough with
the banks as they were with you. Look hard at all those offers of new unsecured cards. Compare the
interest rates, annual fees and how they compute your bills.
Make sure it is a good deal for you; check the Federal Reserve listing. Credit bureaus scan their
listings for updates such as yours. Call your secured card company. Tell them you have credit card
companies beating at your door and you don’t see the sense of their tying up your money any longer.
Request a better interest rate and higher credit limits. If they balk, move on - you don’t need them
anymore.
An Annual Event
Once every year you are going to go through the drill one more time until you eventually reach the
target plateau, only now you have even more control. You are a major creditor with the bank. What
you are looking for now, in addition to the limit increase, is a decrease in the amount of interest they
now charge you. Banks never charge their big customers the same interest rate they charge everyone
else. If you have an annual fee, get the bank to drop it entirely. At first they will agree to lower the
fee. At every turn, if they refuse to increase the limit or decrease your interest rate, make them tell
you why. Always be prepared to switch banks if you don’t get what you want. A new bank will not
reduce what you have already in place.
Cash Advance
Another method to explore is using a cash advance from one of your new cards. Often times the
interest rate on a cash advance from a card you have shopped for is significantly lower than what you
are paying on your debt. It may even pay to take a cash advance to reduce your outstanding balances.
Bear in mind that interest continues to accrue on unpaid balances. If you owe $2,500 and pay the
minimum two percent required monthly, it will take you 30 years and $6,500 in interest payments to
clear up the debt.
If you need a couple of months to get out from under, consider taking an initial cash advance to clear
up card number one and then take a second cash advance from another card to clear up your first
advance. Use this technique only if you know you can pull out of the cycle, otherwise you will drown
in debt.
There are some banks that see this as a way of attracting new customers. If you sign up with them,
they will give you a cash advance for a period of time at a greatly reduced rate, some are even less
than 5 percent. It is a great one-time chance to get your credit balances in order. The banks don’t care
if you’re using balances to pay off each other; they are making money every day you use one.
Balance Transfers
One of the new products banks are offering to increase their credit card income and bottom line is
balance transfers. They will transfer all your preexisting credit card debt to their card at a greatly
reduced annual percentage rate and, at the same time, increase your credit limits. There are so many
ways to improve your credit situation; you just have to be a smart credit shopper.
Think about it, you have decent credit but carry a heavy monthly balance, usually at a high annual
rate. Simply transfer your activity to their card and your monthly savings are huge. What are the
banks counting on? Simply that your spending habits are not going to change and in time you will be
owing their bank a ton of interest payments. But, if you are smart, you can take advantage of the
offer and get out from under your credit crunch.
Creative Financing
You have started on the road to financial independence, and now you want to start investing. Where
do you turn? There are a number of creative financing techniques that you can use to get started. The
most logical is to look for a distressed seller, someone for whatever reason needs to sell hisor her
property fast. Whether it’s a divorce, job transfer, estate sale or possible foreclosure, there exists in
every community individuals who fall into some of these categories. It will take work finding them,
but that’s the ticket for you. Once you have found such a possibility, talk the owner into financing the
property, even to the extent of giving you a second mortgage. Let them know how much more they
will realize if they act as the bank and accept a balloon payment down the road.
Interest rates are significantly higher, but look at the difference in monthly payments in the example
we cited. There are even lenders that are offering portable second mortgages that you can transfer to
a new home, rather than pay it off. Now to be letter perfect, you really are not allowed to deduct
interest payments on debt that is above the market value of your home.
Lease Option
Explore the purchase of properties using the lease-option technique. Make offers on properties based
on your ability to obtain satisfactory financing and in the offer add the phrase “and/or assigns.” Then
immediately look for buyers for the property. You will not make a large spread on the deal because
you will keep the asking price low to attract buyers. Your “and/or assigns” phrase gives you the right
to sell the property even though you technically do not even own it. The wording “obtains suitable
financing” protects you in case you can’t find a suitable buyer and have to pass the deal by.
If you want a house and have followed our blue print for obtaining credit, the only thing that prevents
you from homeownership is that you haven’t taken the first step.
For more detailed information on borrowing money to buy real estate or to buy a business, call one
of our Consultants at 800-741-7877.
IMPROVING BAD
CREDIT
CHAPTER
7
Then we addressed going over all your accounts and making sure that the bureaus reported all those
favorable credit transactions such as rent, telephone, electric, gas, and so on that they were not aware
of. These could also include some store cards that you have but weren’t reported. Have these credi-
tors give you a statement about your account and then forward them to each bureau.
Many will likely have had problems a few years ago, but have paid everything off and just want to
straighten out their credit history so they can buy a home, a car or otherwise qualify for credit. There
is no way a legitimate debt that is currently in the process of collection attempts can be removed
from a credit report. Some credit repair experts may promise this, but the methods they use are
illegal, unethical and don’t always work.
Credit repair begins with a campaign of denial. The Fair Credit Reporting Act requires credit bureaus
and credit reporting agencies to respond to inquiries within 22 business days or 30 calendar days. If
you have challenged an item on a credit report and they do not respond to your inquiry within the
required period of time, they must remove the item from the report. It’s really that simple. And in
numerous cases, the credit bureau will not respond in time.
ORGANIZATION IS KEY
The key to your success is in organization, good record keeping, and persistence. Remember, while
you’re challenging a credit bureau which is a massive, billion-dollar corporation, your contact with
If your letter makes someone at the credit bureau suspicious, they may be inclined to give the investi-
gation a higher level of personal attention. At this point, you’re better off getting lost in the shuffle.
In fact, that is what you would prefer to have happen. Make your challenge generic but truthful. Your
letter may simply say something like, “My records do not agree with the information you have listed.
Please investigate and remove this item.” Remember, sometimes account numbers are scrambled for
security reasons, and your lack of “agreement” may simply be that the account number doesn’t
match precisely.
Accuracy is Essential
That’s why you should never tell a lie when disputing an item, and you should never ask questions
that are frivolous. Don’t claim the entry doesn’t belong to you if you know it does; don’t claim the
account was paid if you know it wasn’t. If the credit bureau can prove that you are either lying or
making frivolous challenges, they are not required to remove the derogatory item from the report.
Credit: Improving Bad Credit 7 - 3
Demand Detail
However, it is perfectly acceptable to ask for complete details on an entry. Just be sure the questions
are relevant.
For example:
• What were the items purchased?
• What was the original date credit was extended?
• Please provide a complete payment profile.
• Please send me a complete and accurate disclosure of the information for this entry.
The first situation is what happens most of the time, and frankly, it’s what you are hoping for. When a
credit bureau receives a dispute, they must contact the creditor, who must dig through their old
records to verify the item.
Most companies store their records after a certain length of time (it varies, depending on the
company’s internal policies) and do not have immediate access to the information. To research credit
information in old, inactive records can be very time-consuming and labor intensive, and many
companies are not willing to invest the time required to respond to the request for verification. But
remember what the law says. If the information cannot be verified within 30 days, it must be re-
moved from the consumer’s credit file. The burden of proof is on the creditor and the credit bureau.
This is why it’s especially easy to remove older entries from a file.
File Again
The second situation will only occur if you are not careful in how you compose your letters, or if you
dispute several items in one letter. If your disputes are personal and specific, this won’t happen. If it
does, simply respond appropriately by filing the dispute again. In the third situation, it is also appro-
priate to file the dispute again. Challenge something different about the item so the credit bureau
can’t claim you are being frivolous.
What often happens is the credit bureau receives the first dispute, sends a request for verification to
the creditor, receives verification and advises the consumer of that fact. When the credit bureau
receives the second dispute letter, they are still obligated to request verification from the creditor. But
it’s not unusual for the clerks in the creditor’s office to see the second request and think it’s a dupli-
cate. They know they already verified the information so many times they won’t bother to do it
again. But if they don’t, the item then becomes unverified and must be removed.
If your dispute of a negative credit entry becomes a request for payment by the creditor, be prepared
to discuss options. Think about how much you are willing or able to pay to settle the debt. If the
account was written off years ago, anything the credit manager can collect will be a bonus, so he or
she may be happy to settle for a partial payment to close the account. But remember that negotiating
is a two-way street. If you’re going to offer money, you must get something in return and what you
want is for the negative item to be removed from your file. When you reach an agreement on the
settlement terms, get the credit manager to sign a letter outlining the details before you send any
money. There is a sample settlement agreement at the end of this chapter.
Public Records
If the derogatory items are public record, they should still be disputed just as you would a creditor’s
item. It is the credit bureau’s responsibility to verify the public records within the stipulated time
frame and if they do not, the item must be removed. This means that it’s even possible to have a
bankruptcy removed from a credit report in less than the standard 10 years. It won’t always happen,
but it’s worth a try.
SOME TECHNIQUES
It’s a good idea to pay attention to the signature on the verification form. It is usually a clerk in the
creditor’s office, someone who is usually at the same status as the army of clerks at the credit bureau
who process your disputes. These people aren’t looking for trouble; they’re just pushing paper
around. When they verify an item you are attempting to get removed, write to them directly. Point out
the consequences of incorrect information in a credit file and explain that the item they verified was
either incorrect or erroneous. Request that they either verify it correctly or not at all. At the same
time, send another letter to the credit bureau to force another investigation. This, quite frankly, is a
technique that borders on intimidation. Some attorneys in the credit repair business take this idea a
step further and either hint or threaten legal action. Don’t do this unless you either are an attorney or
fully intend to follow through with your threat.
Simply Dispute
If the situation is more complicated (perhaps a judgment, lawsuit or even a bankruptcy), you may
want to simply include a statement to the effect that he or she should be contacted for a complete
explanation. For example: “This item is in dispute. See consumer’s statement which accompanies the
credit application” or “Contact consumer for a full and detailed explanation.” You should be prepared
to provide that explanation when applying for credit.
Handling Judgments
When creditors feel as though all other avenues of collection have been exhausted, they seek a
judgment against the debtor. This is a legal action designed to force payment. Now, if you’ve ever
been involved in collecting a debt to this extent, you know getting a judgment is one thing, and
getting money is something else. But that’s another issue. From a credit perspective, a judgment can
be a serious matter. Once a judgment has been entered against a debtor, court costs and interest are
added to the amount owed. Worse, a final binding and non-reversible public record exists and will
remain for ten years from the date of recording and is renewable for an additional ten years. The first
step in dealing with a judgment is to dispute it like any other derogatory entry. If it doesn’t get
verified within the required time period, off it comes.
The only grounds for a compromise on a federal tax lien are doubt as to liability or doubt about
collecting the full amount of tax and penalties. If you cannot reach an agreement with the IRS, you
should consult a tax attorney for further assistance.
Why do you need to clear up a credit history with all three credit bureaus if you have lived in
the same area all your life?
Where someone lives has nothing to do with the location of his or her credit. Credit is reported to
the credit bureaus that serve the areas where creditors are headquartered. For example, a person
living in Florida who has a Sears card will have credit reported to the bureau that serves Chicago
where Sears is located. It’s impossible to track the location of every creditor, so it’s just safer and
smarter to clear up the record with all three bureaus.
Must credit reports be signed before you send them in with a dispute?
Yes, all correspondence must by signed by the person whose name is on the credit report.
What if the credit report includes charge-offs, late pays, judgments and bankruptcies?
It’s possible to remove all of these negative entries with persistence and diligence. Some are
easier than others and there may be some entries you won’t be able to remove no matter how hard
you try.
SAMPLE LETTERS
The following sample letters may be used for your individual situation.
(Date)
Equifax
PO Box 105873
Atlanta, GA 30348
Trans Union
PO Box 1000
Chester, PA 19022
Please send me a copy of my credit report. I’m including the following personal information.
(If appropriate) I have been denied credit in the last 30 days by:
Yours truly,
(signature)
Name
(Date)
Please be advised that at this time I would like a complete and accurate disclosure of the source and
character of the report generated by you regarding me.
Please be further aware that this request is made pursuant to section 606 of the Federal
Fair Credit Reporting Act, which mandates a response by you within five (5) days.
Yours truly,
(signature)
Name
(Date)
At this time, I would like to request a personal interview with your organization. The purpose of this
interview will be to review the files you currently have on me and obtain a copy of my credit report.
I make this request pursuant to Sections 609 and 610 of the Fair Credit Reporting Act.
Please be further advised that a fee for your services is not due because of the following reasons:
1. Because I recently received, within the last 30 days, a letter of adverse action.
2. Because I recently, within the last 30 days, heard from an affiliate in the collection business.
I am available (indicate time and telephone number). Please call me to arrange an appointment.
Sincerely,
(Signature)
Name
(Date)
At this time, I would like to request an interview by telephone with your organization. The purpose
of this interview will be to review the files you currently have on me and obtain a copy of my credit
report. I make this request pursuant to Section 610 (b) (2) of the Fair Credit Reporting Act.
1. Because I recently received, within the last 30 days, a letter of adverse action.
2. Because I recently heard, within the last 30 days, from an affiliate in the collection business.
Please furnish the undersigned with the telephone number of the department and/or a name of a
person responsible for handling this request.
I can be reached at (insert telephone number) between the hours of (indicate time), or you can write
me at the above address.
Sincerely,
(Signature)
Name
This is a formal request to have the following items on my credit report investigated immediately.
Please make the following corrections in order to reflect my true credit file. These items are inaccu-
rate and therefore injurious to my credit rating.
My date of birth is not correct on my credit report. Please list my true date of birth as____________.
The following is listed on my credit report as my previous address. It is incorrect. Please remove the
following:
1.
The following is listed on my credit report as my previous employment. It is incorrect. Please remove
the following:
1.
The following inquiries were never authorized. Please investigate and remove the following:
1.
2.
3.
The following account on my credit report contains erroneous information. Please investigate and
remove the following:
Firm ID Code Account Number
1.
2.
3.
Please send me a copy of your report and an updated copy of my credit report when you have com-
pleted your investigation. Thank you for your prompt attention in this matter.
Sincerely,
(Signature)
Name
(Date)
On (date), you received a letter from me requesting an investigation into erroneous information you
have on my credit report. As of this date, I have not heard from you. Since a reasonable time has
passed, I make the following request. Under the Fair Credit Reporting Act, section 611, Subsection
A, I formally request that the information, which has not been verified, be deleted from my credit
file. Please send a copy of my updated report.
Sincerely,
(Signature)
Name
(Date)
Re: Section 611 of the Federal Fair Credit Reporting Act Notice of Accuracy Dispute
At this time the undersigned hereby disputes the completeness and accuracy of the following infor-
mation as it currently appears in your file:
Pertaining to ___________________________________________________
3. Other (describe):
At this time, I would request that you reinvestigate the information and if found inaccurate or no
longer verifiable, please delete from my report promptly.
Sincerely,
(Signature)
Name
(Date)
The following items are currently reflected on my credit report since your previous investigation.
These items are erroneous and injurious to my credit standing. Please reinvestigate the following and
send to me the names and addresses of the individuals that have verified the information. This
request is made in accordance with the Fair Credit Reporting Act, Section 609, Subsection A.
The following accounts, on my credit report contain erroneous information. Please investigate and
remove the following:
The following records on my credit report are erroneous. Please investigate and remove the follow-
ing:
Please send me a copy of your report and an updated copy of my credit report when you have com-
pleted your investigation. Thank you for your prompt attention in this matter.
Sincerely,
(Signature)
Name
(Date)
Reference is made to the following information currently maintained in your files concerning the
undersigned:
________________________________________________________________
________________________________________________________________
________________________________________________________________
Please be advised that the undersigned vigorously disputes the truth of such information and inter-
poses the following consumer statement:
Please be further advised that pursuant to Section 611 (b) of the Federal Fair Credit Reporting Act,
the undersigned requests that you update your records to provide a copy of such consumer statement
or a clear and accurate codification or summary thereof.
Sincerely,
(Signature)
Name
(Date)
Pursuant to Section 615 (b) of the Federal Fair Credit Reporting Act, please disclose the nature of the
information disclosed to you by persons other than Consumer Reporting Agencies concerning the
undersigned.
This information should be a full disclosure of the same to allow the undersigned to challenge or
dispute its accuracy. This information should be received within a reasonable amount of time, as
required by the referenced section.
Sincerely,
(Signature)
Name
(Date)
This is formal notification that you are sending erroneous information to the above credit reporting
agency. This information is highly injurious to my credit rating.
The credit reporting agency is currently investigating this information and will be in contact with
you. I would appreciate it if you would correctly verify my current status or not verify it at all.
Sincerely,
(Signature)
Name
(Date)
Reference is made to your obligation under Section 605 and 607 of the Federal Fair Credit Reporting
Act to delete obsolete information from the consumer credit report of the undersigned.
Please be advised that the information circled on the attached copy of my credit report is obsolete
and should be deleted from your credit files relating to the undersigned.
Please delete this information immediately and send me an updated copy of my report.
Sincerely,
(Signature)
Name
(Date)
Re: Notification
With reference to Section 611 (d) (a) (b) of the Federal Fair Credit Reporting Act, I take this opportu-
nity to request that you notify all persons who received disputed and/or deleted information from you
within the last two (2) years with reference to employment or six (6) months with reference to a
consumer file, that information has been subsequently deleted or that a personal statement has been
added disputing the claim.
This request is made within 30 days after receipt of an adverse credit determination.
Sincerely,
(Signature)
Name
(Date)
The undersigned understands that you regulate consumer reporting agencies pursuant to the Fair
Credit Reporting Act and wishes to lodge a complaint against the following agency:
This credit bureau has refused to comply with its obligation under the Fair Credit Reporting Act. The
substance of the complaint is as follows:
(insert details)
Your organization is hereby notified so that you may be aware of and able to act upon a matter of
abuse of the Fair Credit Reporting Act.
The undersigned would be happy to furnish full particulars to you if you need further information for
enforcement proceedings.
Sincerely,
(Signature)
Name
(Date)
The undersigned hereby lodges a complaint against the following credit bureau:
This credit bureau has refused to comply with its obligations under the Federal Fair Credit Reporting
Act. The substance of the complaint is as follows:
(insert details)
Your organization is hereby notified of such complaint so that (a) you may be aware of a pattern of
abuse and (b) you may take action to help consumers.
The undersigned would be happy to furnish full particulars to you if you need additional information.
Sincerely,
(Signature)
Name
(Date)
Reference is made to those provisions of the Equal Opportunity Credit Act that allow credit informa-
tion to be maintained in separate files of each of a husband and wife.
Please be advised that the undersigned hereby request that credit information on the account of the
undersigned be maintained by you in separate files under each name.
Please be further advised that we request this information be made available to all credit reporting
agencies.
Sincerely,
(Date)
Pursuant to the Fair Credit Reporting Act, you are hereby requested to add the following data to the
consumer credit report of the undersigned:
(Insert details)
Please advise as to the amount, if any, of your fee for verifying and including this data on all new
consumer reports issued by you.
Sincerely,
(Signature)
Name
Date of Birth
SETTLEMENT AGREEMENT
AGREEMENT made this ___________ day of ____________, 20____, between
_______________________________________________(debtor), residing
at_____________________________________________________ and
__________________________________ (creditor), having an office at
______________________________________________.
WHEREAS, Debtor and Creditor have previously entered into a certain commercial transaction, and
WHEREAS, certain circumstances had subsequently developed causing both Debtor and Creditor to
desire to enter into this agreement.
IT IS AGREED:
1. Debtor agrees to pay and creditor agrees to accept $_______as full payment for all amounts owed
by Debtor to Creditor.
2. Debtor shall be permitted to pay the aforesaid sum by monthly payment without interest at the rate
of $__________ per month. All of the monthly payments are to be made by mail or otherwise at the
office of the Creditor set forth above prior to the _______ day of each month, commencing the
______day of ______, 20_____.
3. In the event of a default by Debtor in making any of the above stated payments, the Creditor shall
have the right upon ten (10) days written notice to Debtor, to declare the unpaid installments due
hereunder immediately due and payable.
4. Creditor agrees to notify each credit bureau with whom the creditor deals with that adverse infor-
mation regarding Debtor’s account is no longer verifiable and should be deleted from Debtor’s
consumer report.
IN WITNESS WHEREOF, the Debtor and Creditor have signed this agreement as of the date set
forth above.
__________________________________
(Debtor)
__________________________________
(Creditor)
PRESERVING WHAT’S
YOURS
CHAPTER
8
PRIVACY ISSUES
You can never hide your real estate activity and you shouldn’t because referrals can be the corner-
stone to success. Once you have achieved a certain level of success, it will be a distinct liability for
everyone to know what your moves are. Why give you a deal on the property when everyone is aware
you are the biggest landlord in the neighborhood. With the Internet, you can pull up the records of
the real property appraiser in most communities, key in a name and up on the screen will come every
single property you own. Maybe you’re trying to assemble a few lots for a small commercial venture.
If everyone is aware of your moves, don’t you think the individual lot prices will skyrocket? Abso-
lutely. There are two rules to follow.
Incorporate
Most will say that is the way to go. You have limited liability and are somewhat shielded from the
public. However, all your profits will be double taxed: first the corporation has to pay taxes and so
will you on any income you derive from that corporation. But remember what we said about having
them deeded separately. If all your properties are in one corporation, then in a suit all are vulnerable.
Should you have a separate corporation for each property? Many will say yes. Unless you have a
number of large complexes or apartment houses, it doesn’t make economic sense to us. Each will
have to pay taxes and file tax returns separately. The only ones who will make money under that
scenario are your attorney and accountant.
Limited Partnership
Numerous experts in asset protection favor the limited partnership as a way of shielding your assets.
Like a corporation, its papers are filed with your state. In a limited partnership, taxes are not paid by
1. Trust Property. The Beneficiaries are about to convey or cause to be conveyed to the Trustee
by deed, absolute in form, the property described in the attached Exhibit “A”, which said
property shall be held by the Trustee, in trust, for the following uses and purposes, under the
terms of this Agreement and shall be hereinafter referred to as the “Trust Property”.
2. Consideration. No consideration was paid by Trustee for such conveyance. The conveyance
will be accepted and will be held by Trustee subject to all existing encumbrances, easements,
restrictions or other clouds or claims against the title thereto, whether the same are of record
or otherwise. The property will be held on the trusts, terms and conditions and for the
purposes hereinafter set forth, until the whole of the trust estate is conveyed, free of this trust,
as hereinafter provided.
3. Beneficiaries. The persons named in the attached Exhibit “B” are the Beneficiaries of this
Trust, and as such, shall be entitled to all of the earnings, avails and proceeds of the Trust
Property according to their interests set opposite their respective names.
4. Interests. The interests of the Beneficiaries shall consist solely of the following rights
respecting the Trust Property:
a. The right to direct the Trustee to convey or otherwise deal with the title to the Trust
Property as hereinafter set out.
b. The right to manage and control the Trust Property.
c. The right to receive the proceeds and avails from the rental, sale, mortgage, or other
disposition of the Trust Property.
The foregoing rights shall be deemed to be personal property and may be assigned and
otherwise transferred as such. No Beneficiary shall have any legal or equitable right, title or
interest, as realty, in or to any real estate held in trust under this Agreement, or the right to
require partition of that real estate, but shall have only the rights, as personalty, set out above,
and the death of a Beneficiary shall not terminate this Trust or in any manner affect the
powers of the Trustee.
5. Powers of Trustee.
a. With the consent of the Beneficiary, the Trustee shall have authority to issue notes or
bonds and to secure the payment of the same by mortgaging the whole or any part of the
Trust Property; to borrow money, giving notes therefor signed by him in his capacity as
Trustee; to invest such part of the capital and the profits therefrom and the proceeds of
the sale of bonds and notes in such real estate, equities in real estate, and mortgages in
real estate in the United States of America, as he may deem advisable.
BENEFICIARIES
______________________________________ ___________________________________
Witness Your Name
______________________________________
Witness
______________________________________ ___________________________________
Witness
______________________________________
Witness
______________________________________ ___________________________________
Witness
______________________________________
Witness
______________________________________
Witness
______________________________________ ___________________________________
Witness Name of Trustee
______________________________________
Witness
COUNTY OF ___________________________
Before me personally appeared (Your Name) to me well known and known to me to be the person
described in and who executed the foregoing instrument, and acknowledged to and before me that
he/she executed said instrument for the purposes therein expressed.
WITNESS my hand and official seal in the State and County aforesaid, this ___ day of ___ 20_____.
______________________________________
Notary Public
(SEAL) State of
My Commission Expires:
______________________________________
COUNTY OF ___________________________
Before me personally appeared (Name of Trustee) to me well known and known to me to be the
person described in and who executed the foregoing instrument, and acknowledged to and before me
that he/she executed said instrument for the purposes therein expressed.
WITNESS my hand and official seal in the State and County aforesaid, this ___ day of ___ 20_____.
______________________________________
Notary Public
(SEAL) State of
My Commission Expires:
______________________________________
EXHIBIT “B”
Names of Beneficiaries
WHERE TO
FIND HELP
CHAPTER
9
Debt Counselors of America, a member of the National Foundation for Consumer Credit, has a rule
of thumb for family budgets and it is as follows:
Monthly Income
Category Percentage of take-home pay
Housing 30%
Utilities 5%
Food 20%
Essential 2 to 4%
Medical 5%
Clothing 7%
Transportation 15%
Recreation 4%
Savings 8%
Mad money 2 to 4%
This is not an end all, but a mirror of what their experience shows a working family’s budget should
look like. Budgeting can be a trying effort, but it is the first step on the road back.
Take Action
If you know you are facing financial difficulties, don’t wait until you can’t meet your obligations.
Call all your creditors and explain the situation to them. You will be amazed at how many will allow
you some slack to stay above water. They would rather have you pay less than not at all.
You might be able to reduce your cost of credit by consolidating your debt. Be especially careful if
this entails a second mortgage or home equity line of credit. Don’t let your secondary debt jeopar-
dize your place to live.
Credit Counseling
Credit counseling is the best bet for most. It allows you at a nominal cost to have highly trained
professionals work with you to assist in your trials. Sometimes just having someone to talk things out
with is a major plus. But be careful whom you choose, make sure they are members of the National
Foundation for Consumer Credit. The Consumer Credit Counseling Service is clearly one of the best.
They can be reached at 800-873-2227.
Budget Counseling: They will work with you to develop the best possible budget tailored to your
needs.
Credit Report Review: They will get copies of your credit history and see what they can do to make
sure it is correct.
Business Education: They conduct a series of financial meetings to train those they counsel on the
financial strategies they should know about and implement.
Debt Management: They completely restructure your debt, talking to your creditors and insuring
that you are able to handle your debt.
Housing Program: They are certified by HUD as approved housing counseling agencies and offer
assistance to renters, homeowners and future homeowners.
Strategies: They will structure a monthly financial plan designed to meet your individual needs.
Bankruptcy
Bankruptcy should always be a last resort because it has a long lasting effect. However, to some it is
the only recourse left. With bankruptcy at an all-time high, we wonder if too many people are choos-
ing this method as the easy way out. As a best-selling book stated, “There is a life after bankruptcy.”
You can survive and thrive, we show you how, but it should only be used as your last resort. You
should know that there are two different types of bankruptcy, Chapter 7 and Chapter 13. Each must
be filed in a federal court.
Chapter 13
Chapter 13 bankruptcy, which is referred to as reorganization, is just that. Under the supervision of
the court it allows you to restructure your debt into a plan to pay it off, usually a three- to five-year
plan. Under Chapter 13, you can keep items like your house and automobile.
Department of Justice
On questions regarding a violation of the Equal Opportunities Law, one would seek out the Depart-
ment of Justice.
If you have a doubt about where to file your complaint, we suggest you contact the Board of Gover-
nors of the Federal Reserve System and they will forward your complaint to the proper authority.
However, taking the time to find out who is the direct responsible party will greatly speed up your
response time.
National Banks
Office of the Comptroller of the Currency, Customer Assistance Unit
1301 McKinney St., Suite 3710, Houston, TX 77010
1-800-613-6743 (9am to 3pm CST)
Attorney General
There are many state and local consumer protection agencies that provide assistance. However, the
primary agency we recommend is the state attorney general. Almost every state has passed legisla-
tion that mirrors the federal law. Some have even made their laws tougher. The reason that they
passed a law that mirrors federal laws is that it enables state officials to get involved in the prosecu-
tion of those cases.
Most attorneys general have taken their consumer protection duties much more seriously and have
mounted aggressive anti-fraud campaigns. If the problem you are having involves an intra-state firm,
you will probably be better off seeking assistance with your local attorney general.
Alabama
Office of the Attorney General, State House, 11 South Union Street, Third Floor, Montgomery, AL
36130, 334-242-7300
Alaska
Attorney General of Alaska, Post Office Box 110300 Diamond Courthouse, Juneau, AK 99811-
0300, 907- 465-3600
American Samoa
Attorney General of American Samoa, Office of the Attorney General, 684-633-4163
Arizona
Office of the Attorney General, 1275 West Washington Street, Phoenix, AZ 85007, 602-542-5025 or
toll free 888-377-6108
Arkansas
Office of the Attorney General, 323 Center Street, Suite 200, Little Rock, AR 72201, 501-682-2007
or toll free 800-482-8982
California
Attorney General of California, Department of Justice, P.O. Box 944255, Sacramento, CA 94244-
2550, 916-445-9555
Connecticut
Office of the Attorney General, 55 Elm Street, Hartford, CT 06106, 860-808-5318
Delaware
Office of the Attorney General Carvel State Office Bldg, 820 North French St., Wilmington, DE
19801, 302-577-8300
District of Columbia
Office of the Corporation Counsel, 441 4th Street NW, Washington, DC 20001
Florida
Attorney General, State of Florida, The Capitol Tallahassee, FL 32399-1050, 850-487-1963
Georgia
Office of the Attorney General, 40 Capitol Square, SW, Atlanta, GA 30334-1300, 404-656-3300
Guam
Guam Office of the Attorney General, Judicial Center Building, 120 West O’Brien Drive, Agana, GU
96910, 671-575-3324
Hawaii
Office of the Attorney General, 425 Queen Street, Honolulu, HI 96813, 808-586-1282
Idaho
Office of the Attorney General Statehouse, Boise, ID 83720-1000, 208-334-2400
Illinois
Office of the Attorney General, James R Thompson Center, 100 West Randolph St., Chicago, IL
60601, 312-814-3374
Indiana
Office of the Indiana Attorney General, Indiana Government Center South, IGCS -Fifth Floor - 402
West Washington St., Indianapolis, IN 46204, 317-232-6201
Iowa
Attorney General of Iowa, 1305 East Walnut St., Des Moines, IA 50319, 515-281-5926
Kansas
Kansas Office of the Attorney General, 120 S.W. 10th, 2nd Floor, Topeka, KS 66612-1597, 785-296-
2115
Kentucky
Attorney General of Kentucky, 1024 Capitol, Center Drive, Frankfort, KY 40601, 502-696-5300
Maine
Attorney General of Maine, 6 State House Station, Augusta, ME 04333, 207-626-8865
Maryland
Maryland Office of the Attorney General, 200 Saint Paul Place, Baltimore, MD 21202-2202, 410-
576-6300
Massachusetts
Attorney General of Massachusetts, Office of the Attorney General, One Ashburton Place, Boston,
MA 02108-1698, 617-727-2200
Nevada
Nevada Office of the Attorney General, 100 North Carson Street, Carson City, NV 89701, 775-684-
1100
New Hampshire
Office of the Attorney General, 33 Capitol Street, Concord, NH 03301, 603-271-3658
New Jersey
Office of the Attorney General, Justice Complex, 25 Market Street, CN 080, Trenton, NJ 08625-
0080, 609-292-3508
New Mexico
Office of the Attorney General, Post Office Drawer 1508, Santa Fe, NM 87504-1508, 800-678-1508
New York
Office of the Attorney General, Department of Law-The Capitol, 2nd Floor, Albany, NY 12224-
0341, 518-474-7330
North Carolina
Office of the Attorney, General Department of Justice, Post Office Box 629, Raleigh, NC 27602-
0629, 919-716-6400
Michigan
Office of the Attorney General, G. Mennen Williams Bldg., 7th Floor, 525 West Ottawa St, P.O. Box
30212, Lansing, MI 48909-0212, 517-373-1110
Minnesota
Office of the Attorney General, 102 State Capitol St. Paul, MN 55155, 651-296-6196 or toll free
800-657-3787
Mississippi
Office of the Attorney General, Post Office Box 220, Jackson, MS 39205-0220, 601-359-3692
Montana
Office of the Attorney General, Justice Building, 215 North Sanders, Helena, MT 59620-1401, 406-
444-2026
Nebraska
Office of the Attorney General, 2115 State Capitol, Lincoln, NE 68509, 402-471-2682
Rhode Island
Office of the Attorney General, 150 South Main Street, Providence, RI 02903, 401-274-4400
South Carolina
Office of the Attorney General, P. O. Box 11549, Columbia, SC 29211-1549, 803-734-3970
South Dakota
Office of the Attorney General, 500 East Capitol Pierre, SD 57501-5070, 605-773-3215
Tennessee
Office of the Attorney General, 425 5th Ave. North, Nashville, TN 37243-0485, 615-741-5860
Texas
Office of the Attorney General, P. O. Box 12548, Austin, TX 78711-2548, 512-463-2100
Utah
Attorney General of Utah, State Capitol, Room 236, Salt Lake City, UT 84114-0810, 801-538-9600
North Dakota
Office of the Attorney General, State Capitol Bldg., 600 East Boulevard Avenue, Bismarck, ND
58505-0040, 701-328-2210
Ohio
Office of the Attorney General, State Office Tower, 30 East Broad St., 17th Floor, Columbus, OH
43215-3428, 614-466-4320
Oklahoma
Office of the Attorney General, 2300 North Lincoln Blvd, Suite 112, Oklahoma City, OK 73105,
405-521-3921
Oregon
Office of the Attorney General, Justice Building, 1162 Court Street NE, Salem, OR 97310, 503-378-
6002
Puerto Rico
Attorney General of Puerto Rico, Office of the Attorney General, Post Office Box 192, San Juan, PR
00902-0192, 809-721-0940
Vermont
Vermont Office of the Attorney General, 109 State Street, Montpelier, VT 05609-1001, 802-828-
3171
Virginia
Virginia Office of the Attorney General, 900 East Main Street, Richmond, VA 23219, 804-786-2071
Virgin Islands
Virgin Islands Office of the Attorney General, Department of Justice, G.E.R.S. Building, 2nd Floor,
Charlotte Amalie, U.S., Virgin Islands, 00802, 340-774-5666 or 340-773-0295
Washington
Attorney General of Washington, Office of the Attorney General, P.O. Cox 40100, 1125 Washington
Street, SE, Olympia, WA 98504-0100, 304-558-2021
Wisconsin
Wisconsin Office of the Attorney General, Wisconsin Department of Justice, P.O. Box 7857, Madi-
son, WI 53707-7857, 608-266-1221
Wyoming
Wyoming Office of the Attorney General, 123 Capitol Building, 200 W. 24th St., Cheyenne, WY
82002, 307-777-7841
IT’S A NEVER-ENDING
PROCESS
CHAPTER
10
REGULAR CHECK-UPS
There are varying theories on how often one should check their credit reports. The Consortium of
Consumer Attorneys advocates checking them every three months. We don’t feel that is necessary,
and quite frankly could possibly work to your disadvantage. Some lenders could become leery of
applicants who have checked their report that often. Remember all credit reports list how often the
report has been accessed, and by whom. They might be nervous that you have a problem coming
down the pike. It’s the same as applying for credit all over the lot. The average lender doesn’t know
that you are shopping around for a deal, only that you had to contact a number of lenders. They
assume that the others probably turned you down for credit. Or you are taking on more liability than
you can handle.
Unauthorized Use
The growing problem of unauthorized use of individuals’ personal information to obtain credit has
hit victims from every walk of life. Often the crime involves the theft of personal information such as
a person’s name, social security number and date of birth from a computer database. The information
is then used by the criminal to obtain credit cards, lines of credit, car loans and in some extreme
cases home mortgages or equity loans.
During the process the criminal usually arranges for a change of the consumers’ address, so that the
victim does not receive the fraudulent mailings. Since the consumer only discovers the fraud when
they apply for credit or are denied credit, this type of activity can go unnoticed for years. If they were
checking their report once a year, most of this activity would be stopped.
ON-LINE RISKS
Many people are wary of making credit card purchases on the Internet. Although this practice is still
not foolproof, advancements in technology have eliminated many of the risks. As e-commerce
became more popular, the companies handling electronic transactions devised secured credit card
transaction methods that encrypt and shield information passing from the credit card holder. The
advantage of these online transactions is that it allows the purchase to be made in real time, with the
customer receiving an approval code in seconds. Besides the speed of the transactions, it eliminates
Our advice to you is to be certain that the credit card transaction site you use on the Internet is secure
before you make your purchase. And be sure to closely monitor the charges on your credit card bills.
No matter how small the charge is, make sure it is legitimate. It’s up to you to weigh the risk factor
against the convenience, selection and discounts when considering online shopping. Bear in mind too
that because of the great technological strides made in Internet security, the Government signed a bill
into law making “e-signatures” legal endorsement on documents.
FINAL REMINDERS
One of the most glaring omissions from what is currently being taught in high school and college is
how to make and manage money. There are numerous courses on economic theory, but nowhere is
there Making Money 101. Even more important, we are not preparing our youngsters on how to
manage their money. Consumer debt has soared and now exceeds $1 trillion according to the Na-
tional Credit Counseling Services. In a survey done for them by the Opinion Research Corporation
International, one in four Americans faces problems in managing debts. Nearly half of those polled
would go back to school to learn the ABC’s of money management. Unfortunately most did not
recognize their lack of money management skills until faced with a financial crisis.
GLOSSARY
Appraisal Fee:
The charge for estimating the value of property offered as security.
Asset:
Property that can be used to repay debt, such as stocks and bonds or a car.
Balloon Payment:
A large extra payment that may be charged at the end of a loan or lease.
Billing Error:
Any mistake in your monthly statement as defined by the Fair Credit
Billing Act.
Business Days:
Check with your institution to find out what days it counts as business days under the
Truth in Lending and Electronic Fund Transfer Acts.
Collateral:
Property offered to support a loan and subject to seizure if you default.
Cosigner:
Another person who signs your loan and assumes equal responsibility for it.
Credit:
The right granted by a creditor to pay in the future in order to buy or borrow in the
present; a sum of money due a person or business.
Credit Bureau:
An agency that keeps your credit record.
Credit Card:
Any card, plate, or coupon book used from time to time or over and over again to borrow
money or buy goods or services on credit.
Credit History:
The record of how you’ve borrowed and repaid debts.
Credit: Glossary - 2
Creditor:
A person or business from whom you borrow or to whom you owe money.
Credit-related Insurance:
Health, life, or accident insurance designed to pay the outstanding balance of debt.
Default:
Failure to repay a loan or otherwise meet the terms of your credit agreement.
Disclosures:
Information that must be given to consumers about their financial dealings.
Elderly Applicant:
As defined in the Equal Credit Opportunity Act, a person 62 or older.
Finance Charge:
The total dollar amount credit will cost.
Joint Account:
A credit account held by two or more people so that all can use the account and all as-
sume legal responsibility to repay.
Late Payment:
A payment made later than agreed upon in a credit contract and on which additional
charges may be imposed.
Lessee:
A person or company who signs a lease to get temporary use of a property.
Lessor:
A company or person that provides temporary use of a property usually in return for
periodic payment.
Credit: Glossary - 3
Liability on an Account:
Legal responsibility to repay debt.
Open-end Credit:
A line-of-credit that may be used over and over again including credit cards, overdraft
credit accounts, and home-equity lines.
Open-end Lease:
A lease, which may involve a balloon payment, based on the value of the property when it
is returned.
Overdraft Checking:
A line of credit that allows you to write checks or draw funds by means of an EFT card
for more than your actual balance, with an interest charge on the overdraft. Deposit
accounts are debited electronically without the use of checks.
Punitive Damages:
Damages awarded by a court above actual damages as punishment for a violation of law.
Rescission:
The cancellation or “unwinding” of a contract.
Security:
Property pledged to the creditor in case of default on a loan; see collateral.
Security Interest:
The creditor’s right to take property or a portion of property offered as security.
Service Charge:
A component of some finance charges, such as the fee for triggering an overdraft check-
ing account into use.
Credit: Glossary - 4