Monday, March 31, 2014

Is Credit Repair Software Worth The Money?

Credit Umbrella's TurboScore Software

     In an effort to make my credit repair journey more effective I have started to look at other options in order to more organize my efforts.

     There are several ways to go about credit repair. You can go the old tried and true route and send out handwritten or typed letters and keep your own tracking and filing system of the interactions with the credit bureaus, collection agencies, and creditors. You can hire a credit repair agency to handle everything for you. You can buy and use a credit repair software to help you generate the letters needed and keep track of your progress. Or you can use any variation of the options above. Today I want to talk about the credit repair software.

     After reviewing a couple of companies' software, I decided to go with Turboscore. From my research, the software seemed to be the most complete version with the lowest cost. At $39.95 it provides a lot of guidance that is very helpful. Especially for beginners. There are a multitude of letters to choose from for almost every situation. You can track up to three users, so if you want to include your wife or friend in the credit repair process, you can help them with ease. There are multiple training videos to help you use the software and to help you choose the correct path to take in the credit repair process. There is even a Credit Dispute Dashboard to help you keep track of your overall progress. 

     The only negative that I found, and I have found this in every credit repair software, is that it does not mention anything about student loans. That is currently what is haunting me on my credit report and guidance in that area is non-existent. For instance, in my previous post I mentioned that I rehabilitated my student loans and that I was promised to have the negative items removed once the rehabilitation was complete. Well, that hasn't happened and I would love to have at least a sample letter in the software to guide me in getting this error fixed. My credit score would skyrocket and I would most definitely give credit to TurboScore for helping me with these errors on my report. 

     I just got the software yesterday and I have set up my user information and have put in my updated credit scores to create a starting point. I will start sending out letters shortly and we will see how it works out.

     

Wednesday, March 26, 2014

Debt to Credit Ratio: Student Loan Issues AGAIN


     In my previous post, "Credit Card Usage", I touched on the percentage of your credit card debt to your actual credit card limits and  how it could affect your credit score. I showed a chart from Credit Karma on how you are graded by how much of a balance you carry on your credit cards. What I wasn't thinking about was the percentage of debt to credit on my installment loans.

     Below is a snapshot of my credit report from Equifax as it stands today.

Latest Credit Summary

Your Credit Summary highlights the information in your credit file that is most important in determining your credit standing by distilling key credit information into one easy-to-read summary.

CREDIT REPORT as of 

Open AccountsTotal#BalanceAvailable Available credit does not include accounts without a credit limit, such as mortgage or installment accountsCredit Limit Credit Limit includes the high balance for accounts without a credit limit, such as mortgage or installment accountDebt to CreditMonthly Payment Amount Monthly Payment Amount includes the amount owed per month on all accounts due on a monthly basisAccounts with a Balance
Mortgage0$0N/AN/AN/A$00
Installment6$60,169N/A$56,488107%$4556
Revolving7$2,441$3,059$5,50044%$1547
Other0$0N/AN/AN/A$00
Total13$62,610N/A$61,988101%$60913


     
     As you can see, my revolving credit ratio is 44%. This equates to a C grade when you refer to Credit Karma's website. But my installment loans ratio is at 107%. These loans include the loan for our van and my student loans. This puts my total debt to credit ratio at 101%.

Next is the snapshot of Sheree's from today.

Latest Credit Summary

Your Credit Summary highlights the information in your credit file that is most important in determining your credit standing by distilling key credit information into one easy-to-read summary.

CREDIT REPORT as of 

Open AccountsTotal#BalanceAvailable Available credit does not include accounts without a credit limit, such as mortgage or installment accountsCredit Limit Credit Limit includes the high balance for accounts without a credit limit, such as mortgage or installment accountDebt to CreditMonthly Payment Amount Monthly Payment Amount includes the amount owed per month on all accounts due on a monthly basisAccounts with a Balance
Mortgage0$0N/AN/AN/A$00
Installment1$18,566$2,530$21,09688%$4551
Revolving12$5,418$12,082$17,50031%$5929
Other0$0N/AN/AN/A$00
Total13$23,984$14,612$38,59662%$1,04710








    
     Her revolving credit ratio is 31%. This equates to a B grade on Credit Karma. Her installment loan ratio is at 88%. This only includes our van loan. This puts her total debt to credit ratio at 62%.

     My credit score is lower than hers. So much so that I have been looking at every nook and cranny of our reports to try and find what the major differences are.

     The debt to credit ratio is one major thing that I have noticed that is really holding me back. Specifically the student loans in my installment loans section. I am on what's called the income based repayment (IBR) plan with my student loans. They take your adjusted gross income from the previous years tax return and your family size to determine how much you have to pay towards your student loans. You have to re verify this every year. After 25 years (10 years if you work full time in a public service organization) the balance on your loans will be forgiven. For the past 1 1/2 years I have not had to pay anything towards these loans. This has been a blessing, but now I may have found the curse.

     While I do not have to pay anything towards these loans, the interest accrued on these loans is being added and submitted to the credit bureaus. This is causing my debt to credit to look inflated in the installment loans section which I believe is causing my credit score to be lower.

     So now I am in a catch 22 again with the government. Do I continue on with the IBR plan and continue to have my credit report have this inflated debt to credit ratio or do I start making payments on these loans, even though I'm not required to, with the hopes of lowering this ratio and increasing my score? I know that over time paying down my van loan and credit cards will lower that ratio, but the interest in the student loans will continue to be added. Over a 25 year period this could really add up and inflate that ratio to astronomical proportions.

     I believe what I should probably focus on doing is paying down the interest part of these loans and continue to at least pay the interest on them every year. The interest is tax deductible and it will help my credit score by lowering the debt to credit ratio.

Any thoughts on this?

And the Saga continues...

Sunday, March 23, 2014

Credit Card Usage


     Like I said in my previous post, "Trying To Rebuild My Credit", I now had a couple of credit cards. Now how do I use these cards to put good credit on my credit reports and raise my credit score?

     Sheree and I didn't start using the cards right away. Just having them for emergencies was enough at first. To be honest, I had read about so many people racking up so much credit card debt and not being able to get out of that debt that we were afraid to use them at first. But not using them would not really help us that much. The two largest factors that make up your score are payment history and Credit Card Utilization. If we didn't use the credit cards, our utilization would be good, but we wouldn't have a payment history.

     We finally took the leap and started using our cards after a couple of months. At first we did very little with the intention of paying off the balances every month. But somewhere around May or June, Sheree's sister and kids moved in. She needed help to get back on her feet. She promised to pay us a set amount. Well, that didn't work out as planned. The extra expense of taking care of two families put us in a hole and we had to use our credit cards to stay afloat.

     While I kept the automatic payments going and I knew we were building that good payment history that is so important to our credit scores, Our utilization increased dramatically. For those of you who do not know much about credit utilization, below is Credit Karma's definition.

About This Factor: Your credit card utilization is the percentage of your credit limits that you're using. It's calculated by dividing your credit card balances by your credit limits. Generally, the higher your utilization (the more credit card debt you have), the lower your credit score. This factor has a HIGH impact on your credit score.



Credit Card Utilization

Next: Payment History
Your grade is based on where your standing falls in the ranges displayed below.
Score% of Credit UtilizedCABCDFN/A0%1-20%21-40%41-60%61-100%100+%No Credit500550600650700750
B Credit Card Utilization
Credit Card Utilization33%
Open Credit Card Debt$5,785
Credit Card Limit$17,550
Open Credit Card Debt$0
(no limit reported)
Your standing is calculated based on how much of your open credit card limits you are using for those cards that have a reported limit.













     As you can see, if you don't use your cards, you get a C grade. The goal is to keep your utilization below 20%, but still use them. That way you can get the best possible grade from the credit bureaus.

      It was frustrating to see our credit scores drop month after month because of this. At one point we had reached the 90% utilization range. I was starting to worry, but I wasn't panicked. We had been through worse. Once we were able to get our lifestyle back to normal, we would be able to pay down that debt and all would be good again in the credit utilization world.

     Sheree's sister moved out and Christmas passed and the new year came. New years stand for a fresh start and I was going to make the most of it. I used about half of our tax return to pay down a lot of our credit card debt  (which boosted our scores between 20 and 40 points per bureau) and I have set up a debt reduction plan in Quicken to pay down the rest.

     I'm very excited to see our scores grow in the future just for paying down our debts. 

Saturday, March 22, 2014

Tackling the Student Loan Conundrum


     Student Loans are a whole other beast when it comes to dealing with your credit report. If you go late or you default on your loans, it's like the mafia sent a hit man out to kill your credit. I really don't understand how student loans weigh so much more negatively on your credit than any other debt, but they do. Every decent book that I've read about credit repair has designated its own chapter on the student loan issue and how hard it is to recover if you default on them. I personally have several student loans that are one of the mysteries of my credit score that I am trying to work out.

     I finished school back in 2008 right around the time of my separation with my ex-wife. There was a lot on my plate back then and I had to prioritize some things in my life. I needed a place to live, I needed to separate all the bank accounts and bills. My ex was not paying for any of our joint obligations, so I had to. I knew I had six months from my last course to start paying back the student loans, so I put the thought of paying on them on the back burner. I had time.

     Well, has anyone told you how fast time can fly? So much was going on with my life back then that six months felt like a blink of an eye. I had to deal with custody, visitation, and child support of my children, paying for my truck and all the other household bills with one income, working 12 hour days with a two hour round trip commute to work and back, and other personal issues that I'm sure you don't want to hear about. To say the least, I felt stretched extremely thin. I didn't know where to start dealing with all of the bills that kept pilling up, including my student loans.

     I tried to pay them at first. That didn't last very long. I started getting garnishments from all over the place. I couldn't stop them, so something had to give. My thought process was, "At least something's getting paid. I'm making some progress." But since 25% of my net pay was gone right off the top every paycheck for the garnishments, I couldn't afford everything. Not paying the student loans was my choice. I didn't think that it would affect me that much as far as credit scores go. I figured that I could get a forbearance or deferral until I could start paying them again. That worked once. For some reason I can't remember, I wasn't approved for another forbearance. I felt stuck between a rock and a hard place. The garnishments kept coming, the living expenses are always there, I needed a vehicle to get to work. So I finally gave up trying to pay them and just let them go.

     About 2 1/2 years ago I had finally finished my last garnishment. I was so excited that these other bills were done and paid for and I was excited for the future and ready to start tackling my student loan debt. I was too late. About two months after my last garnishment, another one started. I was so confused. I just knew those bills were paid for and I was ready to go off on somebody for making such a serious error.

     After calling my corporate office and getting the paperwork, I found out that it was the government that was garnishing my student loans because I had defaulted on them. I called them immediately and they explained my options. The best scenario for me was to rehabilitate my loans and get them back in good standing. I had to make six to nine consecutive payments on time in order for the government to rehabilitate the loans. I actually had to do this twice because I had government loans that were issued out by two separate companies. 

     One of the things that made rehabilitation so attractive when I was offered this was that my credit would be restored and the negative information would be taken off. It seemed like a win win for both sides. While I don't regret getting my student loans in good standing again, what I was told was either a bold faced lie or there is an error in reporting on my credit reports.

     After rehabilitating my loans they were issued to two different companies to service. This created more new accounts on my credit report which lowered my average age of the accounts. I was fine with this because they were in good standing again and, over time, I would be adding more positive information on to my credit reports. The problem I had, and still have, was that the old, defaulted accounts did not go away as promised. These accounts are the main reason that my score is still low today. While I was able to resolve most of the other negative information on my credit reports with little or no effort, these student loans are like thorns in my side that are in so deep that I will need major surgery to get them out. Still today when I pull my credit report and go to the negative accounts sections, I only see those student loans.

     I have disputed the defaulted accounts several times and the credit bureaus have stated that they have verified the accounts. They have gone so far as to say that my dispute with them about these accounts are now frivolous and that the will not investigate them anymore with more evidence to do so. I once disputed directly with the creditor (certified mail, of course) and got no response. After waiting the prescribed 30 days minimum for a response I sent another letter with all the documentation required to the credit bureau and still nothing has happened. This has been so frustrating that I have actually stopped focusing on those accounts for the past eight or nine months and have been focusing on trying to get more positive information on my credit reports.

     They have never left my mind, though. Now that I have put some separation between the flurry of activity disputing everything, including these student loans I will be starting a new round of disputes directly with the loan servicing companies.  I hope to force there hand, by submitting complaints to the FTC and other consumer protection agencies and, if needed, take them to court. I was promised something. I honored my side of the agreement. I feel they need to honor their side as well.

     And the Saga continues...

Thursday, March 20, 2014

Trying to Rebuild My Credit

Getting Credit Again

     After all of that back and forth from the credit bureaus I felt that I had to get something good out of all of that. I needed a reward, so to speak, for all of the effort I put in to getting my score up. I also learned from all that reading that you can't fix your credit by just removing the bad things. You have to add some good things back on.

    I already had some good items on there. Sheree and I had bought a van about nine months prior and I hadn't missed a payment. I had some old credit card accounts on my reports that were never late and they were aged, so that helped. I had no judgements or bankruptcies on my reports. So, all was not bad. I just had to get some more good credit items on my report in order to show my future creditors that I am responsible.

     The problem with getting new credit is that you initially take a step backwards when it comes to your credit score. The reason for this is that part of your score is determined by what the average age of all of your accounts is. Banks want to see that you can maintain a good payment history over a long period of time. It has a medium impact on your credit score. Getting new credit will lower that average age. The other reason is that applying for new credit will add a hard inquiry to your credit report. While this has a low impact on your credit score I read somewhere that each inquiry lowers your score by about two points. This is significant when your score is already low. I had to bite the bullet, though, and apply or I would never start moving my score in the right direction.

     I didn't know where to start applying, so I researched several different sites like www.bankrate.com, www.credit.com, www.creditcards.com, and so on. I was on www.creditkarma.com one day and they said that a credit card was a good match to my current credit score. I thought, why not. This site actually has my score and knows what I can get approved for. I applied and was approved! I was so excited! A fresh start and a chance to prove myself was exactly what I needed and I got that chance.

     I applied to a couple more and got one more card. Sheree was also gracious enough to allow me to add myself as an alternate card holder on her credit accounts. Her accounts were new also since she is also rebuilding her credit (although she didn't take near the hit I did on her score) from a nasty divorce, but we would rebuild together. 

     The first thing I did after receiving the cards was set up auto-pay for all of them. This was very important for me to do because I wanted to make sure that, no matter what, I would always make the minimum monthly payment. I never want to go back to the depths of credit despair again. Making on time payments is the most important factor in determining your credit score (it's about 35% of what makes up your score).

     I reviewed my credit score after all of these accounts were added and it did indeed drop. I lost between 20 and 30 points depending on which credit bureau I requested my score from because these were all new accounts that had no history on them. My average age of accounts went from an average of eight years down to three. According to www.creditkarma.com my grade is a D. Once my average age goes above four years (I'm at 3 years 11 months) That will rise to a C. I can't wait to see how much it will raise my score. Probably not as much as I want, but every little bit counts.

     I was now on my way to rebuilding my scores. I never in a million years thought that it would be this hard or time consuming, but I am taking the approach that the rewards in the end will pay off for myself and my family. Everyone deserves a second chance. I got mine and I wasn't going to fail.

Wednesday, March 19, 2014

The Semi-Plan


     I actually started out with this new endeavor about a year ago. The year 2013 had just arrived and I was at my computer looking at my budget in Quicken. I was reflecting on the year that had passed and trying to find a way not to repeat the struggles that my family had encountered. I knew we had the tools to succeed, but why weren't we? So, I started formulating a semi-plan...... so to speak. I say semi-plan because I really had no idea where to start. I believe that this is the main reason that a lot of people are so apprehensive about tackling there credit problems. So I just winged it at first, hoping that taking that first step would enlighten me to a better path than what I was currently on.

     The first thing I was thinking was to fix my credit so I could possibly get better rates on the things that I was financing and lower my monthly payments. So I went to www.annualcreditreport.com and got a copy of all three of my credit reports for free. As I was looking over these reports the only two things that came to my mind was these things look horrendous and what am I supposed to do to fix them. While I had ordered and reviewed my credit reports in the past, I never actually did anything about the negative or incorrect items on them. I had no clue as to where to start.

     I then started wondering, what does all this information translate in to as far as my credit score? So I signed up for credit monitoring from the three big credit bureaus. I case you don't know they are Equifax, Experian, and Trans Union.  Yes, I paid for their service. I still do. I figured that I was investing in to my financial security by becoming as knowledgeable as I could about how all this credit stuff worked.

     I was shocked at what I saw. I had lived without credit for so long after my separation with my ex-wife that I thought that the stuff that we went through when we separated five years ago would surely be gone. To say the least, it wasn't. I almost gave up there. Below are the scores that I had to start with.

Date Equifax Experian TransUnion Average
1/13/2013 435 529 500 488
For your reference, Trans Union now uses a different scoring system (Vantage) than the other two bureaus so my score on that website actually looked a lot higher. I signed up with www.creditkarma.com to get a more accurate score using a similar model as the other two credit bureaus.

     I didn't understand how much the separation had hurt my credit. Only recently before we split up I was getting approved for student loans, car loans, I had a couple of credit cards, and I had even bought a house a few years prior to that. How could my credit score get so low? What was I going to do to start recovering from this? I was mad at my ex for all she did not pay. I was frustrated with the fact that I even had to deal with this problem at all. I used to pride myself with having very good credit. Even if I didn't know what my actual score was, I knew that I could go just about anywhere and get approved for what I wanted. I had to figure out something to fix this now.

     I started reading everything I could get my hands on about credit repair. I needed to know what I could do to fix this ASAP. The best two books that helped get me started were, "Credit Warefare: Retake Control of Your Financial Life", by S. Louis Blisko and, "Best Credit: How To Win the Credit Game", by Dana Neal. They really helped me gain a really good understanding of the credit world.

     I started the dispute process after reading these books. Some of the stuff I read suggested only disputing a few things at a time. I ignored that and went for the gusto. I disputed everything that I could find on the reports. After all, there were a lot of things on my reports that just were not accurate and I felt that everything needed to come off. I sent everything certified mail so I had a record of the big three receiving the letters. After a couple of back and forth letters between them and me, my credit score jumped up dramatically, but not nearly where I wanted them to be. They are shown below:

Date Equifax Experian TransUnion Average





4/2/2013 528 572 610 570

I knew that, after this initial round of battles with the credit bureaus, that I was definately in for a war. While I saw a lot of things drop off, A few things stayed and I had actually hurt my credit some by taking some of the aged accounts off. This was going to be a long, drawn out war where I was going to have to pick my battles to fight in order to get to where I wanted to be.

My Saga Begins

The Beginning


     The journey to financial freedom is one that everyone has to go through. I am in the middle of one myself. I have had many successes in life. These are things like my children, my fiance, Sheree, and my career stability. I have had just as many failures. Things like getting out of the U.S. Navy, my failed marriage, and, most importantly, not achieving the financial independence that I had dreamed about when I was first starting out. This blog is going to be about my decision to focus on achieving a better credit score which will in turn greatly aid my journey to financial independence.

     Let me warn you now that this is not a story about how I fixed everything in 30 days like some websites proclaim they can do. I want you to know about my journey to achieving a great credit score along with financial independence. I want you to know that I am far from the end of that journey. I want you to hear about my successes and, more importantly, my failures. I believe that if you know about my failures, you are more apt to avoid repeating them yourself. A lot of these failures are ones that a lot of people have probably made, but I'm not sure if they have been put out there for everyone to see. I want everyone to see. I want to help as many people as possible avoid making these mistakes in the future.
     
     I may be wrong sometimes. Like I said, this is not a story of how perfect I am. It is my journey on the battles with the credit bureaus and tackling debt. I will be as raw as possible in these post so I can try to portray the excitement and frustrations that I feel along the way.