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Chapter 2: Dispute the
Charges

You
should always keep an eye on your credit report. There are plenty of credit
card companies and even websites that will provide it to you completely free so
make sure you
’
re taking advantage of that feature. You
’
ll be able to monitor if someone ever steals your
identity and you
’
re also going to be able to keep track of the
accounts that are affecting your credit score both in positive and negative
ways.

If
you look at your credit report and see a lot of negative accounts, such as past
due or collection accounts, consider whether they are accurate. Did you know
that the credit reporting agencies are required by law to ensure that your
credit report is 100% accurate at all times? If it
’
s
not
they are required
(also by law) to remove the incorrect information.

What
this means to you is that, if the negative accounts on your credit report are
not 100% accurate you can request to have them removed. What you want to do is
review your report and consider which accounts may not be correct. Now keep in
mind you
’
re not allowed to dispute anything that is true. So
if the negative account on your credit report is accurate you
’
re supposed to leave it alone. If it
’
s not, write a letter to the credit reporting agency
(that
’
s Transunion, Equifax or Experian) and ask them to
remove it. Let them know why it needs to be removed and make sure you include
your name, birthdate and social security number in the letter.

If
you do
this
then the credit reporting agency is
required to investigate and make sure the account is accurate. If it is then
they will send you a letter verifying the account and request that if you have
evidence that it
’
s not accurate you send that information to them. If
it is not accurate they must remove it from your credit report and your credit
score will be updated to reflect it.

Writing
letters to the credit reporting agencies doesn
’
t
always work 100%. Sometimes they will continue to tell you an account has been
verified when you know it isn
’
t accurate. If this
happens you
’
ll have to go above their heads and write to the
original creditor, letting them know that the account is inaccurate and
providing information that verifies this. This could be statements showing your
bills were paid on time or letters indicating that they removed the account.
Remember to send copies of these documents and not the actual letter.

Disputing
false information can get a lot of accounts dropped and it can remove some of
your debt because you won
’
t have to pay for those
collections or past due charges if you can prove that they are not accurate.
Plus
this is going to improve your credit score and repair
your credit because the negative accounts are being removed.

Chapter 3: Negotiate
With
Credit Companies

Another
thing not a lot of people know is that you can negotiate with credit companies.
So you
’
re able to take the collection letter they send you
or a past due notice that has been sent to you and discuss it with them. In
many cases they will take a lower amount than what
’
s on the bill just so that they can guarantee they
’
ll get something

Let
’
s say you owe Discover $1,000. They really want to
get their money so they send you a past due notice. But for several months you
’
ve ignored that past due notice and now they
’
ve sent it to collections. The collections agency
may offer you a settlement. Maybe they say they
’
ll
take $900 if you just pay it to them right then and there. You have the
opportunity to call them and request that they take a lesser amount.

If
you talk to the collection agency and they agree to take a lesser amount you
will have to send that payment in full. Make sure that when you send them the
check you write out the words
‘
paid in full
’
on the check. Make a copy of the check for your own
records as well. Once they cash that check your account is legally considered
to be paid in full and they are no longer able to come after you for more
money.

In
many cases an original creditor or a collection agency will accept less than
the bill is for just because they want to get something. They know that if you
’
ve ignored them for this long you may continue to do
so and they may never be able to get any money out of you. In fact, a large
number of people who have immense debts and a lot of collections out for them
will just go bankrupt and then those companies never get anything. That
’
s why they are willing to accept lower payments. A
lower payment will guarantee them something for their trouble and it will allow
them to close out the account.

Chapter 4: Cut the Credit
Cards

If
you
’
re looking to save some
money
then you need to make sure you
’
re spending less. That
means getting rid of all those credit cards. If you have a lot of credit
cards
you
’
re going to be tempted
to use them and that
’
s not going to help you
save anything. So what you want to do is get rid of the credit cards.

One
thing it
’
s important to remember is that actually closing out
your credit cards is probably going to decrease your credit score. When you
have less available credit (the amount of money that the credit card companies
allow you to spend) your amount of credit used increases. What you want to do is
make sure that you keep a few credit cards so you have a decent amount of
available credit. You want to avoid using them however.

If
you
’
re able to avoid the temptation to purchase
things
you can put one credit card in the back of your purse
or wallet. Choose a card that will work anywhere such as a major credit card
company. This is for emergencies only. An emergency doesn
’
t mean you found something that you really want to
have. It means that your car broke down and needs to be towed, or you run out
of gas.

The
rest of the credit cards you decide to keep should be locked up somewhere in
your home. Put them in a safe or lockbox. This way you have to actively think
about getting the card out again before you
’
re
able to actually use it. This will keep you from using the card in a spur of
the moment fashion and will ensure that you still have it available if
absolutely necessary.

Stop
using credit cards as much as possible. This will allow you to save more money
because you won
’
t have to spend a lot of your money on credit card
bills at the end of the month. Instead, you
’
ll
have all the money you would have spent on those bills left over to put in a
savings account. Remember that budget you made at the beginning of this book
and make sure that you stick to it. Don
’
t
spend too much of your money on things you don
’
t
need throughout the month.

Keep
in mind that if you don
’
t use your credit card
at all
it
’
s
eventually going to be taken away from you. That
’
s because the credit card companies don
’
t want to allow credit to someone that isn
’
t going to do anything with it and eventually they
will cancel your account. This is going to lower the amount of available credit
you have and it
’
s going to decrease your credit score.

The
best thing to do is make one to two small purchases on your credit card every
few months. Try to space out using different cards so that none of them get
taken but you don
’
t owe very much money each month. You want to keep
the amount negligible. That means it
’
s
low enough that it really doesn
’
t affect your overall
budget. This is going to let you keep the card but, at the same time, it
’
s not going to completely break the bank.

Chapter 5: Understanding
Your Credit Report

Your
credit report is not all that easy to understand. There are a lot of different
categories in the report and that means you need to weigh out different things
in order to make sure that your credit score is going to be high enough for you
to get the things you want.

The
best scores are those that are over 900 but not many people are actually able
to achieve that. If your score is over a 700 you actually have really good
credit and you
’
re pretty much guaranteed any type of credit that
you might apply for. But you want to keep in mind that different types of
credit card companies or credit agencies will want a different score.

If
your score is in the 600
’
s you have a decent
chance of getting credit in most places but not all. This isn
’
t guaranteed however. There are plenty of agencies
that will consider you a little bit of a risk.

Your
credit score is actually an indication of how much of a risk it is to give you
credit. When you first start out getting credit you have a low credit score.
This tells the person checking your score that there is a high level of risk
involved. They don
’
t know if you
’
re
going to pay the bills or if you
’
re going to rack up
high amounts of charges. That
’
s why your score is
low. As you get more recorded payments your score will go up because the risk
of you not paying for things is getting lower.

Now
it
’
s not just late payments or missed payments that are
going to count against you in regards to your credit score. There are actually
a lot of different factors that cause problems with your credit score (or
improve your credit score)

So
let
’
s break them down a little and look at what
’
s on your credit report.

Public
records are one of the first things that show up on your credit report. These
are the worst things you can have, judgments and tax liens against you. Any of
these are going to make a big dent in your credit score and they
’
re going to continue to work against you for a very
long time (up to 7 years). You definitely don
’
t
want these if you can help it.

The
next thing is going to be your credit items. These are credit cards, loans,
mortgages and any other credit account that you
’
ve
had in the past. Most accounts that are considered old (closed more than 10
years ago) will not report unless you
’
ve
had a collection filed for that account.

Each
of your credit items is going to count towards your credit score. Every on time
payment is going to count in your favor and every late payment, missed payment
or collection is going to count against you. Each balance is going to be
reported as well and high balances are also going to count against you.

Remember
we said before that you want to have a high available credit balance but you
also want to have a low balance on the credit you
’
re
using. What the credit reporting agency does is look at how much you
’
re able to spend on all of your credit cards and add
that together. That
’
s your available credit
balance. They then look at how much money you owe on each of those cards and
add that all together.

The
amount owed is divided by the amount available and that
’
s your total balance percentage. You want to keep
this percentage low because that reflects well on your credit card. A high
percentage is going to look bad and lower your credit score.

The
total amount of accounts that you have as well as the types of accounts is
going to count towards your score as well. You actually want to have a moderate
number of accounts (more than 10) as long as you can keep them all current. You
also want to have an assortment of accounts (credit cards, mortgages, car
loans, student loans, etc.) this is going to improve your score as well.

Finally,
the number of inquiries that you have will affect your score. You want to cut
down on the amount of inquiries that you have because
every
one
is a slight ding to your account. What these are is every time that
you apply for credit. If you apply they check your credit score and when they
check your credit score it goes down a little bit. These inquiries stay on your
credit report for some time as well.

That
’
s why you want to apply for credit infrequently and
only if you
’
re sure you
’
re
going to get it. Getting the credit will help improve your score more than it
’
s going to hurt for the inquiry.

So
all in all you want to make sure of a few important things in regards to your
credit report:

• Have
  several different accounts (10 or more)
  
• Keep all
  accounts current
  
• Avoid
  public records
  
• Have a
  variety of types of accounts (loans and credit cards)
  
• Keep your
  available balance high
  
• Keep the
  balance in use low
  
• Don’t
  apply for credit unless necessary
  
• Never
  apply for credit unless you’re sure you’ll be approved
  
• Dispute
  accounts that aren’t correct
  
• Make
  payments on any past due accounts and pay off collections
  

By doing all of
these things your credit score will actually increase over time. It will take
some time and you’re definitely going to need to work at it but you’ll be able
to bring your credit score back up. Once you’re able to bring your score back
up you’ll find it even easier to get out of debt and you’ll start saving better
as well.

The reason your
credit score is going to affect this is because your credit score actually has
a lot to do with you getting approved for everything from credit cards to car
loans to housing. It also has to do with the interest rates that you’re given.
As your score goes up you’ll be able to request lower interest rates and that
makes it even easier to pay off debts and stay out of debt in the long run.
Staying out of debt means you have more money to put away towards your savings.
So it’s really a win all the way around.