Frequently Asked Questions About Credit

Bankruptcy, should I file?

The decision of whether or not to file bankruptcy is ultimately yours; however, we feel that most people are not adequately apprised of their options before filing bankruptcy. Likewise, most clients who come to Credit Restoration Ltd after filing a bankruptcy were also unaware of the effects of the bankruptcy on their credit. We find a large percentage of our clients who have filed bankruptcy were under the impression that a bankruptcy filing not only alleviated them of certain debts but removed those same debts and creditors from their credit reports.

This is not the case. Once a bankruptcy has been filed, every account that was discharged in the bankruptcy as well as the bankruptcy itself will be shown on the client's credit report. These accounts will show on your credit report as "included in Bankruptcy" and are very damaging to your credit score and overall credit health. Additionally, the bankruptcy filing itself will show up under the Public Records section of your credit report. We can remove bankruptcies and "included in Bankruptcy" items from credit reports; we just want to help you be sure bankruptcy is the proper solution for you and your credit situation before you incur these listings on your credit report.

Can credit repair companies be trusted?

Despite the massive efforts of the credit bureaus to convince you otherwise, there are many credit repair companies that are no different than most other services. Like all industries, less-than-honest companies do exist and are damaging to their clients and to the credit repair industry as a whole. For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.

This doesn't mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies. As for credit repair- do your homework. Does the company you are selecting belong to the Better Business Bureau? Does the company employ attorneys who have passed their State Bar? Do they provide you with consumer rights information? Do they charge exorbitant fees? Take these things into consideration when hiring a credit repair company to help you with you credit issues.

What is the Fair Credit Reporting Act?

In the early 1970's, based on pressure from various consumer groups and the growing use of credit reports, Congress passed the Fair Credit Reporting Act to regulate the relationship between consumers, creditors and the credit bureaus (Equifax, Trans Union, and Experian).

This law gives you several rights as to what information of yours can be disclosed, how it can be disclosed and the way your information is reported. One of the most important provisions of the law for the consumer allows you to challenge inaccurate, obsolete and misleading items as they appear on your report.

What are the different types of credit scores?

There are primarily two types of scores, generic bureau-based scores and custom scores. Among bureau-based scores, the most widely used score in the financial service industry is the FICO score generated by the Fair-Isaac Company. Each credit bureau can also generate its own credit score, such as the Experian Credit Score. The bureau-based credit scores draw on statistics from a large number of consumers across a variety of accounts.

Custom scores are generated by individual lenders who rely on credit bureaus and other information, such as account history, from their own portfolios. Scores are not just used to rate the credit worthiness of consumers. Lenders also use scores to predict consumer response to offers sent in the mail, the likelihood that account holders will file for bankruptcy or that a consumer will move their account to another lender.

Does paying off past-due accounts neutralize their negative status?

No. Many people believe that if they pay off an account the previous negative information is deleted from their credit reports. Once an account is late, sent to collection or charged off the negative information will remain until the statutory amount of time has run. If you pay off the account or become "current" your credit is better than if you did not ever pay, but the previous negative information remains.

Facts about Credit Reports

The three major credit bureaus maintain credit files on nearly 90 percent of adults in the United States . An alarming number of these files (credit reports) contain serious errors and could cause the denial of credit, a loan, or a job.

Keeping a 'clean' credit report is vital to your financial well-being. Credit reports affect every aspect of our financial lives, including employment opportunities and the interest rates of personal loans such as home mortgages, car loans, and even the interest rates of credit cards. Your credit report is your 'financial fingerprint' and contains information that can be grouped into the categories listed below:

Payment History

Your payment history includes the following types of specific information:

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
Severity of delinquency (how long past due)
Amount past due on delinquent accounts or collection items
Time since (frequency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
Number of past due items on file
Number of accounts paid as agreed

Amounts Owed

Amount owing on accounts
Amount owing on specific types of accounts
Lack of a specific type of balance, in some cases
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

Time since accounts opened
Time since accounts opened, by specific type of account
Time since account activity

Types of Credit Used

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

New Credit

Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
Number of recent credit inquiries
Time since recent account opening's, by type of account
Time since credit inquiry's
Re-establishment of positive credit history following past payment problems