New Credit Score Model Coming this Fall
On occasion, and in response to changes in the economic environment, FICO updates their credit scoring model. FICO makes formula changes to provide lenders (their customers) with a numeric measure of risk that reflects changes in default rates on debt.
The first half of 2014 demonstrated a solidification of the economic recovery. Unemployment figures continued to improve, as did other economic indicators in most regions of the country. And along with economic improvement has come a decrease in the default rate on debt, which had reached an all-time peak following the mortgage crisis of 2007 and 2008.
Paid Collections No Longer Hurt
FICO Score 9, which will begin a roll-out in the fall (which starts September 22nd), will include a couple of inspiring changes. The one that we are the most happy about is the elimination of paid collection accounts from the score calculation. This means that once a collection is reported as paid in full, with a zero balance, that account will no longer count against your score. Currently, paid collections continue to weigh against your score for some time after they are paid.
Medical Collections Reconsidered
Another logical and happy change to the formula is the reduction in the weight that is given to medical collections. The thought process here is that medical collections often appear without the knowledge of the consumer, the result of insurance shortfalls never disclosed to the patient in advance of appearing on the credit report.
Limited Credit Improvement
And lastly, FICO has announced a change to its method of assigning a score to those with limited credit. The implication is that there will be a more liberal approach to those who have little credit with no strikes against them. This makes sense in this improving economic environment where lenders desire to expand their portfolios.
Here are a few points worth understanding. New versions of the FICO model roll out slowly. Lenders can adopt the new model as they wish, sometimes taking years. Mortgage lenders, historically, have been very slow to adopt. It is expected that credit card lenders will be the very first on-board, so those with some credit issues may be pleasantly surprised to see some prime, low cost credit card offers arrive in the mailbox towards the end of the year.
Credit repair requires courage. If you see something on your credit report that does not look familiar to you, you have the right to dispute it with the credit bureau. To hold back would be a great mistake. Do not attribute the credit bureaus with infallibility. The truth is far different. Errors abound.
And Dispute Again
Errors, generally, are not the fault of the credit bureaus, but the inevitable outcome of a complex reporting system involving countless reporting entities. Credit repair is the cure. And if your disputes encounter resistance, do not give up so easily. Dispute again. Demand satisfaction. You have the right to ask for errors to be investigated and corrected.
Getting a collection letter in the mail is no fun, but it does offer a fantastic credit repair opportunity. The Fair Debt Collection Practices Act requires collectors to provide documentation of their legal ownership of the subject debt as well as proof of the amount that they say you owe. This is called debt validation.
Do It Soon
Your debt validation credit repair opportunity only exists for the thirty days following your receipt of the collection letter, so you must act quickly. If the collector cannot provide the required documentation they must stop collecting and reporting. But an important caveat applies! If you have no doubts about the accuracy of the collection there is no point in validating the debt unless you are ready to negotiate payment.
Open New Accounts Now
This is a major credit repair opportunity which can provide a dramatic boost to your credit scores. If you have been through a difficult financial period, and your credit suffered as a result you can get enormous benefit from opening a couple of new credit card accounts now. As critical as this is for those who currently have no open accounts, it is equally valid for those who do have accounts which have survived the period of difficulty.
Get Secured Cards
The FICO credit scoring model needs open and active accounts to calculate a score, so if you do not have any open accounts it is essential that you open them now. But FICO also gives credit to those who have taken steps to rebuild after a period of hard times, so even if you still have open accounts you can benefit from opening one or two more. Concerned about being approved? Just get secured cards. They are easy and you will not get denied.
Keep Revolving Balances Down
Once you start rebuilding your credit there is one more credit repair tip that will insure that you get the best possible results from your hard work. Keep your balances down! The FICO scoring model puts enormous weight on the ratio of your revolving balances and your account limits. If you open a new account and then use the entire available balance do not be surprised to see your scores fall.
Avoid This Trap
There is a common credit repair trap that you want to be sure to avoid. Many people get small cards, use the full amount available each month, and then pay the balance when the bill arrives. It is unlikely that your payment date and the reporting cycle of the card issuer will coincide. It is more likely that your account will be reported with a higher interim balance, which is likely to harm your scores. For credit repair, and when you need your scores to be their best, limit your card usage to a small percentage of the card limit and do not exceed that number.
If you are reading this your credit report is probably wrong, and it could cost you a fortune. Credit repair offers a solution.
Your Credit Report is Wrong
If you are reading this you probably have concerns about your credit. Maybe you had financial issues in the past. Maybe you looked at your report and found derogatory information. Either way, your credit report is wrong and you are a candidate for credit repair. Okay, there is some chance this statement is not completely accurate, but if you make the serious mistake of believing your credit report simply because you are guilty of some past indiscretion you are doing yourself a grave injustice.
Reporting Rules Can Save Your Life
Most people believe the derogatory information reported by the bureaus is correct. Those people are rarely right. Credit reporting is a regulated industry and, believe it or not, it is designed to provide some reasonable degree of equity. Reporting entities, like creditors and collectors, are supposed to abide by rules. These rules limit the length of time an issue can report, the number of accounts related to a single event that can appear, and the way information is presented. In most cases, consumers with a spotty history experience three or four times the negative impact they should.
The Credit Card Multiplier Effect
The most common case of reporting failure involves defaulted revolving accounts. The sequence of events that leads from default to the need for credit repair is always the same. First comes the charge off by the original creditor, and then comes the sale to a collector, who is likely to resell the account to a second collector, who may sell to a third. If you let enough time pass there is no limit to the number of collection accounts that may appear for the same single indiscretion. And so you look, and think it is all true; you were bad and now you must suffer. And yet, only the most recent of the collectors should be on your report, and only if they have ownership of the debt, which they may not!
Credit Repair is a Consumer Necessity
Credit repair is not a covert operation designed to trick the bureaus into removing accurate information. It is a consumer necessity. The bureaus have a big task, and they do a decent job of it, generally speaking. But to trust the content of your report is a serious strategic error, and one that is almost certain to cost you a fortune in higher interest rates and lost opportunities. There is ample press on the issue, but there is also considerable ignorance regarding the meaning of accuracy in credit reporting. You do not want to be on the wrong side of the information fence. When it comes to your credit report, doubt is a very healthy thing.
Any Path Will Get You There
There are two ways to approach the credit repair dispute process. You can do it yourself. Or you can hire a company to do it for you. Either way is fine. If you do it yourself, you may either take the time to learn all the rules the bureaus must uphold and dispute in a surgical manner, or you can just dispute everything that seems iffy. Hiring a company has the advantage of turning the paperwork over to someone else, and maybe insuring that the letters make some relevant sense. But doing it yourself is not all bad either. The truth about credit bureau disputes is that regardless of what a letter says, the person processing the letter is required to translate the gist of it into a little two digit code.
Respect the Machine
The three major bureaus are independent entities and must be examined and dealt with as such. Their reporting may differ completely. Where one may be wrong, another may be right. They may even use different variations of creditor name and account number. For the best results dispute letters must address issues in conformance with the individual manner of reporting. As aggravated as you may be with the errors you wish to correct it is wise to respect the bureaucracy you are dealing with and to be as clear and simple as possible. Respect the machine. Do not to be frustrated if you have to repeat your effort to get the job done.
Opening Fresh Revolving Accounts
The number one most effective credit repair strategy for anyone that has been through a period of bad credit is opening fresh revolving accounts. Nothing can rocket your scores upward, faster and farther, than a couple of new credit cards. Why does this work so well? It seems that FICO is ready and willing to reward those who prove that they are capable of a successful reentry into the world of credit. Of course you need to manage those new accounts properly.
Managing Your Balance to Limit Ratios
Once you have your new accounts open you must resolve to manage them in a meticulous manner. And this involves more than just making your payments on time, although that too is critical. As urgent is the way you manage your balance to limit ratio. This is the relationship between your balance and your account limit as they are reported to the credit bureaus. For credit repair purposes you should try to keep use less than 20 percent of the available limit.
Becoming an Authorized User
Another phenomenal credit repair technique that is capable of producing dramatic credit score improvement is the tried and true method of becoming an authorized user on a credit card that belongs to a friend or family member that has excellent credit. The key to success, and the factor that will determine how much of a score boost you get, lies in three criteria: the age of the donor account, the payment history, and the way that the donor manages their balance. The best accounts will be older that three years, have never had a late payment, and has a consistently low balance.
Stomping Out Bogus Collections
A phenomenon that has grown into a virtual plague in recent years, and one that can be effectively contained by credit repair, is the prevalence of inaccurate collection accounts. These accounts may include debts that were previously paid or settled but have somehow come back to life and often referred to as zombie debt or zombie collections, debts that belong to another person, and even those resulting from identity theft. These can be challenged and removed through credit bureau disputes and debt validation under the FDCPA.
And let us not forget the most traditional, reliable, crowd-pleasing mainstay of credit repair, the credit report clean up. This amounts to sending letters to the credit bureaus to challenge all of the derogatory information that you believe to be inaccurate. Credit reporting errors are massively common, and for many people a few months of disputes can cause a near complete credit report transformation. Patience may be called for, as the bureaus can be stubborn and may put up unfounded resistance, but stand your ground, repeat your efforts as needed and you will amazed at the results.
Consulting an Expert
When it comes right down to it, you may be best off hiring a credit repair service to guide you through the credit maze, and to manage the more mundane day-to-day tasks involved in the process, like sending and resending the dispute letters to the bureaus. Credit improvement can be critical to your financial well-being and must be done properly. If you find yourself confused or at a loss just reach out for help.
Sky Blue Credit got a high rating from TopTenReviews.com recently because of its superior customer service and commitment to resolving customer credit problems. It received a well-deserved score of 9.38/10 based upon several factors that make Sky Blue Credit an excellent choice when you need a credit repair service.
Quick, Efficient Service
According to our review:
“This credit repair company begins to dispute your negative credit-report items almost immediately after you register with the service. You’re assigned a personal account representative to contact if you have questions about your account. That representative is available to guide you through the process of improving your bad credit.”
Unlike some competing companies, Sky Blue Credit gets to work as soon as possible. You don’t have to wait for account processing or anything else before you begin the process of repairing your credit. Sky Blue orders one report that gives us information about all three of your credit reports so that it can see immediately note areas of concern. And that’s just the beginning of the process. While working on repairing your credit, Sky Blue representatives communicate with you regularly to help you avoid making mistakes that will land you in credit trouble again.
Email and Phone Service
Sky Blue Credit got high marks for responding to customer emails within 24 hours of receipt. In fact, it was only one of three companies surveyed that responded quickly via email. It strives to help every customer get questions answered promptly and keep you apprised of its progress towards resolving your credit problems. Sky Blue also offers customer service via phone, so you can receive immediate answers to your questions.
In addition to answering questions via email and phone, Sky Blue also makes it easy for you to sign up. Call Sky Blue if you have questions and representatives will walk you through the sign-up process. Customers who are more comfortable with Internet technology can sign up online. If you have any problems with the online sign-up service, let Sky Blue know right away so that you can quickly resolve them and can begin repairing your credit.
Some companies don’t pay attention to relevant laws. Sky Blue Credit is not one of them. It makes sure that everything it does is both legal and ethical. Sky Blue uses the law to its full extent to get you the credit repair service you deserve, but it doesn’t break or bend laws in order to change your credit report.
In addition, Sky Blue Credit also aims to be transparent. They tell you what they are doing every step of the way. Sky Blue also don’t make promises it can’t keep, such as promising you that your case will be resolved quickly when it can’t guarantee that it will be. We at TopTenReviews recognized Sky Blue for this, saying:
“Sky Blue is able to challenge negative items that pertain to inaccurate, misleading or unverifiable data on a credit report. It is bound to stay within legal limits. Repairing credit may not happen quickly, and although Sky Blue provides efficient service, it cannot guarantee a specific number of removals in any given amount of time. It will file an unlimited number of disputes to challenge questionable items on your credit report.”
We gave Sky Blue a score of 9.38/10 because it recognized all the ways that Sky Blue Credit provides superior, efficient and ethical services.