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What exactly is bad credit?
There are numerous types of credit report problems that would cause a lender to reject your application for a loan. Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include a judgment filed against you (perhaps for non-payment of spousal or child support) or any collection activity. If you feel that your credit report is wrong, experts say it's best to take it up with the organization or company claiming you owe them money. But if you've been late paying your bills, regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration. You can order a copy of your own credit report from the three reporting agencies.
How do you clear up bad credit?
There is no fast and easy way to repair damaged credit that took months or years to occur. The law allows negative information to appear on an individual's credit record from 7 to 10 years. The first step is to check your existing credit record. Anyone can obtain copies of their own credit report free of charge if they have been turned down for credit recently. For a fee, people can request copies of their own credit report online or by phone from the three major credit reporting agencies: Experian at (888) 397-3742, Equifax at (800) 997-2493 and Trans Union at (800) 888-4213. The bureau also should provide instructions on how to read the report and how to dispute any inaccuracies it contains. See "Credit Bureaus."
What can I do if I am denied credit?
If your application for a credit card or loan is rejected, the federal Equal Credit Opportunity Act requires that the institution that rejected your application provide a written letter that explains why credit was denied. According to "The Credit Jungle: A Consumers' Guide to Credit" (Jain Publishing Co., Fremont, Calif.), " they must also include the name, address and phone number of any credit bureau from whom they requested your credit report. The telephone number given for the bureau will probably play a recorded message telling you how to go about getting a copy of your credit report. Write the bureau within 30 days of your denial and request a copy of your report. It must be provided free of charge as long as it is requested within 30 days of being denied credit." If the credit report contains errors, the bureau can explain how to have the mistakes corrected.
Will bad credit prevent someone from buying a car?
There are numerous types of credit report problems (which may or may not be your fault) that would cause a lender to reject your application for a loan. Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include a judgment filed against you (perhaps for non-payment of spousal or child support) or any collection activity. If you feel that your credit report is wrong, experts say it's best to take it up with the organization or company claiming you owe them money. But if you've been late paying your bills, regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration.
How bad is a previous repossession on credit?
A previous repossession of a vehicle is one of the most damaging events in a borrower's credit history.
How long does bankruptcy stay on my credit record? .
Financial experts discourage clients from filing for bankruptcy in part because a filing will stay on their credit record for years. How many years depends on the type of bankruptcy you choose. Chapter 13, sometimes called a "wager-earner plan," allows you to keep most of your property but requires a formal, court-approved plan to pay at least part of your debts over three to five years. This type of filing usually stays on your credit record for seven years. Chapter 7, known as a "straight" bankruptcy, cancels most of your debts but may require that you give up some of your property to repay creditors. A Chapter 7 bankruptcy will usually stay on your credit record for 10 years.
Is it possible to renegotiate my debt with my creditors?
If you've got too much debt and can't keep up with your bills, you may be able to negotiate with your creditors to buy some more time or reach a settlement of what you owe. According to Money Troubles: Legal Strategies to Cope with Your Debts (Nolo Press, Berkeley, Calif.), "It may be easier than you think to negotiate with the people to whom you owe money. In response to mushrooming consumer debt, many businesses and bill collectors have modified their expectations and their collection practices. If you assert yourself, you may well get more time to pay, late fees dropped and your debts settled for less than the full amount. Remember that if you owe $200, it's to the creditor's advantage to get $150 now rather than to keep spending money trying to collect the whole $200." If a creditor agrees to discount the balance of your account in exchange for you paying a lump sum, remember that it could trigger some unpleasant tax consequences. For example, if you owe $5,000 on a credit card and a creditor agrees to accept a lump-sum payment of $3,000 to close the account, you are likely to owe capital gains taxes on the $2,000 of forgiven debt.
What can I do if my creditor won't work with me to settle a debt?
If you make a proposal to a creditor to settle your debt but the creditor rejects it, you still have a number of options that could help resolve the issue. According to Money Troubles: Legal Strategies to Cope with Your Debts (Nolo Press, Berkeley, Calif.), "If the creditor rejects your proposal or wants more evidence that you are genuinely unable to pay, consider asking a professional credit counseling or clean up service to intervene on your behalf. Or, if the debt is quite large or one of many debts, consider hiring a lawyer to write a second letter asking for additional time. The lawyer won't say anything different than you would, but a lawyer's stationery carries clout. Yes, this will cost some money, but it may be worth it. When a creditor learns that a lawyer is in the picture, the creditor often suspects that you'll file for bankruptcy if he isn't accommodating. So you can often save more in payments than the lawyer costs."
What is identity theft?
Identity theft happens when a person wrongly assumes another person's identity for financial or other purposes. The identity thief obtains vital data about his or her victim -- social security number, credit card account numbers, date and place of birth, etc. Once the thief acquires enough information, he or she is able to obtain credit cards, bank accounts, a driver's license and other financial and legal documents in the victim's name. Identity thieves buy houses and cars fraudulently. They get married using their victims' names. They even are arrested under their victims' names. The Federal Trade Commission maintains a Web site with information about identitfy theft.
How can someone steal my identity?
It can be ridiculously easy. All they have to do is get some personal information about you. Some thieves get started by being friendly and asking the victims and the victims' family innocent-sounding questions, such as "Where were you born?" Others may steal your wallet, go through your trash for old discarded financial records, legally read official court records of your divorce proceeding, or steal your mail. Still others may craft official-looking e-mails and trick you to answer them. Dishonest employees have access to credit bureau records. A friend, a relative or a roommate could steal your identity by getting information about you in your own home.
How can I find out if I am a victim of identity theft?
Many people never find out until a collection agency or a store contacts them, looking for payment on an unfamiliar bill that the thief has run up. Before that happens, check your credit history with the three big credit agencies, Equifax, Experian and Trans Union. If you see any unfamiliar credit card accounts, or a history of application for credit cards that you never made, there is a good chance that someone is using your name for their own gain.
Am I responsible for the bills identity thieves run up in my name?
Federal credit fraud law protects you here. Credit card and other companies that wrongly extend credit in your name must obtain the money from the identity thief, or eat the losses, minus $50 they could ask from you. (Many creditors never ask for that $50.) But your identity theft could cost you in other ways. You will spend time and money fixing your credit record and convincing creditors that you have been wronged.
What can I do to stop an identity thief and restore my credit rating?
1) Report the identity theft to local law enforcement authorities, including the police, postal inspectors and Secret Service. A new federal law makes identity theft a crime for offenses that federal lawyers can prosecute. Unfortunately, however, not all states have such laws on the books, and if yours is one of them, you may find an unsympathetic local police department not willing to pursue the matter. States with identity theft laws include Arizona, California, Colorado, Georgia, Kansas, Mississippi, New Jersey, West Virginia and Wisconsin.
2) Contact all banks and other companies where your name has been used fraudulently, sending a copy of a police report or other documentation to show that you are a fraud victim.
3) Contact the fraud departments of the three major credit bureaus to get copies of your credit report and to have fraud flags and statements added to your reports. The reports will usually be issued free of charge to someone who has been the victim of credit fraud. The three are: Equifax (888) 909-7304; Experian (888) 397-3742 and Trans Union (800) 888-4213. Request that each bureau have fraud flags and statements added to your reports saying that all potential creditors should contact you to verify applications for new credit. Ask the bureaus to clear the fraudulent accounts off your record.
4) If all else fails, contact a lawyer. Strongly worded letters and threats of a lawsuit from an attorney may prompt credit agencies or stores to pay more attention to your case.
What steps can I take to prevent my identity from being stolen?
Don't carry unneeded credit cards, your Social Security card, your birth certificate or other personal documents in your purse or wallet. Keep track of all your ATM, credit and debit cards as well as receipts from these cards. Either store them in a safe place or shred them. Shred unneeded personal documents and mail with identifying information before throwing them out. Cancel all unused credit card accounts. Keep a list of your credit-card account numbers and the companies' telephone numbers in a safe place so you can cancel them quickly and easily in case they are stolen or lost. A handy way of doing this is to use a copy machine. Just be careful where you leave the hard copy. Protect your Social Security and other personal data as much as you can. Do not give out personal information to any person or company unless you are familiar with them and you have initiated the communication with them. Do not provide any person or corporation with personal information unless you have contacted them first or are certain you can trust them.
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