Loans and Mortgages - Credit and Debt - Repairing Credit Score - Planning a Budget - Other Finance
Q. I had a Chapter 7 bankruptcy in 1998. Both my Experian and Transunion credit reports listed a negative account from a bank of which the debt was discharged in the bankruptcy. I disputed it with both agencies. Transunion deleted it almost immediately. Experian, after the investigation, only shows it as 'updated' and still a negative account entry. I believe it should not be listed separate from the Chapter 7. Am I right? Why would Transunion delete it and Experian not?A. It shouldn't be deleted if it was your account. Being discharged means that you are no longer responsible for paying back the balance, but it doesn't mean you did not default on paying them back. Ideally, it would state that it was included in the Chapter 7, but you can't count on that. You need to keep copies of all of your bankruptcy schedules as well as the discharge. You need to be able to show those to prove that the debt was discharged in the bankruptcy.
Q. Not sure if anyone here is familiar with Georgia's local consumer advisor Clark Howard, but I believe that he once said that when paying old debts, to always pay the original creditor. Any advise concerning this?
A. The original creditor has either sold the account to the collection agency, or they have contracted them to collect it for them. You would go to them to take care of things. As always, expect them to screw you and lie to you. Get everything in writing. Do not authorize a check by phone; send certified funds, with the settlement agreement from them, by certified mail so that you have a receipt showing that they received it. Keep all documents for the next seven years. Expect them to leave the negative trade line on your credit report; you'll probably have to file a dispute to clear it off. Do so in writing, not online, so that you can send in your supporting documentation.
Q. How can or what agency do I have to contact in order to remove old items that have been paid in full years ago off my credit report?
A. The main three are Equifax, Experian, and Trans Union. All three have websites. If you were turned down for credit, you are entitled to a free copy of the report. The business that turned you down is required to notify you in writing and list which company they used so you can request a copy. They can bill their fee to a credit card but you can order by mail too. Be persistent - you may have to do a lot of writing to get everything cleared up.
There are also companies on the web who will order for you but it probably better going to the source. Tip: Do not fall for any of those ads that say they can clear up your credit instantly for a fee. They want you to use "tricks" that can get you in legal trouble and do not do a thing for your actual credit history.
Q. I am very curious as to why and how an inquiry into your credit rating "hurts" your credit score. For example, if I apply for a few credit cards and attempt to rent-to-own some furniture then apply for a home loan, why does that make me "look" bad?
A. Inquiries do not necessarily hurt your score. If you pull your own credit file, as a consumer, not a creditor, that does not hurt your score. If you are shopping for the best mortgage, car loan. etc., inquiries from "the same type of lender" within a 2-3 week period do not hurt your score. You have the right to shop for the best deal, but don't stretch it out too long. What you're talking about - applying for different types of credit within a short period - can make a person look like a habitual borrower, which is a bad thing. Using your credit frequently is simply not a good thing. Therefore, if you have inquiries for different types of credit within a short period of time it hurts your score. Just one is no big deal; it hardly affects your score, maybe four points or so. Apply for a credit card, a car loan and a mortgage within a short period of time, however, should be seen as a red flag for a lender. Why are you borrowing so much? Are you having financial difficulty? Questions like that come up.
Even those won't lower your score too much, so if you have been a responsible borrower in the past, your score will still reflect that and being slightly lowered won't really affect you. If you have borderline credit, your score dropping may have a noticeable effect, and creditors will take note when making a decision. They will also be concerned that you have not had time to adjust to the new payments you've taken on. Payment shock = delinquency. If you go from paying out $500/mo to paying out $2000/mo due to the new house, car and credit card, lenders probably won't want to lend to you until you have shown that you can handle the increased debt load for some period.
Q. Is there any advantage to using the credit cards vs. the debit cards? I always thought that I should put everything on the credit cards to build up a perfect credit history. Since we recently became homeowners, should we use debit cards instead? It's a little less maintenance on our part.
A. With debit cards around now, I see no reason to have credit cards. You get the same protection. Even if you always pay before your finance charge on a credit card, you still benefit by not risking missing the date and save a step by not having to transfer the money. Most people I've talked to on the subject don't know what their grace period is to avoid the finance charge. Most say 30 days, some say 45. Every card I've looked up has been 20 or some 24 days, if you did not carry over a balance from the last statement. That just sounds like a nightmare to keep up with.
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