How to Repair and Maintain Your Credit

By Kathy Weyer

Do you know your credit score? It’s just as important as your blood pressure, heart rate and sugar levels. And it can be the deciding factor as to whether you’ll get that loan, that job or that place to live.

When you apply for credit, the lender will pull up information held by three credit bureaus. This information is tied to your social security number. Whatever credit you’ve had in the past reflects how a lender will view you today.

The three credit bureaus are Equifax, TransUnion and Experian. If you are late or default on a loan, the credit bureau(s) are notified and your credit report is dinged.

You can get a free copy of your credit report from all three agencies at, though they will not include your FICO scores. The Fair Isaac Corporation, now known as FICO, uses a proprietary formula to compute this. Catherine Allen from M Financial Planning Services, Inc. of Marlton says it’s well worth the $30 or $40 to get the three FICO scores along with your credit reports to track your credit standing.

When you get your reports, look at every line item and every column. “Be aware of the fact that you may see false, inaccurate or negative information furnished to the three credit bureaus. At least 70% of those reports are incorrect,” says Paul Oster of Better Qualified, LLC, specializing in business and consumer credit services in Eatontown, New Jersey.

You can correct the reports on your own, but it’s a Herculean task. Nonetheless, our experts tell you how:

1. Really look at the credit reports. “Every consumer has the right to have every piece of information verified and validated by the creditors,” says Oster. “The amount of trade lines and the information they contain can be overwhelming, and it’s going to get even more so. Software packages are now being put in place to start taking credit information from utility companies in the near future.” In other words, our routine financial doings are under the microscope more and more.

2. Identify negative and false or inaccurate information and get aggressive in correcting it through the credit agencies. Write to the credit bureau and dispute the erroneous report. “You have a right to include a 100-word statement to the credit bureau to tell your side of the story. Be very precise and try to write less than 100 words. It’s their job to investigate. If it’s fixable, that’s in your favor,” Allen says.

3. If that doesn’t produce results, contact the Federal Trade Commission and/or the newly-established Consumer Financial Protection Bureau. Both agencies protect the consumer, but are different in approaches. (See sidebar for info on how to reach both.)

4. “If you know you’ve handled a particular debt well, make sure it’s reflected on the credit report,” Oster warns. “You want that positive payment history to show up, because 15% of your credit score is a reflection of your payment history.”

As stated earlier, credit is issued on your social security number. But what happens if you have joint accounts, as most married people do? “Make sure you establish your own credit,” says Catherine Allen. “Have credit cards in your own name, perhaps even a separate checking and/or savings account. The most important thing is to establish your own credit rating.

“Obviously on large ticket items you may have to apply in two names in order to qualify, but if you can, keep all credit issues separate, including checking and savings accounts. This is especially important for women.”

Divorce, identity theft, co-signing for someone else, overspending, a natural disaster, health issues, medical bills, unemployment…all these can cause financial hardships that don’t allow you to fulfill your financial obligations and impact your credit. So what can you do?

“First off,” says bankruptcy attorney Michael Katz of Paul & Katz PC, “don’t stick your head in the sand. Take an active role in correcting or amending the report.”

“If you find a negative item on your credit report that you know is incorrect, call the vendor and ask for help. They’d much rather get some money than go to court and/or end up writing off the debt, so they may work with you,” says Allen. “Plead your case politely. If the person on the other end of the phone won’t work with you, ask to speak to his or her supervisor. Get assertive.” She also advises to ask for the removal of late fees, which show up on your credit report, a flag of sorts to reviewers.

Keep Fighting

An investigative report originally broadcast on February 10, 2013 on CBS’ 60 Minutes indicated that 20% of people attempting to correct errors on their credit report were unsuccessful and ran into severe difficulties in their attempts to make corrections. An eight-year government study documents at least 40 million mistakes, 20 million of them significant, meaning, if not corrected, the consumer’s ability to enjoy the good credit they had worked hard to get and maintain is in jeopardy.

In response to the report, Oster says, “The bureaus are actually circling their wagons and showing some signs of complete disregard (to the 60 Minutes report).” Oster and his company are proactively engaging the credit bureaus through the court system; they just filed their fourth lawsuit in Federal Court and are building a class-action suit.

“The good news is, according to these statistics, 80% of disputes are corrected, so go ahead and follow the protocol, and make sure you take advantage of the free credit reports,” says Allen. However, if your dispute is not answered or you get a confirmation that the error is, in fact, correct (and you know it’s not), it may be time to call an attorney. Katz says, “People whose credit reports are incorrect often have no recourse but to file lawsuits to have the problems corrected and recover whatever damages the law allows. The cost of hiring an attorney should not deter anyone whose credit report is inaccurate, and that cost will probably be outweighed by the time that person would spend and the hassle and frustration that person would experience dealing directly with the credit reporting agency.”

Maintaining Good Credit

The magic FICO score, according to Oster, is 720. When you see advertisements for low rates on cars and credit cards, that offer is for people who have a FICO score of 720 or higher. If your score is lower, you will pay higher rates. He advises a couple of things to remember when you are thinking about your credit:

1. Never close out a credit card, no matter how mad you get or how high the rate. Pay it off, and then don’t use it. “One secret the credit bureaus don’t tell you is to get a higher number on your FICO score your outstanding debt needs to be under 30% of all available credit. So if you have a $1,000 credit line on a card you don’t use, keep it; it ups your total credit available amount and improves your ratio when comparing outstanding debt to total amount available,” he says.

Katz notes, however, that if you are going to maintain a credit card that you do not intend to use, “You may need to periodically make single charges to keep the account open, because some credit card companies close accounts that have zero balances and that have been dormant for a certain period of time. If you want to keep a credit card that you do not intend to use, then you should make a single purchase every year and pay off the balance immediately. You should also do that if you receive a notice telling you that your account will be closed due to inactivity unless you use the account again.”

2. Don’t look around for various deals and apply for credit more than once a year. Once you get financing for a new car, stop opening any other new accounts. Oster tells us, “There are statistics that show if a person applies for some kind of credit six times or more a year, they are more liable to file for bankruptcy.”

3. Don’t co-sign for anyone unless you have excellent credit and know the person intimately and are prepared to take on the debt yourself. Sign up on the creditor’s website to be able to track payment history and step in if you see it’s late. Remember, you’re protecting your own credit, not bailing someone out.

4. “You may see differing reports because some vendors will report to only one credit bureau, often different by 100 points or more,” Oster says. The credit reports are an expense to a business; they often don’t subscribe to more than one bureau, so follow all three of them diligently.

5. Use your bank’s automatic pay system to ensure you always pay on time. Schedule recurring payments to be made every month on the same date.

6. If you decide to hire a credit counseling agency, make sure it’s a legitimate one. According to the FTC website, when you hear a commercial for a credit repair service that says…

“We can remove bankruptcies, judgments, liens and bad loans from your credit file forever!”
“We can erase your bad credit—100% guaranteed.”
“Create a new credit identity—legally.”
…keep your guard up. “They’re very likely signs of a scam. Attorneys at the Federal Trade Commission—the nation’s consumer protection agency—say they’ve never seen a legitimate credit repair operation making these claims.”

7. Talk to your bank about credit protection.

8. Keep as much credit as you can in your own name and protect your identity.

Bankruptcy: The Last Resort

“Sometimes bankruptcy is the best decision to get a fresh start, no matter how distasteful,” Katz says. “It’s the last resort. If your debt becomes significant, and you have seen a credit counselor and there is no realistic way to pay off the large debt, your last resort is to file for bankruptcy to discharge the debts and get a fresh start.”

Katz advises a couple of things to protect yourself:

1. Hire an attorney who specializes in bankruptcy. They know how to get exemptions, such as allowing you to keep your car.

2. When the bankruptcy petition is filed, the court appoints a bankruptcy trustee who will work with you. “Complete cooperation and an open door are vital to ensure the desired discharge of debts,” he says.

3. Keep getting those free annual credit reports. If the credit bureau comes back to you saying the negative report is correct, and you disagree, you have the right to file a statement that is recorded on the credit report stating your case. “Bill was paid, product was defective, judgment was satisfied, etc.” The mere fact that you took the time to attempt to correct it will sway future creditors.

Like your heart rate, your blood pressure and your sugar levels, the numbers reflected on your credit report need to be measured, recorded and adjusted as they move up and down the FICO credit line.

The Stats
30% or less should be the outstanding debt ratio to all of your available credit in order to get a higher FICO score*

53% of American women are the breadwinners in their family (which is another reason why it’s very important to have control over credit in your own name). ~

70% is a conservative estimate of credit reports that are inaccurate*

80% of those who attempted to correct errors on their credit report were successful+

* Paul Oster, Better Qualified, LLC
~ Catherine Allen, CFP, M. Financial Planning Services
+ Michael Katz of Paul & Katz PC

[ Learn More About It #1 ]

From the Federal Trade Commission:
DIY Credit Repair

From the Consumer Financial Protection Bureau:
File a complaint about your credit report:

[ Learn More About It #2 ]

The 3 Credit Bureaus:

PO Box 2002
Allen, TX 75013

PO Box 740256
Atlanta, GA 30374

PO Box 2000
Chester, PA 19022

Our 3 Experts:

Catherine Allen, Certified Financial PlannerTM
M Financial Planning Services, Marlton
Catherine Allen is offering Girlfriendz readers a free customized checklist if you contact her and mention this article. Checklists are for those getting married or getting divorced, for those who’ve lost a spouse, or even for those just getting started.

Michael A. Katz
Law Offices of Paul & Katz, PC, Voorhees
Michael Katz is offering Girlfriendz readers a free consultation if you contact him and mention this article.

Paul Oster
Better Qualified, LLC, Eatontown
Paul Oster is offering Girlfriendz readers a free consultation, analysis and kit to repair bad credit if you contact him and mention this article.