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Credit Report and Credit Score Analysis

8. Credit Problems and how to improve your personal credit scores

A credit report is simply a snapshot of your credit looks like today.  It is by no means written in stone.  As you start working on clearing up your credit your scores will start reflecting the hard work you are putting in.  Yes, it is true that a late payment that is derogatory will show up on your credit report for 7 years and a bankruptcy will show up for 10 years but that does not mean that you won’t have access to credit – quite the opposite.

People who have high credit scores have a pattern of maintaining good payment history on their credit lines that results in their having better scores than others.  This is not a matter of how much money one has but in fact has to do with money management.  Credit score management is thus the wise use of credit lines.  People with good credit scores:

  • Generally pay bills on time
  • Keep a low balance on their credit cards and other revolving credit lines
  • Do not apply for credit unless it is necessary thus resulting in opening only a few credit lines.

A clear example of this is store charge cards – many times we are enticed by the discounts available when you open a charge card at say a Sears or Macy’s but what a  lot of folks forget is that these charge cards result in the opening of new lines which really can be avoided.  If a large item is being purchased, certainly consider opening a charge account, but also consider shutting it off in a couple of billing cycles since it has served it’s purpose!  In order to improve your credit score you must make every effort to reestablish or repair your bad credit or derogatory issues on your credit card or other loan.

The most common items that we find on our borrowers credit reports are late payments on cell phone bills that wind up in collection, and medical bills that are left unpaid.  Oddly enough the amounts for which these accounts are delinquent are often only a few hundred dollars – however the impact that these unpaid bills which go into collection, can have on your credit scores is tremendous.  If you credit report shows that you have credit scores in the high 700’s, one delinquent payment can result in a as much as a 60 point drop in your scores!

9. How to handle delinquencies?

First things first – contact the lender.  Make a good faith attempt to get in touch with the lender – most times in the case of a delinquent account, the lenders are more than willing to talk to you and are glad you are calling.  Tell them where you stand and that you would like to make some sort of payment arrangements.  Most times the lines have already been closed by the lender and most lenders will probably settle for a certain amount of the outstanding as a final settlement amount. 

As hard as it may be, you must start making your payments slowly but surely and once done, make sure you request a letter of satisfaction from the lender and send it in to all the bureaus to update them of the changed status of the account which should show no outstanding dues from you if you have paid as per the agreement arrived at between you and the lender.

If you have multiple delinquencies, one approach will be to take on the credit lines that have the highest interest rate.  On the other hand if these lines are delinquent already it does not really matter that much does it?!  The biggest battle when you are running uphill trying to re-establish your credit is psychological – therefore it is recommended that you look for small victories – take the smallest of the delinquent credit cards and work on that one first – it may not make a huge difference to your overall debt outstanding but you will score a wonderful little victory for yourself – when you see the smaller credit lines disappearing you will feel more empowered and will look to ‘squash’ all your outstanding debts.  Play the game at your pace!

10. Correcting derogatory information on the credit report

Cleaning up derogatory items from your credit reportis a four step process.  You can either do all the clean up work yourself or you can hire credit cleanup specialists to do this work for you.  Keep in mind however that even folks in the credit repair business need you to get the letters of satisfaction from your lenders showing that the derogatory items has been corrected and/or the outstanding balances have  been paid in full.


Step 1:  The first thing step as we mentioned earlier is to get in touch with the lender or collection company and try and settle the amount that you owe to them.  Remember if you decide to settle for a smaller amount than the total amount owned to them, they will mark the account as a settlement rather than a fully paid account and it will still show up as a derogatory item against your bureau for seven years.  In fact if a couple of years have gone by and the amount is large and you don’t think that you will be able to pay the entire amount off, we recommend that you let it be!  The reason is that the minute you settle and send in a partial payment the account status will be changed to settlement in lieu of full payment and it will come up as a new derogatory item that will stay on for another seven years!

Step 2:  Once a settlement is reached between you and the lender make sure you follow through and send in the payment that is due to them; send all payments by certified mail, or courier service.  You may even want to wire the money into the lender.

Step 3:  Make sure that the lender sends you a letter of satisfaction that denotes that the account has been duly paid off or settled as the case may be.  This letter of satisfaction is very important since without this proof there credit repositories will not be able to amend their databases.

Step 4:  Send a cover letter to each of the repositories requesting that the derogatory items be removed and include the satisfaction letter to provide the proof that they will need.  The repositories have 30 days within which they have to make their inquiries and update their credit reports.  If the item has been corrected by them they also have to provide you with a free copy of an updated credit report without the derogatory item listed against you.  Many times the repositories may also try to sell you a credit monitoring alert service – we personally think it is not such a bad idea to monitor your credit on an ongoing basis.

Small Business Owner Resource Center


Articles on the Small Business Financing Sources, the Small Business Loan Basics, small business loans Checklist and SBA Loans are incredible sources of knowledge for the small business owner.



Credit Report and Credit Score Analysis, how to Read a Personal Credit Report and all about Business Credit cover the intricacies of credit and are required reading for everybody.



The Foundation Grant Directory is a free listing of sources for grants by state. Why not look if there is some free money out there for your business. Hey - you never know!



The Business Loan Application covers every item you will need in your loan package and tells you how to get approved for business loans.



Fire your loan broker and use our Free Business Loans Bank / Lender Directory to find every bank in the country lending to small businesses.



If you are looking to start a business - look no further.  Check out the Free Incorporation Guide discussion and the State Incorporation Resource Directory.

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