This is the second in our series of introductory articles about the basics of credit scores. Read the first article to get an overview of FICO scores and how they affect you.
How Can I Preserve My Credit Score Before the CCRE Program?
When you go through Integrity Debt Solutions-Texas’ proprietary Credit Card Relief Education (CCRE) program, we implement many federal, state, and banking laws. One in particular, the Fair Credit Billing Act, allows you to file a legal administrative dispute on any part of or all of your credit card bill/statement.
When you file this dispute, there are some foundational principals that apply (1) it must be done in writing (2) it must come from the consumer himself or herself and (3) once the dispute is sent, you have the legal right to stop your monthly payments until the dispute is resolved (see the Fair Credit Bill Act and Title 12 of the Code of Federal Regulations 226.12 and 226.13).
Another key factor is this: when you file the dispute and stop your monthly payments, the bank or credit card company is NOT supposed to report ANY negative entries to your credit report UNTIL the dispute is resolved. Unfortunately, the banks/credit card companies do not adhere to this statute and they do report negative entries.
That is the bad news. The good news is that there are specific & profound steps you can take to preserve your credit and avoid many of the pitfalls. Here is the list we’ve accumulated and continue to add to as we receive new & updated information.
Many of our married clients will transfer as much of their debt as possible to only one name and then only enter those accounts. For example, if Tom & Susan have 8 total accounts equally split between them, they can transfer as many of these accounts as possible to Susan’s name and enter only her accounts (or visa versa). They will also call all of the credit cards and remove Tom’s name from them. This will allow Tom’s credit to remain in perfect condition (or in the exact condition it now is). This is the most ideal situation.
If transferring accounts is not a possibility, the next best thing is to still call and remove ANY other authorized users on an account other than the primary user. For example, if Tom & Susan have 8 accounts total and they are split equally, Tom can call on his 4 accounts and have Susan’s name removed from those accounts. This will ensure that Susan will not have 8 negative entries submitted now but only 4 (assuming she enters her 4 cards) which is a 50% improvement.
Another strategy to consider is this: if Susan can now consolidate her accounts from 4 down to 3 or even 2 cards, the potential negative entries on her credit score will go down further. This is actually quite simple to do. All Susan would have to do is call one of her accounts (we can tell you which companies we have the highest degree of success with so you can focus on those!) and say, “I would like to consolidate some of my credit cards and I was wondering if you would allow me to transfer my $6,000 Bank of America balance (this is just an example) to my account with you?” Again, they may or may not allow this it all depends on your current circumstance & credit score at the time. They may allow you to transfer only a portion of your balance. However, it is worth a try and it is ALWAYS best to plan ahead! Start positioning yourself now, before it is too late.
An often overlooked strategy that many of our clients ignore trying is this: if you will obtain a copy of your credit report (you are entitled to one free report per year. If you’ve been denied credit, you are allowed to receive another free copy each time you are denied. All you have to do is call), you may find that you have one or more old credit card accounts or signature loans that you either paid off or transferred that balance and you now have an account with a zero balance. Any zero balance account that is still active & open can be considered in the consolidation & positioning process especially if this account has a large available credit limit. Also, even if the account is closed, you may have the ability to reopen it since your track record with that bank is good. NOTE: Never close a credit card account – even if it is paid off. If you don’t want to use it, simply cut up your cards and shred any notices that come to you in the mail. The more accounts you have open, the better your credit score will be.
Yet another variation to the strategies mentioned above is this: suppose Tom & Susan have 8 accounts – 4 each in their name. They can enter 6 accounts into our CCRE program and keep one out for each. Now, they can continue to pay on those 2 accounts along with their mortgage, car payments, utility bills, etc. and their credit score will remain stronger than if they entered ALL of their accounts.
If your credit score is currently good to decent, you can obtain 2 additional credit card accounts and simply never use them. Again, the more accounts you have open (especially with large available credit limits), the better your credit score will stay.
If you can determine which accounts are your oldest accounts and if you can move those balances to a newer account, you can then keep the older accounts out of the program. The credit rating agencies will value the older accounts you’ve had higher and this will help your score – longevity is very important to them.
Check Back tomorrow to find out the next step after completing the CCRE process.