A Quick Guide To Better Credit

A Quick Guide To Better Credit From the Credit Professionals at Credit Unlimited

1. Understanding Your Credit Report ° Credit 101 ° Negative Credit Listings ° Authors secrets to improving negative listings.

2. Knowing Your Credit Score ° The Basics of Credit Scoring ° 5 Main factors of a Credit Score ° Affects of a low credit score ° Authors Secrets to a better credit score.

3. Other Tips & Hints ° Opting Out-Stopping the credit card offer insanity! ° Goodwill Negotiations-Show your creditor some love and they’ll love you back!

4. Credit Quiz ° Take the Credit Quiz and see what you’ve learned!

5. Professional Resources ° Credit Report & Score Improvement Specialists ° Ordering Your Credit Reports ° Getting a credit card.

Introduction Personal Credit has become an extremely vital part of the way of life in America today. Its crazy so much is dependant on what 3 little numbers say about a person. At Pure Credit Unlimited we understand this better than anyone. We have helped thousands of people improve their lives through the improvement and wise use of their credit. The purpose of this guide is to help you do just that. The number one way to improve your current credit situation and maintain good credit is to know your credit report. Knowing what is on your credit report and the effects of your financial actions on your credit report can save you a lot of future struggles and pain. Take a moment to review this information and test your credit knowledge as well as evaluate your current actions and their effects on your credit.

Credit 101 The items below are general Credit terms and the definition of each. Knowing these basic terms will go a long way in understanding credit reporting and credit scoring.

What is a Credit Report? A credit report is a detailed account of the credit, employment and residence history of an individual used by a prospective lender to help determine creditworthiness. Credit reports also list any judgments, tax liens bankruptcies or similar matters of public record entered against the individual.

What is a Credit Score? A credit score is a number that represents an estimate of an individual's financial creditworthiness as calculated by a statistical model. A credit score attempts to quantify the likelihood that a prospective borrower will fail to repay a loan or other credit obligation satisfactorily over a specified period of time.

What is a Credit Bureau? A credit bureau is a for profit company that compiles pertinent credit report information (payment history, inquiries, addresses, employment). This information is sold to creditors to be used as basis for approval or denial on credit applications.

The Main Three – The main three credit bureaus used through out the United States are: Experian, Trans Union and Equifax.

What is a Credit Inquiry? An "inquiry" is a listing of the name of a credit grantor, or authorized user who has accessed your credit file. Each inquiry is posted to the credit file so you know who has obtained a copy of it

Revolving AccountA revolving account is an account with revolving monthly payments. Since balances are changing and interest rates may fluctuate they are considered revolving. Credit cards and department store accounts are the most common revolving accounts. Installment AccountA revolving account is an account with revolving monthly payments. Since balances are changing and interest rates may fluctuate they are considered revolving. Credit cards and department store accounts are the most common revolving accounts.

Negative Listings The items below categorized as “Negative Listings” are items that can appear on your credit report that have a negative effect on your overall credit standing. Each item shows the reasons they appear on a credit report as well as how long they can be reported in your file. Late Payments (30,60,90) A late payment is a listing reported when a consumer has been behind on a certain account for more than 30, 60 or 90 days. Sometimes after 60 days and most times after 90 days a delinquent account will be sent to collections. *Late payments can stay on a credit report for up to 7 years. Collections AccountA collection account is reported when a collection agency is called in to collect on a debt. Collection agencies will be called to collect on credit card accounts, foreclosures, repossessions, medical bills, utility bills and rental defaults. A consumer can even utilize a collection agency to collect on a simple documented debt gone bad. *A Collection Account can appear on a credit report for up to 7 years.

ForeclosureA foreclosure is reported when a consumer has had their home or property taken from them by their lending institute or agency hired by the lending institute due to payment default.

*A Foreclosure can appear on a credit report for up to 7 years.

RepossessionRepossession is reported when a consumer has had an automobile taken from them by their lending institute or agency hired by the lending institute due to payment default. *A Repossession can appear on a credit report for up to 7 years.

BankruptcyBankruptcy - is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. Chapter 7 Bankruptcy – Filing a chapter 7 bankruptcy allows the filer(s) to rid themselves of all debts included in the bankruptcy. After discharge there will be no repayment of the owed money. Chapter 13 Bankruptcy – Filing a chapter 13 bankruptcy allows filer(s) to stop the collection of debts and incurring of fees and interest. The outstanding balance is taken into account and repayment is scheduled.

*A Bankruptcy can appear on a credit report for 7-10 years.

Charge-OffWhen a creditor deems a debt uncollectible they charge it off. This means they will receive a tax benefit for that loss. When this happens a charge-off will be reported to the consumer’s credit report. *A Charge Off can appear on a credit report for 7-10 years.

What is a judgment? A judgment appears on a credit report when a creditor or landlord takes legal action in order to collect on a debt. A court has ruled against the consumer therefore a judgment appears on the credit report. *A Judgment can appear on a credit report for 7-10 years.

What is a tax lien? A tax lien will appear on a consumer’s credit report when a tax debt has been owed and a judgment of the case has been filed. The Federal or State government is who the debt is owed to. *A Tax Lien can appear on a credit report for 7 after the debt is paid.

Secrets to Improving Negative Listings Find the Errors Studies show that 7 out of 10 credit reports contain listings in error. Do you know which listings on your credit report should or should not be there?

Take Action. To take care of these issues you must take action now! Most consumers have created their own credit problems by procrastinating or by being under educated and in most cases a nasty combination of both. Don’t Do That! Step 1. Access your credit reports from all 3 credit bureaus (Experian, TransUnion, Equifax) We suggest you use a company called True Credit (an arm of TransUnion). They offer a service with unlimited access to all three reports and credit scores. Also you can update your reports and scores every 24 hrs. This will help you stay on top of your credit report and protect you from identity theft as well. You can access your reports by following this link www.pcureport.com . Step 2. Review your credit report with a fine tooth comb. If you come across an item that seems fishy or doesn’t match your records you will need to contact the creditor directly and file a dispute with the credit bureau reporting this about you. Each creditor reporting information about you on your credit report must also provide their contact information in the case of a dispute. This information is found on the last pages of your credit report. For contacting the credit bureau you’ll need to harness your word processing skills. Draft a letter targeting the items you have an issue with. This should instigate an investigation into your complaint (often times the credit bureaus can be difficult to deal with and my not start an investigation for many different reasons). Step 3. Rinse Later and Repeat. Within 30-60 days you will receive the results of your dispute or investigation (or the lack there of). If the desired outcome is not reached, you will need to start the whole process from the beginning.

Professional Resource: Credit Unlimited. ° ° ° ° ° °

Professional Credit Restoration Firm Attorney Reviewed Processes 15 years experience Money-Back-Warranty Unlimited Support Fast Track Program

1-866-440-6344 www.creditunlimited.com

The Basics of Credit Scoring The below information about credit scoring will describe what a credit score is, how it is determined, the effects it has on your life and how to improve and maintain a high credit score.

Credit Score-A credit score is a number that represents an estimate of an individual's financial creditworthiness as calculated by a statistical model. A credit score attempts to quantify the likelihood that a prospective borrower will fail to repay a loan or other credit obligation satisfactorily over a specified period of time. Credit Scores range from 350-850

Fico Score-A FICO credit score is credit score developed by a company outside of the credit bureaus called are Fair Isaac Co. FICO is the most popular and most used model for credit scoring.

Bureau Generated Score -A Bureau Generated Score is a score generated by each individual credit bureau. The models used for this scoring are very close to that of FICO but still different. These scores are rarely used for approval by lenders but are a good resource when working on credit improvement.

5 Main Factors of a Credit Score

These percentages are based on the importance of the five categories for the general population. For particular groups -for example, people who have not been using credit long -the importance of these categories may be somewhat different.

Payment History •

• • • • • •

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.) Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items) Severity of delinquency (how long past due) Amount past due on delinquent accounts or collection items Time since (how recent) past due items (delinquency), adverse public records (if any), or collection items (if any) Number of past due items on file Number of accounts paid as agreed

Amounts Owed • • • • • • • •

Amount owing on accounts Amount owing on specific types of accounts Lack of a specific type of balance, in some cases Number of accounts with balances Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts) Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History • • •

Time since accounts opened Time since accounts opened, by specific type of account Time since account activity

New Credit • • • • • •

Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account Number of recent credit inquiries Time since recent account opening(s), by type of account Time since credit inquiry(s) Re-establishment of positive credit history following past payment problems

Types of Credit Used Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Affects of a Low Credit Score Where do you stack up? Below are the general ranges for credit scores.

Credit Score Rating

How lenders view you as a risk

720 +

Excellent

680 719

Very Good

620 680

580 620

Below 580

You are viewed as not a risk at all. Approval is certain and you will pay the lowest interest rates and fees available.

You are viewed as a small risk. Your application will most likely be approved. You will qualify for a very good interest rate. You are viewed as a moderate risk. The possibility of being approved is 60/40. However; the interest rates and Good fees will be pretty high. You are viewed as a risk. Being approved is not easy at these scores. If you are approved your interest rates and Poor fees will be very high. You are viewed as a high risk. Most lenders will not approve you for any type of loan. There are a few special Very Poor programs that will work with you. The interest rates and (Possiblefees Credit fromto350-800) are Scores too highrange for most accept.

The effects of a low credit score range from a small bump in the road to a huge painful brick wall standing in front of your dreams. Below are the most common effects of a low credit score.

Turned Down-A consumer with poor credit has a high chance of being turned down when applying for credit or a loan. By law if a consumer is turned down for credit the creditor must provide in writing specific reasons for not granting the credit applied for within 30 days. Also included in this category is being turned down when applying for an apartment or home to rent.

High Rate Approval-A consumer with poor credit if approved for credit or a loan will most likely suffer the effects of a high rate. A higher interest rate will result in a much higher over all payoff amounts as well as higher monthly payments.

Unnecessary &Higher Fees

A consumer with poor credit if approved for credit or a loan will pay unnecessary and higher fees than a person with good credit. These start with yearly fees usually charged by credit card companies to establish and maintain an account with them. Other fees range from higher over limit fees to higher late payment fees.

Unnecessary deposits – Consumers with poor credit often times are required to make a deposit when establishing specific accounts. These accounts include general utilities (power, gas, and phone) and most recently cell phones and higher deposits when renting an apartment or home.

Employment Problems –

It is possible for employers to inquire about a potential employee’s credit history. A poor credit history can definitely have barring on the decision to hire a particular person.

Example

For a $216,000 30 year, fixed rate mortgage: If your FICO® score is: Your interest rate is: ...and your monthly payment is:

760 -850

5.89%

$1,279

700 -759

6.11%

$1,310

680 -699

6.29%

$1,335

660 -679

6.5%

$1,365

640 -659

6.93%

$1,427

620 -639

7.48%

$1,507

Secrets to a Better Credit Score Below are some very helpful tips and hints to improve your credit score and maintain your good credit score once you have it where you want it.

1. Remove the negative listings-Negative listings kill your credit score. Taking the necessary steps to remove them will boost your score more than anything you can do. 2. Credit Card Balances-Having high credit card balances is known as the Silent Credit Score Killer. Next to negative credit listings, high credit card balances hurts your score most of all. If you get your balances in check, your score will probably go way up. Debt to limit ratio* How much you owe compared to the credit cards limit. If you have a $5,000 limit card that you owe $2,500 on, that is a 50% debt to limit ratio. Add up all your limits on all your balances and divide your total balance by your total limit and that is your overall debt to limit ratio. The lower the overall ration, the better the score. Closing accounts* A really bad idea that most everyone will tell you to do to help your score is to close a bunch of accounts. Don not do it! Unless you have lots of cards (over four) and zero balances on all of them, closing accounts shrinks your overall credit limit & increases your debt to limit ratio.

Credit Unlimited Suggestions: 1. Ask for higher limits* Higher limits equals better ratios. Be careful here, if they pull your credit report it will create an inquiry that might lower your score a bit. 2. Pay down any cards that are over the limit until they are within the limit. 3. If you have the cash start paying your cards completely off one at a time until they are all paid off. (Don’t close them though) 4. If you do not have the cash to pay them all down, pay as many down below 50% as possible. If money is tight and you cannot pay them down be sure not to add to the balances (keep your cards in your pocket).

3. Inquiries-Credit Inquiries When it comes to Inquiries on your credit report Less is More. The fewer inquiries you have on your credit report the higher your credit score will be. So obviously the more inquiries you have on your report the lower your score will be. When you apply for credit, most creditors report the application to one or more credit bureaus, and that is called an inquiry. Any more than a few inquiries per years hurts your

credit score a little. A bunch of inquiries can hurt your score a lot. With new credit scoring procedures, applying for a string of auto or home loans in a row will only count as one inquiry (if they are within about two weeks of each other) so the damage is a lot less now than before. Credit Unlimited Suggestions

1. Watch your step* It can be very easy to rack up the “Inquiries” on your credit report, a credit card application here, a new cell phone there and before you know it “Inquiries are dropping your score by 20+ points. Be very conscious who you authorize to pull your credit. 2. Know the places inquiries come from* The following is a list of places that can potentially put an inquiry on your credit report when applying or signing up with them. Mortgage Loans Auto Loans Credit Card Offers Balance Transfers Cell Phones Cable/Satellite Co’s Auto Insurance Life Insurance Gym Memberships Home/Apartment Rentals Student Loans New Checking Accounts

Other Tips & Hints 1. Opting Out-Stopping the credit card offer insanity! The Credit Reporting Agencies (TransUnion, Experian, Equifax) are for profit companies who make billions of dollars each year compiling and selling consumer information to lenders, credit card companies and insurance agencies. Through their partnership the lending institutes and insurance agencies are allowed a “sneak peak” into your credit file in order to extend a credit offer to you. This is why you receive credit card offers and insurance rate quotes in your mailbox on a constant basis. Each time this occurs something called a “soft inquiry” will appear on your credit report. While soft deletions are not considered damaging to your credit file many consumers are leery of the easy access companies have to their personal information. You have the right to stop the Credit Bureaus from sharing your information with other companies by completing a quick process called “Opting Out.” Opting out will stop the mad rush of offers mailed to you by companies with access to your personal information. In many cases consumers have found that their credit scores have actually increased by completing the “Opt Out” process. Credit Unlimited Suggestions: 1. Increasing your Credit Score – While completing the “Opt Out” process in itself may raise your score, we’ve found that the discontinuing credit offers helps our clients avoid temptation to accept poor credit offers and lowers the chance of adding inquiries on their reports. 2. Security – Having your personal information shared by unknown unauthorized companies can definitely pose a risk for Identity Theft. We suggest keeping your personal credit information as private as possible to avoid any type of tampering or theft.

Completing the “Opt Out” process is simple. Go to the official “Opt Out” website at www.optoutprescreen.com and submit the simple opt out form. Keep in mind you always have the option to “Opt back in” at the same website at any time.

2. Goodwill Negotiations-Show your creditor some love and they’ll love you back! Often time’s consumers miss a payment or do some damage to accounts that otherwise are in good standing and have been for some time. Now their long standing good relationship with the lending institute shows differently when it comes to their credit report and what potential lenders see. A goodwill negotiation is not really a negotiation

at all. It simply consists of a letter to the creditor of good will. We suggest that these letters use the following “Goodwill” tactics: ° Compliments of their Company-Let them know why you chose their company and how great your experience has been. ° An Explanation of why you were late-Explain your situation and the circumstances surrounding your financial mess up. Be authentic and accountable. ° Explain Why you are contacting them-Don’t tell them that you are working on improving your credit, let them know that you are trying to buy a home or car or get some sort of financing that you truly need. This shows a human element that they can understand and put themselves in your shoes. ° Ask for what you want-Example “It would be really great if you could help me out on this one by removing that late payment (or whatever it is). “ Make sure you specify the outcome you desire. ° Where to send them-Give the creditor a call and ask them who to send a letter to in regards to what they are reporting to the credit bureaus about you. Each company is different, so be sure to complete this step.

This suggestion may seem a bit corny at first but it can be extremely effective! And hey, what do you have to lose?

Credit Quiz Take the following credit quiz to see what you’ve learned. Try to do it without your cheat sheet above. (the actual answers are located below).

1. True or False-The credit bureaus are government agencies that I am at the mercy of when it comes to my credit report and scores. 2. Circle the items below that are considered negative items on your credit report. • Late Payment • Inquiry • Bankruptcy • Revolving Account • all of the above • 3. What are the 5 main factors that make up a credit score? (This one is a toughie) 1._______________________ 2._______________________ 3. _______________________ 4. _______________________ 5. _______________________

4. True or False-Stopping credit card offers from filling your mailbox is completely possible and a very easy process to do. 5. If you want to hire professional help for your credit situation which of these firms below are the best and most capable. • Credit Unlimited • Credit Unlimited • Credit Unlimited • Credit Unlimited

Answers: 1. False 2. Late Payment, Bankruptcy 3. Payment History, Amounts Owed, Length of Credit History, New Credit, Types of Credit Used 4. True 5. Pure Credit Unlimited

Professional Resources

Credit Report and Score Improvement: Credit Unlimited. ° Professional Credit Restoration Firm ° Attorney Supervised Staff ° 15 years experience ° Money-Back-Warranty ° Unlimited Support ° Fast Track Program 1-866-440-6344 www.creditunlimited.com

Ordering A Credit Report: www.annualcreditreport.com ° The only true “Free” Credit Report Available online

Credit Card Resources: www.youorchardcard.com ° Best Interest Rate Cards ° Bad Credit Credit Cards ° Prepaid Credit Cards ° Business Credit Cards ° Student Credit Cards ° Establishing Credit Cards