How To Repair And Build Your Own Credit Report For Free

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Attention visitors:

I have found a volunteer to complete a tutorial. This will be a step by step PDF with screen shots showing you what to do on each credit reporting agencies site. I am working on this now. I have completed Equifax so far and am adding this below.

With lenders tightening up on credit standards and making less loans to people who have blemished credit it is essential that we all start taking charge of our credit report. Over the years I have gave hundreds of borrowers personalized plans at no cost. I have found that most of these plans take a lot of time to do and very few of the people follow them. Out of those who do follow the plan I have seen dramatic increases in credit scores and overall credit quality. So, today I am centralizing the bulk of this information into a blog post in hopes that you will benefit and save a lot of time and grief in finding resolution.

Step 1 – Pull All 3 Credit Reports

You are entitled to 1 free credit report per year. It is federal law. But there’s only one online source authorized by the FTC. That’s annualcreditreport.com. Beware of other sites that may look and sound similar. It is 100% free period. Do not pay for anything. There is no need too at this point.

In the steps below I have created a tutorial to assist you with completing this process. Click the report name below for step by step instructions with screen shots of the pages you will see.

Equifax

Trans Union

Experian

So, pull all 3 credit reports from this site. I am going to suggest you pull 1 report then proceed to step 2. When finished pull another and proceed to step 2 and repeat until all 3 are done.

Step 2 – Dispute all derogatory marks on your credit

When you pull your report online you can view it, print it, and dispute any negative marks on your credit. Each site allows you to dispute these items online. Let me take a brief minute to explain the credit dispute process. When you dispute a negative mark the credit bureau sends a request to the creditor asking them if the negative mark occurred, if you owe the account, and they must complete other details about the account. Most of these are handled by a human and subject to human error. The creditor has 30 days to respond. No response is awarded in your favor. Sometimes creditors may have bad record keeping. The company may have been sold and so on.

In other words if you were late there is a chance this derogatory mark may be removed from your credit when it actually showed correctly on your credit report!

With that being said you need to dispute every account showing a derogatory mark period. Even if the account is paid or closed. Old or New. Every account showing a negative mark!

Step 3 – Wait 30 to 60 days for the results

You will wait to see the results of your dispute. The credit bureau’s will email you or mail a letter showing the results. When you receive results proceed to step 4.

Step 4 – Paying off and settling accounts owed

This is the part where there are a few strategies involved. I will cover one that I feel is best suited overall. I am also going to cover 1 option that may be rare but it offers you an opportunity to resolve the account and re-build your credit at the same time. But, first let me cover some important facts. I will then go into which accounts you should pay off first.

Companies will offer you settlements for less than the full balance. It is a good option to take advantage of especially when you are operating on a limited budget. It also satisfies the account. I have not came across a lender who demanded you pay off the remaining balance of a settled account to qualify for a mortgage. However, a settled account is said to have a lower positive impact on your credit score than an account paid in full. You can always go back and pay off the remaining amount to the creditor at a later date.

Consult a tax professional about the impact of settling an account on your Federal Income Taxes.

If you have an account with a creditor (not a collection company) you may be able to work out an alternative option for resolving the account. You can ask them if they will consider re-opening a new account, closing out the old account, and giving you a fresh start on repaying the balance owed. Personally I have done this. I opened an account when I was 18 and defaulted on it for various reasons then re-opened it  in the manner described above.

If the above option fails I suggest you either start with the smallest balance and work your way up OR for a more positive impact on your credit score you can start on the most recently reported debt and work your way back to the oldest.

A tip for qualifying for a loan to purchase a home. Separate medical bills from non-medical. Pay off non-medical first.

Another tip for a low budget. Attempt to set up payment arrangements. In the end it may be more costly than settling accounts but showing you are making the effort to repay the debts may be enough to qualify for a home loan. You will need to consistently pay your agreement on time and a letter can be obtained showing you are doing so. I would say you need a minimum or 6 months paying on time or as many as 12 months.

Step 5 – Re-establishing or establishing credit

Let me start by saying that if you have less than 3 accounts open that you are making monthly payments on that are reporting to the credit bureau you may want to incorporate some of step 5 into step 1. That may give you a head start on establishing history. If your credit is undoubtedly bad or you try to apply for credit and are turned down or offered terms that are unfavorable allow me to give you a few tips.

Open a secured credit card. You send in about $200 to the company and they place it into a savings account and that account is your collateral. You receive a credit card with a credit limit typically equal to the deposit. The payments are very low even if the interest is higher. These accounts are credit builders ONLY! Charge 1 item utilizing no more than 30% of the credit limit. I suggest keeping it under 20% because when your billing cycle hits some revolving accounts add the payment to your balance when reporting to the credit bureau.

The goal is 3 open accounts minimum.

The absolute best card you can get that is available to nearly anyone is through Orchard Bank. You deposit 200 in an interest bearing savings account and your card comes to you with a 0 balance! No fees! The apr is about 7.9% right now for purchases made on the card. You may even qualify for an unsecured card. I still have my card from them.

Currently they will allow you to open another card after paying this one for 6 months.

Beyond that the cards offer less favorable terms. I am going to suggest you use creditcard.com to find other cards for the time being.

Why credit cards? You can make a charge on the account and pay it off within 30 days with little or no interest at all. I suggest you make a charge right before your cycle date which is also your billing date then pay off the balance after the billing date so they report a balance to the credit bureau. Repeat this every month and you may pay absolutely nothing to build your credit.

Fannie Mae Homepath Program

Some great news has hit the industry. Fannie Mae is establishing a program to help banks liquidate Fannie Mae REO inventory. Visit www.homepath.com for eligible properties. I have a nice flyer available here.

It has been a long time since the mortgage industry has loosened up guidelines on loans. Right? This program is truly incredible. There is nothing like it out there.

Very few lenders offer the program. I am lucky to have it available in all 50 states. It is simply incredible for investors!

• Owner Occupied is a 3% minimum down payment however my lender requires 5%.
• Second Home/Investment is 10% down payment! (nearly every loan is 20-25% down payment otherwise)
• Rehab funds will be available soon.
• No Appraisal Required! Property is acceptable as-is!!!
• No PMI! I have had people increase their price range by 20% higher than using alternative financing and they buy more house for the same payment!
• Less than perfect credit is acceptable.
• 1-4 unit properties, Condo’s, PUD’s, Modular, and Manufactured (Double Wide) are all acceptable.
• Fixed Rate, ARM, Interest Only, 10yr, 15yr, 20yr, 25yr, and 30 yr options.
• Up to 6% seller concessions!
• Down Payment can be a gift, a grant, or a loan from a nonprofit organization, state or local government or employer.
• Up to 10 financed properties is acceptable.
• Conventional Rates.

Investment Loan Crisis

Real Estate Investors all over the country are feeling the pinch of Fannie Mae and Freddy Mac. These agencies were the largest purchaser of investment loans. When they announced their new risk based pricing it made nearly every loan a cost to the customer. Even if you have perfect credit and put 20% down there may not be a loan available for you due to exeeding high cost thresholds.

In the past investors would purchase properties, rehab them, and cash out the equity. This practice is virtually extinct now. Anyone wanting cash out of an investment property will likely be unable to obtain a loan.

Local Banks and Private Investors have taken notice to this and have began raising fees for these loans.

Undoubtedly this will cause properties needing repair to sit vacant even longer as investors cannot obtain the financing needed to rehab them.