Many people experience a financial challenge that destroys their credit.

The good news is that even the worst credit can be salvaged and put your credit score well above average within 12 months.

Here is a plan that will get you back on track.

Introduction

Credit scores range from 300 to 850. A good credit score: around 680. There are five (5) components to your credit

score:

How Your Credit Score is Calculated

• 35% of credit score• Based on timely

payments

Payment History

• 30% of credit score• Based on credit

utilization

Amounts Owed

How Your Credit Score is Calculated Cont’d.

• 15% of credit score• Based on how long

accounts are open

Length of Credit History

• 10% of credit score• New accounts lower

your credit scoreNew Credit

• 10% of credit score• Establish varied

types of credit

Types of Credit

People end up with credit woes for one of two reasons:

Aim to have at least $500 in your emergency fund.

Start Your Emergency Fund

Not enoug

h saving

s to weathe

r financi

al issue

More debt than

income could

support

Consider whether the following things are really necessary:

Limit Your Spending and Create a Budget

Multiple Cars

• Consider car pooling

• Realize savings in gas, maintenance & loans if you have one car

Cell Phone

• Not as utilized in emergencies as most people think

• Eliminate land line and keep pre-paid cell phone

Consider whether the following things are really necessary:

Limit Your Spending and Create a Budget Cont’d.

Internet

• Can be a distraction

• Utilize free Wi-Fi in public places if you need to use the internet

Eating Out

• Average family spends 40% of income on eating out

• Visit grocery store more

Start thinking about other things you could potentially minimize or remove from your expenses.

Use easily accessible and free resources available to help you develop a realistic budget.

Review your budget weekly and you'll be well on your way to fixing many troublesome money habits.

Limit Your Spending and Create a Budget Cont’d.

Consider your free time now that you have eliminated things like cable TV or internet access.

Spend free time generating additional income by getting paid for doing something you enjoy.

It doesn't need to pay a lot to make a significant difference. This is especially true if you've given up an activity that costs money for a new activity that earns you money!

Increase Your Income

There are 2 basic strategies to eliminate debt:

Eliminate Your Debt

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”

Ogden Nash

Eliminate Debt

Pay debt with

highest interest

rate

Pay debt with

smallest balance

The only debt you should have is debt to generate income, like a mortgage on a rental property that provides a positive cash flow.

Avoid creating new debt while you’re busy eliminating existing debt!

“It is the debtor that is ruined by hard times.”Rutherford B. Hayes

Tips for Eliminating Debt

There are three components to rebuilding credit:

Rebuild Your Credit

Minimize negative info

Have negative data removed

Create new credit

Two main factors help to minimize negatives:

Rebuild Your Credit – Minimize Negatives

Pay on Time

Pay Down

Balances

Rebuilding will take some time, but if you're aggressive, you can eliminate any negative information on your credit report, even a bankruptcy.

Rebuild Your Credit:Have the Negatives Removed

1. Get a current copy of your credit report. 2. Analyze your credit reports. 3. Write letters to the credit bureaus disputing the

information. 4. Send the letters by registered or certified mail. 5. Keep excellent records. 6. Wait. 7. Review your results. 8. Take the next step.9. Repeat.

Rebuild Your Credit – Steps for Having Negative Information Removed

The Fair Credit Reporting Act stipulates that you can receive a free copy of your credit report from Equifax, TransUnion, and Experian every year.

https://www.annualcreditreport.com is the official place to get your free copies.

Step 1. Get a Copy of Your Credit Report

Step 2. Analyze Your Credit Reports

Negative information in order of seriousness:

• Bankruptcy• Foreclosures• Repossessions• Loan Defaults• Court Judgments• Collections• Past Due Payments• Late Payments• Credit Rejections• Credit Inquiries

Step 3. Write Letters to the Credit Bureaus Disputing the Information

Do not send letter electronically. Mail a physical letter.

Include name on account & amount owed.

State that you are disputing the accuracy of the report.

Include name, date of birth, address, social security number, and a copy of your driver's license

Step 4. Send the Letters by Registered or Certified Mail

This is important as you will need proof of when the letters were received by the credit bureaus.

Step 5. Keep Excellent Records

Keep copies of all your letters, the responses you receive, and the receipts from your mailings.

Also keep detailed records of any phone conversations. At a minimum, you should record the time, date, to whom you spoke, and what was discussed.

Step 6. Wait

After the credit bureaus receive your dispute, they are required to do the following:

Respond to all disputes within

30 days.

Transmit to the creditor all relevant evidence submitted

by the consumer

Send written notice of the results within five days of its completion; include a

copy of the amended credit file

Step 7. Review Your Results

There are only three possibilities:

The item has been removed

You don't get a timely

responseThe item

comes back 'verified'

Step 8. Take the Next Step

If no response after 35 days:

Send letter that they did not

comply with the lawRequest

that disputed

accounts be removed

If returned ‘verified’:

Ask for info about

method of verification

Make request via

phone

Step 8. Requesting Method of Verification

Call reporting agency

Get number from report

Give them reference number

Ask for method of verification

per FCRA Section 611(a)

(7)

Step 8. Requesting Method of Verification Cont’d.

If agency cannot confirm they verified with

original creditor:

Ask for phone number for

original creditor

Call original creditor Ask for records

Step 8. Requesting Method of Verification Cont’d.

If original creditor cannot provide

records:

Ask for a mail copy under

new FACTA Act

If you are sent records, review

them

If original creditor has no records, take

next step

Step 8. Requesting Method of Verification – Next Step

Inform the credit bureau that they must open another dispute.

Give the name and number of the person who you spoke to at the original creditor.

Call the credit bureau back.

Tell them the original creditor has no records.

Step 8. Requesting Method of Verification – Next Step

If they still refuse:

Send the information via certified letter along with an intent to sue letter.

If credit bureau refuses: Inform them you will sue for willful non-compliance

under section FCRA § 616.

Step 9. Repeat

If you are unable to remove items from report, re-submit dispute with any of the following reasons:

Step 9. Repeat, cont’d.

• I didn't pay late that month.• Incorrect amount• Incorrect account number• Incorrect original creditor• Incorrect charge-off date• Incorrect date of last activity• Incorrect balance• Incorrect credit limit• Incorrect status - there are about 20 of

these.• Incorrect highest credit usage

Credit Repair Companies

Research to find a reputable company.

The process takes them

longer than it takes you.

Fees are usually set

per a certain amount of work each

month.

Debt Settlement

If you're way behind on your unsecured debt (credit cards) payments, it is possible to have it reduced dramatically by debt collectors.

Did you know that debt collectors are authorized to accept less than the full amount as payment in-full?

This amount can be as low as 25%.

“Ten million dollars after I’d become a starI was deeply in debt.”

Sammy Davis, Jr.

Suing Credit Bureaus

If credit bureaus are in violation of the law, they can be fined up to $1,000 per violation. They are rarely willing to go to court; they will almost always settle just before going to the judge.

The trick is, you have to show up to court. The credit bureaus will always show up, just to see if you show up.

Rest assured, they will settle 99% of the time and agree to remove all the negative information.

Create New Credit

Secured credit cards

Secured loan

Variety of credit

• Credit limit =Amount of Deposit

• Get a secured loan with your collateral

• Get a secured loan, secured credit card and store card

Having bad credit is usually either the result of bad decisions or not having an emergency fund to take care of a financial challenge.

It is important to remove the cause(s) of your credit woes. This likely means you need to increase your income and decrease your debts and your spending.

Establish your emergency fund, even if it's just $500 to start!

Conclusion

Focus on removing the negative items from your credit report.

Get new credit, no matter what it takes, and guard that credit with your life.

Get started now! The sooner you start the sooner you reap the benefits.

“Who goeth a borrowing. Goeth a sorrowing.”Thomas Tusser

Conclusion

We hope you enjoyed your Special Report!

Curtis Roese is an experienced professional with extensive experience in personal finance and small business matters. Curtis writes and publishes articles, courses, guides and special reports on his personal finance blog.

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