Sofiya is from Better Credit USA, which specializes in credit repair, FICO enhancements, and credit building for personal credit and business credit. In this episode, Sofiya explains to us what credit is, how they fix credit score issues and the cost structure of their service.
Everyone in the U.S. must have credit. Credit bureaus are basically private agencies that collect information on your credit history to sell to lending institutions, employers, and insurance companies. The bureaus use a scoring algorithm that looks at many contributing factors including your revolving accounts and personal information.
Missing a payment can have huge damage on a credit report. Late payments tend to be the hardest items to remove or correct. Credit card companies or merchants have to report the payment history correctly. However, creditors are allowed to make a goodwill adjustment on a consumer’s credit report.
The types of public records Better Credit USA can help resolve are bankruptcies, judgments, short sales, foreclosures, and taxes. They do an audit of every negative item and based on the findings, they can qualify the account for either deletion, correction, or enter into a settlement. Their completion time is about 2-3 months.
The ideal client for them is someone with collection charge offs like tax liens. Someone with a credit score of 720 might only need some advice.
Their clients are usually those with scores in the 600s or below 600 range and do not qualify for an FHA loan.
Monitoring services use their own formula because they cannot use the copyrighted algorithm used by bureaus. It does take time from when you pay off your balance to reflect on your credit report. The credit card company has to first post your payments and update their system before each bureau can update their system and do a rescore.
There’s a free app directly from the bureau which anyone can use to monitor their credit scores, and it’s called Experian.
Pay off as much of the existing credit card debt to reduce the utilization ratio and increase the credit score.
Basic qualification requirements are the same from lender to lender. So don’t apply at different mortgage lenders. Having higher credit is still the first step to qualify for a loan.
Between buying a home and getting a car, buy a home first before you get the car.
The statute of limitations for a creditor to take legal action on a consumer with unpaid debt is 4 years in California. Any outstanding balance over $500 will get summoned into court before the 4 years are up.
Ignoring a summons can result in a creditor winning by default, and wage garnishment and bank levies for the full amount plus legal fees.
It’s better to attend the court and negotiate a settlement or repayment plan with the creditor.
The second statute of limitations is seven years. It gives the creditor the right to report on your credit report. The statute of limitations starts from the date of default or the last day of activity.
While talking to collection companies does not reset the clock, collection companies sometimes make an entry saying that a client attempted to make a payment and that would reset the clock.
The ideal number of credit cards is between 3-4. Setting up auto-pay for each credit card on top of your regular payments is recommended to avoid being late on payments.
Closing credit cards drops your score because you close down your outstanding limit. If you have an outstanding balance and close your credit card, your utilization rate goes over 100%.
It’s better to keep credit cards, especially ones you opened years ago as they add depth on your credit history and help you to pass the 740 marks.
Sofiya shared the story of a client who found out his credit score dropped to 640 when he tried to refinance his home. There were 3 months of the overdue payment from a car dealership he had previously leased a car from. What happened was after the lease ended, he asked for an extension of 4 months and paid in advance without signing the lease extension.
After 4 months, the company failed to pick up the vehicle. It stayed with him for another 3 months, which the dealership then charged him for.
Because of the outstanding debt and late fees, his credit score was affected. He got an attorney, but the attorney wasn’t successful.
The client then hired Better Credit USA. They found out that signing the lease extension wasn’t a requirement, and the client returning the vehicle was also not a requirement.
They argued that with the Consumer Financial Protection Bureau (CFPB) and successfully got the late fees reversed, the $15,000 fees removed, and an apology letter from the dealership.
Since Better Credit USA charges $249 to start the process and bills $500 per deletion per bureau, the client spent less with them than with the attorney he first hired.
In another case, Better Credit USA helped a couple in escrow who found out that an unpaid utility bill lowered their score by 30 points. The couple had called in to pay off the bill, but it dropped their score more.
Any activity on a collection whether it’s reporting the collection, paying the collection, or removing the collection results in a loss of points.
But since the payment did not go through, Better Credit USA was able to negotiate a settlement in lieu of the deletion of the collection for the client, and they did that in 11 days.
When dealing with collection companies, it’s important to have an agreement in place first to remove the collection before making the payment. If you made the payment first, there won’t be any room for Better Credit USA to negotiate with them later as it benefits collection companies to keep the collection on the credit report.
One misconception is that late payments can be removed as long as customers eventually paid for it including the late fee.
While the bureau makes changes every 4-6 months, medical collections do affect the score.
When it comes to naming changes like when someone gets married, you should also report the name change to the credit bureau to avoid having split files.
Better Credit USA has two main plans. One is the platinum plan where they review your credit report and do an analysis. They then give a full quote for the completion time, cost, and score.
The average completion time is 2-3 months. Changes in completion time vary on the score and from credit to credit.
Their base price starts at $450 with additional charges of $150 each for accounts 4 years or younger, and $100 each for accounts older than 4 years. Public records are also another additional charge.
They also have a silver plan of $199 per month with a one-time enrollment fee of $249. The contract runs for 6 months only. In California, Better Credit USA is not allowed to have a client enrolled for more than 6 months. Clients can stop services within the 6 month period.
Don’t miss a payment and keep your utilization at under 30%.
If you’re anticipating a big purchase, ask for a line of credit increase with your credit card company.
Plan for Christmas and make sure to put away cash.
Don’t overextend yourself on credit.
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