Who do they pull? Auto Brands and the Credit Bureaus they Use…

Many auto finance companies’ choice of credit bureau varies based on what region of the U.S. you are in.  Overall, though, this is who I have found the following car-makers’ captive finance companies credit bureau of choice:

Mercedes-Benz:  TransUnion
BMW:  Equifax
Lexus:  Experian
Audi:  TransUnion
Volkswagen:  TransUnion (Audi and VW are one in the same)
Jeep (Chrysler):  Experian
Toyota:  Experian
Nissan:  Equifax
Honda:  Equifax or Experian
Ford:  Equifax
Mazda:  Equifax
Hyundai:  Experian
Kia:  Experian

Remember:  the above is for the captive lender only! (VW Financial Services, BMW FInancial, etc.)  If you go to a dealership and apply for credit, they will likely pull all three and send your application to several banks who may choose to pull any or all three credit reports themselves.

My Thoughts on Applying for a Car Loan

So you are in the market for a new car.  You think you know your credit score but in all likelihood you do not because there is nowhere you as a consumer can access your auto-enhanced score with any of the bureaus.  An auto loan is an installment loan and the auto-enhanced score weights more heavily your installment loan history. Have you had an auto loan in the past? Was it paid satisfactorily?  Mortgages and student loans are also installment loans, as are personal loans (though these are much less common).  If you have not had any installment loan history, more than likely your auto-enhanced score will be lower than the FICO score you can purchase online.

I became friends with a Finance Manager at a Lexus dealership who gave me a few “suggestions” when it came to completing the application. When it asks you how long you have lived at your current residence, he said to always put at least 3 1/2 years.  When asked how long you had been employed at your current job, always put at least 2 years.  This information is rarely if ever verified but he said it often was considered in reviewing applications.  Unlike a house, a car is a piece of property that can be moved around even though it is liened – thus, the bank likes to see that you have lived at the same place for a while, worked at the same job – that you are stable and not going to disappear in a few months. 

When you go to an auto dealership and apply for financing there, be prepared for them to “shop” your loan – meaning, they will send your credit application to the captive lender and two or three other banks.  (The captive lender is, for example, VW Credit Services if you are at VW.)  The dealership will pull your credit, then each of the lenders they send your loan to will pull it as well, so you will end up with a bunch of inquiries that WILL count as hard inquiries, regardless of what the salesman may tell you.  I can tell you based on just a few pieces of information whether or not you will get approved – if you are not confident, you should consider running it by someone who knows first and save yourself time.  If you have defaulted student loans, no auto loan history, and a score in the mid-500s, you are not going to get approved at a dealership – well, not without 50% down, and even then it is not guaranteed. 

My best score is with Transunion, so when my Transunion score soared above 720, I applied online with VW Financial Services, as I knew they would only pull Transunion.  As expected, I was approved immediately and referred to my local VW dealership.  I went in the next day and basically just had to pick out a car.  My credit was not pulled again and the financing was not an issue.  I was approved for a lease with a low interest rate and nothing down.  Had VW pulled Equifax, things would have been very different. 

I personally believe the best thing for your credit when it comes to an auto loan appearing on your credit is for it to be with the captive lender. If it isn’t, it just looks bad.  The captive lender is where you get the lowest interest rates, the cash back, etc.  If you can’t get in with them but you are a member of a credit union, I would suggest applying with your credit union before you even go to the dealership.  Credit unions also offer great interest rates and if you get approved, you will go to the dealership in a stronger position, as you won’t need financing from them at all. 

Even if you don’t know your auto-enhanced score, having a general idea of what is on your credit file before you go car shopping is a good idea.  If you have a low credit score, especially due to recent missed payments or delinquencies, you should know what you will be faced with.  Without excellent credit, it is highly unlikely you will be approved for a lease.  My Jetta had a sticker price of about $30,000 – and my lease payment is $414 per month.  If I had financed the car for five years at 10% interest, the payment would be $637 per month; at 20% interest, it would be nearly $800 per month.  It is not uncommon for dealerships to use lenders charging exorbitant interest rates of 25% or higher for people with compromised credit.  Additionally, at an interest rate of 20%, to get that payment down to what my payment is, you would have to put about $13,000 down – almost half.  Now, if you are in a position to do so, you will have equity in your vehicle and be able to pay it off more quickly.  If not, though, you may be unable to get the car you want because the monthly payment is too high based on your income.

And finally, with regard to applying for an auto loan, apply for a car you can easily afford the payments.  Make your monthly payments on time and you will find your car buying experience in the future to be simple and easy – and you will save a fortune each month not paying outrageous interest.  I can’t imagine paying $800 a month for my car, but $414 is just fine.

 

Capital One Bank and Secured Mastercard

I remember getting a Capital One card in the 1990s with a $300 credit limit and thinking it was a joke – I did not have any cards with limits under $1,000.  I also remember being told by someone that Capital One was a subprime credit card company and using their card was the equivalent of telling someone you had bad credit.  The only reason I had even applied was because I received offers from them in the mail all the time.

In 1994, Richmond, Virginia-based Signet Bank launched a spinoff company called Oakstone Financial Corporation; a year later, Oakstone changed its name to Capital One.  Throughout the rest of the 1990s, Capital One was a bank that issued credit cards to people who couldn’t get cards from better banks.  They had higher interest rates and annual fees – they were like Providian.  In the early 2000s, Capital One started expanding beyond credit card issuance and working to improve its image and become a “prime” bank.  I was living in New Orleans, Louisiana when Capital One acquired Hibernia Bank, one of the largest banks in Louisiana and a bank I had accounts with.  Louisiana is among the states you will find Capital One Bank branches.

In 2012, Capital One bought HSBC’s U.S.-credit card portfolio.  Part of that portfolio was Orchard Bank, which issued secured and unsecured credit cards.  Anyone with credit issues or who needed to build credit in the 2000s probably had heard of Orchard Bank.  If you were not approved for an unsecured credit card with them, Orchard always offered you a secured card.  When Capital One completed its takeover of HSBC, Orchard Bank began being eliminated. Capital One launched its own secured card in its place, which became being the Capital One Secured Mastercard.  If you are rebuilding your credit and need a credit card, Capital One’s product is a good one overall.

A bit of advice…if you go with Capital One, have your s**t together.  They may not want to look like a sleazy sub-prime credit card issuer anymore but they haven’t become soft or flexible with their policies.  Capital One is unforgiving of those who mess up their accounts and they report negative accounts in a way that hits your credit the hardest and for the longest time.  I am a master at removing bad accounts from credit files and Capital One is virtually impossible to remove by any means.  They keep excellent records on all of their accounts, so getting them deleted on a technicality is very unlikely and they will always respond to disputes.  I recently prepared letters for someone with three charged-off credit cards on his credit reports – two from retails stores issued by Comenity Bank and one with Capital One.  My letter, a goodwill letter, offered to pay the balances on each account in full and explained the circumstances that resulted in the months of non-payment (hospitalization due to an automobile accident).  We received letters in response from all three.  With Comenity, he had only ever charged $29 on one account and $45 on the other but the balances were both almost $300 due to fees.  I offered payment in full in my letter – it was worth it if it got rid of the charge off.  The letters from Comenity, however, adjusted the balances to remove the those fees; in addition, Comenity agreed to delete both accounts as soon as they received payment for the $29 and $45.

Capital One, however, had a much different response.  The account I wrote them about had been a secured card – secured by $700 he had put on deposit.  Presumably due to fees, etc., the balance had swelled to over $1,200.  Again, my letter offered payment in full in return for deletion of the charge-off.  In response, Capital One provided him with a phone number to call to discuss payoff and resolution of the account.  They said paying the balance in full would certainly look good if they decided to consider deleting the account in the future but they would not commit to doing anything though.  The account remains on his credit report.

Pay your account on time, keep your credit under the limit, and don’t have any returned payments and you will be fine.

Capital One also won’t require you pay the full amount of the credit limit as the deposit.  For $49 or $99, you will get at least a $200 credit limit which you can increase in $100 increments whenever you want.  From the time you do the application it will likely be three weeks or so before you actually get your card.  When they say ten business days for the ACH from your bank account to post, they mean it.  Supposedly, Capital One may increase your credit limit at some point without you making an additional deposit.  I have read on several sites lengthy complaints from people about this not happening for them.  It’s a secured card people – if you get a credit limit increase, cool.  If not, send in some more money and increase your limit yourself.  That’s what you should expect with a secured card anyway.  Besides, if Capital One does do it, it won’t be for more than $100.

They have a great website and phone app for making your payments, which post in a day or two. My experience with them has been great so far.

The Shopping Cart Trick

One of the things I always find frustrating when it comes to the credit “tricks” you hear about is how difficult it often is to get a simple, straightforward explanation of how exactly one does it.  Instead, you do a search and end up on page 239 of 341 pages of forum posts about the topic.  Do you start from the beginning and read all 341 pages? Or do you just go forward from the page it sent you to? Either way, you have to read every person’s response on every page of posts hoping somehow to put together some idea of how it was done.

So, I am going to try and help with this.  Please feel free to comment below – but I am going to do my best to provide instructions within and update the post to include anything I may have left out based on your questions.  This posting is on what is known as the “shopping cart trick” or the “shopping bag trick”.  It is a method of opening one or more new credit card accounts without a hard inquiry being placed on your credit files.

 

WHAT YOU SHOULD KNOW FIRST:

• You MUST be opted-in for promotional offers.  If you don’t know what this means, click here.  If you know you are opted-out, you can opt-in again here.  Unless you remember opting-out, you are probably opted-in already and don’t need to worry about this.  If you get credit card offers in the mail, you are opted-in for sure.
• The trick applies only to cards issued by Comenity Bank.  Comenity is a major issuer of retail store credit cards, but also issues a few Visa and Mastercard branded-cards.   Here is a list of some of the Comenity-issued cards:

Abercrombie & Fitch Credit Card
Ann Taylor MasterCard Credit Card
Ann Taylor Credit Card
Arizona Mail Order Credit Card
Arhaus Credit Card
Ashley Stewart Credit Card
Avenue Credit Card

Bon Ton Credit Card
Buckle Credit Card
Burke’s Outlet Credit Card
Chadwick’s Credit Card
Chadwick’s Visa Card
Christopher and Banks Credit Card
Crate and Barrel Credit Card
Crescent Jewelers Credit Card
David’s Bridal Credit Card
Domestications Credit Card
Dots Credit Card
dressbarn Credit Card
Dunlaps Credit Card
Eddie Bauer Credit Card
Express Credit Card
Fashion Bug Credit Card
Fortunoff Credit Card
Fortunoff VISA Credit Card
Friedman’s Credit Card
Goody’s Credit Card
Gordmans Credit Card
Grand Rental Station Credit Card
Home Shopping Network (HSN)
Home Shopping Network (HSN) Mastercard
Jessica London Credit Card
Lane Bryant Credit Card
The Limited Credit Card
LOFT MasterCard Credit Card
LOFT Credit Card
maurices Credit Card
Marathon Credit Card
Marathon VISA Car
New York&Company MasterCard

Newport News MasterCard
New York&Company Rewards Credit Card
Newport News Credit Card
Ohio University Alumni MasterCard
OSH Credit Card
OSH Commercial Credit Card
Overtons Credit Card
Palais Royal Credit Card
PacSun Credit Card
Parisian Credit Card
Peebles Credit Card
Petite Sophisticate Credit Card
Petland Credit Card
Pier 1 Credit Card
Pottery Barn Kids Credit Card
Pottery Barn Credit Card
Priscilla of Boston Credit Card
Premier Designs Credit Card
Reeds Credit Card
Restoration Hardware Credit Card
Spiegel Credit Card
Sports Authority Credit Card
The Sportsman’s Guide Visa
Talbots Credit Card
The Tog Shop Credit Card
TigerDirect Credit Card
Torrid Credit Card
Total Rewards Visa Credit Card
Trek Credit Card
True Value Credit Card
UnderGear Credit Card
uTango VISA Credit Card

Value City Furniture Credit Card
Victoria’s Secret Credit Card
Virgin America Visa
West elm Credit Card
Westgate Credit Card

• It does not always work.  And it may work for one store but not for the next.

HOW TO DO IT:

This is the simple part:

1. Go to the retailer’s website, such as http://www.buckle.com.
2. At this point, I usually register or join or whatever that particular store calls it. You give them your name, email, phone number and maybe address information.
3. Pick an item or two and add it to your shopping bag or shopping cart.
4. Begin the checkout process.  Enter your shipping address, billing address, etc. and go as far as you can before it requires you to enter your credit card information.  If the trick is going to work, you will get a pop up offering you an account at some point before you have to enter payment info.  ACCEPT THE OFFER.

NOTE:

• If you have pop-ups blocked, you may miss the offer.
• Once you accept the account offer, you can choose whether or not you want to proceed with using your new account to finalize your purchase.  You do not have to buy any of the items in your cart once you accept the offer – you will still get the account.
• You may or may not be told the credit limit on the account.  I would not expect it to be high though – they are typically $500 or less.  You can always request a credit limit increase once you get your card.

Based on my experience and what I have read from others’ experiences, the following cards are pretty easy to get this way:  Express, Buckle, J Crew, and Pier 1.  I have read a lot of comments that it does not work with Abercrombie & Fitch – at least for a lot of people.

The Total Rewards Visa is part of the Harrah’s Total Rewards players club.  I have read that it does work with this card as well; most people discover the pop-up almost immediately after they login to their Total Rewards account.

If you don’t get the pop-up and select a link for the card on the store’s website and then subsequently fill out an application, understand you WILL get a hard inquiry on your credit file.

Finally, remember that even without the inquiry, you are adding a new account to your credit files.  Doing so may lower your AAoA (Average Age of Accounts), which some people may not wish to do.  In my opinion, for those trying to build credit history and need open, active tradelines to do so, getting a couple cards this way can help achieve this without adding an inquiry or inquiries.  Keep the balances low or paid off and let the accounts age – they will really start helping 6-12 months later and beyond.

Good luck.

A Way Away from Sallie Mae

Recently I’ve been thinking a lot about the direction I want to be headed financially, my sources of income, and how much money I need to make things happen.

I want to get into real estate investment and I have a lot of ideas about how I want to do this.  Getting my credit repaired and my scores up will be a critical part of making this happen and it is one of the reasons I hit the ground running there.  But there are obstacles remaining I have not yet tackled because I am still trying to figure out how.  Last night, I tried to break things down and determine what was holding me back.

Even as my credit improves and I continue to build it up, there is one account that remains on my credit reports that, while reporting as current/paid as agreed, will no doubt hinder my ability to secure financing for real estate in the future. This is my account with Sallie Mae, my consolidated student loan account, currently reporting a balance of over $81,000.  As I looked over this account in recent months, armed with the knowledge I have now, I am disgusted and ashamed of how irresponsibly I handled this account over the last seven years and it makes me ill thinking of just how much money it will ultimately have cost me.

My original student loans totaled about $54,000 – at least that was the total balance after they had all been consolidated in 2007.  The intended repayment term for most student loans is ten years – the interest rates are low, the payments spread out, and the average person would have them paid off by their early- to mid-thirties.  If I had begun repaying my student loans in 2007 on a ten year plan:

Monthly Payment:  $609.73
Total Principal:  $54,000.00
Total Interest:  $19,167.63

Paying an extra $100 each month would knock two years of payments off the loan and reduce the amount of interest I paid by over $4,000.  That would have been one of the many options that would have been wise and prudent.

I instead let my loans remain in forbearance (and several times, my failure to remember the forbearance had ended allowed them to enter repayment, become delinquent, and put the negative payment history on my credit file I am dealing with today).  Sitting in forbearance, the loan continued to accrue interest that was compounded (made part of the principal) and thus interest on the interest.  The result: my student loan balance is now $30,000 greater but not because of more education.

I am scheduled to enter repayment next month – as my forbearance comes to an end.  In order to pay this debt off in ten years, I would now be looking at the following:

Monthly Payment:   $925.89
Total Principal:  $83,000.00
Interest Paid:  $29,106.00

And don’t forget that $30,000 of the principal IS ALSO INTEREST.  The amount of interest I would be paying is greater than the principal balance.

If I can’t make that much of a payment and I instead pay according to the thirty-year repayment plan:

Monthly Payment:  $511.57
Total Principal:  $83,000.00
Interest Paid:  $102,166.49

Monitoring my credit reports has also helped me see the magnitude of this situation as well.  Each month that goes by, the amount owed on this account increases by over $400.00.  Just to stop it from becoming even greater, I would need to pay over $400 per month!

This balance is comparable in size only to a mortgage – and that is how lenders will see it when I seek financing to buy real estate.  This monthly obligation will affect the total expenses they will consider for me, since it is equal to a mortgage payment of its own.

There is no escaping this loan. It will never expire, never be dischargeable, never be settled.  The only way to eliminate it, is pay it.

I have to figure out how to tackle this loan.  The best solution at this point is to pay it off as quickly as possible – doubling the monthly payment, for example, would pay the loan off in 4 years and would save me over $18,000 in interest paid.  But that would be four years of monthly payments of $1,937, and at this point in my life, not even remotely possible.  What I need is a large, lump-sum payment to immediately reduce the balance enough that the monthly interest being created is substantially reduced.  This would make my monthly payments count for a lot more.

Figuring out how to do so is the trick.

Judge Me For Saving Money

My first post was about my experience being terminated for the first time by my employer.  When I was called into the conference room to meet with my supervisor and the firm’s Executive Director, one of the first things raised as an “issue” was my personal use of a rental car obtained through the firm.  To make a couple things clear: (1) the cost of the rental car was not being paid by the firm – it was charged to my personal account that I was responsible for paying, (2) when I expressed interest in renting a car, I was directed to an individual in the accounting department who handled car rentals – she made my rental car reservation and assured me I was following procedure and that this was permitted; (3) I was able to get an excellent monthly rate due to the firm’s volume of business.

I started my job one month before I started my credit repair. It was challenging getting rides to work and coordinating schedules with other people when I was working two jobs myself.  I knew I needed to buy a car; I also knew with a  494 credit score, no finance company was going to give me a loan and if, by chance, I was able to secure financing, it would require a huge down payment with the remaining amount financed at an outrageous interest rate.  It was pointless to even look at cars at that point – all that would come out of it would be disappointment and a bunch of inquiries hitting my credit reports.  I knew, though, that if I could get a few things cleaned up on my credit reports and get my score up, I could get an auto loan.  It was just going to take me a little time to do so.

They looked at me like I was shady and up to something when they asked me about the rental car.  ‘Why would you rent a car for a month?’ they asked.  Well, I needed to get a couple things cleared up on my credit files to get financing – I did not have $5,000 to spend on a down payment at the moment nor did I want a loan at 26% interest.  Today, one of my former co-workers told me that people “talked” about me renting a car – again, as if I was doing something sketchy.

Let’s say I chose not to be “sketchy” and wanted to buy a car that was $20,000.  Assuming I got lucky and only had to put down $5,000 (25%), I would be financing $15,000.  The best I could expect would be 48 months on the loan.  At an interest rate of 21%, my monthly payment would be $470.  And remember, that was with $5,000 down.

Well, because I was shady and rented a car for a month (which cost $675 by the way), I was able to get my credit score up.  I applied with VW Financial Services for a new Jetta.  I was approved for a fully-loaded TDI with a sticker price of just under $30,000 with $0 down.  My monthly payment is $414 per month and to a lender who will benefit me credit-wise both short- and long-term.  Renting a car and being patient cost me $675 out of pocket and I got a brand new car – a car $10,000 more than the other scenario.  And I saved myself $5,000 cash and almost $60 per month for 48 months – almost $3,000 there too.

So judge me all you want.

The Benefit of Store Cards

I am not usually an advocate of store cards.  Why use a store card for something you can use a major credit card for, which will likely have a lower interest rate and possibly offer you airline miles or some other benefit?  Besides, store cards can be just another bill you have to deal with every month.  Yeah they may offer you some coupons every month, but they rarely come with interest rates below 24%, so how much would you really be saving?

For someone working to build new credit, store cards can potentially be a major help.  Most store cards are issued by one of two major banks:  Comenity Bank and GE Merchants Bank/GE Capital Retail Bank (GEMB/GECRB).  Opponents of store cards and using them to rebuild credit will often cite the adding of inquiries to your credit report for each store card.  Well, with Comenity Bank, one can use the “shopping bag trick” to get approval with just a soft inquiry – I just did it a few months ago and got an Express card.  With regard to GEMB/GECRB, they will pull your TransUnion credit report and score – and for the most part, if you get approved for one GEMB card, you will get approved for any of them.  TransUnion inquiries are the easiest to bump off, so my approach was (1) pick whatever GEMB cards I wanted and apply for them all same day then (2) bump all the inquires off TransUnion within the next month.  I started with the WalMart card, then got the Banana Republic, Amazon, Belk and Chevron cards.  After four months of good payment history on your GEMB-issued card, you will get a credit limit increase.

Just because you have the store cards does not mean you need to use them.  Most of mine I have used one time, paid the entire balance off, and then just left it alone.  It will add positive, active tradelines to your credit file and increase your total revolving credit amount, making any balances you may carry on your major credit cards have less impact on your credit score.  When I began my credit repair in December, 2013, I had ZERO positive, open credit card accounts.  Less than three months later, I have EIGHT open revolving accounts of my own (plus two on which I am an authorized user).  I pay my balances in full every month and I know when summer is here and my accounts have all aged six months or more, my score will have improved even more and I will be able to open accounts with Barclays Bank, Discover, etc.

If you don’t know the shopping bag trick or understand bumpage, this may not be the best idea for you.  Also, GEMB does not like public records or collections (from my experience).  Start with Walmart – if you don’t get approved there, no need applying for any other GEMB accounts.  And if you have a collection or public record and are not approved, that is more than likely why.

All my store accounts are showing on my credit files already.  My current FICO score is 733 (TransUnion).  When I started my credit repair less than three months ago, my score was 496.  So, in three months, I have raised my score 237 points.  It can be done.

Awareness

Do you know your credit score? If you are thinking no, good answer – very few of us do. If you are thinking you do, where did you get your score?  If you got it from FreeCreditReport.com, you don’t know your score.  If you got it from TransUnion’s or Experian’s websites, you don’t know your score.  More than likely, if you got it from Equifax’s website, you don’t know it, unless you happened to buy ScoreWatch or another Equifax product that includes your FICO score.

Basically, if you didn’t get it from myFICO.com, you didn’t get an accurate score (if you have a Discover card or Barclay Bank credit card, you should be receiving FICO scores monthly – these are good, take advantage of them!).  Vantage Scores, PLUS Scores, and any other non-FICO scores are worthless and a total waste of money.  Lenders don’t use them, you shouldn’t either.

Don’t think I am a Suze Orman junkie though.  Even if you got your FICO score, chances are it isn’t a hundred percent accurate.  Suze never tells you that you actually have 49 FICO scores, as there are 49 different models/formulas lenders can choose from when they pull your credit.  FICO also released an updated score model (FICO08) but even on their own website sell consumers TransUnion 98 scores.

Why does this matter? The most dramatic example, perhaps, can be seen in mortgages.  A $250,000 house will cost you about $1600 a month with a score in the low 600s.  If your score is in the high 700s, that same house will cost you $1200 a month.  $400 a month for 30 years is $144,000.  Think it matters now?

The thing is, both scores qualified for the mortgage loan – one just qualified for a much better one.  How many people just accept the rate they are given?  The credit world affects us as consumers in a major way and banks and creditors have worked hard to keep us in the dark.  The sooner we become involved in this world, the better off we will be.

No Honor in Debt Collection

Let’s knock out the “running a legitimate business” crap right away.  Remember this:  the collection agency is trying to recover money owed to someone else, not them.  That said, if you feel you should pay the debt because “you owe the money and its the right thing to do” – more than likely whomever you owed the debt to is never going to see a penny of the money you paid.

Debt collection is a $12.2 billion industry – about the same amount of federal income taxes paid by the entire state of Nevada last year.  Like most industries, the majority of the collection business is controlled by a handful of collection agencies: NCO, Midland, LVNV, etc.  They purchase debt from the big banks, who, after writing the debt off of their taxes as a loss, gathers up a bunch of written off accounts and sells them to these collection companies.  If you owed Chase $1,000 on a credit card they charged off, ultimately that account will be included in a package of 500 charged off accounts Chase sells NCO (as an example).  NCO, however, did not give Chase the $1,000 you owed.  They paid about $40 for the account – but they are coming to you still demanding $1,000.  Obviously, this can be a very lucrative business – I pay $40 for a $1,000 account – if I collect it, I make $960 – a huge return by any standard.

The guys running these collection agencies then hire a bunch of minimum-wage workers to staff their call centers.  These employees are expected to make a certain number of calls per hour and collect a certain amount of debt.  In return, they see few rewards for a miserable job.  At the end of it all, who really benefits?  The bank wrote the debt off and sold the debt for a pittance.  If you pay the debt, the bank you owed it to won’t see it – they won’t even know you paid it.  The only one who benefits is the owner of the collection agency who cashed in on money he was never owed.

What makes the industry even more sleazy are the tactics they use – and way too often get away with – to accomplish their goals.  First and foremost, they will report the account to the credit bureaus, who will then place it on your credit file without verifying its your account even.  You may not even know its there until you apply for credit and get turned down – and you won’t even know then unless you request a copy of your credit reports.  Let’s say, for example, you discover XYZ Collections has reported a debt of $233 you originally owed to Bell Telephone.  When you see it, you remember you never paid that bill, so you call XYZ to clear things up.  XYZ tells you no problem, once you pay the $233, they will “update” the account with the credit bureau.  You then pay the balance in full and feel good you got that taken care of.

A few months later, you apply for a credit card while out shopping.  It was embarrassing — your application was declined.  A few days later, you get a letter in the mail from the store you applied with listing the reasons you were denied credit.  Reason #1: you have a collection account on your credit file.  How could that be, you wonder – you took care of that? Perhaps you call the credit bureau – they must not have updated their records.  When you speak to the representative, she tells you the account was updated to reflect that the balance had been paid.  You are then informed that the account, paid or not, is still a negative account.  No worries, though, it will be removed in seven years.

You can call the collection agency – little good it will do.  They got your money already, and as far as they are concerned, they did what they were supposed to – the account was paid.

Again, the sleazy collection agency got money they were never owed.  Bell Telephone got nothing.  And you got stuck with a negative account on your credit for seven years – your reward for paying your debt.

RULE NO. 1:  NEVER PAY A COLLECTION AGENCY.

Success!

I began working on my credit on December 1, 2013.  When I pulled my FICO score with TransUnion then, it was an abysmal 496.  In less than two months, though, I was able to bring increase that score by 222 points!  I brought my score from where lenders would not even look at me to prime status – and I did it on my own.

When I first pulled my credit reports in December, 2013, I discovered a lot of bad stuff.  For starters, there were nine (9) collection accounts, eight of which were from 2013 and the remaining one from 2012 (point: they were ALL recent collections and thus causing maximum damage to my credit score).  Additionally, there was a judgment present from 2011.  Multiple student loan accounts appeared, 7 showing derogatory (90+ days late) in May, 2007, 1 (a private loan) showing as a charge-off, and 1 (the consolidation loan) reporting derogatory 14 of the last 24 months and quite a bit more prior.  There was only one closed revolving account on file – not showing as negative, but not really showing a payment history and it was closed.  A few of the student loan accounts were reporting paid and closed (positive), but they were older and far outnumbered by the negative?

So where do you begin?  I started from a couple different angles.  First, you gotta have positive, active tradelines reporting if you want to build a good credit score.  Even with bad credit this is still possible.  I did this two ways.  My first method may not be an option for everyone, but if it is, take advantage of it.  I had my folks add me as an authorized user to two of their major accounts (in my case, Citibank and American Express).  Their Citibank account was opened over 15 years ago, has never had even a thirty-day late, and had a credit limit of $15,000 and a balance of $100 – this is, perhaps, the truly ideal authorized user account to add.  It took about 2-3 weeks for both accounts to start showing on my credit reports.

The second method is one available to everyone but one that will require you to put up some cash – and the more the better.  I opened two (2) secured credit card accounts, one with my credit union and the other with Capital One.  The former required me to put up $500 and the latter $200, neither of which are ideal credit limits but they are somewhere to start.  Within a few weeks, both were appearing on my credit reports; with the authorized user accounts, I went from zero to four open tradelines in less than a month.  An excellent start.