Why is challenging a credit entry effective?
There are three reasons for this. First, the credit bureaus were too busy during a particular period that they could not reverify the item you challenged within the time limit, and therefore they removed it. Second, because of human error correct information was inadvertently deleted. Third, after two or three years a closed or inactive file is often stored offsite by your old lenders, and so they cannot access it, and as a result they do not respond to the credit bureau because it is too much work.

The negative item I challenged has been confirmed by the lender. What should I do now?
It is normal that some of your challenged items will be confirmed by the lender, and they will not be removed from your credit file. Wait 1 to 6 months and try again, with a written challenge.

All my attempts to have an item removed have failed because the lender keeps verifying them. What do I do next?
If this is the case, you need to talk directly to the lender and see if you can convince him to come to a settlement. If you agree to pay him off, make sure you get in writing that he will remove any negative information from your credit file. Once you have this in writing, only then pay him. Otherwise, he may take your money and do nothing.

How does a lender decide that I'm credit worthy?
When you apply for credit by filling out an application, you normally give permission to the lender to get your credit report from a credit bureau. Lenders use this credit report to work a short-term debt-to-income ratio, where they calculate your present short-term debt payments (excluding your mortgage), and divide the total by your total annual income. Lenders will refuse you credit if your short-term debt is more than 20% of your annual income. The second method lenders use is to add up your monthly bills (not including rent or mortgage and utilities) and divide the total by your gross income (before taxes). With this method, lenders are looking for a ratio of under 35%.

How does a lender qualify me for credit?
Most lenders look at the number of years you have worked at your present job, the kind of work you do (the worst to best being: manual work, clerical, self-employed, managerial, professional), the number and nature of negative entries in your credit report, the amount of credit you currently have, savings and or checking accounts with the lender, length of time at your present address, is the telephone in your own name, do you own your home.

Should I apply for as many credit cards as possible?
No, you should not, because it greatly decreases your chances of getting approved. Most lenders will look at your total unused credit on all your cards. If you were to max out all your cards, would you be able to pay it all off on the income you presently make? Lenders normally assume that you would not be able to.

What do I do if I'm turned down for credit?
By law the lender must provide you the specific reasons why you were rejected, and the name and address of the credit bureau that provided your credit report. You can appeal your rejection by sending a letter to the lender explaining why you are a better credit risk than your credit report indicates. But it is best to rebuild your credit before applying for credit again.

What can lenders do if I don't pay them?
As you well know, we got rid of debtor's prison. This means that not paying your bills is not a crime (except for the IRS, of course). In the case of a secured loan, the lender can foreclose on the property that secures the loan. Unsecured lenders can get a court judgment and attach your property and become secured creditors. But if you have no property of any real value, there is very little a lender can do. A lender can try to have your wages garnished, if you work. But if you don't have a job and no real assets, there is virtually nothing that a lender can do. And if your debt is small, it may be more expensive for the lender to attempt to collect. In most cases, a lender will stop short of legal action, and write off your debt.

How do I get collectors off my back?
There is a limit to what collectors can do. If collectors are being deceptive or harassing you, you can sue them in civil court. By law, collectors can only call you between 8AM and 9PM. A collector cannot contact you at your place of employment. A collector must not make false or misleading statements, or make abusive remarks, or harass you. Nor can a collector call your family or friends to collect your debt. If collectors are harassing you, you should immediately write a Cease and Desist Letter, telling them to stop calling you, and to stop any further communication with you. Send this letter by certified mail, return receipt requested. By federal law, they must stop contacting you with the exception of a letter stating that their collection efforts have ended, or the collection agency intends to take specific action against you (that is, sue you). Generally, collection agencies do not sue, so don't loose sleep over it.

Should I use a credit repair agency to fix my credit?
No. They often use many illegal methods that will make things worse for you. Be wary especially of agencies that tell you that they will create a new credit identity for you. This is fraud, and is a criminal offense. It is better that you handle your credit problems yourself, because only you can do a good job of repairing your credit.

Where can I get reputable help improving my credit rating?