Monday, October 11, 2004

Credit card issuers require better record



Steve Rhode
Gannett News Service

Question: I have two questions about my credit report. First, some of the accounts on my file are over 20 years old - why are they still listed? Secondly, during the past 12 years, I have financed and paid off three new cars and got a home equity loan for $25,000. If my credit is so bad, why can I get financed for those kinds of loans?

Answer: About your first question: Negative information generally cannot remain on your report for more than seven years, 10 in the case of bankruptcy. But positive information can remain indefinitely. If your file contains negative information, such as late payments or collection accounts, that are more than 7 years old, file a written dispute with the credit reporting agency.

As for your second question, it's important to realize that secured loans, such as auto or home equity loans, are different than unsecured loans, such as credit cards. With a secured loan, there is something physical that the lender can repossess if you don't pay. With an unsecured loan, the creditor is lending you money based on your signature alone. (In addition, people tend to be more diligent about making car and house payments.)

When it comes to getting credit cards, most issuers like to see that you have a record of paying other cards on time. Consider getting a secured credit card, which requires a security deposit, to get started. Go to Bankrate.com (www.bankrate.com) for a current list of available secured cards.

Q. I filed for bankruptcy in early 1997. Since then, I have been working hard to rebuild my credit. I have discovered that if I apply for credit in some states the bankruptcy shows up. In other states, my credit appears immaculate. Should I pursue this?

A. Bankruptcy can legally be listed on your credit report for 10 years from the date you filed. The major credit bureaus, however, have agreed to remove Chapter 13 bankruptcies (where you pay back some or all of your debts over several years) seven years from the date of filing. Assuming you filed Chapter 7 (which most people do), the bankruptcy may be listed until early 2007. Your bankruptcy can be reported for the rest of your life when you apply for certain loans, life insurance or jobs. It may be that these creditors are using different credit bureaus to obtain your report, and not all the bureaus have the information about your bankruptcy. If you want to see an accurate report of your credit history, you should order a consolidated credit report, which contains all the information the three major credit bureaus have about you, off the Myvesta.org Web site (www.myvesta.org). This consolidated report will show all three bureau reports side by side and make it easy to compare.

But remember, even though the bankruptcy does not appear on your credit report, you must still disclose it if you are asked on a credit application. Otherwise, you can commit credit fraud, which has some serious consequences.

It sounds like you are on track as far as rebuilding your credit is concerned. Just keep it up.

Tip: Avoid paying credit repair firms to "clean up" your credit. Their tactics are often unethical and/or illegal.

Have a question for Steve? Visit SteveRhode.com. Steve Rhode is a money coach, president of Steve Rhode Inc. and co-founder of the nonprofit consumer education group Myvesta.org.




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