Information on Credit Reporting for Mortgage Repayment Plan

BILL'S ANSWER

In answer to your question about delinquency and payment plans, establishing a repayment plan on a delinquent account will help bring the account current and prevent further delinquencies (as long as you make your payments on time), but setting up a repayment plan will not generally make a previously reported delinquency disappear. However, some creditors will offer to “re-age” a delinquent account for you to establish a repayment plan, which could bring the account current and remove past delinquencies. I encourage you to discuss how the creditor will report the account to the credit bureaus before committing to any repayment plan. Even if the creditor will not re-age the debt, bringing a delinquent account current should have a positive impact on your credit rating. That said, there is no guarantee that resolving a single delinquent account will improve your overall credit score. There are simply too many factors that go into calculating a credit score to make a broad statement as to the effect of paying down any single account.

Establishing a positive credit rating is very important, especially since you are considering purchasing a home, as a positive credit history could save you thousands of dollars in interest over the life of your loan. There are several steps you can take to help improve your credit rating, but building and maintaining a good credit score requires diligent effort and a long-term commitment to financially sound living.

First, you should obtain a copy of your credit report from each of the three major credit bureaus — Experian, Equifax, and Transunion. You can request free copies of your reports by visiting AnnualCreditReport.com. Once you have received copies of your reports, you should carefully review them to make sure that all listings, especially the listings appearing in the “derogatory” category, belong to you and are being reported accurately. Credit reports are notoriously inaccurate, with consumers frequently finding listings of derogatory accounts that never belonged to them or that were paid off years ago. If you find any inaccurate listings, you should dispute them with the appropriate credit bureau. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information. Clearing up inaccurate derogatory accounts may significantly improve your credit score, depending on the number of inaccurate listings you find on your reports.

Next, if you do not already have a long, positive credit history, you should begin to build one. You can start by opening a few small credit card accounts, making charges on them, and paying off most, if not all, of the balances each month. By doing this, you will show yourself to be a responsible user of credit, and your credit score should improve with each month you continue to show a positive payment history. If you find that you cannot obtain a traditional credit card because of credit problems, a secured credit card, in which you deposit cash in an account as collateral for the credit line, can help build a positive credit history. Again, I cannot tell you how much or how quickly opening a new credit account will improve your credit rating, but building new positive trade lines is the key to improving your credit score over the long term.

To learn more about credit and strategies to improve your credit score, I encourage you to visit the Bills.com Credit Solutions and Resources.

I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/