ForeclosuresMass - ForeclosuresMass Monthly - Interview With The Expert

Getting the approval needed for an investment loan is heavily dependent on your credit score. Unfortunately, if you have "bad" credit, this can get in the way of making a purchase.

With that in mind, we contacted credit score expert Marty Eerhart - a senior loan officer with Assured Mortgage and a recent speaker at a ForeclosuresMass Turning the Key event - and spoke with him about credit problems and what you can (and can't) do to fix them.

ForeclosuresMass Monthly: Welcome Marty, and thanks for taking the time to speak with us. First question: What determines my credit score?

Marty Eerhart: Your credit score is actually a computer-generated, composite number. In rough percentages, your score is a function of: Payment History (35%), Amounts Owed (30%), New Credit (10%), Types of Credit in Use (10%) and Length of Credit History (15%). Taken together, these add up to 100% of the score you are given.

* Next 37 17 investors only!

FMM: You mention that payment history is the single biggest determining factor (35% of my total score). Given that, if I pay off my past due accounts, will that improve the number?

ME: Not by itself. The problem is that while paying your debt is always a good idea (there are only three ways to get out of debt in the United States - pay, go bankrupt or die), doing so only shows that the debt is paid. It doesn't improve your history of bad debt, which from a credit score standpoint is what really matters.

FMM: I see. In that case, how long do negative items remain as part of your history?

ME: This too is a source of much confusion, and there are all sorts of varying "expert" opinions on this issue. In fact, the law clearly states that an item can remain for seven years after last date of report before removal (10 years for certain bankruptcies). You can see for yourself by checking the Fair Credit Reporting Act 15 USC C section 605C.

FMM: There seem to be a lot of people and organizations out there that claim to "repair credit." Is that legitimate?

ME: To tell you the truth, most are scams. Offering to start a new credit file for example, by recommending that you get an employer identification number to divert attention or something similar, is illegal, and something you should stay away from.

Keep in mind however, that if you have an item on your report that is inaccurate, obsolete or unverifiable (as opposed to something that legitimately reflects your past history), than yes, absolutely, you have the right do dispute that.

FMM: In those situations, how long do the credit bureaus have to respond to a dispute?

ME: Here again, the Fair Credit Reporting Act is your best guide. The Act states that the bureaus must respond in a reasonable time period. That's usually 30 to 45 calendar days.

FMM: One last question and then we'll let you go. What about consumer credit counseling as a means for repairing my credit?

ME: In practice, most credit counseling services are affiliated with creditors. Their goal is to work with you to pay off the debt. But they have nothing to do with the credit bureaus. So again, pay off your debt, but understand that this won't "repair your credit."

Also, you should be aware that if you are in an active credit-counseling program, a lot of lenders view this the same as being in a bankruptcy Chapter 13! Both are an agreement/promise to pay off your debt.

Marty Eerhart is Senior Loan Officer with Assured Mortgage in Pawtucket, Rhode Island. Contact Marty at his cell phone at 508-294-8359.