Kris Kringle & The Credit Crisis

by : Ian Hollander

Along with the 5 frozen fruit cakes, 12 extra pounds of padding and another year of Uncle Elmer singing drunken Christmas Carols - the biggest thing thing that Americans share each Christmas is an alarming and ever-increasing amount of debt.

Did you know that the average American unsecured credit card debt is pushing 20,000 Dollars per household?

And invariably - while your debt load is going up - your credit score is heading in exactly the opposite direction.

Just because you pay your bills on time - does not guarantee you an above average credit score. I remember being rejected for a home loan several years ago - not because I had any delinquent marks on my credit - but rather because my debt to limit ratio was too high - and according to the mysterious algorithms created by the FICO mathematical model - the chances I would default on a further extension of credit were much higher.

(Just paying my credit cards down considerably the next month led to a huge jump in my credit score - and I was approved for that very same loan 60 days later.)

Your Credit Score is now the most singularly important component to any lending decision you are involved in - it's not how nice you are - how crisply your suit folds when you apply for the loan - or how eloquently you can communicate that the credit crisis you had in 2002 wasn't really your fault - rather - it was that old crazy girlfriend who stole your Bloomingdales' credit card.

Most people I meet have such erroneous understanding of what goes into their credit worthiness.

Credit issues are often times the most confusing and confounding issues we face as consumers - as more and more of our culture moves to a paperless society - the more dependent we become on having a healthy and positive credit rating. The cost of bad credit isn't just measured in interest rates - or amortization charts - but in the very real and tangible psychological scars that accompany being denied for employment, housing and opportunity on account of what "number" a computer generates to measure our worthiness. I can personally remember spending years being embarrassed at my credit rating, accepting less than I was worth in a whole host of areas of my life, just because I knew the score that represented me to the world wasn't too my liking - so rather than open that wound up to the world - I settled for what I had and waited the torturous seven years that they tell you it takes to remove the stain of past credit blemishes.

The truth is - I was young and un-informed and believed the myths I was told about credit and credit bureaus. But after one particularly embarrassing rejection, I said - "enough is enough" and began the process of learning the keys to credit correction. Along the way - I came face to face with the many myths that permeate the scrapheap of bad credit information that exists in the general consumer's mindscape.

Let's review a few of those "Myths" here:

1)Adding a "consumer statement" on your credit file to explain past sins or problems is a good thing. In my experience - adding an explanatory statement to your credit file is not only a bad idea - it is an absolutely terrible one. The notion that a forgiving and understanding human being named Hank is going to carefully consider your lower back problem in 2001 that caused you to miss three months of work is a credit bureaus created fallacy - in today's impersonal world of credit scoring and profiling - there is just no merit ( in the vast majority of scenarios) to adding a subjective, personal story to your file. If anything - it just adds one more obstacle to the credit repair process - if you decide that information on your report is incorrect and needs to be challenged - you have your own "admission of guilt" to contend with.

2) Credit Repair is illegal and immoral - Absolutely not! You have the right to challenge information in your credit report as inaccurate. This right has been provided to you by Congress in the Fair Credit Reporting Act and all of its subsequent revisions and
amendments. It appropriately puts the owness on the credit bureaus to verify and validate all of the information they are reporting on you to others. Credit Bureau errors are common, widespread and on occasion, so egregious that consumers like you and I have suffered for years in "credit purgatory" - unable to get employment, insurance and other benefits we are were deserving of - purely as a consequence of information in their credit files that was and is just flat wrong, and often - not even belonging to us! And that is why the credit repair processes - and the laws that allow for it, are an important part of our rights as American consumers. No one should have the right to report false information on your ability or willingness to pay your debts. It has become such an instrumental part of our ability to survive and get ahead in today's credit culture, that without having to verify that the information they are reporting is indeed correct, the credit bureaus would run amok with bad information and create even worse consequences for us.

3)Paying old bills off is a wise idea once you have the money to do so. Well of course -philosophically (and ethically, too) paying your bills is always the right thing to do, but when it comes to your credit rating and credit score - actually paying your bills months or even years after they originally fell delinquent can be the most catastrophic decision you can make - and will - almost always - cause an immediate drop in your credit rating. No matter how good your intentions - or how ridiculous it sounds - paying off old bills hurts your credit - unless you understand the proper process that needs to be followed to ensure your accounts aren't "re-aged" for further damage to your score and
credit future.

4)You need a Professional credit agency to repair your credit - absolutely not! You can most definitely fix your credit yourself - with nothing more than a word processor - some good old fashioned motivation -and a decent dose of knowledge and research. The same laws that the professional firms utilize to challenge and dispute erroneous, outdated and unverifiable information on your report is available for use just as well. The key is to understand your rights - to be informed, persistent and knowledgeable - and you can achieve great results. It's analogous to fixing your transmission - or - representing yourself in a court of law - these are skills that can be learned by anyone willing to invest the time and energy involved. If you don't have the time and inclination to learn, just hire someone who does!

Either way - don't let anyone tell you differently - you can achieve great results in keeping your credit in tip top shape - regardless of how flabby it may be right now - with the appropriate amount of care and exercise.

But remember - as we approach Christmas and the beginning of yet another new year - keep the credit cards safely stored in your sock drawer when you do your last minute shopping and you won't be faced with the daunting dilemma of starting 2007 with a credit score crisis - care of Kris Kringle and the Christmas crunch..:-)