MODULE 7: Credit Repair and Improvement

Duration: 35 minutes

Learning Objectives:

•Understand how credit reports and scores work

•Identify and dispute credit report errors

•Implement strategies to rebuild credit

•Protect credit score during debt payoff

Content Outline:

7.1 Credit Reports and Scores Explained (10 min)

The Credit Reporting System:

•Three major bureaus: Equifax, Experian, TransUnion

•They collect your financial history from creditors

•Generate credit reports (your financial resume)

•Calculate credit scores based on reports

Your Credit Report Contains:

•Personal information (name, addresses, SSN)

•Credit accounts (cards, loans, payment history)

•Credit inquiries (who checked your credit)

•Public records (bankruptcies, liens, judgments)

•Collections accounts

FICO Score Breakdown (300-850):

1.Payment History (35%) – Most important

•On-time vs. late payments

•How late (30/60/90/120 days)

•Collections, charge-offs, bankruptcies

2.Amounts Owed (30%) – Credit utilization

•Total debt vs. total credit available

•Per-card utilization

•Target: Under 30%, ideal under 10%

3.Length of Credit History (15%)

•Age of oldest account

•Average age of all accounts

•Keep old cards open

4.New Credit (10%)

•Recent applications

•Hard inquiries

•New accounts

5.Credit Mix (10%)

•Variety: cards, loans, mortgage

•Not essential but helpful

Score Ranges:

•800-850: Exceptional

•740-799: Very Good

•670-739: Good

•580-669: Fair

•300-579: Poor

What Hurts Your Score Most:

•Late payments (especially 30+ days)

•Collections accounts

•Charge-offs

•Bankruptcies

•High credit utilization (over 30%)

•Foreclosures

•Too many hard inquiries

7.2 Getting Your Credit Reports (5 min)

How to Get Free Reports:

•AnnualCreditReport.com (official site)

•Entitled to one free report per bureau per year

•Smart strategy: Get one every 4 months (rotate bureaus)

•Many apps provide free credit monitoring (Credit Karma, etc.)

Reviewing Your Reports:

•Check all three bureaus (may differ)

•Look for:

•Accounts you don’t recognize

•Incorrect balances

•Wrong payment history

•Outdated information

•Duplicate accounts

•Identity theft signs

7.3 Disputing Errors and Inaccuracies (10 min)

The Dispute Process:

Step 1: Document the Error

•Note account, date, specific inaccuracy

•Gather supporting documents

•Take screenshots

Step 2: File Disputes with Bureaus

•Online dispute (fastest): 30 days to investigate

•Mail dispute (creates paper trail)

•Dispute with all three if error appears on multiple

•Be specific about what’s wrong

Step 3: Dispute with Creditor Too

•Send letter to creditor directly

•Request investigation and correction

•Keep copies of all correspondence

Step 4: Follow Up

•Bureaus must respond within 30 days

•If corrected, verify on updated report

•If not corrected, can add statement or escalate

Common Errors to Dispute:

•Accounts belonging to someone else

•Duplicate accounts (same debt listed twice)

•Wrong payment status

•Incorrect dates

•Accounts that should be closed

•Debts past statute of limitations still reporting

•Spouse’s debts on your report (if not joint)

Sample Dispute Letter Template:

[Date]

[Your Name]

[Address]

[Credit Bureau Name and Address]

Re: Dispute of Inaccurate Information

I am writing to dispute inaccurate information on my credit report.

Account: [Account Name/Number]

Issue: [Specific error – e.g., “This account shows late payment in March 2024, but I paid on time”]

I have enclosed [documentation] supporting my claim. Please investigate and correct this error.

Sincerely,

[Your Signature]

Important Rights:

•Creditors must investigate within 30 days

•Errors must be corrected or removed

•You can add 100-word statement if dispute denied

•Corrected reports sent to recent inquirers (if you request)

7.4 Rebuilding Your Credit (10 min)

Quick Wins (30-90 Days):

•Pay down credit cards to under 30% utilization (major score boost)

•Become authorized user on someone’s good account (risky for them, beneficial for you)

•Pay off collections accounts (negotiate pay-for-delete)

•Request credit limit increases (improves utilization if you don’t spend)

Medium-Term Strategies (3-12 Months):

•Set up automatic payments (never miss due date)

•Pay bills twice monthly (keeps utilization lower)

•Use credit cards for small recurring bills, pay in full

•Keep old accounts open (helps credit age)

•Mix types of credit (if you can manage responsibly)

Long-Term Building (1-3 Years):

•Perfect payment history (35% of score)

•Age of accounts increases naturally

•Negative items fall off after 7 years (10 for bankruptcies)

•Build diverse credit portfolio

•Keep utilization consistently low

Special Strategies:

Secured Credit Cards:

•Deposit $200-500, get card with same limit

•Use responsibly for 6-12 months

•Upgrade to unsecured card

•Get deposit back

•Rebuilds credit if used properly

Credit Builder Loans:

•Small loan ($500-1,000) held in account

•Make monthly payments

•Get money back at end

•Builds payment history

•Offered by credit unions, online lenders

Rent Reporting Services:

•Report rent payments to credit bureaus

•Services: Rental Kharma, RentTrack

•Adds positive payment history

•Small monthly fee

Goodwill Letters:

•Write to creditors asking to remove late payments

•Best for one-time mistakes with good history

•No guarantee but worth trying

•Be honest, polite, explain circumstances

What NOT to Do:

•Don’t close old accounts (hurts credit age)

•Don’t apply for multiple cards quickly

•Don’t max out cards even if paying off monthly

•Don’t ignore collections (won’t disappear)

•Don’t fall for credit repair scams (you can do it free yourself)

Timeline for Credit Improvement:

After paying off debt/collections:

•1-2 months: Utilization improvement shows

•3-6 months: Payment history starts helping

•6-12 months: Score noticeably improves

•1-2 years: Score in “good” range possible

•2-3 years: Major negative items matter less

•7 years: Most negatives fall off report

Interactive Elements:

•Credit Report Review Checklist: What to look for

•Credit Score Simulator: See impact of various actions

•Dispute Letter Generator: Customizable templates

•Credit Improvement Plan Builder: Personalized roadmap

•Quiz: 10 questions on credit repair strategies

Downloadable Resources:

•Credit Report Error Checklist (PDF)

•Dispute Letter Templates – 5 Scenarios (Word/PDF)

•Credit Improvement Action Plan (Excel)

•Goodwill Letter Template (Word/PDF)

•Credit Monitoring Comparison Chart (PDF)

•12-Month Credit Building Tracker (Excel)