Credit Success Journal

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The Credit Success
Journal
By Mi ke Rober t s
The Cr edi t Sol ut i on
Copyr i ght 2012 by Mi ke Rober t s
1

Copyr i ght Inf or mat i on:

Copyright 2011, 2012 by Mike Roberts

All rights reserved. No part of this book may be reproduced, distributed,
transmitted, stored in a retrieval system or used in any form or by any means,
whether electronic, mechanical or digital, except as may be expressly permitted
by applicable copyright laws or as expressly allowed by the publisher or the
author in writing.

Publ i sher Inf or mat i on:

Published by Smart Consumer Solutions, LLC, 601 Van Ness Ave, STE E869
San Francisco, CA 94102.

Di scl ai mer :

All of the information contained in this publication is true and accurate
according to the best information available to me at the time of publication.
Please understand, however, that laws and credit industry practices and
procedures are constantly evolving; so you should independently update laws,
practices and facts before you take action. I do not accept any responsibility for
errors or mistakes of any kind, or for any damages or losses that might result
from the use of any information provided.

Also, I am not a lender, a collection agent or a credit reporting agency. I am not
an accountant or an attorney, and nothing in these materials is intended as
professional advice. It is personal opinion only. I am providing it to you without
any warranties or guarantees whatsoever. To obtain advice as to the tax or legal
consequences of any action covered in these materials, or any action that you
might consider based on these materials, you should consult an attorney, an
accountant, or both. What I have tried to do here is simply offer solid, useful
information that I have obtained through my own personal and business
experience. Any action you choose to take based on any information that I
provide, including forms and other attachments, is entirely your responsibility.
2

Tabl e of Cont ent s

Introduction: ................................................................................................... 4
Why I Created This Workbook ................................................................. 4
How to Use This Workbook .................................................................... 5
Setting Your Goals ................................................................................. 6
Long- term Goals: ......................................................................... 6
Short- term Goals: ......................................................................... 8
Obstacles to Your Goals: ............................................................... 8
Immediate Goals: ........................................................................ 13
Goals Summary: .......................................................................... 13
Where Do Things Stand Right Now?................................................................ 14
Your Monthly Income ........................................................................... 14
Your Monthly Expenses ........................................................................ 16
Step 1Current Monthly Expenses.............................................. 18
Step 2Other Loans and Credit Card Balances ............................ 19
Step 3Fill in the Current $ column for all expenses ................ 21
Step 4Columns A, B and C ....................................................... 22
Step 5Your Target $ Column ................................................. 24
The Credit Solution, Chapter 1: The Real Cost of Bad Credit ........................... 28
How to Calculate the Cost of any Loan .................................................. 28
A Really Important Concept......................................................... 28
Another Really Important Concept............................................... 29
Mortgage Loan Exercise .............................................................. 31
The Definition of Loan Cost ...................................................... 33
Installment Loan Exercises .......................................................... 34
Credit Card Exercises .................................................................. 38
Whats the Point? ........................................................................ 41
The Credit Solution, Chapter 2: How Credit Actually Works ............................ 42
Taking Stock of Your Loans .................................................................. 42
Loan Status Worksheets .............................................................. 42
The Credit Solution, Chapter 3: How to Get Your Credit Records .................... 52
The Credit Solution, Chapter 4: Exactly Whats in Your Credit Report? ............ 53
Credit Report Errors Worksheet ............................................................ 53
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The Credit Solution, Chapter 5: Understanding Your Credit Score ................... 55
Credit Report Differences Worksheet .................................................... 55
The Credit Solution, Chapter 6: Steps to Raise Your Score .............................. 57
Managing and Scheduling Your Payments ............................................. 57
Automatic Payments Worksheets ................................................. 59
But What about Credit Card Bills? ................................................ 62
Get an Online Calendar ............................................................... 62
Credit Card Payment Worksheets ................................................ 63
Controlling the Use of Your Available Credit ......................................... 64
Utilization Rate Worksheets ........................................................ 65
Putting Your Utilization Rates to Work for You ............................. 69
The Credit Solution, Chapter 7: Remove Negative Items from Your Report ...... 74
Goodwill Letters Worksheets ....................................................... 75
FCBA Evidence Request Letter Worksheets ................................... 80
Validation Letter Worksheets ....................................................... 85
Investigation Letters Worksheets ................................................. 96
Another Use for Validation Letters............................................. 103
Workbook Conclusion .................................................................................. 105

4

Int r oduct i on:
Why I Cr eat ed Thi s Wor kbook

A great deal of time and effort went into The Credit Solution. It took several
months to put it together. I researched, I studied, and I made sure I was
working with the latest, most reliable information about how the credit
reporting system works. All the homework was really necessary and worthwhile,
but it wasnt my homework that made the greatest contribution to the success
of the project. In the end it wasnt my study and research that made The Credit
Solution a real standout. It was you.

As you might be aware, I offered a series of free videos to road test some of my
ideas before I released the final eBook version. The whole purpose behind this
trial run was to find out exactly how I could help you best. I wanted you to tell
me what you need and the most effective way to provide it to you. You didnt
disappoint. I got tons of feedback from thousands of people just like youall
searching for a way to establish or rebuild their credit.

I learned a lot from this experience, and the insights I gained from it made The
Credit Solution better in countless ways; but there was one point that kept
coming through in most of the great emails and comments I received. One
basic concern kept coming up. The message you kept repeating boiled down to
this:

M Mi ik ke e, , i it t s s g gr re ea at t t th ha at t y yo ou u r re e c cr re ea at ti in ng g
T Th he e C Cr re ed di it t S So ol lu ut ti io on n t to o h he el lp p u us s i im mp pr ro ov ve e o ou ur r c cr re ed di it t, ,
a an nd d w we e c ca an n t t w wa ai it t t to o g ge et t s st ta ar rt te ed d; ;
b bu ut t
P PL LE EA AS SE E d do on n t t f fo or rg ge et t t to o s sh ho ow w u us s
e ex xa ac ct tl ly y h ho ow w t to o d do o i it t. .

Message received. This workbook is my response. In The Credit Solution, I
explain the damage that poor credit can do, I analyze the credit reporting
system and the FICO score calculation, and I describe what must be done to
boost a credit score and get rid of negative items. I tell you why you need to
improve your credit, and I explain what you have to do to make that happen.

In this workbook, I tell you how to do it. In this how to guide, which works
hand- in- glove with The Credit Solution, Im going to do exactly what you asked
me to do. In the pages that follow Im going to take you by the hand and lead
you through The Credit Solution. Im going to guide you along the path to
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improved credit, show you each and every stepping stone, and help you put
your feet down safely on each one. How am I going to do this?

I I m m g go oi in ng g t to o h he el lp p y yo ou u d de ev ve el lo op p y yo ou ur r
o ow wn n p pe er rs so on na al li iz ze ed d g ga am me e p pl la an n a a s se er ri ie es s
o of f s st te ep ps s, , c cr re ea at te ed d j ju us st t f fo or r y yo ou u, , t th ha at t y yo ou u
c ca an n f fo ol ll lo ow w t to o r re ea ac ch h y yo ou ur r g go oa al ls s. .

I under st and that right now your personal finances might not be organized,
and that you might need some help identifying and setting your goals. Im
going to help you with that.

I under st and that you might not feel confident about calculating interest on
loans, evaluating the real cost of credit, and working with utilization rates.
Dont worry. Im going to take you through it.

I under st and that you might have some concerns about scheduling and
keeping track of the letters and correspondence required to remove negative
items from your reports. Ill map that out for you too.

Every step, every action item, will come with very clear directions. Youll know
precisely what you have to do and how to do it; and Ill make sure you know
when youve completed a step and are ready for the next one. When youve
worked your way through the process, your personal Credit Solution program
will be in place, and youll be on your way to a better financial future.

Lets get started.
How t o Use Thi s Wor kbook

Ive designed this workbook to be used as a toolone that is absolutely
essential to accomplishing a really important project. I want you work with it,
go through the exercises youll find in it, write in it, make notes, think about
what youve written, and keep it close to you. Day to day, week to week, I want
you to have it handy so youll always know

1. Exactly where you are in the process of improving your credit,

2. Exactly what the next step is, and

3. Exactly what you need to do to complete the next step and then move on.

Please print out the entire workbook right now and put it in a three- ring binder.
I recommend that you print on one side only, so youll have plenty of room to
6

make notes along the way. Make sure the binder is sturdy. Youre going to be
using it a lot.
Set t i ng Your Goal s

Improving your credit is a process. Its not an event; it doesnt happen in a
single moment. This journey is going to take awhile, probably several months.
No one is going to be standing over you, cracking the whip. It isnt likely that
anyone will be checking on you to make sure youre staying on course and on
schedule. Probably no one will be enticing you with rewards for success or
threatening you with penalties for failure.

Youre going to have to crack your own whip, check up on your own progress,
and reward or penalize yourself. Youre going to have to find a way to motivate
yourself, stay focused, and follow your game plan.

At times you wont feel like it. Youll feel like resting or catching your
breath. Or maybe, like the dejected folks who came into the piano bar in Billy
Joels song,The Piano Man, youll just want to forget about life for awhile.
Believe me, youll be tempted. I know because Ive been through this. I know it
isnt easy. Goal setting can help.

T Th hi is s i is s w wh he er re e g go oa al ls s c co om me e i in n. .
W We e a al ll l n ne ee ed d a a d dr re ea am m, , s so om me et th hi in ng g
i im mp po or rt ta an nt t t th ha at t w we e r re e w wo or rk ki in ng g t to o a ac ch hi ie ev ve e. .

The more difficult and prolonged the job is,

The more important it is to have a goal, and

The clearer and more important that goal needs to be.

If you havent already fixed in your mind exactly why you need to solve your
credit issues, now is the time to do it. Lets set some goals (your goals; not
mine).
Long- t er m Goal s:

When you look into your future and see yourself financially secure, youll notice
that something important has changed. The future you will have something
that the present you doesnt have. Youll own something, youll be able to
provide something, or youll have the skills or knowledge to do something that
isnt part of your lift today. Whatever it is, its personal- - its important to you
and desirable to you. Its the thing that pops into your mind whenever you
7

think about making your financial life better. If youre like most people, you
have more than one dream. You know what yours are. List them here.

Ti ps:

Dont be afraid to set the bar high here. This is the place to list things
like a nice home in a safe neighborhood, the financial freedom to change
careers, or a college education (for you or a family member).

This is not the place to list things like a new computer, a new wardrobe,
or a better car. It isnt wrong to want these things (Who doesnt?); but
these are not objectives that will fire you up and keep you going when
youve had it with the process.

Determine which of the above three goals is most important to you.
Which one is it that you really want, even if you cant have the other two?

o Visualize this No. 1 goal. If its a home, what does it look like? What
color is it? What style is it? If your No. 1 dream is a different career,
what is the symbol of that career or profession?

o Find an image that captures this goal (a picture of the perfect
house, or a photo of a graduate receiving a diploma) and put it in
your wallet or purse so youll see it when you reach for a credit
card. Keep it on your desk next to your computer so it will be there
when you shop online. Put a copy in your check book.

o Goals can serve not only as motivators; they can serve as
deterrents. They can help you avoid behaviors that will keep you
from improving your financial life.

Ident i f y t hr ee l ong- t er m goal s t hat you bel i eve youl l abl e
t o achi eve i f you have good cr edi t .

1. ____________________________________________________

2. ____________________________________________________

3. ____________________________________________________

8

Shor t - t er m Goal s:

Most of us need more than a few lofty objectives to keep us going when were
trying to do work through a lengthy process. Long- term dreams are inspiring,
but its good to have something that we can look forward to enjoying relatively
soon. These near- term goals have two purposes:

1. They provide some immediate incentive, and

2. They serve as benchmarks. When you achieve a short- term objective that
youve set, you know that youre on track and making progress toward
your long- term goals.

Ti ps:

This is the place to lighten up. This is where you put getting rid of your
clunker, taking a vacation, or getting a new guitar.

These items dont have to be all that important in a what- really-
matters- in- this- life sense; but they need to matter to you.
Obst acl es t o Your Goal s:

As youve been thinking about your long- and short- term objectives, youve
almost certainly been thinking of reasons why they cant or wont happen. Its
just human nature. If you havent had these reflex yeah, but thoughts, dont
worry: Your spouse, friends or family members will have them, and theyll share
them with you. Count on it. This isnt a bad thing.

Its important to identify and evaluate stumbling blocks for two reasons:

Ident i f y t hr ee shor t - t er m goal s t hat you hope t o achi eve
wi t hi n si x- mont hs i f you have good cr edi t .

1. ____________________________________________________

2. ____________________________________________________

3. ____________________________________________________

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1. An objection raised might be genuine. Just because we want to achieve
something doesnt mean that its possible. People with 500 SAT scores
dont get into MIT; people who weigh 100 pounds dont become interior
linemen for the Green Bay Packers. If an objection is really going to block
you from achieving a dream in the long run, its time to modify the dream
or find another one. Its counter- productive and self- defeating to pursue
something that is impossible. In the long run, youll just deflate yourself
and doom your efforts to improve your financial life.

2. The objection raised might appear genuine, but theres probably a way to
overcome it. You need to recognize this and figure out the best approach
to this obstacle. Maybe you blast through it with a frontal assault; maybe
you go around it; maybe you tunnel under it. Theres probably a way to
the other side. You just need to decide what it is. When you realistically
assess a stumbling block, you dramatically increase your chances for
success.

So lets work through some obstacles.

My t op l ong- t er m goal i s: ________________________________

___________________________________________________________.

The mai n t hi ng st andi ng i n my way i s: ___________________

___________________________________________________________

___________________________________________________________.

Thi s i s how I pl an t o over come t hi s obst acl e: _____________

____________________________________________________________

____________________________________________________________

____________________________________________________________.

10

My 3r d l ong- t er m goal i s: ________________________________

___________________________________________________________.


___________________________________________________________

___________________________________________________________.


____________________________________________________________

____________________________________________________________

____________________________________________________________.

My 2nd l ong- t er m goal i s: ________________________________

___________________________________________________________.


___________________________________________________________

___________________________________________________________.


____________________________________________________________

____________________________________________________________

____________________________________________________________.

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My 2nd shor t - t er m goal i s: ________________________________

___________________________________________________________.


___________________________________________________________

___________________________________________________________.


____________________________________________________________

____________________________________________________________

____________________________________________________________.

My t op shor t - t er m goal i s: ________________________________

___________________________________________________________.


___________________________________________________________

___________________________________________________________.


____________________________________________________________

____________________________________________________________

____________________________________________________________.

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Ti ps:

The main thing to remember as you work through this exercise is to be
realistic. He honest with yourself.

If you see a big rock in the road to one of your goals, and you dont see a
way to move it or get around it, talk with a close friend or loved one
someone who knows you well and will be honest with you. They might
see something you dont see, and provide you with a way forward; or they
might agree that there isnt a way forward. Either way, it will help you
youll end up with a solution or youll confirm that you need a substitute
goal.

Once you have your workarounds in place, theyll become part of your
plan. Your obstacles wont be problems anymore; theyll be solutions.

My 3r d shor t - t er m goal i s: ________________________________

___________________________________________________________.


___________________________________________________________

___________________________________________________________.


____________________________________________________________

____________________________________________________________

____________________________________________________________.

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Immedi at e Goal s:

Believe it or not, there are probably ways that you can get more living out of
your finances as they stand right now. Well get into how to do that shortly, but
for now, try to come up with three ways you would use an extra hundred bucks
per month.

Ti ps:

This is another way to help you look at the consequences of what youre
trying to do. As youll see in later sections of this workbook, there may be
measures you can take right now to add some money to your bottom
line. Its helpful (and fun) to think about what you could do with this
money.

This is the place to list activities like joining a health club, subscribing to
HBO, or going out to dinner and a movie more often. Maybe not big, life-
changing stuff, but important stuff nonetheless.
Goal s Summar y:

The items you list in these goals worksheets should meet these criteria:

They Shoul d be Per sonal t o You. This is all about you. It has to be
about you because you are the person who will have to work through the
process. Its your determination and commitment, and no one elses, that
will carry you through this process. If you list a goal that involves
someone else, make sure youre focusing on it because it matters to you,
and not because its important to someone else.

They Shoul d be Real i st i c. If youve always wanted to get a degree in
nuclear physics but math and science leave you cold, dont list the
Thr ee ways my l i f e woul d change i f I had anot her $100
each mont h i n di sposabl e i ncome.

1. ____________________________________________________

2. ____________________________________________________

3. ____________________________________________________

14

physics degree as a goal. Its not realistic. If you hope someday to
become a professional basketball star but youre five feet tall, leave that
off as well.

They Shoul d be Measur abl e. By this I mean that you need to be able to
tell when the goal is achieved. Buying a nice home is a measurable goal;
youll know youve bought it because it will belong to you and youll live
there. Compare this to a perfectly responsible goal such as becoming
more respected in your community. Thats a good objective, but its
difficult to know what achievement looks like. Youll be hard pressed to
know exactly when, or if, it happens.

Wher e Do Thi ngs St and Ri ght Now?

As I said earlier, this is a process. Its a journey. Youre going to be travelling
along a road that leads to a very desirable destinationa place where your
goals will be fulfilled and your life will be better. But right now, we dont know
how long or winding your road is going to be. Why not?

Because we have not established where you arewe dont know your starting
place. The best map in the world is useless if you dont know the point of
beginning. You cant draw a line between two positions until you locate both of
them. So its time to identify precisely where you are (financially) right now. We
need to establish your financial latitude and longitude. We need to get a fix on
you so we can chart your course.

Your Mont hl y Income

Lets look at your income first. Heres a worksheet to help you nail that down.

15

Monthly Income Worksheet
Income Source Income $
Net Salary or Hourly Wages
Alimony Received
Child Support Received
Federal or State Assistance of Any Kind
Investment Income
Self-Employment Income
Other Income

Monthly Income Totals

Income Wor ksheet Ti ps:

Net Salary or Hourly Wages is the amount that you get after all the taxes
and other deductions are taken out of your check. There is no point in
accounting for the money you have to pay to Uncle Sam. The figure you
want to use here is the amount that goes into your checking account
when you deposit your check.

Alimony and Child Support are self- explanatory.

Federal or State Assistance is any kind of money you get from any
government source to help you pay your bills.

Investment Income is money like stock dividends or interest paid to you
on money that you have loaned to someone. Most people with credit
trouble dont have income like this; but if you do, list it here.

Self- Employment Income should include any income you generate
through your own efforts outside your regular employment. It might
include money paid to you for odd jobs you do for other people, or it
might be net profit you receive from operating a small business that you
own. If you rent out space in your home, or if you rent anything else out
to someone else, include the income here.

Other Income is any regular, dependable money you receive that
doesnt fit in any of the other categories.
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Total everything up and write the number in the bottom right box on the
worksheet. Thats all the money you have to cover all your expenses each
month.

Your Mont hl y Expenses

The next order of business is to get a handle on your expenses. Heres a
worksheet that should serve you well.

Monthly Expenses Worksheet
Category/Item Current $ A B C Target $
Housing
Mortgage/Rent Payment
Property Taxes
Repairs/Maintenance
Home Insurance

Utilities
Electric
Heat
Water/Sewer
Cable/Satellite
Internet
Land Line Phone
Cell Phone
Trash Collection

Transportation
Car Loan/Lease Payment
Maintenance/Repairs
Registration/Licensing
Insurance
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Gas/Oil
Tolls/Parking
Bus Fare/Rail Pass

Food
Groceries
Dining Out/Fast Food
Alcohol/Tobacco

Health
Medical Insurance
Doctor Bills
Medicine/Pharmacy

Personal
Clothing
Grooming
Gym/Health Club
Dry Cleaning
Tuition/Education

Entertainment
Movies/Theatre/DVDs
Magazines/Newspapers
Sports
Music/Concerts/CDs
Pay Per View

Pets
Food
Medical/Vaccinations
Grooming

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Other Expenses
Child Support
Birthday/Holiday Gifts
Charities
Back Taxes
Savings/Retirement
Other Expense 1
Other Expense 2
Other Expense 3

Other Loans/Credit Card Balances
Installment Loan #1
Installment Loan #2
Installment Loan #3
Card #1 ($______________)
Card #2 ($______________)
Card #3 ($______________)
Card #4 ($______________)

Grand Totals

How t o Use Thi s Mont hl y Expenses Wor ksheet :

Dont worry if this worksheet looks a little strange at first glance. Ive designed
it to do more than just help you figure out where you are. It also will help you
find ways to lower your expenses. Heres how to use it.

St ep 1Cur r ent Mont hl y Expenses

First, get all your monthly bills in front of you, get out your checkbook
register, and dig out your recent credit card statements.

Now get out your copies of your credit reports. You have those, right? If
not, follow the instructions in The Credit Solution and download them.
Its important to do this now because those reports might show expense
items that youve forgotten.

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You wont fill in all the line items. Depending on whether you live alone
or with others, depending on whether you rent or own, youll have some
expenses and not others.

This is probably a pretty complete list of most peoples expenses; but
you might have some that I havent thought of. Thats what Other
Expenses 1, 2 and 3 are for.

Youre going to have some expenses that are not billed monthly (property
tax is a good example). Thats why you need to have statements and bills
handy that go back several months. For your annual or quarterly
expenses, just take the annual number and divide by 12 to get the
monthly number.

St ep 2Ot her Loans and Cr edi t Car d Bal ances

At the bottom of your expenses column, youll see a category called Other
Loans/ Credit Card Balances. This is for installment loans other than your car or
your mortgage, and for credit cards with a balance that you cant pay off right
now. Heres how to figure the amount that goes in the Current $ column.

The Thr ee Loans: Lets say you have a snowmobile loan and a boat loan,
and not long ago you borrowed some money from your credit union to
get you through a rough patch. The first two loans are secured and the
third isnt; but that doesnt matter. All three are installment loans; which
means that they will eventually disappear if you make your payments on
time. Lets assume that you are current on these loans. Put your regular
monthly payments in the Current $ boxes.

The Cr edi t Car d Bal ances: These are trickier. I want you to look at these
balances as if they were one- year installment loans. Why? Because
installment loans disappear, and thats what has to happen to these
balances. You have to get rid of them because the interest rate is
murderousdepending on the card and the terms of your contract,
youre paying an annual percentage rate (APR) of somewhere between 20
and 30 percent, maybe more. This has to stop. Heres a way to deal with
this difficult situation.

o Find the current balance on each of your cards. Dig out your most
recent statement, or go online, and see how much money it would
take to reduce your balance to zero. Thats the number you need.
Thats the balance Im talking about. It will be labeled new
balance, current balance, or something of the sort.

20

o Take the current balance on each card and add 15 percent to it.
Lets say you have a card with a balance of $1,500. Fifteen percent
of $1,500 is $225. This amount, added to the $1,500, will give you
a total of $1,725.

o Now divide this total by 12 ($1,725 divided by 12 equals $144,
rounded up to the nearest dollar) and put this number ($144 in this
example) in the Current $ column.

o What youve just done is put yourself on a one- year payment plan
to get rid of this $1,500 credit card balance. At the end of 12
months, if you stay on course, youll have reduced this balance
(interest and principal) to zero.

o We had to add in the $225 because if we had just divided the
$1,500 by 12, youd still owe quite a bit of money at the end of a
year. Why? Because your credit card company is going to charge
you interest to finance your balance over the coming year. Were
figuring that in up front, just like your bank does when you take
out an installment loan.

o This 15 percent number Im asking you to use will come pretty
close to reducing your balance to zero after a year, but as they say
in the car ads, your mileage might vary. Depending on what the
applicable interest rate actually is, your last payment might be a
little less than calculated, or you might owe a few dollars more. It
will be pretty close.

o Of course, if you use the card for new charges in the months to
come, youll need to pay off these new charges on top of the
monthly payment that you just calculated. If you dont, youll fall
behind again.

o If you do use the card going forward, youll be using it (I hope) only
for things that already are on your expense list as budgeted items.
That way, you wont be blowing up your budget, even if you use
your credit cards. From now on (you must promise yourself), youll
use these cards only for convenience, if at all; and never to buy
something that isnt a budgeted expense.

Im sure you noticed that I did NOT suggest that you just find the
minimum payment due on your credit card balances and use that. You
definitely dont want to put that number in your Current $ column. The
reason is that the minimum payment due usually reduces your principal
balance only a little bit, if at all. Most of it just pays down interest. If all
you do is make the minimum payment on a card, it will take you forever
21

to get rid of the debt- - even if you swear off using the card and put it
through a shredder.

Heres an example of how this last category might look when youre
finished. The installment loan numbers are all using monthly payments
defined by the loan contract. The card payments are calculated by adding
15 percent to the balance and dividing by 12.

Monthly Expenses Worksheet
Other Loans/Credit Card Balances
Installment Loan #1 (Boat) $ 130
Installment Loan #2 (Snowmobile) $ 110
Installment Loan #3 (Tide me over) $ 75
Card #1 (Balance is $1,500) $ 144
Card #2 (Balance is $800) $ 77
Card #3 (Balance is $1,250) $ 120
Card #4 (Balance is $1,000) $ 96

St ep 3Fi l l i n t he Cur r ent $ col umn f or al l expenses

Once you get all your numbers crunched for your other loans and credit card
balances, go ahead and fill in the Current $ column completely. Then add all
the numbers in this column and enter it at the bottom of you worksheet in the
first box to the right of Grand Totals. This is your total for monthly expenses
as things stand for now. This is what it costs you, or will cost you

If you want to continue to live exactly as youre living now, and

If you want to get rid of your loans and credit card balances in a
reasonable, predictable way.

Now, how does your monthly expense total compare with your monthly income?
Check one of these two options and fill in the dollar amount:

22

If you checked the first option, then give yourself a pat on the back. This is a
real achievement in tough times. If at this very moment youre bringing in more
than youre spending, youre going to have no problem improving your credit.

If youre upside downthat is, if you checked the second option, then youre
probably in the majority. Most people who are having credit problems are in
this same fix. Youre not alone, and you can start right now working through
Steps 4 and 5 to try to turn this around.

Even if youre in the first group (youre operating in the black right now), I still
recommend that you go through Steps 4 and 5. Youll increase the positive
monthly margin you have now, and the larger your surplus every month the
better.

St ep 4Col umns A, B and C

These three columns are on your expense worksheet to help you rank your
expenses in order of importance. Heres how to use them.

A It ems: Go through each individual line item and ask yourself whether
that particular expense is absolutely necessary for your survival. If it is,
put an X or a check mark in the A column. For example, lets say that
you have rent of $1,200 per month and youre locked into a long- term
lease. This is a Must Have item. Youll want to put a mark in the A
column for Rent. You also should mark the A box for all your credit card
payments that you calculated in Step 2.

Monthly Expenses
Housing
Mortgage/Rent Payment $ 1,200 X

B It ems: Maybe you really love dining out at a nice restaurant on Friday
nights, and maybe grabbing a morning coffee and bagel at Starbucks on
your way to work really gets your day off on the right foot. But the fact is
that you can eat at home on Fridays (thats where you eat the other six
____ My i ncome exceeds my mont hl y expenses by $________________.

____ My mont hl y expenses exceed my i ncome by $________________.

23

days of the week), and you have a toaster and a coffee maker at home
too. Give Starbucks a pass. Think of this Dining Out/ Fast Food expense
as a Nice, But item. Check your B column for this one.

Monthly Expenses
Food
Groceries
Dining Out/Fast Food X

C It ems: If youre like most people, youre spending money every
month on things that you just dont need at all. A good example might be
a subscription to a magazine that you havent read in months, or maybe
you subscribe to a newspaper that you can read online for free. These
things are in the Wont Miss class, and should be marked in the C
column.

Monthly Expenses
Entertainment
Movies/Theatre/DVDs
Magazines/Newspapers X

Once youve checked the appropriate column for all of your line item
expenses, count how many checks you have in each column and enter the
number in the last row of your worksheet. For example:

Monthly Expenses
Pets
Food X
Medical/Vaccinations X
Grooming X

24

Other Expenses
Child Support X
Birthday/Holiday Gifts X
Charities X
Back Taxes
Savings/Retirement X
Other Expense 1 X
Other Expense 2 X
Other Expense 3 X

Grand Totals 5 3 2

Youll probably have more A items than anything else, and B items
likely will outnumber your Cs.

St ep 5Your Tar get $ Col umn

OK, the first four steps were relatively easy; but now were going to move up to
a higher difficulty level. This is where you have to say NO! to yourself. I dont
mean that youre going to have to scream and shout at yourself, or beat
yourself up; but you will have to be firm.

Go through all the expenses that you marked in the A column.
Remember that these are all Must Have itemsthings that are necessary
for your survival. But, just because you have to have something, that
doesnt mean you have to keep paying the same price for it. The fact that
you must have it doesnt mean that you cant shave the price a little.

o For some items, like Child Support (if you have it listed) or your
Rent or Mortgage Payment, you might be stuck with your current
number. If thats the way it is, so be it.

o For others, you should be able to cut back a little.

You need to stay warm in cold weather, but maybe you can
save a few dollars on heat by turning the thermostat down a
degree or two.

You cant start stumbling around in the dark after the sun
goes down, but maybe you can use more efficient light
bulbs, remember to turn off lights when you leave a room,
25

and do a better job of conserving electricity.

You have to drive to work, but maybe you can cut back on
your other driving and reduce the Gas/ Oil bill for your car.

You have to eat, but maybe you can lower your food bill by
using coupons and shopping more frugally at the
supermarket.

Again, be honest with yourself here. Ask yourself if you can really
do it if you decide to make a cut.

Once youre finished analyzing and (hopefully) shaving your A items,
write the reduced cost in the Target $ column. If theres just no way to
cut back on an item, write your current cost in the target cost box. Heres
a snapshot of how this might look.

Monthly Expenses
Housing
Mortgage/Rent Payment $ 1,200 X $ 1,200
Utilities
Electric $ 90 X $ 80
Heat $ 110 X $ 100
Transportation
Car Loan/Lease Payment $ 295 X $ 295
Gas/Oil $ 145 X $ 120

Now go through all your B expenses. Remember that these are not Ill-
die- without- this expenses. You like having them, sure; but theyre not
crucial. You should be able to make some major headway here. You want
to cut all of your B items by a substantial percentage20, 30, maybe 50
percent or even more. Write all your reduced numbers in the Target $
column.

As for your C expenses, you see where this is going, right? Right. These
should all be history going forward. For these, write a zero in the Target
$ column.

OK. Mission accomplished. Now lets see if things have changed for the better.
Please fill out one of the two boxes below. For monthly expenses, use the total
26

in the Target $ column (the number in the bottom right box on your expenses
worksheet):

If youll be in the black, fill out this box.

If youll be in the red, fill out this box.

If you filled out the first box, you deserve congratulations. Youre in position to
work your way through the rest of this workbook, apply the lessons of The
Credit Solution, and establish or improve your credit.

If you filled out the second box, you might be thinking, Uh Oh! This isnt for
me. Im going to be stuck with my current credit rating. Ill just be wasting my
time going through all this. Believe me, this isnt true at all.

J Ju us st t l li ik ke e t th he e p pe eo op pl le e w wh ho o a ar re e
o op pe er ra at ti in ng g i in n t th he e b bl la ac ck k, , y yo ou u t to oo o c ca an n
i im mp pr ro ov ve e y yo ou ur r c cr re ed di it t s st ta ar rt ti in ng g r ri ig gh ht t n no ow w! !
Goi ng f or war d f r om her e, I expect t o oper at e i n t he RED!

My mont hl y i ncome wi l l be $__________________

My t ar get mont hl y expenses wi l l be $__________________

My mont hl y def i ci t wi l l be $__________________
Goi ng f or war d f r om her e, I expect t o oper at e i n t he
BLACK!

My mont hl y i ncome wi l l be $__________________

My t ar get mont hl y expenses wi l l be $__________________

My mont hl y sur pl us wi l l be $__________________
27

The thing is, in order to get the lasting benefit of all this work (to turn your
credit around and keep it high for a lifetime), you need to find a way to close
your deficit gap. You need to get into the black somehow.

If youre like most people in this situation, the problem is that your loan
balances and your credit card balances are just way too high. Thats probably
the heart of the problem. If these balances could somehow be reduced, youd
soon be in the black every month.

I If f y yo ou u r re e u up ps si id de e d do ow wn n i in n y yo ou ur r
m mo on nt th hl ly y f fi in na an nc ce es s, , i it t s s p pr ro ob ba ab bl ly y y yo ou ur r o ou ut ts si iz ze ed d
l lo oa an n b ba al la an nc ce es s t th ha at t a ar re e k ki il ll li in ng g y yo ou u. .

I It t d do oe es sn n t t h ha av ve e t to o b be e t th hi is s w wa ay y! !

You might be surprised to learn that there is a way to negotiate with your
creditors and get them to substantially reduce what you owe. Its true. I know
this can be done because I have done it. So have thousands of others. Its just a
matter of learning the processits a question of getting the mechanics down
and using the right approach. I explain all the details, and I take you through
the process step by step, in my Negotiate and Settle Your Debts course. You
can learn more about it at the website.

If you decide to negotiate your debts, you dont have to abandon this
workbook. In fact, you can keep going through the remainder of this workbook,
and follow the process to negotiate your debts, all at the same time. You can do
both at once. If you do, youll become a person with good credit that much
faster.

Ti mi ng Is Impor t ant . If you plan to negotiate with your creditors, you should
get started right now. Youre going to be improving your finances as you work
through the following pages, and strange as it might seem, as you strengthen
your financial position, you weaken your negotiating position for lowering your
debt balances.

Youll succeed in negotiating with your creditors only if it is obvious to them
that you cant pay the full amounts owed. A stronger credit score wont send
the right message. If you need to negotiate your debts, now is the time to get
started.

28

The Cr edi t Sol ut i on, Chapt er 1: The Real Cost
of Bad Cr edi t

In the first chapter of The Credit Solution, I introduce you to some fictional
characters (Jack and Jim) and I show you how Jims less- than- excellent credit
score causes him to pay a lot more than his friend Jack when they borrow
money. Now its time to take a look at your loans and your credit cards, and see
how much money youll be able to save once you fix your credit.

How t o Cal cul at e t he Cost of any Loan

In order to figure out how much a loan is actually costing you, you need to
know three things: your balance, your monthly payment, and the number of
payments (either the total number of payments the loan calls for, or the number
of payments you have left).

The balance is the amount you owe at any given point in time. At the
beginning of an installment loan, its the amount you borrow; and it goes
down over time as you make your payments. With credit cards, the
balance is the amount showing on your monthly statement as the total
amount due.

The monthly payment on installment loans is fixed at the beginning of
the loan. Its the amount you pay each month to reduce the balance to
zero at the end of the loan. Credit cards dont formally identify a
monthly payment. They do tell you what the minimum payment is; but
thats not what were talking about here. Dont confuse the two. The
minimum payment is just a number that the credit card company has
decided to accept to allow you to continue to use the card.

The number of payments is just that. A three- year car loan has 36
payments at the start. If youve made 24 of them, you have 12 left. A
credit card doesnt call for a specific number of payments in any
particular amount, but you can still figure out what your card is costing
you if you know your balance and your interest rate (both of which you
can get from your monthly statement or online). Ill show you how to do
the numbers.

A Real l y Impor t ant Concept : Normally, payments have two components- -
principal and interest. Part of each payment goes to pay down a portion of your
balance (thats the principal part), and the rest goes to pay the interest on the
loan for that month. As you make your payments over the life of a loan, the
amount of the payment stays the same; but the portion of each payment that
29

goes to principal or interest changes. Heres an example:

Lets say you finance $3,100 over three years at 10%. Youre going to
have 36 payments of $100.03 each.

Your first payment of $100.03 will be mostly interest. This payment will
reduce your principal balance by only $25.83 and the rest will be interest.

But its a very different story for your 24
th
payment. By this time youre
making an ever larger dent in the principal balance every time you make
a payment. For payment No. 24, you reduce your balance by $89.80, and
only $10.23 goes to pay interest.

Anot her Real l y Impor t ant Concept : The longer the life of a loan, the more it
costs. Its true that as the number of monthly payments goes up the amount of
each payment falls, but the total cost of the loan skyrockets. Why, because the
lender has to wait longer to get paid. While the balance remains unpaid, the
lender continues to charge you interest on it.

It would be nice if you could just decide to finance your car for five years
(60 payments) instead of three years (36 payments), and have the total
cost to you remain the same.

It would be excellent if you could just add up your 36 payments, get a
total, divide that total by 60, and come up with your new monthly
payment.

But surprise, surprise; thats not how it works at all. The five- year loan is much,
much more expensive.

OK, now that weve nailed down these basic ideas, lets figure out the cost of a
loan and see what happens when we make changes in the interest rate and the
number of payments. Well use a $15,000 car loan.

30

Here we just total up all the payments and subtract the original amount
financed from the total payments number. What you get is the actual cost of the
interest over the life of the loan. In this example, the lender is charging $2,424
to loan $15,000.

Now, check out what happens if we borrow the same $15,000 for a longer term.
Well increase the number of payments, but leave the interest rate the same.

Sampl e 4- Year Car Loan

Amount Fi nanced (Bal ance on Day 1): $15,000

Number of Mont hl y Payment s: 48

Int er est Rat e: 10%

Mont hl y Payment : $381

Tot al of al l Payment s ($381 x 48): $18,288

Tot al Cost ($18,288 - $15,000): $3,288






Tot al Cost ($17,424 - $15,000): $2,424
31

Notice that the size of each payment goes down, but the cost of the loan goes
up by a lot. In this example, borrower ends up paying an extra $864 just to
extend the loan an additional year. Now lets see what happens if we go back to
a three- year term and jack up the interest rate instead.

We only moved the interest rate by five percent; but it boosted the total cost of
the three- year loan from $2,424 to $3,720. This is an increase in cost of
$1,296. The fifteen percent loan costs almost 54 percent more than the ten
percent loan.

Now you should be ready to dive in and figure out two things about your loans:

1. The actual cost of each of your loans, and

2. The amount each of your loans would be costing you if you had good
credit.

Mor t gage Loan Exer ci se: Lets get started with your installment loans and lets
tackle your mortgage first. You need to dig out your copies of your loan
documents and find the one that tells you how much you borrowed, the name
and address of the lender, the interest rate, the number of payments required,
and the amount of each payment. The document you need is probably called a
promissory note or something similar.






Tot al Cost ($18,720 - $15,000): $3,720
32

What were going to do here is figure out the actual cost of your mortgage over
the life of the loan. The only tools youll need are a pen or a pencil and a simple
calculator.

Lets go through the steps here just to be on the safe side:

For Line 1, take the amount financed number stated in your promissory
note. It should be at the top of the first page or in the first paragraph.

If your note doesnt call for a specific number of payments and instead
simply states the term of the note in years, just divide the number of
years by 12 to get the number of payments for Line 2.

Your note will state the interest rate. If you have a variable rate note and
your rate has changed since you bought your home, use your current rate
for Line 3.

Your note will state the amount of the monthly payment required. If you
have a variable rate note and your payment has changed, use the current
payment for Line 4.

Multiply the total number of payments by the amount of the monthly
payment. This gives you the number you need for Line 5.

The Home Mor t gage Loan You Have Now

Amount Fi nanced (Bal ance on Day 1): $____________

Number of Mont hl y Payment s: ____________

Int er est Rat e: ___________%

Mont hl y Payment : $___________

Tot al of al l Payment s ($________ x ____): $___________

Tot al Cost ($__________ - $___________): $___________
33

Subtract the value you entered for Line 1 (the amount financed) from the
value you entered for Line 5 (the sum total of all your payments). This
gives you your value for Line 6the dollar cost of this mortgage loan. If
you continue to keep up your payments until you retire your mortgage,
this is the total amount you will have to pay over and above the amount
financed.

The Def i ni t i on of Loan Cost : Now that youve worked your way through this,
youre in a position to really understand the simple definition of loan cost. Its
always the same: Its the difference between the amount borrowed and the sum
of all the payments. (I know, I know, sometimes there are additional charges
like points, document fees, title costs, legal fees, etc.; but these are never going
to go away and they arent worth considering when the point of the exercise is
to evaluate the benefits of improving ones credit score.)

But What Mor t gage Coul d You Get Wi t h Excel l ent Cr edi t ? Now that you know
the actual cost of your current mortgage loan, you need to see how it could
plummet with good credit. Call your bank and find out what interest rate you
could get today for this same loan (the same amount over the same time
period) if you had a FICO score of 720 or better. Then do the calculations again
using this new interest rate percentage.

Youl l Need t he Mont hl y Payment . Try to get the mortgage loan person
you speak with to tell you what the monthly payment would be at this
new rate. You need to know this too, and you cant figure it out with a
pencil and paper (well, most people cant). If youre speaking with an
actual mortgage lender or bank officer, theyll have a loan calculator on
their desk or computer and they can give you the payment amount in two
seconds.

If you cant get the payment amount on the phone, go online and find a
free loan payment calculator. Here are the website addresses for just a
few of these. Any one will do the trick. All youll need is the amount
financed, the interest rate, and the term expressed in months or years.

http:/ / www.vertex42.com/ Calculators/ loan- amortization- calculator.html

http:/ / www.bankrate.com/ calculators/ mortgages/ loan- calculator.aspx

http:/ / www.mlcalc.com/

http:/ / www.efunda.com/ formulae/ finance/ loan_payment.cfm

OK. You should be all set now to calculate the cost of a loan that is probably
going to be much more to your liking than the loan you have.

34

Now compare the cost of your actual loan with the cost of the loan you could
get today if you had really good credit. For most people the difference is huge. I
want to make two points here:

1. You might have bought your home several years ago, when you had good
credit. If so, your interest rate might have been very good for its day; but
its probably not competitive at all now. If you had good credit now, you
could refinance and take advantage of todays extremely low rates.
Without excellent credit, these low rates are not available to you right
now.

2. No one believes the current superb rates are going to last forever. The
best rates are available only to those with very good credit. In order to
take advantage of the current excellent borrowing climate, you need to
get your credit shaped up, and soon.

OK, thats it for the mortgage loan exercise.

Inst al l ment Loan Exer ci ses: Now lets do the same thing for your installment
loans, starting with your car loan. Again, somewhere you have the note and
financing contract on your car. Thats where youll find the necessary
information.

The Home Mor t gage Loan You Coul d Get
Today i f You Had Excel l ent Cr edi t






Tot al Cost ($____________ - $_____________): $___________
35

Again, call your bank or financing company to find out what interest rate you
could get on this same loan today if you had a FICO score of at least 720. Try to
get the monthly payment from the person on the phone, or figure it out
yourself by using one of the online calculators youll find in the Mortgage Loan
Exercise section above.

The Car Loan You Coul d Get






Tot al Cost ($____________ - $_____________): $___________
The Car Loan You Have Now






Tot al Cost ($____________ - $_____________): $___________
36

You might have one or two other installment loans. Maybe they are secured and
maybe theyre not. That doesnt matter. All were going to do here is compare
the one you have now to the one youd like to havethe same as we did with
the mortgage and the car loan.

Just fill in the reason why you got the loan at the top of the exercise boxes. Call
it the Boat Loan, the Snowmobile Loan, the Student Loan, or whatever.

Again, call the folks where you got this loan and find out what rate theyre
giving their highest rated customers right now. Go online for the payment if you
need to.

Ot her Inst al l ment Loan #1
The _________________ Loan You Have Now






Tot al Cost ($____________ - $_____________): $___________
37

The _________________ Loan You Have Now






Tot al Cost ($____________ - $_____________): $___________
The _________________ Loan You Coul d Get






Tot al Cost ($____________ - $_____________): $___________
38

Cr edi t Car d Exer ci ses: Now for your credit cards. These credit card exercises
are only for cards with a balance that you cant pay right now. Heres the
worksheet for your first card with a balance. Tips and instructions follow.

Cr edi t Car d #1
Cost t o Fi nance Cur r ent Bal ance

New Cur r ent Bal ance: $____________





Tot al Cost ($____________ - $_____________): $___________
The _________________ Loan You Coul d Get






Tot al Cost ($____________ - $_____________): $___________
39

Get out your monthly statement for this first card or go online and login to your
account.

Find out what your current balance is. Its going to be called New
Balance, Total Now Due, or something of the kind. Dont confuse this
with new charges or transactions. The number you want for Line 1 below
is the amount it would take to reduce your card to zero right now.

In the blank space for Line 2, write in the number 12. Were going to
assume that youll pay off this balance over twelve months.

For your interest rate, look on your statement for a box or heading
marked Interest Charges, Interest Charge Calculation, Interest
Applied, or something of the sort. Once you find that box or section,
look for the words Annual Percentage Rate or APR. Youll see a
number next to or under that, and thats the number you want.

If youve never really focused on this number before, dont go into shock.
Its going to be somewhere between pretty high and unbelievably high.
Put your interest rate in Line 3.

To get your monthly payment, go find one of those handy online loan
calculators youve already used a couple of times (the web addresses are
in the mortgage exercises section above). Figure out your monthly
payment using your balance, your interest rate, and twelve months (or
one year). Write it in Line 4.

Now tally up your twelve payments (you know the drill by now), and write
the total in Line 5.

Subtract your balance from your payments total to get the actual cost of
paying off this card over the next twelve months. Enter this amount as
your value for Line 6.

Lets say your balance is $2,000, and your interest rate (APR) is 27 percent.
Youll find that your payment is $192 and the total cost of financing this
balance over one year is $304. As you already know, if you take longer to pay it
off the cost goes way up even if the interest rate stays the same. If you paid off
this $2,000 balance over two years instead of one, the cost would more than
double.

Now follow suit with any other cards you have that are carrying balances that
you cant pay right now.

40

Cr edi t Car d #3






Tot al Cost ($____________ - $_____________): $___________
Cr edi t Car d #2






Tot al Cost ($____________ - $_____________): $___________
41

What s t he Poi nt ? So why go through this with your cards? Is it just to
demoralize you? No, not at all.

Heres the point: If you had really excellent credit right now, you could transfer
these balances to a card (or cards) that would let you pay them off over the
next year at terms that would be far, far superior to those youre dealing with
on your current cards. Credit card offers come and go, but as of this writing,
here are a couple of very good options that would be available to you if you had
top- shelf credit:

Capi t al One has a car d that would let you transfer the balance and
charge you a one- time fee of three percent. On $2,000, thats a single
charge of $60. This same card would carry the balance at zero interest
for the next fourteen months. That would let you make twelve payments
and pay no interest at all to finance the balance over one year.

Di scover has an even bet t er car d for balance transfer purposes. That
card would not charge any fee at all for the transfer, and it would carry
the entire balance for twelve months at no interest. Again, you could take
a year to pay it off and pay no interest along the way.

All of these cards start charging interest after the introductory period, of
course; but the rates are low by credit card standardsaround ten percent if
you have a credit score above 720, and ranging up to around twenty percent if
Cr edi t Car d #4






Tot al Cost ($____________ - $_____________): $___________
42

your score is only fair. In all probability, even twenty percent is less than youre
paying to finance the balances on your current cards.

What Id like you to do right now is get an idea how much you could save over
the next year in credit card financing charges. Referring to the credit card
exercises youve just completed, fill in the following blanks.

Total up your costs (Line 6) from all your credit card exercises above and write
it on Line 1 above. Get your current balances from these same exercises, add
them all up, and write the total in Line 2 above. Then subtract Line 2 from Line
1. Thats how much you could save (not counting the nominal transfer fees you
might have to pay depending on which new cards you choose).

The Cr edi t Sol ut i on, Chapt er 2: How Cr edi t
Act ual l y Wor ks

Chapter 2 of The Credit Solution is mostly explanatory. Theres a lot to learn
there about the many forces at work in the credit reporting industry, but there
isnt much to do. Consequently, there isnt much in the way of exercises to go
along with Chapter 2.
Taki ng St ock of Your Loans

Now is a good time, however, to gather together in one place some information
that youll need in the later stages of this workbook. At this point Id like for
you to put down some very specific details about each and every one of your
loans and credit card accounts.

Loan St at us Wor ksheet s: Here is the first worksheet for this exercise, followed
by the usual help.
Tot al Savi ngs on Cr edi t Car d Bal ances
Over Twel ve Mont hs i f You Had Excel l ent Cr edi t

Tot al Cost s f r om Al l Car ds: $____________

Tot al Bal ances f r om Al l Car ds: $____________

S Su ub bt t r r a ac ct t T To ot t a al l B Ba al l a an nc ce es s f f r r o om m T To ot t a al l C Co os st t s s: : $ $_ __ __ __ __ __ __ __ __ __ __ __ _

43

Account #1 Cur r ent St at us Wor ksheet

Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________

Is Account Past Due? ______ Yes ______No

If Past Due, How Long? _________________________________

Past Due Not i ces/ Let t er s f r om Cr edi t or ? ______ Yes ______No

Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

Is Account i n Col l ect i ons? ______ Yes ______No

Name of Col l ect i on Agency: _________________________________________

Addr ess: _____________________________________________

_____________________________________________

Not i ces/ Let t er s f r om Col l ect i on Agency? ______ Yes ______No

Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

44

Here are the line- by- line instructions:

For the name of the account, use something that identifies the loan in
your mindmy mortgage, my student loan, my Discover card, or
whatever.

Next enter the name of the creditor, the creditors address, the phone
number, and the name of a contact person if you have one;

The account number is on your monthly bill or statement.

The date when the account was opened is on your original loan
documents if its an installment loan. If its a credit card, youll find this
information online under your account information, or you can look on
your credit report. Youll find it there, for sure, along with your other
account details.

Record whether the account is currently past due, and if it is, how long it
has been past due.

If youve received any past due notices or letters from the original
creditor (OC) related to your failure to pay on the account, enter the
dates.

Indicate whether the account is in collections.

If the account is in collections, enter the name and address of the
collection agency (CA).

Record the dates of any letters or notices received from the collection
agency.

Here are some additional worksheets. Ive provides several in case you have lots
of accounts.

45


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

46


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

47


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

48


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

49


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

50


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

51


Name of Account : __________________________________________________

Cr edi t or Name: _____________________________________________________

Addr ess: _____________________________________________

_____________________________________________

Phone: _____________________________________________

Cont act : _____________________________________________

Account No.: ________________________________________________________

Dat e Opened: _______________________________________________________




Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________



Addr ess: _____________________________________________

_____________________________________________


Dat e of 1
st
Let t er : _______________________________________

Dat e of 2
nd
Let t er : ______________________________________

52

The Cr edi t Sol ut i on, Chapt er 3: How t o Get
Your Cr edi t Recor ds

The Credit Solution, Chapter 3 is all about getting your hands on your credit
reports and your FICO scores. If you have not already taken care of this, the
information you need so you can follow through and get it done is in Chapter 3.
So youll know youve handled it, and so the details are in one place, please fill
in the blanks below:

St at us of My Cr edi t Repor t s
and FICO Scor es

Exper i an:

Dat e Recei ved: ________________________________

Exper i an FICO Scor e: __________________________

Equi f ax:

Dat e Recei ved: ________________________________

Equi f ax FICO Scor e: ___________________________

Tr ansUni on:

Dat e Recei ved: ________________________________

Tr ansUni on FICO Scor e: _______________________

53

The Cr edi t Sol ut i on, Chapt er 4: Exact l y
What s i n Your Cr edi t Repor t ?

OK, by now you have your credit reports and your scores; but maybe you
havent had a chance yet to go through them in detail. If so, now is the time to
get started. Please take the following steps in order:

St ep 1Revi ew t he per sonal i nf or mat i on in all three reports. Make sure all of
the following are correct.

The spelling of your name,

Your birth date,

The last four digits of your SSN,

Your current and former addresses,

Any references to current and past employment.

Its not unusual for there to be minor discrepancies. One CRA might spell out
your middle name and another might not. One of your addresses might not be
quite right. The point of this exercise is to make sure that none of the CRAs is
confusing you with someone else, so minor variations are OK.

St ep 2Check t he sect i on t hat l i st s bankr upt ci es, foreclosures, tax liens,
judgments and the like. Are there any entries? Are they correct?

St ep 3Revi ew your account s f or accur acy. Make sure that all accounts listed
are yours, and that the information presented is consistent with your own
records. The account status worksheets you completed above should help you
out with this.

The reason youre going through this is to make sure that your reports contain
information about you (and only you), and that the information is correct. Flag
any errors, because youll be using these mistakes as leverage to upgrade your
score later on in the process. Unless you found all three reports to be perfect in
every respect, take some time now to fill out the following worksheet.

Cr edi t Repor t Er r or s Wor ksheet

54

Cr edi t Repor t Er r or s/ Di scr epanci es Wor ksheet

Exper i an:

Er r or / Di scr epancy #1: _______________________________________

______________________________________________________________


______________________________________________________________


______________________________________________________________

Exper i an:


______________________________________________________________


______________________________________________________________


______________________________________________________________

Exper i an:


______________________________________________________________


______________________________________________________________


______________________________________________________________

55

The Cr edi t Sol ut i on, Chapt er 5:
Under st andi ng Your Cr edi t Scor e

Youve already listed all three of your FICO scores, but please note them again
here.

It would be amazing if all three of these numbers were the same. Its not
unusual for the spread to be as much as twenty to 25 points. This is normal
because the mathematical calculations used by the three CRAs are not exactly
alike. Still, its possible that the differences are because of the data and not due
to variations in the calculation method.

Take a moment now to look through all three reports to see if you spot any
differences that might account for the higher and lower scores. Note any such
variations on the worksheet below. For each difference, note the nature of the
issue and how the three CRAs differ on the point.

Heres an example of what I mean:

Difference #1: Experian says I was thirty days late on Bank of America
Acct. # 458921 in January of 2009. Equifax and TransUnion show no late
payments on this account.

Take care with this because youre going to be using this information later.

Cr edi t Repor t Di f f er ences Wor ksheet

My Thr ee FICO Scor es

Exper i an Scor e: ___________________

Equi f ax Scor e: ___________________

Tr ansUni on Scor e: ___________________
56

Di f f er ences i n My Thr ee Cr edi t Repor t s

Di f f er ence #1: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #2: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #3: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #4: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #5: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #6: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Di f f er ence #7: ______________________________________________________

_____________________________________________________________________

_____________________________________________________________________

57

The Cr edi t Sol ut i on, Chapt er 6: St eps t o
Rai se Your Scor e

As you know from studying The Credit Solution (You have been studying it,
right?), a total of 65 percent of your credit score is based on only two factors

1. Your payment history (the extent to which you make your payments on
time), and

2. Your use of the credit available to you (whether you are using more than
30 percent of the limits on your credit cards).

These two elements are twice as important as all the other factors combined, so
it only makes sense to find ways to manage your payments and your credit
usage going forward. If you do, youll make major strides toward improving
your credit. Lets get down to the business of doing just that.

Managi ng and Schedul i ng Your Payment s

Ill let you in on a little secret about my own credit scoreIts very good; but as
good as it is, it could be better. How can I be so sure? Well, Im sure because all
three of my credit reports show a 30- day late payment on my mortgage about
two years ago. I wish it was a mistake, but its not. I blew it, and Im sure its
shaving my scores by fifteen to 25 points even today, after two years. The
damage was surely a lot worse right after I missed the payment.

So how did this happen? Well, I was on vacation, and I came down with the flu. I
was in a strange place, and really sick, for two weeks. Once I felt better, it took
me a couple of weeks to get home and get everything back on the right track.
By then I had missed my mortgage payment.

This didnt have to happen, and it wont happen to me again. Dont let it
happen to you either. Here are some measures you can take to make sure it
wont.

Put Your Payments on an Automatic Pay System. There are two ways to
approach this:

o One way is to give your creditors access to your bank account and
to allow them to make automatic monthly withdrawals. I dont
recommend this because I dont like the idea of letting anyone have
access to any of my deposit accounts; but people do it because
their creditors encourage it (creditors love this). Regardless of how
you feel about it, it has the advantage of reliability. You can count
58

on your creditors to pay themselves on time.

o Another, better way is to automate certain payments using the
scheduled payments feature of any online banking system. This
way, you dont have to share your account with your creditors. You
stay in complete control.

Bank of America, CitiBank and the other national online banks have
great bill pay systems on their websites. So do regional banks and
many local banks. With these systems, you dont actually write
checks. You just tell the system that you want to pay someone a
certain amount, and the bank sends a check to the creditor. Heres
what you have to do to make this happen.

You open your deposit account with the online bank and you
keep enough money in the account to handle any bills you
intend to pay.

You sign up online to use the banks bill pay service.

Once youre signed up and the bill pay system is live, you
identify the people or companies that you intend to make
payments to. For each creditor you provide specific
information such as the account number, creditor name,
mailing address, and so on. You only need to do this once.

For each creditor, youll have the option to make the
payments automatic.

Once a payment is automatic or regularly scheduled, it
goes out to that creditor on the same day of the month every
month until you stop it, which you can do any time.

You can also change the amount and the date of the payment
whenever you want.

I strongly recommend that you put your installment loan payments on a
bank automatic payments system. They work great for payments that
dont vary, like car payments, mortgages and student loans. As long as
there is enough money in the designated account, the bank sends out the
check to your creditor on the designated day, and you dont have to
worry about it.

The major banks offer this service for free. Not only do you not have to
buy the checks, but you save on postage.

59

Heres a worksheet for you to help you through the process of setting up
an automatic payment system at your online bank and scheduling your
payments.

Aut omat i c Payment s Wor ksheet s

60

Inst al l ment Loans Aut omat i c Payment s Wor ksheet

Onl i ne Bank Account Inf or mat i on:

Name of Bank: ________________________________________________

Account #: ____________________________________________________

Onl i ne ID or User name): ______________________________________

Onl i ne Passwor d: _____________________________________________

Inst al l ment Loan #1:

Name of Loan: ________________________________________________

Cr edi t or Name & Addr ess: ____________________________________

_______________________________________________________________

Account #: ____________________________________________________

Payment Amount : $___________________________________________

Dat e of Aut omat i c Payment : __________________________________


Name of Loan: ________________________________________________


_______________________________________________________________

Account #: ____________________________________________________

Payment Amount : $___________________________________________


61


Name of Loan: ________________________________________________


_______________________________________________________________

Account #: ____________________________________________________

Payment Amount : $___________________________________________



Name of Loan: ________________________________________________


_______________________________________________________________

Account #: ____________________________________________________

Payment Amount : $___________________________________________



Name of Loan: ________________________________________________


_______________________________________________________________

Account #: ____________________________________________________

Payment Amount : $___________________________________________


62

But What about Cr edi t Car d Bi l l s?

Youve just taken care of scheduling your installment loans (fixed monthly
payment loans); but what about your credit cards. You cant afford to miss
those payments either. The problem is that they vary. You cant just tell your
online bank to send Discover a certain amount of your money every month
(well, you can; but you shouldnt).

Automatic payment of credit card bills is a bad idea for two reasons:

1. You can never be sure what the exact amount of the bill will be, even if
you really police your use of the card. If you pay too little one month, and
you dont catch the mistake, you can have a 30- day late pay on your
credit report before you know it.

2. If you pay your bill automatically, there is a real danger that you wont
study your credit card statement every month the way you should. You
should check it every month, before you pay it, to make sure all the
charges are yours, that they are correct, and that you havent used the
card for purposes outside your budget.

Get an Onl i ne Cal endar . The solution for scheduling credit card payments is an
online calendar. If you have a Google or Yahoo! account, you already have an
online calendar that will solve this problem for you. If youre already using it to
make sure you pay your bills on time, excellent. If youre not, you should start
today. Its easy.

Here are the steps to set this up.

Get your credit card statements all in one place. You need to know all
your payment due dates.

If you dont have a Google or a Yahoo! account, open one. Both are free. I
like Google, but I dont think it matters. The two calendars look different,
but they work pretty much the same way.

Once your account is set up, youll find the calendar option on your
screen somewhere. Click on it and open your calendar.

Find the next due date for Card #1 and click on the box. This should give
you an opportunity to create an event for that date and to establish an
email reminder to be sent to you some number of days before the event
occurs.

63

Name the event appropriately. Use Discover Payment Due or something
similar. Tell the system to send you the email reminder seven days before
the due date. If you like, you can set a couple of remindersmaybe one
seven days in advance, and another three days ahead. Google also lets
you send a reminder to your cell phone.

Click on the repeat box and select the monthly option. Make sure the
reminders repeat monthly as well.

Thats it. Youve just arranged to have your online calendar send you an email
or cell phone reminder to pay Card #1 every month. The reminder will show up
in your email inbox or on your phone on the day, or days, you designate.

Now repeat this procedure for your other cards. Heres a worksheet that will
help you keep track of your progress.

Cr edi t Car d Payment Wor ksheet s

64

Controlling the Use of Your Available Credit

By setting up automatic payments and an online reminder system, youve taken
a big step toward boosting your future credit score; but theres more thing that
you can, and should do. If you dont take this measure, you run the risk of
losing the benefits of the good work youve already done.

Every one of your credit cards has a spending limit. As you know from The
Credit Solution, you dont ever want to approach that limit. The relationship
Cr edi t Car d Payment Dat es and Remi nder s

Car d #1 Name: _____________________________________________________

Payment Due Dat e: ___________________________________________

1
st
Remi nder Dat e:___________ 2
nd
Remi nder Dat e:_____________

Car d #2 Name: _____________________________________________________

Payment Due Dat e: ___________________________________________

1
st
nd

Car d #3 Name: _____________________________________________________

Payment Due Dat e: ___________________________________________

1
st
nd

Car d #4 Name: _____________________________________________________

Payment Due Dat e: ___________________________________________

1
st
nd

Car d #5 Name: _____________________________________________________

Payment Due Dat e: ___________________________________________

1
st
nd

65

between your card balance (how much you owe) and your credit limit is called
the utilization rate. If you want to improve your score and keep it high, you
want to keep the utilization rate below 30 percent on all of your cards.

The first thing you need to do is find out what your utilization rate is on each of
your cards. You need to see if youre over the 30 percent threshold on any of
your cards right now.

Get out your most recent statements, or go online; and using the information
presented for each credit card account, fill out the worksheets belowone for
each of your cards. The first worksheet (for your first card) is followed by step-
by- step instructions for filling these out.

This is critically important, so take is slow and be careful. Once you finish the
first worksheet for Card #1 and youre sure you have the hang of it, go ahead
and do the rest of the worksheets for your other cards.

Ut i l i zat i on Rat e Wor ksheet s

Cr edi t Car d #1 Ut i l i zat i on Rat e Wor ksheet

Car d #1 Name: __________________________ Acct . #: __________________

Cur r ent Bal ance: $_________________________

Cr edi t Avai l abl e: $_________________________

Cr edi t Li mi t : $_________________________

Cur r ent Ut i l i zat i on Rat e (Bal ance
Di vi ded by Cr edi t Li mi t ): __________________Per cent

My Cei l i ng on t hi s Car d (30% of
The Cr edi t Li mi t ) $_________________________

My Cur r ent Mar gi n (Subt r act t he
Cur r ent Bal ance f r om t he
Cei l i ng Amount ): $_________________________

66

Utilization Rate Worksheet Instructions:

The Current Balance is the amount you owe on this card right now.

The Credit Available is the amount the company would let you spend,
over and above your Current Balance. It will be labeled Credit Available
or something very similar. It will appear in an obvious place on your
statement or youll see it on your screen once you login to your account.
You also can find it on your credit reports.

Some companies make it really easy to spot your Credit Limit and some
dont, but if you dont see your Credit Limit right away, thats not a
problem. Just add your Credit Available and your Current Balance
together. The total of these two amounts is your Credit Limit. Its that
simple. Make sure this total matches the credit limit that your credit
reports show for each card.

To get your Current Utilization Rate, divide your Current Balance by your
Credit Limit. This will give you a percentage. You want this percentage to
be below 30 percent. If using a calculator isnt your strong suit (it might
not be if you dont work with numbers a lot), follow these steps:

o Clear your calculator.
o Key in the amount of your Current Balance.
o Hit the division button (the little horizontal line with a dot above
and a dot below).
o Key in the amount of your Credit Limit.
o Hit the equals button (two little horizontal lines).
o Youll see some numbers in your LED screen. The first two numbers
to the right of the decimal point (the period) are the ones you need.
If the two digits are 28, for example, then your Current Utilization
Rate is 28 percent.

To figure out what your Ceiling is for this card, multiply your Credit Limit
by 30 percent (30%).

o Key in your Credit Limit amount.
o Hit the X button.
o Key in 30
o Hit the % button.
o The numbers you see in your LED to the left of the decimal point
(the period) are dollars, and the first two numbers to the right of
the decimal are cents. This amount of money is 30 percent of your
credit limit. You dont ever want your balance to exceed this
number. This is your Ceiling on this card.

67

The last item, your Current Margin, can be a positive number or it can be
a negative number. Positive is good; negative is bad. Your Current Margin
is the difference between what you owe on this card right now, and the
amount you could owe without breaking through your Ceiling (without
exceeding your 30 percent utilization rate).

To get this number, just subtract your Current Balance from your Ceiling.
If your Ceiling is more than your Current Balance, youll end up with a
positive amount. If your Current Balance is higher than your Ceiling, your
remainder will be a negative amount.

OK, if youre satisfied that youve filled out the first worksheet and done all the
math correctly, go ahead and work through the same process with your other
cards. Here are some more worksheets.


Car d #1 Name: __________________________ Acct . #: __________________

Cur r ent Bal ance: $_________________________


Cr edi t Li mi t : $_________________________


The Cr edi t Li mi t ) $_________________________

Cei l i ng Amount ): $_________________________

68


Car d #1 Name: __________________________ Acct . #: __________________

Cur r ent Bal ance: $_________________________


Cr edi t Li mi t : $_________________________


The Cr edi t Li mi t ) $_________________________

Cei l i ng Amount ): $_________________________


Car d #1 Name: __________________________ Acct . #: __________________

Cur r ent Bal ance: $_________________________


Cr edi t Li mi t : $_________________________


The Cr edi t Li mi t ) $_________________________

Cei l i ng Amount ): $_________________________

69

Congratulations on working your way through these worksheets. Maybe you
enjoyed it, and maybe you didnt (you probably didnt); but either way, youve
done yourself a serious favor. Youve provided yourself with critical information
that you can now use to help fix you credit score and keep it high. Believe me,
most people dont have this information, and now youre among the few who
do. Youve moved yourself to the head of the line.

Put t i ng Your Ut i l i zat i on Rat es t o Wor k f or You

Now that youve crunched the numbers for these utilization rate worksheets,
heres what you know:

1. You know what the spending Ceiling is for each card (you should think of
your Ceiling as the real limit on the card);

2. You know whether or not you have overspent your Ceiling on each card;

3. If youve overspent your Ceiling (your Current Margin is negative), you
know how much you have overspent; and

4. If youre under your Ceiling (you havent overspent and your Current
Margin is positive), you know how much room you have left.

Car d #1 Name: __________________________ Acct . #: __________________

Cur r ent Bal ance: $_________________________


Cr edi t Li mi t : $_________________________


The Cr edi t Li mi t ) $_________________________

Cei l i ng Amount ): $_________________________

70

Now you need to put this knowledge to work.

If you have positive Current Margins on all your cards, thats outstanding. Most
people who are having credit problems find that they have negative margins on
at least one or two cards. If you have all positive margins, youre in the
minority. Going forward from here you just need to

Carefully monitor your monthly statements and make sure you stay below
your Ceilings on all your cards, and

Make sure you use your cards only for budgeted items.

If you have negative Current Margins on at least some of your cards, you need
to do what you can to remedy this situation as soon as possible. These negative
margins are hurting your score right now, and if you can fix this problem, your
score will improve quickly. Here are some measures you can take:

Pay Down t he Negat i ve Mar gi ns: We dont want to ignore the most
obvious remedy. If you can spare the cash, make immediate payments on
your negative cards and bring the margins into line today.

Bal ance Tr ansf er s: If you dont have the money immediately available to
solve your problem, then some balance transfers might quickly save the
day. To find out fill out this worksheet.

71

When you add up all your Current Margins on this worksheet, youll get a
positive or a negative number. If the total is positive, this means that you
can transfer your way out of your margin problem.

o Lets say you have a negative margin on Card #3 of $725. Youre
above your Ceiling on that account; but maybe you have a $1,000
positive margin on Card #2. In this case, you can transfer $750
from Card #3 to Card #2. This will bring the Current Margin on
Card #3 below its Ceiling, but it wont cause you to break through
the Ceiling on Card #2. Youll still be below 30 percent there.

o But maybe you dont have enough room on any of your other cards
to absorb the entire $725 negative margin on Card #3. If so, you
can split it up. Transfer part of the Card #3 margin to Card #1 and
the rest to Card #2. Do what you have to do so that you bring all of
your cards below their Ceilings.

o If the Total of All Current Margins on the above worksheet is a
positive number, this means that you can spread out your balances
on your cards and get all of them to a Utilization Rate of 30 percent
or less.

If the total for the above worksheet is a negative number, then you wont
be able to completely solve your problem with transfers. Your positive
cards dont have enough room to absorb the deficits from your negative
cards. If youre in this situation, here are your options:
Tot al of Cur r ent Mar gi ns on Al l Car ds

Car d #1 Cur r ent Mar gi n: $_________________________





= = = = = = = = = = = = = = = = =

Tot al of Al l Cur r ent Mar gi ns: $_________________________

72

o Rai se Your Li mi t s: You can contact your credit card companies
and try to raise your limits on your negative cards. This can be very
helpful in working your way out of a utilization rate problem, but
please keep in mind that a request for a credit limit increase will
very likely result in a hard inquiry on your credit report. If youve
had very few such inquiries in recent months, this wont hurt your
score much; but you need to weigh this factor. If youre wavering,
call the companies and ask about the inquiry issue before you
make the request.

If youre going to do this, fill out the following worksheet for each
negative card first so youll know for sure what you need for a new
limit.

If youre working with a card that has a balance of $2,000, youll
multiply that balance by 3.34 to get $6,680. This is the minimum
new limit youll be looking for. Here are a couple of extra
worksheets.

Wor ksheet f or Cal cul at i on of New
Cr edi t Car d Li mi t Request

Cur r ent Bal ance: $_________________________

(Mul t i pl y Cur r ent Bal ance by 3.34: X 3.34
= = = = = = = = = = = = = = = = =

Mi ni mum New Li mi t Request $_________________________


Cur r ent Bal ance: $_________________________

= = = = = = = = = = = = = = = = =


73

If you dont succeed in getting your limits raised all the way, take
what you can get. Any limit increases you receive will help you with
the next option.

Dont neglect your cards with positive margins. Call these
companies too and see whether theyll raise your limits. You might
have more luck increasing the limit on a card with a positive
margin, and if you succeed there it will give you more total margin.

Its also worth noting that if you have higher limits, your utilization
rate will be lower in the months and years to come when youve
paid off all your balances. This will only increase your future
scores.

o Mi ni mi ze t he Pr obl em wi t h Tr ansf er s: If you cant persuade your
card companies to raise your limits as much as you need, and if
you have any cards with any significant positive margins, you can
still use transfers to help yourself. Move at least some of your
deficits to these positive cards.

Keep in mind that a high utilization rate on a high limit card will
hurt your credit more than a similar utilization rate on a low limit
card. If youre working with limited positive margins and you have
a negative margin on a high limit card, target the high limit card.

Lets say you have a balance of $2,000 on a card with a limit
of $5,000. Youre utilization rate there is forty percent.

You have another card with a $2,500 limit, and you only owe
$500. Your utilization rate there is only twenty percent.


Cur r ent Bal ance: $_________________________

= = = = = = = = = = = = = = = = =


74

You would do well to transfer $500 of the balance from the
first card to the second card, even though that will bring the
utilization rate on the lower limit card to forty percent. Better
to break through the Ceiling on the $2,500 card than the
$5,000 card.

OK. Now that youve done what you can to make sure your payments are made
on time and that your credit utilization is under control, its time to deal with
getting rid of negative items that youve found in your reports.

The Cr edi t Sol ut i on, Chapt er 7: Remove
Negat i ve It ems f r om Your Repor t

By now you should already have market up your credit reports according to the
instructions that you found in The Credit Solution, Chapter 7. If you havent
completed this important first step, go ahead and take care of it now.

As I know you understand, it isnt enough to straighten out your finances and
pay your bills on time going forward; its also necessary to get rid of some of
the black marks that are on your credit reports right now. If you dont, theyll
stay on your record and drag down your score for months and years to come.

In The Credit Solution, Chapter 7, I show you that there are four different letters
that you can use to remove negative items.

1. Goodwi l l Let t er s. These go out to OCs. Theyre useful for getting rid of
30- to 60- day late pay entries when you have a recent history of timely
payments on the account.

2. FCBA Evi dence Request Let t er s. These go to OCs too. You use them
with you have more serious 90- to 150- day late pay entries on an
account that is currently paid up.

3. Val i dat i on Let t er s. These you mail to CAs only. Their purpose is to
remove unpaid collections entries that the CA has reported to the CRA.

4. Invest i gat i on Let t er s. These go directly to CRAs. Theyre for correcting
errors in your reports and for getting rid of collection entries that are now
paid in full.

Because these letters have different purposes and are used in different
circumstances, it can be a bit of a chore to keep track of what youve sent out,
75

to whom you mailed it, when a response is due, what you need to do when you
get a response, and so on.

What you need are some customized worksheets and some instructions on how
to use them.

Goodwi l l Let t er s Wor ksheet s: This first set is for goodwill letters. Instructions
follow the first worksheet.

Goodwi l l Let t er #1 Wor ksheet

Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________

Dat e My Let t er Mai l ed: _____________________________

Set Remi nder t o Check Rpt s: ____________

Dat e of OC Response (i f any): _____________________________

Removed Af t er 90 Days?

Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No

Tr ansUni on: ___________Yes ____________No

Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

76

Instructions:

Lender name, address and account number are self- explanatory.

Record the date on which you mail your letter.

Use your online calendar to send yourself reminders to check each of
your credit reports. You can set this for earlier than 90 days if you like.
Enter the number of days you select here.

If you get a written response from your lender, record the date here and
make a note of what the letter says in the Notes section on your
worksheet.

Check your three reports after 90 days, at the latest, to see if the
negative item has been removed. Record the result for each CRA.

Here are some more goodwill letter worksheets if you need them.

77


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________





Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

78


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________





Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

79


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________





Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

80

FCBA Evi dence Request Let t er Wor ksheet s: These are similar to those used
for goodwill letters.

FCBA Evi dence Request Let t er #1 Wor ksheet

Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________



Dat e Evi dence Pr ovi ded: _____________________________

Dat e of Ot her Response: _____________________________


Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

81

Instructions:

Lender name, address and account number are self- explanatory.

Record the date on which you mail your letter.

Use your online calendar to send yourself reminders to check each of
your credit reports. You can set this for earlier than 90 days if you like.
Enter the number of days you select here.

If you receive the evidence you requested in your letter, record the date
here. Record any comments or notes in the Notes section on your
worksheet.

Check your three reports after 90 days, at the latest, to see if the
negative item has been removed. Record the result for each CRA.

Here are some more FCBA evidence letter worksheets if you need them.

82


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________






Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

83


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________






Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

84


Lender Name: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Account #: _____________________________






Equi f ax: ___________Yes ____________No

Exper i an: ___________Yes ____________No


Not es: ___________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

85

Val i dat i on Let t er Wor ksheet s: As you know from The Credit Solution, Chapter
7, a Validation Letter can require one or two follow- ups, depending on the
response you get from the collection agency. These worksheets should help you
through the stages.

My 1st Mai l i ng (1.A)

Dat e My Let t er Mai l ed: _________________________

Remi nder Set f or 30 Days: ____________

Val i dat i on Let t er #1 Wor ksheet

Name of CA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

CA Account #: _____________________
86

My 2nd Mai l i ng (2.A)

Reason f or 2nd Mai l i ng:

CA Ignor ed 1st Let t er : _____________

CA Response Not Suf f i ci ent : _____________

It em i s St i l l On Repor t s: _________Yes _________No

Dat e My 2nd Let t er Mai l ed: _________________________

Wol l man FTC Lt r Encl osed? _________Yes _________No


CA Response t o 1st Mai l i ng (1.B)

Dat e of CA Response: _________________________

Response Val i dat es Debt : _________Yes _________No

If No, Why Not ? (descr i be i nsuf f i ci ency) _________________

__________________________________________________________

CA Agr ees t o Remove It em? _________Yes _________No
87

My 3r d Mai l i ng (3.A)

Reason f or 3r d Mai l i ng:

CA Ignor ed 2nd Let t er : _____________



Dat e My 3r d Let t er Mai l ed: _________________________

Cass FTC Lt r Encl osed? _________Yes _________No


CA Response t o 2nd Mai l i ng (2.B)




__________________________________________________________

88

Instructions:

The t op sect i on identifies the collection agency, the lender, the
accounts, and so on. Its self- explanatory.

Sect i on 1.A deals with your initial mailing. Note the date of the mailing
and set your online calendar to send you a notice 30 days thereafter.
Assuming that youre not sending out this letter in response to a
Validation Notice from the CA (well cover that situation in a later section
of this workbook), 30 days is a reasonable period to wait.

Sect i on 1.B: Note the date of the response to your first mailing, if you
receive one.

o If the response properly validates the debt, check the Yes box.
This completes the process for this account validation.

o If the response doesnt properly validate the debt, check the No
box and state the reason why the response isnt sufficient.

o If the CA says it wont remove the item, or doesnt say anything in
response to your request to remove it, check the No box here.

If after 30 days you get no response at all to your mailing, enter None
Received on the Date of CA Response line and move on to Section 2.A.

Sect i on 2.A: If youre doing a second mailing, its because you have not
heard from the CA at all, or because whatever they sent you fell short of
CA Response t o 3
r d
Mai l i ng (3.B)




__________________________________________________________

89

proper validation. Just check the appropriate option.

o Whether youve heard from them or not, its a good idea at this
point to check your reports and make sure the item is still there. If
it isnt, this means they just removed the item when they got your
first mailing and didnt bother to even contact you about it. This is
GOOD. If the item is gone, mission accomplished. Dont do
anything else. If its still being reported, check Yes.

o Record the date of your second mailing.

o If youre writing because the response to the first mailing was not
sufficient, youll want to include a copy of the Wollman FTC Letter.
Check Yes or No as appropriate here.

o Set another reminder to review the status 30 days after this second
mailing.

Sect i on 2.B: The instructions for this stage of the worksheet are the same
as those for Section 1.B.

Sect i on 3.A: The instructions for this stage are the same as for Section
2.A, except that here you definitely should enclose the Cass FTC Letter if

o If you have not heard from the CA at all or if the response did not
properly validate the debt, and

o If the item is still on your reports.

Sect i on 3.B: Handle this section the same as you handled Section 1.B and
2.B.

If you work your way through this process and the CA has failed to either
validate the debt or remove it from your reports, youll have reached the end of
the line as far as validation is concerned. Youll have to decide whether to
contact the FTC or take legal action, and if youre thinking along those lines,
remember to consider the statute of limitations implications, which are fully
discussed in The Credit Solution. Youll also have the option to pursue the
matter direction with the CRAs, using the Investigation Letter process. Well
cover that next.

But first, here are some more Validation Letter worksheets. Again, these
worksheets are ONLY for items that are already showing up on your credit
reports. There is a different worksheet for the validation process that is
triggered when you receive a validation notice from a CA and the item has not
yet appeared on your reports. Well cover that last.
90

CA Response t o 1st Mai l i ng of
Val i dat i on Let t er #2 (1.B)




__________________________________________________________

My 1st Mai l i ng of Val i dat i on Let t er #2 (1.A)




Name of CA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

CA Account #: _____________________
91

CA Response t o 2nd Mai l i ng of




__________________________________________________________

My 2nd Mai l i ng of Val i dat i on Let t er #2 (2.A)








92

CA Response t o 3
r d
Mai l i ng of




__________________________________________________________

My 3r d Mai l i ng of Val i dat i on Let t er #2 (3.A)








93

CA Response t o 1st Mai l i ng of




__________________________________________________________

My 1st Mai l i ng of Val i dat i on Let t er #3 (1.A)




Name of CA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

CA Account #: _____________________
94

CA Response t o 2nd Mai l i ng of




__________________________________________________________

My 2nd Mai l i ng of Val i dat i on Let t er #3 (2.A)








95

CA Response t o 3
r d
Mai l i ng of




__________________________________________________________

My 3r d Mai l i ng of Val i dat i on Let t er #3 (3.A)








96

Invest i gat i on Let t er s Wor ksheet s: Investigation Letters are mailed to CRAs.
Their purpose is to dispute errors in your reports. When a CRA receives one of
these letters about an item, it must investigate and confirm the accuracy of the
item, or remove it from your report within 30 days after receiving the letter
from you. This is a very powerful tool.

97

Invest i gat i on Let t er #1 Wor ksheet

Name of CRA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

Name of CA: ____________________________________________

CA Account #: _____________________

Dat e My Let t er Mai l ed: ____________________________

Dat e CRA Recei ves Let t er : ____________________________

Remi nder Set f or 30 Days f r om CRA Recei pt : ____________

St at us af t er 30 Days:

CRA Has Conf i r med It em? _______Yes _______No

If No, CRA Has Removed i t ? _______Yes _______No

If It em i s Removed:

Set Remi nder f or anot her 30 Days: _____________

Is It em Rei nser t ed? _______Yes _______No

If It em i s Rei nser t ed:

Chal l enge Accur acy? _______Yes _______No

Dat e New Chal l enge Mai l ed: ______________________
98

Instructions:

Enter the name of the CRA. Remember that if the item youre disputing
shows up on more than one report, youll need to go through this
process with two, or maybe all three CRAs. Fill out a separate worksheet
for each CRA for each item. You might have three worksheets for a single
disputed item.

Fill in the name and account # for the OC. Add the CA and account # if it
is relevant.

Enter the date of your mailing.

Enter the date the CRA receives your mailing. Youll find this on your
return receipt.

Set your reminder to show up 30 days after the date of delivery as shown
on your receipt. Thats the date that starts the 30- day clock. The CRA has
only 30 days from that date to either confirm the accuracy of the item or
remove it.

If within the 30- day period the CRA that confirms the item, check Yes. If
within this same period you dont get confirmation, check No.

If the item is not confirmed within the 30- day period, check your report
from that CRA to see if the item has been removed. Check Yes or No
as appropriate.

If the item has been removed, thats very good, but it isnt necessarily the
end of the story. Sometimes the creditors take longer than 30 days to
return the confirming information to the CRA and by the time the CRA
receives it the item has been removed. In such cases, the CRA might
reinsert the item into your report.

o So if the item has been removed after the initial 30 days, set
another reminder to check your report again in another month.

o Check Yes or No depending on whether the item has reappeared
after a month.

If the CRA has not reinserted the item, GREAT. If it has, you need to
decide whether it makes sense to challenge the accuracy of the new
entry. Check Yes or No to signify your decision.

99

If you decide to send a new challenge, write the date of your new mailing
and start the process over again with a new worksheet.

100


Name of CRA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

Name of CA: ____________________________________________

CA Account #: _____________________












101


Name of CRA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

Name of CA: ____________________________________________

CA Account #: _____________________












102


Name of CRA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

Name of CA: ____________________________________________

CA Account #: _____________________












103

Anot her Use f or Val i dat i on Let t er s: So far weve been dealing exclusively with
ways to remove negative items from your reports. There is, however, another
use for Validation Letters. In certain circumstances, you can use them to keep a
negative item from ever showing up on your report.

When a debt goes to collections, the CA must send you a written notice and
wait 30 days before reporting to the CRAs. If you send out a Validation Letter
immediately after receiving such a notice from a CA, you have a chance to keep
the item off your reports. The letter you send is Sample Validation Request 2,
which youll find in the Appendix of The Credit Solution.

104

Instructions:

The first seven items on this worksheet are the same as on previous
worksheets.

Val i dat i on Let t er #1 i n Response t o
CA Not i ce of Col l ect i ons St at us

Name of CA: ____________________________________________

Addr ess: ____________________________________________

____________________________________________

Name of OC: ____________________________________________

OC Account #: _____________________

CA Account #: _____________________


Remi nder Set f or 30 Days: _____________


CA Has Val i dat ed Debt ? _______Yes _______No

Has CA Repor t ed Debt ? _______Yes _______No

If No t o Bot h,

Set Remi nder f or 30 Days: ___________

Has CA Now Repor t ed Debt ? _______Yes _______No

105

After 30 days the CA will have property validated the debt, or not. Check
Yes or No as appropriate.

If there has been no validation, and a check of your reports reveals that
the CA has reported that the debt is in collections, then the CA is in
violation of the law. You can now pursue the multi- phase Validation
Letter process already laid out in the Validation Letter Worksheets section
above.

If the CA has neither validated nor reported the debt, set another
reminder and check back in 30 days.

Eventually, youll likely receive something from the CA because the CA
cannot pursue any collection activity, once it gets your validation request,
until it responds to it. If the CA provides proper validation, it will report
the debt; and youll have to consider whether to ask the CRA for an
investigation.

o This will depend on whether you can find some basis for
challenging the report entry.

If you dont get proper validation and the CA reports the debt, you can
still consider the Investigation Letter approach, and you also can weigh
whether to notify the FTC or take legal action. Again, the statute of
limitations consideration will be important here.

Wor kbook Concl usi on

Youve come to the end of your Credit Solution Program Workbook, which I
sincerely hope you found beneficial and easy to use. By now it should be filled
with tons of evidence of

All the work youve done to get your finances in order,

All the steps youve taken to improve your credit score going forward,
and

All your negative item removal correspondence to the OCs, CAs and
CRAs.

Like many other objectives in life that are really worthwhile, turning around
your financial life and shaping up your credit are not easy. As I said at the
beginning, this is a process and not an event. It takes time. Congratulations on
your commitment and your efforts. It wont be long before you start reaping the
106

rewards. Your financial life is going to improve, dramatically; and if youve
seriously done your homework, youll soon be enjoying

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