Steve Bucci doesn't believe in quick credit fixes. The author of "Credit Repair Kit for Dummies" sees our credit histories as carefully woven tapestries created over a lifetime. Credit is something that, if left ignored, can't be slapped together at the last minute when you need it most -- such as when it's time to apply for a car loan or a mortgage.
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Bucci preaches that your credit has to be built from the bottom up -- and can't be fixed from the top down. There's no a magic wand, no credit repair fairy. And rebuilding a damaged credit file requires taking the right steps over time.
The fourth edition of "Credit Repair Kit for Dummies" was released March 24. CreditCards.com talked with Bucci about common credit repair misconceptions and the best ways to improve your credit score.
Q: What do you see as good or bad about our current credit reporting system?
A: I think the current system is great! You have to understand what was there before to understand how good it is now.
Credit now is almost completely nondiscriminatory. It's fast and efficient. The current system is not perfect by any means, but it's a vast improvement over the old days, when [a lender] could arbitrarily say, "We don't lend to women with tattoos," or some such thing.
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The difficult part of this system is that it can seem overly complex to consumers, primarily because they have no education on it. The first thing they know is that they have a problem, and they hit a wall of ignorance.
Another frustration is that the bureaus can act so impassively.
Maybe the worst part of this system is that so many young people get credit advice from their peers, and their peers don't have a clue.
Q: How important is it that a person repairs his or her credit? Should people worry about their credit even if they don't think they are applying for a loan anytime soon?
A: If you have credit that needs repairing, it's essential that you address it sooner rather than later. It will mess up your life for a long period of time. Bad credit has gone way beyond lending. It's about the fabric of life.
Credit is now used as a proxy for any number of behavioral or decision-making processes. If you're looking for a job and your credit is not good, it may significantly reduce your opportunities.
Credit affects buying insurance. The insurance companies, including homeowners and auto insurance companies, look at your credit reports. They score them and decide whether they will [issue] you [a policy] and how much they will charge. There is a proven link between creditworthiness and insurance risk.
It's difficult to buy a home with bad credit, but it's also hard to rent a place. They may make you put down a larger deposit.
A bad credit report could affect you in love. A lot of people today will say, "Sweetheart, before we commit to this relationship, I'd like to see your credit report." I've seen relationships break up over what's in a person's credit report.
Q: Have you heard any myths or misconceptions about credit repair?
A: The main one that keeps popping up is that negative information that is accurate and timely can somehow be erased form your credit report if only you pay enough money. They can just make it disappear. They cannot.
Q: Do you recommend paying someone to help you rebuild your credit?
A: I have done coaching in the past, and that has worked out well. Credit repair is a long-term systematic solution. It can be very valuable. Paying someone for a quick fix, I don't recommend. If your life is out of control, so will be your credit.
I was working with someone who has a very good income whose credit was trashed. She wanted to buy a house and didn't know how to go about it. I suggested getting rid of her love interest, who was using her credit cards, living in the house and not paying rent, and so on. There was no one else to tell the person to do that, and I did. I told her how to get new credit cards and rebuild her financial life.
In about a year, she bought a new house. It was a coaching job, not a credit repair job.
Q: So many people have foreclosures and short sales. What can they do about the damage to their credit?
A: Let's look at this in two parts: Before you lose your home, and after you lose it.
Before you lose your home: Foreclosures don't happen overnight. You get some warning. There are a number of things you can do. If you're in trouble, you need to act, and act quickly. Begin with a HUD-approved mortgage counselor. Don't get your brother-in-law.
If you cannot avoid foreclosure, start rebuilding [your credit] at once, when you see it coming. Open new lines of credit, personal loans -- just small ones -- before you default. That allows you to add positive data to your credit. This offsets negative data from the foreclosure more quickly. You're going to have a lot less access to credit after the foreclosure.
After foreclosure: If you can't start early, start small. The key is to get new, positive data flowing into your credit reports as soon as possible. If you can avoid having the lender suffer a loss in the foreclosure process, your credit will not suffer as much of a loss.
Q: Some people say a foreclosure can be worse than bankruptcy for your credit. Is that true?
A: It depends on your goals. If your goal is to buy a house, a foreclosure is worse than a bankruptcy. It's hard to get actual numbers for these things. Someone who has bad credit to start with loses less ground than someone who has good credit.
If you have a good credit score, you could lose in the vicinity of 100 points. If it's lower, you could lose 50.
Q: How do tightened credit markets affect people with so-so or bad credit?
A: They have a different effect. It used to be a matter of price. If you had bad credit, they would charge you more, or you'd need a bigger down payment. It's no longer about price. It's about risk. We're living in a risk-averse world. Credit was tremendously loose, then it was tight. Now, it's beginning to loosen up.
Still the equation is more risk driven. Before the mortgage meltdown, if you were breathing, you could get a loan. It's almost like science fiction the things that have changed since that time.
Q: What's the No. 1 thing you wish people knew about credit and credit repair?
A: The credit/life connection is really strong in how I look at credit. If people realize their credit and their lives have a relationship, it helps them understand it better.
I help people understand how credit works by giving them examples in nature. For example, I refer to bankruptcy as clear-cutting your credit. All the trees are all gone. You start all over from zero.
View credit as part of your life as an ecosystem. Negative information in your credit is like pollution in a pond. The more pollution, the longer it takes to get back to a solid ecosystem. People need to know that you can only repair credit by rebuilding it line by line.