money talk

Can I qualify? Tips from insiders on catching errors in your credit report andimproving your score

To state the obvious, your credit score has a big impact on your ability to qualify for a mortgage, and your score depends on what's on your credit report.

For that reason, it's important that you review your credit report regularly.

While a recent study reported the incidence of significant errors on reports is fairly small, our experience contradicts those results, and an error could prevent you from qualifying.

It's likely the study only identified items creditors were willing to correct. I find many reports have negative items creditors are just too pigheaded to correct.

Maybe the hospital and your insurance company are arguing about coverage for a procedure, and the hospital reported the bill to a collection company. Maybe you returned your cable box, but the cable company didn't note it on your account. Maybe your landlord said he was going to let you break your lease, then reneged after you left. The study didn't address these types of errors, and to find them, we need to look at credit repair.

You are entitled to a free copy of your credit report from each of the three credit bureaus (Experian, Transunion, Equifax) once a year. You can request your report online, by mail or phone. If you have the discipline, I recommend requesting the report from a different credit bureau every four months (you can request your report from only one bureau at a time), which gives you the best chance to catch something early. You're looking for two things: accounts that you didn't open and errors in reporting. The report doesn't include your FICO score, but that's not really important for the task at hand.

If you find an error, the Fair and Accurate Credit Transactions Act (FACTA) provides you with certain rights to help get it corrected. To better understand those rights, I spoke with a credit repair expert, Doug Buford of Better Life Credit. Buford said the most important part of FACTA is the word "accurate," and a lot of creditors don't report accounts accurately. If you identify inaccurate account information, the act requires that creditors remove it from your credit report.

Buford stressed that the creditors and bureaus are not allowed to change account information to make it accurate. Once you prove an account is inaccurate, "the credit bureaus have to notify the creditor that they can no longer sell that debt and that they have to eat it."

Buford said the bureaus are required to verify any account you dispute, and you can ask for the written documentation they used for verification. From the date a dispute letter hits a bureau's desk, it has 30 days to respond. If the dispute is resolved in your favor, it may take 45 days for the correction to show up on your credit report.

You can dispute accounts yourself, or you can use a credit repair professional. If you choose the do-it-yourself route, you can dispute the inaccurate account by mail, by phone, or online. Burford suggested that you always dispute by mail. With phone disputes, you don't have a record. Burford also said the online dispute systems operated by the credit bureaus have onerous "fine print" that states you cannot dispute the same account again.

When done by mail, you can dispute an account again if you have new information or documentation. You can find a number of resources on the Internet with instructions on how to write and file a dispute (including here, here, and here).

Disputing accounts is a lot of work and often requires multiple iterations with the credit bureaus. If you choose to use a credit repair service, the cost should be around $1,000, and the process may take six to nine months. Buford's claim for successfully removing negative accounts is similar to other credit repair services — in the 70 to 80 percent range.

One really lousy way to try to improve your credit score is disputing all negative accounts without supporting documentation. It is true that when you first dispute an account, the credit bureaus remove the account from the credit score calculation.

However, lenders have gotten wise to this trick. If a credit report contains disputed accounts, lenders typically will subject the loan application to extra scrutiny, including considering how the negative items could affect your ability or willingness to pay your mortgage. In some cases, the lender won't even consider the application.

Another lousy way is paying off old collections. Paying an old collection can hurt your score more than it helps. According to Buford, "once an account goes into collection, the credit bureau computer no longer looks at the dollar amount. It just says collection account, reduce score."

If you pay a $1,000 collection, the next month your credit report will show a balance of $0, but it will have no positive effect on your score. The computer doesn't care about the amount, but it does care about the date of last activity, which is going to be today. The more recent the activity on a collection account is, the greater its negative effect will be.

Sometimes you cannot remove negative items from your credit report, especially when you experience a financial crisis, like a bankruptcy.

Next week we'll talk about how to qualify for a mortgage after a financial crisis.

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Preserving Texas

Protecting Texas for generations: The Texas Land Conservancy and centennialranches

Bluebonnets at Pike Davis Ranch
Terry and the river
Fox at Pike Davis Ranch
Photo by Matt Hicks
Pike Davis himself with friend Hiram Yost.

Cousins Howard Hicks and Bettie Green didn’t want their grandfather’s Hill Country ranch cut into subdivision lots and corner convenience stores.

“I had this real desire for it to continue to be a working ranch as long as possible, because I felt that what’s my granddad would have wanted,” says Green, now a grandparent herself. “We all wanted it to stay pretty much as it is.”

Hicks agrees. “It’s important to keep it where we could graze cattle on the land and make money from it. But our kids and grandkids have been coming here for years and have feelings for it and we also want to practice conservation.”

Their grandfather, Pike Davis, was one of five grandsons of Alfred Davis, who came to Texas in 1854. The earliest record of Davis owning land is in 1871, the cousins say. He accumulated an additional parcel, eventually owning 4,300 acres. Details are a bit sketchy; some records were lost when the Blanco County courthouse burned down, others when a tornado destroyed the family home in the 1920s.

“Ninety-five percent of land in Texas is privately owned, so the best chance at protecting land here is if private landowners lead the cause by electing to protect their own land in partnership with conservation organizations."

Over the years, pieces of the ranch were sold off. Today, it encompasses 1,415 acres of Llano Uplift in the Colorado River watershed, falling in both Blanco and Gillespie Counties. In 2008, Hicks, Green and other members of their extended family approached the Texas Land Conservancy (TLC), says executive director Mark Steinbach. The land conservation non-profit has been around since 1981 and preserved 108 properties totaling 80,000 acres around Texas.

“We completed a project with two adjacent properties in 2007, and the owner was so happy with the result that he recommended us to Howard Hicks,” says Steinbach. Hicks completed an easement on his individual property adjoining the Pike Davis Ranch in 2008. TLC staff spent the next four years meeting with the various owners and bringing everyone to agreement about how they wanted the preserve the ranch.

Together, these four properties protect 2,115 acres of Hill Country landscape, an area larger than Garner State Park and including frontage on the Pedernales River. It includes abundant native plants and natural habitat, water resources, and a lot of history. The latter means the most to Green. “Just to go around and say, my relatives walked here, that’s the most important thing to me.”

For TLC, one of the most important conservation values is the joining of the four properties. “It’s a tenfold outcome versus one piece of property,” Steinbach says. “Stitching together private lands in this way allows us to protect vast landscapes. With the price of land in the Hill Country, it’s nearly impossible to protect such large tracts without working in partnership with landowners.”

Conservation easements are a tool to help families with their long-term planning goals, he explains. Under a voluntary, negotiated agreement with TLC, the owners retain the right to build houses, within reason, and conduct other activities such as agriculture and hunting. “Easements protect the property from land fragmentation, and large-scale or intensive development,” Steinbach explains. “The landowner can pass it down to heirs, or sell it. The easement is perpetual and so runs with title of the land.” Tax benefits are the main takeaway for landowners, he adds. “By donating development rights to us, the owners can take a tax deduction of that value.”

Typically, the taxable value of the property is diminished by anywhere from 30 to 50 percent. “If the land is worth a million dollars, then perhaps $300,000 of that would be donated. With Hill Country land as valuable as it has become, that makes for a good enough incentive.” But even with tax benefits, the easement is not a money making strategy for landowners. Those who enter into an easement tend to have a conservation ethic in the first place.

“This will be the second centennial ranch, meaning one in the same family for more than a century, for us,” Steinbach adds. “It’s pretty significant that a family could hold land together for that amount of time, and now ensure that the next generation can hold the land. It’s a historically significant piece of property.”

The ranch will not be open to the public, which is the case with many conservation easements, but it will contribute to the public good, says TLC Outreach Coordinator Callie Thompson. “Ninety-five percent of land in Texas is privately owned, so the best chance at protecting land here is if private landowners lead the cause by electing to protect their own land in partnership with conservation organizations. Because Pike Davis will never become a shopping mall or parking lot, it will continue to be a public asset through its preservation of scenic views for everyone, protection of water quality, and conservation of native plant and animal species.”

Without the easement, the ranch most likely would be developed at some point. “Areas in Texas that are not under some kind of conservation easement, or that aren’t large properties that someone can afford to keep, are going to be developed,” Howard says.

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