Credit Repair Law

With the increasing difficulty for getting credit when you have an adverse or poor credit score, it is vital that the information held on file by the Credit Bureaus and Credit Agencies is both accurate and current. That is why so many people are looking at repairing their credit history and looking for bad credit help.

Before we look into Credit Repair Law and your legal rights as an individual, it is absolutely paramount that you understand and digest the following statement – “No one can legally remove accurate and timely negative information from a credit report”. Lets us dispense with companies and claims which tell you otherwise. The internet is packed full of companies which tell you that it can be done. To avoid being caught out read our guide to Credit Repair Agencies.

So what can be done?

You can erase incorrect or outdated information easily and legally. The law allows you to ask for an investigation of information in your credit file that you dispute as inaccurate or incomplete or expired. This is a free service and there is no charge for it. As intimated previously some people hire a company to investigate on their behalf, but remember, anything a credit repair clinic can do legally, you can do for yourself at little or no cost.

So where does the land lie with reference Credit Repair and the Law? According to the Fair Credit Reporting Act (FCRA):

• You’re entitled to a free report if a company takes “adverse action” against you, like denying your application for credit, insurance, or employment. You have to ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

• Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it.

The three companies have a mailing address for consumers to order the free annual credit reports the government entitles them to.

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You may order reports from each of the three consumer reporting companies at the same time, or you can stagger your requests, ordering one from each company throughout the year from the central address.

Remember, it doesn’t cost anything to dispute errors or outdated items on your credit report. Under the FCRA, both the consumer reporting company and the information provider (the creditor) are wholly responsible for correcting inaccurate or incomplete information in your report. If it is wrong it can be corrected and will improve your credit score.

FREE Credit Reports

One of the most common questions asked on credit repair is actually how to fix credit. Well, the most essential tool and piece of information to assist in doing this is the credit report which will detail your credit score. Armed with this piece of information you will have the same data that the lenders will have when making decisions on whether to give you credit, how much, and at what rate. You will be able to examine the report and ensure whether the information held on record is a true and fair representation of your financial situation. Mistakes and errors are not uncommon which is why it is vital that you obtain a credit report and check it thoroughly.

There are several different credit bureaus each of whom will use different criteria and scoring models for determining the credit score – this means that at any one time a person may have several different credit scores simultaneously. Most lenders use one of the “big” three bureaus – Experian, Equifax and TransUnion, who in turn will use differing systems to access credit worthiness.

The most common is the FICO, used by a majority of bureaus and lenders; others include NextGen, VantageScore and CE who make up the rest. It is therefore recommended that when looking at your credit report you obtain one from each of the three different bureaus to make sure that the information is correct across all data.

So what is a credit report or credit score? A credit score in the United States (and most other countries) is a number representing the creditworthiness of a person. It will detail all aspects of a person’s financial history – payment history, credit utilization, length of credit history, type of credit and recent searches/credit obtained – each of these criteria given a weighting towards the overall figure. By looking at these scores lenders are supposed to be able to measure the risk of default and from this accept or reject credit applications and assess the rate of interest. Late payments, arrears, defaults will all count against a good score.

But let us not forget the purpose of the Credit Score – it is about making the bank profit at the lowest acceptable risk. Even people with perfect credit scores can be rejected simply because the transaction will not make the bank enough money. The scoring process is about profit not risk – banks accept customers for their own requirements, not the reverse. Risk of course plays a part – clients unlikely to repay are a threat to profits. Yet even the solvent may be rejected if they’re unlikely to generate profit for lenders.

The current financial turmoil has only magnified this, therefore we need to understand banks are there to make money, not help us.

It’s about weeding out unprofitable customers.

So, to recap, order copies of your credit files from the 3 different Credit Agencies. Once you’ve got them be diligent – check the accuracy of the info that banks are judging you on. As we’re talking billions of pieces of data, there are always mistakes. Lots of costly mistakes….

Check EVERYTHING! One apparently minor mistake can be a hammer-blow to credit applications

Are all your debts correctly listed? Are there any inaccuracies on your repayment history?

Yet other details are important too. Check your present and past address details. Errors here can lead to you being judged on someone else’s credit history. Also, your finances may be incorrectly linked with someone else’s. Focus especially on any currently active accounts. If they’re still open, even if you haven’t used them for years, it can cause problems.

Any errors?

Follow our step by step guide on how to repair your credit.

If like many you have found yourself in the situation where you have an adverse credit history it may be possible to clean up your credit report. The importance of a clean (or at least less adverse) credit report cannot be overstressed in today’s financial climate.

Your ability to gain credit and how much you will be charged are directly related to how your credit rating is perceived by the various lenders. Late payments, missed payments and other negative items on your credit file will all count against you when the lenders are making a decision on whether to advance funds and at what rates. Even if your credit rating is good, a cleanup of your credit report periodically won’t hurt.

The first step to clean up your credit history is to obtain a credit report from a credit reference agency, for details on how to obtain one for FREE follow the links at the bottom of the page.

Once you have obtained your credit report, spend some time going through the contents and check each item carefully. If you discover errors in one or more of your credit accounts, or references to late payments or other negative issues that lower your credit scores, take notes and document any contentious items. The good news is that credit report errors can be fixed, and it’s possible to remove many correct negative items too, the bad news is that it does take time.

The next step is to make a copy of your credit report and circle every item you believe is incorrect. Once completed write a letter to the reporting agency (the address will be on the report), explain each dispute and request an investigation to resolve the issues which you have found. If you have documentation supporting your issues, send it along, remembering to code pages to match dispute items. Important – do not send your originals.

Send all materials by certified mail, return receipt requested, so that you can prove the packet was received.

At the same time, send a similar dispute letter to the creditor whose reporting statements you disagree with. Remember to refer to a billing statement to find the correct address for disputes -normally it’s different from the payment address. Do this for each incorrect item/credit company.

If your dispute involves personal information, such as your current address, current employer or similar, enclose a copy of some co-oberating documentation such as a driver’s license, payslip or a utility bill in your name to verify your residence or other relevant detail.

The reporting agency will initiate an investigation, contacting your creditors to verify the accuracy or otherwise of the information in the credit report and your letter. If the creditor cannot verify that their entry is correct, it must be removed.

When the investigation is complete, the agency must send you a free copy of your report if changes were made. If the investigation uncovers an error, you have the right to ask that a corrected version of your credit report be sent to everyone who received the report during the past six months.

Tip:
Contact your creditor first, allow a bit of lead time before you submit the dispute to the report

Click here for a FREE Credit Report

Can you Erase Bad Credit Legally?

One of the most common questions asked about repairing your credit rating is how to erase bad credit and if it is indeed possible? Well, there is a lot of misinformation on this very topic.

There are adverts and boasts of people and companies dotted all over the internet all claiming to erase bad credit legally – don’t be fooled. The sad fact of the matter is that if the adverse items on your credit file are indeed correct and truthful, then there is no legal way to fix them and thus erase the bad credit. If there are inaccuracies or expired items on your file then YES, these CAN legally be removed.

Most of these companies offering to help repair your credit score will charge you a handsome fee for doing something you could do yourself – simply and cheaply.
So what should you actually do? The first step in all aspects of credit repair is to obtain a credit report showing the current information which the various credit bureaus hold on you. See the links at the bottom of the page to read about credit scoring and where to obtain a FREE credit report.

Sit down with a piece of paper and go through the credit report with a fine tooth comb, looking for errors and inaccuracies, noting them down where applicable.
The next step is to write a letter to the applicable lender or creditor if one or more error exists, detailing the mistake in as much depth as possible and providing as much supporting evidence as you can muster. Follow this up with a letter to the credit agency from whom you obtained your credit report. In this you must again detail the errors in full and provide evidence. When sending documentation be sure to send COPIES of the necessary evidence and not the original paperwork. Also send it recorded mail, receipt requested to ensure that your letter has arrived safely.

The credit bureau is obliged to complete a full investigation of your complaint within 30 days and report back with any findings. It will take up your case with the creditor concerned and try to ascertain the accuracy of your dispute and whether your evidence verifies the claim. The creditor or lender has to reply within 14 days, again with information supporting their claim.

If, as you have implied that the bad item reported by them is erroneous or obsolete, the creditor will have to report back to the credit bureau with amended information. However, if for any reason, the creditor fails to respond or report any amendments within the 14 days the disputed information will be erased from your credit file.

By using this simple method, you may succeed in getting some old or adverse issues removed from your report. If the reply from the creditor is that the information is correct but that you still feel that it is wrong another option is to add a statement of dispute to your file. You can get this done by making a written request to the credit bureau or agency who must oblige. It will appear as a written statement alongside any disputed item on your file. Whilst not erasing the bad credit it will have a positive impact on your credit report.

Visit here for a FREE CREDIT REPORT.

Credit Repair Agencies

Following on from Credit Repair Agencies PART1

If you have been suckered in and do follow illegal advice to commit fraud, you will find yourself in major legal difficulties. It is a federal crime to lie on a loan/credit application, to misrepresent your Social Security number, and most seriously, to obtain an Employer Identification Number from the Internal Revenue Service under false pretences.

You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or Internet to apply for credit and provide false information.

So what is the answer – do legitimate Credit Repair Companies exist?

The answer is a very reluctant yes, legitimate credit repair agencies do exist but given the relative ease of correcting your own mistakes in your credit file, their effectiveness and value is questionable.

Consumers can already dispute mistakes in their credit files for free. But it will take time – applying for your credit reports, reviewing and highlighting errors, documenting the mistake, typing up your letter and mailing it. Several hours at a guess – but worth it for saving hundreds of dollars.

The typical service offered by a Credit repair services is to do this legwork for a sizeable fee. They will obtain a copy of your credit reports, review them for errors and send out dispute letters along with documentation, all things you can do yourself. Yes – they save you some time but the fee spent would negate this and then some. Erasing bad credit – forget it.

The most important thing to remember is that these repair services don’t have any secret methods for erasing bad credit. They don’t have the right to remove accurate and current information from your credit report however bad. FACT – Credit repair services can’t do anything for you that you can’t do for yourself. For free.

So, the task of trawling through your credit history is proving to be a job too far, how do you find a reputable Credit Repair Agency?

Like most things in life, it pays to do your homework. Go online and research the company before you contact them. Speak to the Better Business Bureau to see if there is a history of consumer complaints. Verify with your state’s consumer agencies and States Attorney Generals Office to find out if there are any pending legal investigations. Don’t however rely on chambers of commerce or other trade associations where membership is based solely on a fee as their opinion might not be neutral.

Finally take time to know your rights. Credit repair services must follow specific guidelines from the Credit Repair Organizations Act, intended to protect consumers from these very types of scams. You should receive an explanation of these rights before signing a written contract. Read them and be sure you are happy. If there is a request for cash up front – RUN.

If you do proceed you should receive a contract with all of the following information:

• The payment terms for services, including their total cost
• A detailed description of the services to be performed
• How long it will take to achieve the results
• Any guarantees they offer
• The company’s name and business address

Ensure they have offered a grace period. The credit repair company cannot perform any service for you until you’ve signed a written contract and completed a three-day waiting period. You may cancel the contract without paying any fees during this period.

As a footnote it is worth mentioning that the FTC cites “Credit protection and credit repair” scams as one of the top consumer complaints reported. The actual losses to consumers by these scams are difficult to calculate because many people are too embarrassed to complain but estimates put the losses easily in the millions.

Credit Repair Agencies

Are companies which claim to be able to fix or erase bad credit too good to be true? Well, in a word YES – in a lot of cases.

As with all walks of life there are good and bad, however when it comes to matters of finance and money when the going gets tough the tough get sneaky – out of the woodwork appear huge numbers of companies and individuals making promises they cannot backup, and this current financial turmoil is no different.

You will have seen advertisements in newspapers, on TV, and on the Internet from credit repair agencies offering credit repair services. They all make the similar claims:

“Credit problems? No problem!”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

“We can erase your bad credit — 100% guaranteed.”

“Create a new credit identity — legally.”

Let us start with a basic guide on the above statements – any company which makes these type of claims is most likely up to no good. The law is VERY clear on credit repair – bad but accurate credit information cannot be legally removed from credit files, and for the record, nor can new credit identities be created, bad loans be removed and so on. The fact is there’s no quick fix for creditworthiness – if it is bad and bad for a reason then sadly no amount of trickery is going to help you – hard work however will. You can improve your credit report legitimately, but it takes time and effort – there are no quick fixes.

Recognizing Credit Repair Scams

Each and every day, nefarious credit repair companies target consumers who have poor credit histories with promises to clean up their credit report, helping them to get a vehicle loan, a cheaper home mortgage, insurance, etc – once they pay them a fee for the service. That last bit is the real clincher….

These companies cannot supply you with an improved credit report for you using the tactics they promise. As stated previously - It’s illegal: No one can remove accurate but negative information from your credit report. So having paid hundreds or even thousands of dollars in fees up front you are left with the same poor credit report and they have your money.

So, how to tell if the credit repair agency is up to no good:

• Well, most importantly – they demand money up front. If they ask for money in advance the advice is simple – WALK….Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

• The Credit Repair Company doesn’t inform you of your rights and what you can do for yourself for free.

• The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

• They recommend that you do not contact any of the three major national credit reporting companies directly.

• The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number. This is fraud and can get jail time.

• The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness. This wastes your time and that of the credit agencies – hardly a way to impress them!

To continue reading see Credit Repair Agencies Part 2