Myths of Credit Repair pt. 10

Myth #10 really forms the basis of what a credit repair company does. Unfortunately, there is a lot of negative and inaccurate information about it.

Myth # 10: It is illegal for creditors to take a negative, accurate listing off my credit report. The law requires that these items remain on the credit report for at least seven (7) years.

The truth is that negative information, of any type, does not have to be on a credit report for seven years, seven days, or even seven seconds. The creditors and collection agencies report it to "punish" you for your misdeeds. The law states is should not stay on the credit report greater than seven years with the exception of Ch. 7 bankruptcies which may stay on for ten years.

Here is where the confusion starts. The Federal Trade Commission says that accurate, negative information cannot be removed from a credit report. They are partially correct. The "whole" statement should be that negative information that is ACCURATE, TIMELY AND ABLE TO BE VALIDATED can legally remain on a credit report. Note that it is not required to be left on however.

Considering that 79% of ALL credit reports contain errors and that 25% are significant enough to be refused credit, what is the chance that there is inaccurate and negative information on your report? Yes... about 4 out of 5.

Let's discuss the three points in detail...

Accurate - While the credit reporting agencies are supposed to verify the information they provide when a credit report is requested, it is pretty obvious that they do not do a very good job. The vast majority of the time, the negative, inaccurate information is on your report causing you to pay higher interest rates on mortgages, auto loans and credit cards, as well as higher insurance premiums until YOU find it and make them remove it. It's like being guilty until you prove yourself innocent which, by the way, they make as difficult as possible.

Timely - As far as timely, negative trade lines are supposed to drop off about 7 years from the date of last activity (as found on your credit report as "DLA"). While sometimes these trade lines are removed automatically, often times you have to request their removal. Unfortunately some debt collectors will purchase old debt and then report it as new debt, just to hurt your score. For instance, suppose you have a hospital bill that you last paid 1-02. It is quite old and should be dropped from the report within the next several months from now (10-08). Besides the fact that it is affecting your score very little because of the age, it is past the statute of limitations for legal remedies in many states. Some unscrupulous debt collectors will "buy the debt" for 5 to 10% of it's value (due to it's age) and then report it as a new debt that restarts the clock injuring your credit score. This is illegal and highly improper, but that does not stop some of them.

Able to be validated - There are court cases that outline what it takes for the creditor or debt collector to prove that the debt is accurate, timely and that the debt belongs to you and that you agreed to be responsible. Many times, the collection agencies cannot provide the proof and the negative trade line must be deleted. Remember: it is their responsibility to prove you're 100% legally liable for the debt, not your responsibility to prove you are not.

As you can now see, the issue is not as cut-and-dry as you have been led to believe. In addition to what I have mentioned already, there are also issues with how the creditor arrived at the amount you allegedly owe, was it documented correctly, are any interest charges or fees appropriate, can the debt collector legally collect in the state you are in and much more.

If you are going to attempt to dispute your own negative items, I suggest you become very familiar with all the laws and acts that govern fair credit reporting and fair debt collections. Because of the time and difficulty involved, you can see why many people are using credit restoration organizations. In fact, Congress recognized that there is a legitimate need for this service and passed a law, the Credit Repair Organizations Act, to oversee these companies.

Hope this was helpful. Check back soon for more credit related information.

ScottScott Swinford is an Executive Consultant for the US Consumer Credit Restoration Association and a Certified Mortgage Planning Specialist in Northwest Indiana. If you have any questions, you can send email to scott@USCCRAonline.com.

What Do Credit Repair Companies Really Do?

It seems like you cannot get through the day without seeing an ad for a credit repair company. With your credit score being more important than ever to get you low interest rates on your home, car, and credit cards, not to mention lower your insurance costs, we are much more aware of how a poor score can affect us.

According to a booklet released by the Public Information Research Group, 79% of all credit reports have errors and 25% of those are significant enough to be denied a loan. That seems like a very large number, but in my experience, is correct. Add in the fact that most people are either too busy to dispute errors, are unaware of their rights under the various Federal Statutes, or in many cases both, and you have a great reason to turn to a credit repair company.

A reputable company will help a consumer correct the errors on their credit report and will often attempt to remove collections, late payments, charge-offs, foreclosures, repossessions, and bankruptcys. They do this by disputing the tradeline or public record with the credit reporting agencies (Trans Union, Experian, and Equifax). The statutes state that what is on a credit report must be accurately reported and must be verifyable.

Note: the issue is not whether or not the remark is correct, but whether or not the creditor can verify it properly as correct. For example, Bob has a $200 collection from Low-Life Collection agency that they purchased from HIR (high interest rate) credit card company for 15-20 cents on the dollar. Low-Life then calls Bob several times a day at home and at work, and even calls relatives asking for his whereabouts. Their simple goal is to collect as much from Bob as they can; as anything they get over $30 is profit. Bob then hires All-Star Credit Repair to dispute the collection. They simply write Low-Life a VALIDATION letter asking for all the documentation required by statute to prove that this debt is Bob's. They also tell then, in writing, not to contact Bob except by mail. Low-Life has 30 days to respond after they receive the letter.

What often happens is that Low-Life bought only the personal information and amount of debt, not the original paperwork with Bob's signature and the other required information to validate. They then decide that it is easier to lose $30 than to fight a battle they will probably lose and leave Bob alone. All-Star Credit Repair then sends a letter to the Credit Reporting Agencies stating that Low-Life cannot verify the debt and telling them (not asking, but telling) to remove the notation from Bob's credit report at once or they will file suit (and probably win the $1000 that the statute provides).

Sound complicated? It can be! The issue at hand is not whether Bob owes the money, because he does, but it is removed from his credit report because it cannot be validated. This should improve his scores and help him get better interest rates.

Is this something that you can do yourself? Yes, it is. In fact, the Federal Trade Commission says that the consumer can do everything that a credit repair company can do. That is true, and it's also true that you can rebuild your own transmission if you have the time to learn the proper way to do it and have the know-how to get it done right the first time.

If a credit repair company sounds like a good idea to you, you should know the truth. Many of the companies just send out dispute letters that you can find on the internet. They will keep disputing tradelines until the creditor forgets to reply in 30 days or less and then will fight to have it removed from the credit report. Again, something that you can do, but I would not recommend that tactic. The credit reporting agencies have been known to mark these types of repeat disputes as frivilous and not address them.

Unfortunately due to the need for credit repair, many people have just "hung out their shingle" after buying a repair kit and website for a few hundred dollars. Many of them have no idea of how to do anything except send multiple letters hoping to get results. Again, something that you could easily do without spending hundreds or even thousands of dollars.

If you are looking for a legitimate credit repair company, look for someone who will restore your credit. I don't mean look for someone who calls themselves a credit RESTORATION company, but one who not only removes negative information, but gets you positive tradelines and credit that will help restore your good credit. They are hard to find, but they are out there.

The company that I am affiliated with is a credit restoration association which means they do much, much more than just send frivilous letters. When you join, you are assigned an attorney and a paralegal who work for you. You are also eligible for a new checking account, a line of credit and helped with getting additional positive credit. And this is only one benefit of being in the association. You are also eligible for a discount healthcare program, legal advice and a review of your last two years taxes to see if you are due additional money back (and a lot more). All this is included in the membership cost which is less than what many other companies charge.

I included this information to show you that there are legitimate restoration services available, but you just need to know where to look. There is a lot of opportunity to get taken advantage of by some of the unscrupulous companies that pop-up to make a quick buck and then disappear.

As they say, let the buyer beware.

Scott

Scott Swinford is an Executive Consultant for the US Consumer Credit Restoration Association and a Certified Mortgage Planning Specialist in Northwest Indiana. If you have any questions, you can send email to scott@USCCRAonline.com.