Credit Repair 101

The following is a basic introduction to credit repair. You have more legal rights and avenues then can possibly be listed here, so be sure to read through the posts in our discussion forum for additional information! You will find many people willing to help you along the way.

So where to begin?

Before doing anything else, you must know where you are, and what you have to work with. The very first step is obtaining current copies of all 3 of your credit reports. Each Consumer Reporting Agency (CRA) maintains its own, separate database, and the information on each report is often different. So plan on getting all 3 reports. You can order each report individually below for a cost of about $8-$10 each:

Experian - www.experian.com
Equifax - www.equifax.com
TransUnion - www.transunion.com

You can also order all 3 reports at once thru myFICO a division of Fair Isaac.

If you have been denied credit, insurance, or employment, you should have received a "notice of adverse action". This will spell out how to get a free copy of the report used in the decision. Note that this will not get you copies of the other two reports.

Once you have your reports you will need to understand the information within them. You report is divided into several sections:

Personal Information - This section contains your name, address, employer, date of birth, Social Security number, spouses' name. Several variations of each may be listed, along with former addresses and names. This information is supplied both by creditors, and by you when you fill out a credit application.

Public Records - Bankruptcies, liens, judgments, garnishments, felony convictions may all be listed here. Anything that is a public court record is fair game.

Credit history - Loans, leases, mortgages, credit cards, collection accounts will be listed here. Also listed is your payment history, and various details about each account.

Inquiries - This is a listing of everyone who has "pulled" a copy of your report. Often divided into two sections, "hard" and "soft".
"Hard" inquiries are a result of you applying for something, or a current creditor looking at your report. These are the inquiries that lenders can see. "Soft" inquiries are only viewable by you, and are commonly the result of you pulling your own report, or marketing inquiries.

Let's take a look at each of these in more detail:

Personal information - Perhaps the first thing to attack is all of the old addresses and name variations. These serve no positive purpose on your report. If this information is needed by a creditor, you can supply it on an as-needed basis. These items can be removed by calling or writing the CRA, and asking for their removal, as they are "not accurate".

Public Records - Review this information carefully. It often passes through many hands between the courthouse and CRA, and is prone to errors. Information here can be disputed just like anything else on your report. Be cautious of sending in documentation in an effort to "correct" your report. You may find that you have inadvertently verified information by your own submission, making it's dispute nearly impossible later.

Credit Information - The important details here are-
Date of Last Activity. This is the date that is used to start the 7-year reporting clock.

Date Last Reported - This is the last date that the creditor supplied an update to the CRA. It has no bearing on reporting period or SOL computation.

Account Type - R= "revolving" I="installment"

Payment history:
0 - Too new to rate
1 - Pays account as agreed
2 - Not more than two payments past due
3 - Not more than three payments past due
4 - Not more than four payments past due
5 - At least 120 days or more than for payments past due
7 - Making regular payments under W.E.P (wage earner plan)
8 - Repossession
9 - Bad Debt; placed for collection; skip

Limit/Original Amount - For installment loans, the amount of the loan at it's inception. For revolving accounts, your credit limit. This is used to compute your credit utilization %, an inaccurate low limit will lower your score.

Balance - The amount owed as of the date reported.

Open/Closed - Whether an account is open, active, and available for your use, or closed and no longer usable. Closed by Consumer indicates that the account was closed at your request. This has neither a positive nor negative effect. Closed By Credit Grantor indicates that the account was closed by the creditor, often involuntarily. This is nearly always seen as a negative.

Inquiries - Listed by date, this is a list of who has pulled your report. There are specific reasons which must be met before anyone can pull your report. "Permissible Purpose" refers to the legal requirements for anyone to do so. Generally, you must:
1) Apply for something, like credit or insurance.
2) Have a current, open account with the creditor.
3) Have otherwise given your permission for the report to be pulled.

Companies or individuals pulling your report without "Permissible Purpose" are violating Federal Law, and subject to fines of $1,000, more in certain states.

How long do items remain on the report?

Bankruptcies remain 10 years from the date discharged.
Other negative items remain no longer than 7 years from the date of first delinquency. Positive items can remain indefinitely, but no less than 10 years. Inquiries remain for 2 years, with those in the last 6 months usually given the most consideration.

Credit Scoring

Often, a Credit Score is provided with your report, or available for an extra charge. There are 2 types of scores. FICO score, sometimes referred to as "Beacon" is the industry standard, and the only score that carries any real value. It is calculated by the Fair Isaac Company using the data contained on your report.

CRA-Specific scores are scores provided by the CRA's themselves,
using their own credit-scoring formula. These scores are of varying accuracy, and should never be relied on for an accurate indication. Only the true FICO score will be used by potential creditors. It is not unusual for these CRA-specific scores to differ from your FICO score by 100 points or better in certain circumstances.

Once you understand what is being reported.

Take some time to read the FCRA (Fair Credit Reporting Act) and FDCPA (Fair Debt Collection Practices Act). These are the laws that apply to credit reporting and debt collection. You have specific rights regarding both. Understanding your rights is basic to moving forward. Read and re-read until you are familiar with these laws.

Post questions in our forum as necessary for clarification.

You have the right to dispute any information contained on your credit report. This is done by writing the CRA, or using the dispute form on their web site. The CRA then is required to verify that information with the furnisher. They have 30 days by law to do so.
If such information cannot be verified, it must be deleted. Note that whether the account is "really" yours or not has no bearing on their responsibility to verify it. If it cannot be verified, it must be deleted. Period.

You also have the right to "validation". This is demanding that the creditor reporting the information prove to you that the account is really your responsibility, and that the balances are accurate. In the case of collection agencies, they must also prove that they have legal right to collect the debt. They must STOP all collection activity, including reporting and verifying, until they supply proper validation to you after a written request. Although no time limit is specified for them to validate, they cannot continue collection activities until they provide such. Sometimes, Collection Agencies will stop collection activities and return the account to the original creditor rather than validate. (This is perfectly legal )

*You do NOT have legal right to validation under the FDCPA when dealing with an original creditor. They may supply validation at their option, but are not required to do so. However, you do have the right under the FCRA to dispute directly with an original creditor any information reported that you feel is incorrect. This can be found in section 623. Once they have received your dispute, they must investigate the reported info and, they must also report the acct as disputed with the cra's.

If you demand validation from a creditor who is already listing a derogatory trade line on your credit report, they are required to note that account as "disputed by consumer" (or similar language). They may NOT place a new listing, or verify a current listing with the CRA until they have provided you with validation.

It is most always a good idea to send validation demands via CMRRR. (Certified Mail Return Receipt Requested) as this gives you proof, in the form of a receipt ("green card") that your demand was received, and on what date.

Be careful in selecting your method of dispute. Most of the time "not mine" is an acceptable starting place. Using one of the other choices such as "wrong dates" or "balance incorrect" implies that you have some knowledge of the account, making a later "not mine" pretty awkward.

Also be very careful in what information you supply to the CRA's. If you supply court papers, or collection statements in an attempt to correct your report, you may find those very papers used against you later! You won't be able to claim "not mine" on an account that you previously verified yourself. It's not your job to prove what is being reported. It is theirs. If they are reporting it, they must be able to prove it, without you sending in "supporting" documentation.

 

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