Best credit repair calls for aggressive action
Patricia (not her real name) cannot remember the last time her bank denied her their services. Since when she became employed, she has been a diligent client. All her transactions pass through the same bank. Her employer processes paychecks through the institution. Several months ago, Patricia opened a savings account for her kids at the same bank. She considered applying for a mortgage. Patricia could not believe her ears when the manager told her that she did not qualify. She now feels like the world has collapsed on her and cannot understand why the financial world is so ruthless.
Understanding your credit report
Are you in such a predicament? When did you last look at your credit report? Do you know your FICO score? How can you improve your credit score? By finding answers, you will gravitate to a subject only a few people understand; credit repair service. Our friend, Patricia, sought assistance from a financial counselor who advised her to get a copy of her credit report. Upon scrutinizing it, she first checked the credit score and was saddened at how low it was. However, with the help of her counselor, she realized that there were some mistakes, and these had lowered her score.
Consequences of bad credit
Most of the time, you go about life without thinking about the impact of credit issues on your finances. Reality checks in when you need to apply for a facility such as a mortgage. Like it or not, the information credit bureaus collect and pile on your credit report could make you have a smooth life or turn it into a daily struggle. Take for instance the simple act of paying your monthly bills. If you, out of ignorance or otherwise, decide to delay a few things could happen:
- Lenders start denying you loans
- You cannot secure a home or an apartment
- Employment doors get shut in your face
- Insurance service providers increase your rates
- Your relationship with a spouse takes a beating
Consider taking some action
However, getting into a lousy credit situation does not put you into financial condemnation. With some effort and patience, you can regain your functional status and be on the way to restoring control over your finances. Credit card providers, banks, and other lenders could soon be chasing you all over trying to get you to sign up. Moreover, you are set to get reasonable interest rates when seeking for a home loan. However, all these goodies will only come your way if you take bold steps to repair your credit report.
Unpacking credit reports
A credit report is like a snapshot that summarizes the way you have been settling your credit transactions. It captures personal information, credit applications and account statuses whether positive or negative. The report also shows who has viewed it and when they did. Before you apply for a mortgage, for instance, you need to review your credit report first. To steer clear of possible embarrassment, you should carry out an appraisal on a quarterly or half-yearly basis. That way, you can spot inaccurate information and any attempts at identity theft.
When your secrets become public
Each month, your creditors together with collection agencies file a report with credit bureaus. An electronic system exists which interlinks all lenders to the credit bureaus which then update the information collected into a database. Also, there are third parties that help in sharing other details such as court judgments and liens on taxes. All these go to your credit report. Negative items can only be removed from your report upon the expiry of the amount of time stipulated by the Federal Statute of Limitations. The statute comes into force 180 days from delinquency.
Statute of limitations
To expound a bit on the statute of limitations, let us assume that you have a payment that falls due on 1st August. However, you do not pay until 1st September. From the lender’s perspective, you will be late by 30 days. Your 180 days start from September meaning that the statute begins in February of the following year. If by this time you still have not paid-up, the status remains in your credit report for the next seven years. The creditor who had advanced you the facility then proceeds to disclose your status to a credit bureau.
Destructive items in your credit history
When a lender makes several attempts at collecting debt and is unsuccessful, they can charge it off as a bad debt. An alternative is to sell the debt to a collector. What transpires is a charge-off. Judgments are another destructive item that can ruin your credit status. When creditors sue you, they obtain a court decision. The judgment also goes on record and stays there for seven years. Payments for child support also become part of your credit history. When you fail to remit these payments, the report becomes public record and remains there for seven years. Foreclosures and repossessions are also negative marks on your credit report. They too stay for seven years.
Obtaining a status report
To get your credit record, you can place a request to TransUnion, Experian and Equifax as they are the three main bureaus. Alternatively, you could wait for the free annual report or opt for a merged report by the three agencies. However, the ideal thing to do is to obtain the Annual Credit Report online. You are entitled to one such report per year, and it is free of charge. Ensure that you print the credit report because once you close the screen, you cannot have access again unless you pay for it. Obtaining credit reports via mail is also possible. All you are required to do is visit AnnualCreditReport.com, print out the form provided fill and send it to the address provided.
Get your reports for free
You may not have the liberty of waiting for the yearly release. Fortunately, federal law provides some exceptions. If a lender denies you credit or an insurance company refuses to provide you with coverage, you can request for a free report. The law allows you a grace period of 60 days from the date of service denial. To initiate the process, you must notify the credit bureau in question plus the notification must be in writing. At the same time, you can place a similar request if you suspect identity theft or has been a victim. High rates of interest by your bank or credit card service provider are also sound reasons to request for a free report.
Credit repair action with gloves off
The best credit repair action is to invoke a letter of dispute. You must have reviewed your credit report and noticed some discrepancies. For example, there could be charge-offs, yet you cleared your loan or made payments on time. In your dispute letter, you should question any negative line that you feel is unfair. You then proceed to mail the letter and wait for a response from the credit bureaus. Usually, they give a reply in 30 days. However, the process can frustrate you while also consuming too much time. Armed with your report, first check the correctness of your personal information. After that, go through the reports once more and highlight all erroneous entries. Look out for:
- Deceased clients
- Inquiries that neither you or your creditors sanctioned
- Name of a spouse that you divorced
- Incorrect credit limits
- Attempts at foreclosure
- Amounts listed as owing yet you paid everything off
- Tax Liens
- An indication of an asset repossession that you surrendered on a voluntary basis
According to the Fair Credit Reporting Act, credit bureaus have 30 days within which they should investigate and ascertain the validity of the items you have queried. After the expiry of this period the agency should verify and if not, delete the thing in dispute.
Well-kept records, critical for successful dispute
To succeed in your dispute inquiry, you need to keep records of all correspondences with credit bureaus. You can use a box file or a set of folders. If using the latter, be sure to label them appropriately. Write the name of each bureau on a separate file. Keep a copy of every letter you send or receive while also updating the same in the dispute items tracker.
On the other hand, you could also track your time and money utilization. Make a note of the time you have taken off from work to attend to credit-repair efforts. Note the date, time off and the money you have spent. Record the time you made a phone call to a credit bureau plus the name of the person with whom you spoke. The information in your files will come in handy just in case there is a need to sue the credit bureaus.
Techniques that work effectively
Best credit repair techniques you could use include:
- Self-credit repair
- Settlement of outstanding accounts
- Hiring a credit repair company
- Legal action against credit bureaus
In the self-propelled method, you are the one to write to the bureau and express disagreement with negative items. For settlement, you need first to pay what was outstanding after which you reach out to creditors and ask them to remove all entries that could harm your status. Without paying what you owe, you will have little or no negotiating power. Credit repair agencies, advisors or companies will help the process move fast. However, you must research these companies aggressively to confirm that the firm you are dealing with is legit. Confronting the credit bureaus almost always yields results. Some agencies delay investigations leaving you with no option but to sue.
Writing a dispute letter that gets noticed
While preparing your dispute letter, remember to be polite in your tone. Choose five items and move on to the next set of inaccuracies rather than tackling everything at once. Otherwise, credit bureaus may take it that you are trying to misuse the system. At the same time, you do not want to water down the challenge by making it look unworthy of their effort. Find items that are easy to tackle and have the bureau investigate them first. State your points clearly and avoid vague phrases. If you can, send your inquiry during the public holidays. After receiving the first response, send your second letter five days later. This time, use a language that is more aggressive than the first.
Taking the creditors to task
At times, the credit bureau may retain a negative item despite your spirited efforts to have it deleted from the report. If this happens, write to the creditor in question and request that they show proof of your outstanding obligation. Go further by asking them to send you a payment report detailing a history of the settlements you made. Your objective here is to find out whether you delayed your payment on the date stipulated in the credit report. If the creditor fails to show proof, they must delete the information and notify the credit bureau. When no response is forthcoming, take the matter up with the attorney general’s office.
Final say – you can do it
As you have realized, the credit repair process is a tough exercise. You should not pursue it half-heartedly. Before making any moves, equip yourself with knowledge. Fortunately, this article has gone to great lengths to share with you tips on the best ways to review your credit report and scan it for erroneous information. You now know how to prepare a dispute letter; you need to keep sending them until the credit bureaus pay attention. Do not relent in your efforts to repair bad credit. Your financial future depends on how creditworthy you are. Use the knowledge you possess to find credit repair tools that have worked for others; they will work for you too.
Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.