Consumer Credit Repair
Consumer credit repair refers to the process of disputing mistakes and errors in your consumer credit reports generated by the national credit bureaus. One American in five has errors in their credit reports based on a recent report from the FTC. These errors can negatively affect your credit scores since they are calculated solely based on the information in your consumer credit reports.
A lower consumer credit score indicates to a potential lender that the quality of your creditworthiness is less than ideal. This can result in limiting your availability of credit sources as well as increasing the cost (fees and interests) of borrowing. It may be the the difference between getting approved for that first house mortgage loan with an interest rate that you can afford. It is definitely worth your time and effort to identify and repair these errors in your credit reports. Why? It can cost you many of life’s opportunities.
To help you understand the process of consumer credit repair, we provide you an overview of what it is, how to go about it, and your need to set realistic expectations as what credit repair can do to improve your credit score. Remember, your goal is to improve your credit score based on an accurate credit reports.
What Is Consumer Credit Repair?
What Is A Credit Score?
Your credit score is your credit history expressed as a number. It is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time. You can also think of it as a grade for how responsibly you have managed loans, lines of credit and other financial obligations over the years. Credit scores are extremely important because they affect your ability to borrow money as well as the cost of doing so. Simply put, those with higher credit scores generally receive more favorable credit terms.
The Consumer Credit Repair Process Is...
By law, information reported about you to credit bureaus must be fair, accurate, relevant, substantiated and verifiable. Consumer credit repair involves fixing inaccurate, misleading, unverifiable, untimely, biased or incomplete information listed on your credit reports.
In order to fix these errors, the national credit reporting bureaus (Equifax, Experian and TransUnion) require you to work through a series of formal dispute letters and complicated online disputing systems.
You or a third-party credit repair company will examine your credit reports to identify items that are in error and then register disputes with the three credit bureaus. This process takes discipline, patience and time.
There are four basic steps to improving the quality of your credit reports and resulting credit score:
Obtain your credit reports from the three major credit bureaus. Each credit bureau’s report is different and all need to go through analysis. You focus on the negative items that are affecting your credit score and you create a disputing plan.
If you choose to use a third-party credit repair service, their team assigned to your case reviews your negative items, drafts and sends the appropriate dispute correspondence to the creditors or credit bureaus. The disputes need to be done in writing and sent to the credit bureaus via certified mail for bureau accountability.
If a negative item requires more care or correspondence to remove, the dispute is escalated to include legal representation (if you use a third-party credit repair service). The Fair Credit Reporting Act and other laws are used to ensure your credit rights are accurately represented.
As disputes are processed, the credit bureaus need to be tracked to ensure compliance with the dispute resolutions. Additionally, you will need to analyze and adjust your financial behavior to take steps to improve your credit score.
Credit Repair Dispute Process | Step 1
A credit dispute is an inquiry sent to a credit bureau about an error on your credit report. It is a request for them to conduct an investigation of questionable information on your credit report. You will need to do this for all three credit bureaus.
Once you have begun a credit dispute, the credit bureau will initiate an investigation of any credit information that you challenge. The Fair Credit Reporting Act statutes obligate the three major credit bureaus to investigate the items in question. They must also forward any data you provide about the error to the organization that provided the information to the credit bureau.
Here are the following steps that you should take if you find an error on your credit report.
Each of the major credit bureaus have their process in place to dispute inaccurate information in a consumer credit report. While you can do this online, it is recommended to send a letter to ensure receipt and accountability.
The FTC has a sample dispute letter you can use for reference. It should cover:
- Clearly identify each item that you challenge.
- Explain why you challenge the information and go into detail.
- Request that the negative item is removed or corrected
2 – Contact The Data Furnisher
The data furnisher is the lender or creditor that provided the information to the credit bureaus. They are also obligated to follow the statutes in the FCRA. This means they are responsible for investigating consumer disputes about the accuracy of the information they provided.
Credit bureaus and data furnishers must investigate the items in dispute usually within 30 days. Once completed, they have five days to report the results back to you. They must provide the results in writing and give you a free copy of your credit report if the dispute results in a change.
Credit bureaus are not obligated to investigate a claim they decide is frivolous, such as:
- Submitting inaccurate or incomplete information on the dispute.
- Trying to contest the same item multiple times without new evidence.
- Attempting to claim without proof that everything on your credit report is inaccurate.
If the information you challenge is verified as accurate by the data furnisher, the item will remain on your credit report. Otherwise the item will be updated or deleted. Review your credit report to verify.
Filing a dispute and updates to personal information have no impact on your score. Your credit scores could change if information on your credit report is updated (removal of a late payment, change in account status, etc.) and is relevant in the calculation of your credit score.
Laws Governing Consumer Credit Repair
Fair credit reporting act
The FCRA regulates how the credit bureaus treat consumers.
- Ensures that consumers can acquire their consumer credit reports at a reasonable price (or for free under certain circumstances), and severely restricts “investigative consumer reports”.
- Regulates who has “permissible purpose” to acquire a consumer’s report.
- Specifies the running reporting periods for information on credit reports. Generally 7 years for most items except for bankruptcy which can remain for 10 years.
- Details how a credit bureau must handle consumer complaints.
The FDCPA was enacted to protect consumers civil rights and details credit collection business activities.
- Provides standards for acceptable third-party collections behavior.
- Specifies that Collection Agencies (CA) must always include several legal caveats in their dealings with debtors.
- Prohibits collectors from screaming, threatening or actually employing violence, using profanity, misrepresenting their identity, or hinting at possible imprisonment.
- Allows any consumer to formally request that the CA “cease and desist” from communicating with them.
- Obligates CAs to behave in a certain manner when communicating with others.
- Specifically details a consumer’s right to request further information regarding an alleged debt.
The Fair Credit Billing Act requires creditors to bill correctly and completely. It is the FTC’s job to make sure that the statute is universally applied.
To appreciate the importance of your credit standing you just have to look at what your credit impacts. Everything. Not having ideal credit can cost you thousands of dollars over the course of a home or car loan. It can keep you from getting insurance coverage or even a job. It can make even everyday needs and decisions more difficult.
If you do not have ideal credit, consumer credit repair should be a first step to improve it. It is a process that takes dedication, time and patience. Unfortunately it does not fix your credit score, like yesterday… And, if your credit reports do not have any errors that will materially affect your credit score, the only means for improvement will be changes in your financial behavior.
Whether you decide to do your credit repair yourself or with a third-party credit repair company, when you compare this to the cost of your credit situation and the opportunities that it brings, the value of credit repair should be obvious.
An overview of consumer credit repair is presented. This includes 1) What Is Consumer Credit Repair; 2) What Is A Credit Score; 3) The Credit Repair Process; 4) The Credit Repair Dispute Process; and 5) Laws Governing Consumer Credit Repair; and 6) Why It Is Important.
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