Learn Credit Repairing For Beginners | The Fundamentals of Credit Repair For Beginners
This credit course for beginners is intended to provide students with an introduction to the fundamentals of credit as well as credit management. Understanding credit scores, the distinctions between secured and unsecured loans, the significance of monitoring how much credit is being used, and the steps involved in applying for a loan are some of the topics that will be covered in the course. Students will gain an understanding of how to establish and keep a good credit rating, how to use credit in a responsible manner, the significance of creating a budget and making a financial plan, and how to protect their credit from identity theft. When the course is over, the students will have a better understanding of the credit system, how to make informed decisions regarding credit, and how to use credit in a responsible manner. They will also gain an understanding of the varying kinds of loans, as well as the interest rates and repayment terms that are associated with each type. Students will also learn how to identify and steer clear of common pitfalls that can arise when applying for credit, such as applying for an excessive amount of credit or taking out loans that are beyond their financial means. In general, the goal of this class is to equip students with the information and practical experience they need to manage their credit responsibly and in a manner that is informed by their own experiences. Students should have a better understanding of the fundamentals of credit and how to make responsible use of credit by the time the course is finished with them. This class is ideal for individuals who are just starting out in the world of credit and wish to acquire fundamental knowledge in a condensed amount of time.
Start with our Master Course which is a DIY course designed by Industry experts, especially for Beginners. Start learning Credit repair now and earn a valid certificate and become a certified Consultant within Weeeks. Earn a Valid certificate and start your OWN Credit repair business.
HUGE number of people are successfully running their own businesses after taking our course.
You are just a click away, Click here to start the course
Methods for Creating a Credit Repair Enterprise
One's poor credit history seems to follow them wherever they go. When one's credit isn't up to par, the dream of a new car, house, or business can seem like it's on the other side of the world. A person shouldn't let their past mistakes prevent them from moving forward.
One's poor credit history seems to follow them wherever they go.
When one's credit isn't up to par, the dream of a new car, house, or business can seem like it's on the other side of the world.
A person's credit score shouldn't prevent them from pursuing their dreams, and with the help of a credit repair company, they can get out of the hole they've dug for themselves and rebuild their financial standing.
Starting a credit repair company could be the next step in your career if you enjoy assisting people in getting back on their feet financially so they can put money towards their interests. Let us assist you in launching your successful business.
A credit repair company is defined as follows:
The services of a credit repair company help restore credit. A credit repair expert works to restore a client's good standing by contacting credit bureaus on their behalf to dispute and have inaccurate information removed or updated.
If you're wondering how credit counselling differs from credit repair, the answer is that credit counselling provides financial advice to help people rebuild their credit but does not do so on their behalf. Credit repair services will delve into the finer points of your credit history to make sure it's in tip-top shape moving forward.
How to Open a Credit Repair Shop in 9 Easy Steps:
People shouldn't let a single misstep in the past derail their plans for the future. But credit's inherent complexity can have that effect on consumers if they don't work with a reputable credit repair service. Help the less fortunate by starting a business to help them reach their financial goals.
1 Be aware of your "why"
Understand your motivations for starting a credit repair company first. Have you ever had credit problems and then made major life adjustments once things improved? Know anyone who is having trouble getting a mortgage because of low credit scores?
There will be times when you want to throw in the towel and give up on your small business. Understanding your motivational "why" will provide you with an internal drive to succeed. Find your own motivation, and use it to carry you through the tough times in business.
2. Fulfill All Necessary Procedures for Your Credit Repair Company
Let's just say it: people tend to have a negative impression of credit repair services. Numerous con artists pose as credit repair services only to disappear with victims' money once they have it. In 2021, the FTC received 3,151 complaints about credit repair scams.
Governments at all levels have responded to the proliferation of credit repair scammers by passing laws intended to safeguard consumers and give a boost to legitimate businesses.
Obtaining the necessary licence to operate a credit repair business is a necessary step in many jurisdictions, while in others it is outright prohibited. Check out this helpful Credit Repair Cloud map to learn more about the regulations in your state (but remember, laws are always changing, so do your due diligence and research for the most up-to-date info).
Legislation such as the Credit Repair Organizations Act (CROA) has been enacted to protect consumers from dishonest business practises by credit repair organisations.
According to the Fair Credit Reporting Act (FCRA), everyone has the right to a free copy of their credit report once every 12 months.
The credit repair industry is rife with scam artists, so it's important that legitimate businesses like yours take precautions to set themselves apart from the competition. One such precaution is obtaining a surety bond.
3. Figure Out Who You're Trying to Reach
Remembering your motivations can help you identify your ideal customers.
Do some digging to find out who you know or see on the internet who is having credit problems. Who exactly needs to improve their financial literacy in order to buy a house someday? Or those who wish to start their own business but are unable to do so because they made poor financial decisions while attending university?
Focusing on a small subset of the population can help you find customers who are willing to pay top dollar for your services without having to compete with a wider audience.
Put together a business plan and employ a strategy 4
Make a plan for your business's short- and long-term success. There is no right or wrong way to write a business plan; instead, you should do what works best for you. But there are a few essentials to include in a business plan for your credit repair service:
Demand and Supply: Describe the analysis you conducted to identify your market. What problems does this neighbourhood have, and how can you help them?
Develop a strategy for attracting new clients and promoting your company. Given the prevalence of phoney credit repair services, it's crucial that you emphasise your company's reliability and legitimacy.
Pricing and Cost Estimates: Spell out the pricing structure you intend to use. How will you charge your customers? Will it be a flat rate, or will it be based on the number of negative items removed from their credit reports? Justify your strategy and explain how it will help you grow to a larger size.
5. Determine Your Company's Legal Structure
Let's talk about money and finish up the other arrangements at the same time. If you haven't done so already, you should register your credit repair business as a legal entity. You can form your company in a few different ways:
A sole proprietorship or general partnership is a type of informal business structure that offers no protection to the owner against claims made against the company. While general partnerships can have multiple partners, sole proprietorships can only have one.
A formal business structure that shields the owner from the company itself is called a limited liability company (LLC) or a limited liability partnership (LLP). For a limited liability company with a single owner.
S Corporation (S-corp): A legally recognised business entity with fewer than 100 shareholders that provides liability protection for its owners.
Establish a Commercial Banking Relationship
Opening a business bank account is the next step after deciding on a legal classification for your credit repair company. Consider how long it will take you to sort through your profits, what with returning clothes, buying food, and paying the rent. How much more convenient it will be if all your business costs could be managed in a single location!
(And why wouldn't you want to increase your own financial profile if you're helping others do so?)
Select Credit Restoration Software 7
You can better assist your customers with the right software. To better serve your clients, consider using the following top credit repair tools:
Dispute Bee is a credit dispute management tool that facilitates the importation of credit reports, the generation of dispute letters, and the tracking of responses.
When you sign up for Credit Repair Cloud, you'll have access to credit software and a business challenge designed to help new business owners like you get their businesses off the ground.
Credit Detailer is a bi-lingual, single-payment application for credit repair company owners.
Managing customers and projects effectively requires a simple customer relationship management (CRM) and project management tool.
Be sure to keep tabs on your clientele once you begin receiving referrals for additional inbound leads. Keeping in touch with current customers is easy with customer relationship management (CRM) software like Hubspot, Dubsado, or HoneyBook, and project management software like AirTable or Notion for tracking client information like emails and birthdays.
Promote Your Credit Repair Business 9
You can automate the implementation of referral programmes and send out thank-you notes to customers who have helped you through project management and customer relationship management software. In high-risk industries like credit repair, where word-of-mouth from satisfied customers can change how the public perceives your company, a referral programme can be extremely useful. The earlier you get started with marketing, the more time you'll have to perfect your strategy and see results.
Spread the Word About Your Product in Facebook Groups: Investigate local companies, startup founders, and money-minded individuals who may be interested in your services. Groups often have policies against excessive self-promotion, so be mindful of how much you talk up your business.
Establish a Referral Program to Increase Public Confidence. As was previously mentioned, word-of-mouth is a powerful tool for gaining credibility among your target audience. To accomplish this, you can use affiliate programmes and monetary incentives to spread the word about your service.
Find a Reliable Associate to Help You Launch Your Credit Repair Company
The thrill of venturing out on your own is matched by the anxiety of having too much information at your fingertips. Where do I even begin? When starting a business, you probably have a lot of questions running through your head, including "Who can answer my questions?" The toughest part of starting a business is no longer necessary. With a trusted business partner like doola, you can launch your company, expand with ease, and make a positive impact in your community by assisting customers with resolving their most pressing credit issues.
What is a credit score?
While the topic of one's credit score might not make for the most riveting conversation at the dinner table, it is, in fact, of the utmost significance. Your credit score is one of the primary factors that can influence whether or not you are granted a mortgage, a loan, or a credit card. It can even influence whether or not a landlord will rent to you. Additionally, it is a significant factor in determining the interest rate that will be applied to loans and credit card balances.
Your credit score is determined by your payment history, the amounts owed, the length of your credit history, the new credit you've opened, and the mix of credit you have. These five key factors are derived from the information contained in your credit reports.
In the following paragraphs, we will dive deeper into each of the five factors and analyse how they influence your credit score.
What exactly constitutes a credit score?
Credit scores are typically expressed as three-digit numbers and can range anywhere from 300 to 850. Lenders will look at this score to determine whether or not they will extend you credit. According to their point of view, the higher your score, the greater the likelihood that you will repay any loans or credit card debt that you have. Bringing your credit score up to a good or excellent level can make it simpler for you to qualify for loans and credit cards, and it can also improve the interest rates that are offered to you when you apply for these types of credit.
It is a widespread misunderstanding that each individual only has one credit score. In reality, there are a great number of distinct models for calculating credit scores, and different lenders may use different scores for a variety of purposes.
FICO, for instance, is the credit score that is used the most frequently in the United States. FICO is responsible for the creation of both base credit scores and industry-specific credit scores, such as those used by auto lenders and credit card issuers. Additionally, it routinely updates the credit-scoring models that it uses; however, your score may change depending on the model that a particular creditor employs.
Although the ranges for credit ratings from poor to exceptional can differ from one credit-scoring model to another, the following scales are used by FICO:
Bad credit, ranging from 300 to 579
Credit equivalent to 580-669
Good credit: between 670 and 739
Very good: 740-799
Nevertheless, the FICO score is not the only credit score available. VantageScore is a competitor to FICO that provides credit scores, and card issuers, lenders, and other creditors may use them in addition to FICO scores.
The following ranges are used when calculating VantageScore:
Very poor: 300-549
Bad credit, ranging from 550 to 649
Credit equivalent to: 650-699
Good credit is between 700 and 749.
In addition to FICO and VantageScore, the three major credit bureaus also generate their own credit scores by using the information in their own credit reports. Lenders may also choose to use their own proprietary credit-scoring models in place of or in addition to FICO and VantageScore. To put it another way, if you check your credit score, you should be aware that there is more than one score available to you.
What factors go into determining a person's credit score?
However, credit-scoring companies do reveal the fundamentals of which factors affect credit scores and how they are calculated. Credit-scoring algorithms are industry secrets, but credit-scoring companies do not disclose them.
Your credit reports are the starting point for everything. Your credit score is based on five factors, which are your payment history, amounts owed, length of credit history, new credit, and credit mix. These factors are reported on a regular basis by your creditors. Experian, Equifax, and TransUnion are the three credit bureaus that receive this information when it is reported. Each credit report includes information that can include your history of making payments on credit accounts, whether or not you have any accounts that have been turned over to collections, as well as other personal data and public records such as filings for bankruptcy.
Your credit score is the result of this information being turned into a number that is simple to understand. Imagine it like your final grade point average from school; all of your tests (i.e., credit activity) are included on your credit report, and the credit score is the equivalent of your final grade point average.
Your credit scores might not be identical if they were calculated by the same company due to the fact that there are a number of different companies doing the calculating. They can be different from one another depending on which credit report the score is derived from and which credit-scoring model is utilised.
The impact that each of these five aspects has on your credit score.
The following is a breakdown of how much weight is given to each of the five factors that go into determining your credit score. It is essential, especially if you are working to improve your score, to have a thorough understanding of each component and the weight that it contributes to the total score.
The history of payments (35%)
Your history of making payments is the single most important component of your credit score and accounts for 35% of the total score. Your payment history will show whether or not you have been timely with payments for loans and credit cards in the past. It also takes into account other information regarding your payments, such as the number of occasions on which payments have been late and the length of any period during which payments have been overdue.
If your payment history is dragging down your score, you might be able to raise it by paying your bills on time in the future. This will depend on the severity of the problem. It is possible for a late payment to remain on your credit report for as long as seven years; however, the negative impact of the late payment will lessen over time if you maintain a positive payment record.
Outstanding balances (30%)
Your credit score is based in part on the amount of revolving debt you have, which includes credit cards and other lines of credit but does not include installment loans. This accounts for 30% of your credit score. The reports take into consideration not only the total amount that you owe across all of your revolving accounts but also the total amount that you owe across each individual account.
Your credit utilisation ratio is determined by the credit bureaus based on your "amounts owed." This is an extremely important figure. Your credit utilisation ratio is the percentage of your total credit limit that corresponds to the amount of credit you have actually used. The calculation is performed for each individual credit account as well as the overall sum for all credit accounts. (This does not take into account loans with monthly payments, such as mortgages or auto loans.)
To determine your credit utilisation ratio for a specific card, divide the amount that you currently owe on that card by the total credit limit associated with that card. For example, if you have a credit card with a limit of $4,000 and you currently have a balance of $1,000 on that card, your credit utilisation ratio for that card is 25%.
To determine your overall credit utilisation ratio, first add up all of your outstanding balances on your various credit cards, then divide that total by the total amount of available credit you have across all of your accounts.
A credit utilisation ratio that is too high (either individually or overall) will have a negative impact on your credit score. This is because it indicates to lenders that you may have difficulty managing the revolving credit debt that you have taken on. In order to keep a good credit score, it is recommended by credit specialists that you keep your credit utilisation ratio below 30 percent.
Tip: The credit utilisation ratio is one of the few aspects of your credit score that you have the ability to change quickly and effectively, which will lead to an increase in your credit score. If you pay down the balances on your credit cards and any other accounts that use a revolving line of credit, you may see an improvement in your credit score as soon as the following billing cycle.
The length of time you've had credit (15%)
Your credit score is determined in part by the length of your credit history, which accounts for 15% of the total. It is founded on the following three primary considerations:
The length of time that your credit accounts have been active in the marketplace (including your oldest account, your newest account and the average of all your accounts)
How much time has passed since particular credit accounts were opened?
How much time has passed since you last logged into particular accounts?
In most cases, the length of your credit history has a direct bearing on the quality of your credit score.
You can get a rough estimate of the length of your credit history by adding up the number of years that each of your credit cards has been open, then dividing that sum by the total number of cards you have. This will give you a rough estimate of the length of your credit history. If it's the year 2022 and you opened credit card accounts in 2020, 2018, and 2010, for example, the average length of time you've had credit is six years. Be aware that the length of time your average account has been open will decrease each time you open a new account, which could have a negative impact on your credit score.
For as long as they remain on your credit reports, closed accounts will continue to have an effect on the length of your credit history and may also have an effect on other factors. After they have been paid off or closed, accounts do not immediately vanish from your credit reports. This can take up to two billing cycles.
Instead, the credit bureaus remove them according to a schedule that is derived from the history of payments made. After ten years, a closed account will be removed from your credit report if you have never been late with a payment on that account. If, on the other hand, you were late with a payment, the account in question will be removed from your credit reports seven years after the very first time you were late with a payment.
Ten percent for new credit.
The remaining 10% of your credit score is determined by the number of new credit accounts for which you apply and the amount of time that has passed since you opened a new account.
When you apply for new credit, a lender will pull your credit report in order to evaluate your application. This is known as a "hard enquiry." Each challenging enquiry will result in a loss of a couple of points for the overall score. Even though they remain on your report for two years, the impact of hard inquiries becomes less significant over time.
Multiple hard inquiries in a short period of time may send the message to potential lenders that you are a high-risk consumer, which may result in the denial of your application. However, if the inquiries stem from rate shopping for a mortgage, auto loan, or student loan within a 45-day window, then the majority of lenders will count it as just one hard enquiry. This is because rate shopping is considered to be a single enquiry.
It is important to be aware that soft inquiries, which take place when you check your own credit score or when a creditor preapproves or prequalifies you for an offer, do not have an effect on your credit score. This is due to the fact that you are not actually applying for new credit when the inquiries are received.
Credit mix (10%)
Your credit mix is made up of the various kinds of credit accounts and loans that you hold, such as credit cards, retail accounts, installment loans, mortgage loans, and accounts with finance companies.
Lenders will see that you are able to competently manage various types of financial obligations if you keep a diverse variety of accounts at different institutions. There is no requirement that you have at least one of each type, but having a diverse collection can help your score.
It's possible that some industry-specific credit models give more weight to previous experience with a particular category of accounts. It's possible, for instance, that a history of on-time payments on a car loan will have a more positive impact on an auto-industry score than it will have on a general credit score.
What won't have a negative impact on your credit score?
Your credit report may contain some of your personal and financial information; however, this information does not factor into the calculation of your credit scores. These are the following:
regardless of factors such as age, gender, sexual orientation, race, nationality, ethnicity, or place of residence
Your resources, employment standing, or job title, if applicable.
Affiliations with a particular religion or political party
The interest rates that you are currently paying on your accounts.
Whether you rely on government aid or have sought the assistance of a credit counsellor,
Things that aren't included in your credit report in any way.
How to Keep Your Credit Score in Good Standing
When you have a solid understanding of the components that go into calculating your credit score, you will have a good idea of how you can raise that score. The good news is that the actions you take to keep a good to excellent credit score and the actions you take to improve a poor to fair one are the same. They are as follows:
Always pay your bills on time, and try to pay them in full whenever you can.
Keep your balances low at all times.
It is best to refrain from closing your credit card accounts.
Make an effort to avoid opening a large number of new accounts, particularly all at once.
Make use of a wide range of different accounts.
In addition to this, you should monitor your credit score frequently. Not only can you pinpoint areas that need to be improved, but disputing errors that have been made on your credit report can help you recover your score if the item that is being disputed has had a negative impact on it.
Methods for Erasing Hard Inquiries from Your Credit Report
If you remove a hard inquiry from your credit report, will your credit score improve?
After falling victim to identity theft, Jason Mikula had to learn the hard way how to remove inquiries from his credit reports in order to restore his good name.
[*] After discovering two unauthorised hard inquiries on his credit report in 2021, the professional in financial technology fought a relentless battle against identity thieves throughout the entire year.
One thing became abundantly clear while Mikula was working with the authorities to rid himself of fraudulent accounts and rebuild his creditworthiness.
Identity thieves have a much easier time than they should opening new credit accounts in your name, which can have a devastating effect on your credit score. Those who have been victims of identity theft and are now dealing with the fallout of the crime face a long and arduous process of remediation.
Even though removing inquiries won't necessarily result in a rise in your credit score, allowing potentially fraudulent credit pulls or errors to remain unresolved on your report can be problematic.
What exactly does it mean when it says "hard inquiry" on your credit report?
When someone requests to review your credit report as part of the application process for credit, this constitutes a "hard inquiry," which is recorded in your credit file. Requests like these from an authorised lender can lower your FICO score by as much as five points. These types of checks are also known as hard pulls or hard credit checks. [*]
Hard inquiries remain on your credit report for two years, but the effects they have on your score are only visible for one year after that. Your credit report will have a section labelled "Hard Inquiries" where you can view the results of these checks.
What sets it apart from a soft inquiry into your credit history?
When you pull your own credit report or receive a pre-approved offer from a lender, these are both examples of soft inquiries that are made on your credit report. Your credit score will not be negatively impacted in any way by these kinds of inquiries.
It is in your best interest to refrain from making a large number of hard credit inquiries in a short period of time. This could be interpreted by potential creditors as a sign that you are making irresponsible credit applications or that you are unable to repay them when they are due.
When it comes to shopping around, here are some things you should know.
When you shop around for different types of credit accounts, such as the best credit card, personal finance options, or an auto loan, you may cause a flurry of hard checks to be performed on your credit report. Credit scoring models, on the other hand, can group together credit checks that are very similar to one another and give you the ability to shop around for the best interest rates.
This rate shopping window is different for each model, including but not limited to:
FICO: anywhere from 14 to 45 days, depending on the specific FICO scoring formula that was used.
VantageScore: 14-day span
There are three primary reasons why your credit report contains hard inquiry marks.
There are a few different angles to look at when conducting a thorough investigation. Because there is a possibility that not all inquiries are genuine, it is essential to maintain vigilance and report anything that appears to be incorrect.
checks drawn on an authorised lending institution
Data furnishers are any authorised lenders who report information to the credit reporting agencies. These lenders are also referred to as information reporters.
The companies that fall into this category include credit card companies, banks, loan companies, and even your landlord. When you apply for a new line of credit, the provider will want to conduct an investigation into your credit history before approving your application.
Therefore, you will be required to grant the lender permission to obtain a copy of your credit report in order for them to proceed with the loan process. For instance, in order to proceed with an application for a car loan, you will first need to have your credit checked.
There may be instances in which one or more of the three major credit bureaus, namely Equifax, Experian, and TransUnion, include incorrect information in your file. Errors in reporting one's credit history frequently take the following forms:
Identity mismatches or files that are mixed up.
- Errors in your personally identifiable information (PII), such as a misspelt name, an outdated address, or a disconnected phone number
- Confusion regarding your account information because it was mistakenly associated with another person who shares your name or a name that is very similar to yours The same debt listed multiple times under different names
- Due to the perpetrator(s) of the identity theft, incorrect account information
Errors in the accounts
- Dates that are incorrect (e.g., opening date, last payment date, or date of first delinquency)
- Inaccurate reports of late payments or delinquencies
- Authorized users posed as the account owner in their reports.
- accounts that have been closed but are shown as open (or vice versa)
Balance and data management errors
- Inaccurate representation of the current balance or the credit limit
- Reintroduction of erroneous information even after it has been corrected
- Instances of the same account listed multiple times with various creditors
- Possible use of a stolen identity
If you come across an inquiry that is unfamiliar to you, it is possible that a lender made a genuine error. However, this may be an indication of fraud; therefore, you should always get in touch with the source of the data if you have any questions.
In the event that a fraudulent credit check is performed, the following are some immediate steps you can take to protect yourself from financial fraud:
Place a fraud alert or credit freeze:
- In order to place a fraud alert on your credit report, you will need to get in touch with either Experian, Equifax, or TransUnion. (That organisation will get in touch with the other two.)
- To put a freeze on your credit, you will need to contact each of the three credit bureaus individually.
- Give us two pieces of identification, such as a driver's licence, a passport, a birth certificate, or a Social Security card, and we'll be happy to let you in.
Please notify the Federal Trade Commission (FTC) about the theft of your identity:
- Go to the IdentityTheft.gov website.
- Create a police report detailing the suspected fraudulent activity along with the identity theft.
- In order to protect yourself, you should get a recovery plan and follow the guidelines provided by the FTC.
How Do You Dispute Unauthorized Inquiries, and How Do You Remove Them?
If you believe that there have been fraudulent hard pulls or reporting errors on your credit report, you should take steps to protect both your credit score and your identity. The following is a rundown of how the process of removing a credit inquiry works.
1. Get copies of your credit report that are free of charge.
You are permitted to make one request for a free credit report per bureau once per calendar year. There are many instances in which the three bureaus record the same information. But because there are inconsistencies from time to time, it is imperative that all three reports be thoroughly examined for indications of identity theft.
How to proceed:
- To protect yourself from identity theft, make it a routine to check your credit report once every few months.
- You can get a free copy of your credit report by going to AnnualCreditReport.com.
- Every year, you should place an order for your credit report from each of the three bureaus; your credit score is included in each bureau's version.
2. Immediately report any incorrectly hard inquiries.
The firm that conducted the in-depth credit check may be identified by a variety of names across the various credit reports it generated. Always double check anything that seems out of the ordinary to make sure it's not a scam.
How to proceed:
Check the section of your credit report that is labelled "Hard Inquiries."
Verify that you are treating all inquiries on your credit report as legitimate hard inquiries.
Take note of the information regarding any credit inquiries that are not recognised.
3. Make contact with the initial creditor.
By making direct contact with the furnisher, you may be able to circumvent the need for a formal dispute regarding a difficult inquiry (such as the credit card issuer or car dealership).
How to proceed:
Please get in touch with the creditor who initiated the hard inquiry. You should be able to find their contact information on the official website of their organisation or on the social media page of their organisation.
Explain that you think there is an error on your credit report, and ask that they remove the inquiry from your file as soon as possible.
Disclose all relevant information regarding the erroneous hard inquiry, such as the date on which the credit check was performed.
4. Raise the issue in a formal manner.
It's possible that your attempts to solve the problem on your own won't always be successful. You should submit a formal dispute if the entity that provided the information does not know how to remove inquiries from credit reports, or if the entity ignores or declines your request.
How to proceed:
Make a decision as to whether you will submit your dispute in written form or via the internet.
When you send a dispute letter through the mail, be sure to keep a copy for your own records. It is important to keep a record of everything in the event that you decide to take legal action at a later date.
Try to avoid resolving disputes over the phone whenever possible. It is difficult to keep a paper trail when using that method, despite the fact that it is a fast way to report problems and get advice from authorities.
5. Include all essential information
Be sure to include the following details in the letter that you are writing to dispute the transaction:
Information including one's name, address, and birthday
Identifier for social security purposes (SSN)
The date on which the letter was written.
Dates of information that is in dispute, as well as the name of the company that provided that information
The credit agency that is responsible for recording the contested hard inquiry
Your formal request for the investigation to be terminated, along with the reasons why you think the authorities should terminate the investigation.
Any pertinent supporting documents that will assist the authorities in their investigation, such as a report of identity theft filed with the FTC, bank statements, or evidence from the creditor
Please make sure to send copies of any supporting documents rather than the originals, as you will not be able to retrieve the originals. The Federal Trade Commission offers a sample dispute letter that you can use if you want to simplify this process.
6. Submit your dispute
It is imperative that you dispute any inquiries that leave you suspicious with the credit bureau that included them on your report. It was mentioned earlier that it is a good idea to keep track of the documentation in case there is a legal investigation. Therefore, the most effective strategy is to submit your credit dispute either online or in writing.
Errors on hard inquiries can be contested over the phone:
Experian's phone number is 888-397-3742, and TransUnion's number is 800-916-8800.
Dispute errors in your hard inquiries online:
Equifax: online dispute page → Experian: online dispute portal →
TransUnion: online dispute page →
Send a letter notifying of the dispute via registered mail:
Equifax: Equifax Information Services, LLC, P.O. Box 740256, Atlanta, GA 30374
Experian: Experian, P.O. Box 4500, Allen, TX 75013
TransUnion Consumer Solutions can be reached at the following address: Post Office Box 2000, Chester, Pennsylvania 19016
7. Watch for the judge's decision.
Following the official lodging of your dispute, the credit reporting agencies are required to make a decision regarding the matter within 30 to 45 days. The bureau will get in touch with the provider to find out whether or not there was an error with the credit check.
In accordance with the Fair Credit Reporting Act, businesses that supply information to credit reporting agencies have a legal obligation to investigate any disputes that may arise.
It is highly likely that the inquiry will be removed from your credit report if the bureau is unable to verify it. If the furnisher, on the other hand, claims that the hard inquiry is a legitimate credit check, the bureau may decide to dismiss the claim.
How to proceed:
You should write to the credit bureaus and ask them to add a notation to your credit file that explains the dispute in 100 words or less. This statement will be made available to any potential lenders in the future who conduct a hard inquiry on your credit report.
Make an appointment with a nonprofit credit counselling company for additional assistance. The National Foundation for Credit Counseling (NFCC) is an organisation that assists individuals in resolving credit issues and restoring their credit scores at no cost. Before approaching a credit repair company, you might want to think about speaking with a credit counsellor from the NFCC.
Not All Incorrect Inquiries Indicate Fraud. Aura Is Able To Assist
Even though not all unfamiliar credit checks are fraudulent, honest credit reporting mistakes can still damage your score, which can then result in you being denied credit cards, auto loans, or student loans.
You can get a free copy of your credit report by calling 1-877-322-8228 or ordering it online at AnnualCreditReport.com. Keep in mind that the free credit reports will not include your credit score; in order to obtain this information from any of the three bureaus, you may be required to pay a fee.
When you use an identity theft protection service that checks your credit report around the clock for indications of fraud, you can save a lot of time and avoid a lot of hassle.
With Aura, you'll get:
Rapid credit monitoring and fraud alerts — Get notifications whenever there is potentially fraudulent activity on any of your bank accounts, credit cards, or credit reports. You will be notified of any issues with Aura four times faster than with any other digital security provider.
Virtual Private Network (VPN) that protects against malware — Keep all of your devices safe from cybercriminals by browsing with Wi-Fi protection and encryption that meets military standards.
Your credit report can be locked instantly with our one-click credit lock feature, which also helps prevent unauthorised inquiries into your credit report.
Scan the dark web to check the exposure of your personal information and make sure that your Social Security number and credit card numbers are not at risk.
Identity Theft Insurance Policy Worth $1,000,000 - Get Complete Coverage for Losses That Are Eligible Due to Identity Theft!
What is DIY credit repair?
What is DIY credit repair?
DIY credit repair entails repairing your credit on your own by getting in touch with creditors and credit bureaus to dispute and challenge errors. You can do this entirely on your own or you can handle some of these things yourself while using a credit repair service for others.
How Can I Fix My Credit on My Own?
The steps involved in repairing and improving your credit are the same whether you do it yourself or use a credit repair service. In essence, they entail obtaining your credit report and methodically correcting errors that are harming your credit score.
Get a credit report first
Get a copy of your credit report as soon as possible so you can see what needs to be fixed. Each of the major credit bureaus must provide you with a free copy of your credit report once a year, and additional copies can be ordered through AnnualCreditReport.com. Additionally, you can access free updates to your Vantage 3.0 credit score every 14 days here.
2. Check your report for unfavourable information that can be disputed.
Reviewing your report for unfavourable items that can be contested is the next step after receiving it. Look for things like:
- Inaccurate personal information, including names and addresses
- Accounts that provide false information
- redundant accounts
- lost accounts
- Delinquencies or late payments
- false information about missed payments, bankruptcies, or foreclosures
- Criminal activity
- Accounts that you closed rather than the provider (listed as "closed by grantor")
- You might be surprised by what you discover because a sizable portion of credit reports are inaccurate.
3. Contact Credit Bureaus and Creditors to Dispute Negative Items
The next step is to dispute any items you think are open to review. You can contact the three major credit bureaus through their websites, by phone, or by mail.
P.O. Box 4500
Allen, TX 75013
Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374-0256
TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000
You should also contact the creditor or lender involved in the dispute. They may be able to correct an item for you. The correction may take 30 to 45 days or more to appear in your updated credit report.
4. Make all payments on time going forward and pay off any past-due items immediately.
Paying off items that were paid late should be a priority when working to improve your credit score because late payments can have such a negative impact on a person's credit score. Pay off any past due items as soon as you can, and make it a habit to pay your bills on time going forward. The longer past due payments remain unpaid, the more damage they do to a person's credit score.
You may be able to arrange for items that have been sent to collection agencies to have the account reported as paid in full in exchange for a full or partial payment agreement. This type of arrangement is referred to as "pay for delete," and it is possible that you will be granted this request. A pay for delete arrangement, on the other hand, does not automatically remove an item from your report; rather, it merely indicates that you have made arrangements to pay your debt. Even though creditors may view the item on your credit report more favourably as a result of this action, the item will not be removed completely. If you decide to pursue a pay-for-delete arrangement, you should make sure that the collection agency provides you with a written agreement before proceeding. Otherwise, you run the risk of the agency keeping your money but failing to report that they have received payment.
5. Reduce the Outstanding Amount in Accounts That Have a High Balance
One more significant factor that can bring down your credit score is having a high balance, and reducing that balance can be one way to work towards improving your score. When paying down balances, be strategic. Think about how much of your available cash you can put towards paying down your debt without throwing off your financial plan. In order to ensure that you have sufficient funds for all of your other monthly bills and expenses, it is recommended that you do not devote more than twenty percent of your monthly income to the repayment of your debt. On the other hand, this is subject to change depending on your circumstances.
Also, think about which outstanding balances you ought to pay off first. In the long run, you can cut costs and save money by reducing balances on credit cards with high interest rates. You could, as an alternative, choose to pay off credit cards that have low balances so that you can track your progress and feel like you're making headway.
6. As your credit score rises, gradually open a variety of new accounts of different types.
If you follow the steps above, you should see an improvement in your credit score. When your credit score improves, opening new accounts can help boost it further, particularly if you have a limited variety of debts represented in your credit portfolio.
Nevertheless, resist the temptation to use your improved credit to apply for an excessive number of new accounts. Doing so can have a negative impact on your credit score. Instead, you should be picky about the different kinds of credit for which you apply, and you should open new accounts gradually. For instance, a multitude of financial institutions provide unsecured credit builder loans that are simple to qualify for and are intended to assist you in reestablishing your credit.
7. Keep all of your accounts active.
Because the length of time your accounts have been open is a factor in determining your credit score, maintaining an active account balance can help your score improve. Once you've established a new account, you shouldn't close it unless there's a very good reason to do so. However, if you do not actively use an account, you should make sure to monitor it on a regular basis to ensure that you are not being charged any fees that are detailed in the account's fine print.
When it comes to your credit report, how long does negative information remain?
The information contained in a credit report is categorised as either "positive" or "negative." Items such as rent and utilities being paid on time are examples of positive information. Inaccurate or late payments, collection actions taken by a third party, loan defaults, personal bankruptcies, and property foreclosures are all examples of negative information.
In most cases, negative information will stay on your report for a period of seven years. Nevertheless, this varies with different types of unfavourable items, including the following:
- After the initial date of delinquency, there is a seven-year grace period for late payments.
- Negative information stays on your credit report for seven years after the first missed payment, even if the creditor has charged off the debt as a loss and written it off as a "charge-off" or has referred the account to a collection agency.
- When it comes to bankruptcies, adverse information can stay on your credit report for anywhere from seven to ten years, depending on the type of bankruptcy.
- Other derogatory accounts, such as repossessions, can stay on your credit report for up to seven years after the initial payment was missed.
- Closed accounts that have been paid in full and in accordance with the terms of the agreement can remain on your credit report for up to ten years after the creditor first reported the account.
- Open accounts that have been paid in accordance with the terms of the agreement will not be closed as long as the account is open and the creditor continues to report it.
Furthermore, hard inquiries into your credit score can stay on your report for up to two years after the inquiry has been completed.
Is it Possible to Have Unfavorable Information Removed from Your Credit Report?
Although you cannot remove negative information from your report, you can ask the credit bureaus or your creditors to remove negative information that is inaccurate. You are unable to have inaccurate negative information removed from your credit report if it has not been there long enough to be eligible for deletion due to the passage of time. You do have the ability to request the removal of certain types of negative information, including the following:
The information that has been included in your report for such a long period of time that it ought to have been removed automatically
The information that is presented in a number of different instances
Those things that go wrong as a direct result of identity theft
You may be able to negotiate a "pay for delete" arrangement with a collection agency in order to have the agency accept a payment of your debt in exchange for reporting that your account has been paid in full. This arrangement pertains to items that have been turned over to the collection agency. This will not remove the delinquency from your report; however, it may lessen the impact of the delinquency and cause financial providers to view you as less of a risk for credit.
Tips for Do-It-Yourself Credit Repair
What steps should you take if you make the decision to fix your credit on your own? Following the steps outlined here will help you improve your credit score.
1. Obtain a copy of your credit report.
Getting a copy of your credit report should be the first thing you do because it will tell you exactly where you stand. AnnualCreditReport.com is the place to go to get a free copy of your report. You also have the option of signing up for free updates on your credit score once every two weeks through this site.
2. Argue and bargain regarding unfavourable aspects
When you have your credit report in hand, you are in a better position to spot inaccurate negative items, contest them, and challenge them. You may be able to negotiate a partial payment for accurate items that have been referred to collection agencies in exchange for a report that your debt has been paid off in full if you do so quickly.
3. Be prompt with payment of bills.
If you want to improve your credit score, one of the most important things you can do is make it a habit to pay your bills on time. It is possible that you will find it beneficial to automate some or all of your bill payments in order to reduce the likelihood of forgetting when payments are due. If you're having trouble paying all of your bills, you should look over your budget and see if there are any expenses that you can eliminate.
4. Reduce the Percentage of Your Available Credit That You Use
Your credit score can improve if you reduce the percentage of available credit that you use. Make it a goal to keep your balances at or below 30 percent of your available credit, with a lower percentage representing a better situation. If you are able to do so, you should pay more than the required minimums.
5. Always maintain active bank accounts
The length of your credit history has a direct correlation to the potential increase in your credit score. You can raise your credit score by maintaining open accounts and allowing them to age.
6. Make an application for a secured loan or credit card.
Applying for a large number of new accounts at once can have a negative impact on your credit score; however, applying for a secured credit card or loan can help you improve your score. You can demonstrate that you are capable of good credit management by obtaining a secured credit card or loan and diversifying the types of credit you use. Think about having a conversation with your bank to find out if they offer any credit builder options that are suitable for someone in your position.
7. Give Consolidation of Debts Some Thought
If you owe money on multiple accounts, each of which has a high balance and a high interest rate, consolidating your debt may be an option for you that will lower your overall credit utilisation while simultaneously improving your ability to pay your bills on time. The process of combining several different debt obligations into a single monthly payment is known as debt consolidation. You can accomplish this goal by applying for either a credit card that offers 0% interest on balance transfers or a debt consolidation loan that has a fixed interest rate. Your other debts are paid off with the money you received from your credit card or loan, which results in a lower percentage of your available credit being utilised across all of your accounts. In the meantime, you can consolidate all of your monthly debt payments into one payment, which will make it much simpler for you to make all of your payments on time.
You need to have a credit score that is high enough to qualify you for a balance transfer credit card or a debt consolidation loan in order to implement this strategy successfully. In addition to this, you need to make sure that the reduced amount of money you owe will be an amount that is manageable for you to pay back. Additionally, if your balances are low enough that you can pay them off in a short amount of time, you may benefit more from this solution than you would from consolidating your debt. Before making the decision to consolidate your debt, you should first consult with a financial advisor and carefully consider all of your available options.
8. Obtain an Increase in Your Credit Limit
The percentage of your available credit that you actually use can also be reduced by increasing your credit limit. As your credit score rises, you may receive offers to request an increase in your credit limit or you may qualify for an increase in your credit limit automatically. Before applying for a raise, you should evaluate your likelihood of being granted the new amount based on your current credit score. If you have seen an increase in your income, this may also improve your chances of being approved.
When Should I Do It Myself to Repair My Credit?
It is possible to repair your credit on your own. And any credit repair company that is worth its salt will tell you that.
According to Padawer, "If your circumstance is straightforward, and all you have are one or two glaring inaccuracies, you might want to consider performing a round of credit repair on your own."
When you are attempting to fix your credit, make sure that your disputes with the three major credit bureaus are clear and to the point. And get your documentation in order. You have the option of sending a dispute letter through the mail or submitting it online through the websites of each of the credit reporting agencies.
Keep in mind that you are required to file a dispute regarding each error with each bureau. Your credit report will not be cleaned up by any of the bureaus that compete with it! Discover more information about credit repair here.
If you decide to hire a credit repair company or a law firm, such as Lexington Law Firm, to assist you in repairing your credit, you should make sure that the company you are working with has a good reputation and is ethical.
The Best Ways to Raise Your Credit Rating
Whether you're trying to rebuild your credit after making some poor financial decisions or you're getting ready to apply for a new loan or mortgage and want to make sure you get the best interest rate, it's a smart move to take steps to raise your credit score. This is true whether you're trying to rebuild your credit after making poor financial decisions or you're getting ready to apply for a new loan or mortgage. In this article, we will discuss the factors that have an impact on your credit score, as well as seven strategies for improving it, as well as considerations to make if you are considering working with a credit repair company.
What's the deal with having a high credit rating?
A better credit score can mean a significant reduction in the amount of interest you pay over the life of various loans, credit cards, and mortgages. If your credit is good to excellent, you can expect to pay less in interest over the life of any loan you take out, whether it's a home mortgage, car loan, or personal loan.
For instance, a New York resident with a credit score of 590-619 would pay $4,885 in interest over the life of a $20,000, 48-month loan on a used car, while a resident with a credit score of 720-850 would pay only $1,617 in interest. A total of $3,268 is spared.
What is an acceptable credit rating?
The range of possible values for your FICO Score, a credit scoring model commonly used by lenders to determine whether or not to grant credit, is 300 to 850. There are five credit bands within that range.
A good FICO score is between 670 and 739, and an excellent score is above 740.
The three major consumer credit bureaus, Experian, Equifax, and TransUnion, compile the data used to determine your FICO Score. However, it's important to remember that credit bureaus don't actually generate your FICO score. Further, under federal law, you are entitled to one free copy of your credit report annually from each bureau, which you can request at annualcreditreport.com.
Credit bureaus have been providing free weekly reports during the coronavirus pandemic.
Boosting Your Credit Score: 7 Steps to Take
You can influence your FICO Score (the scoring model most frequently used by lenders) by the following:
1.The first step is to look for mistakes on your credit reports.
It's a good idea to periodically check your credit reports for errors by visiting annualcreditreport.com. If you see a bank account that you didn't create, for instance, it's possible that your personal data was stolen and used fraudulently, or that someone else's data got mixed in with yours. If this happens, you can file a dispute to have the account deleted.
Assuming the error is present across all three of your credit reports, you should file a dispute with each of the credit reporting agencies. Information on how to file a dispute with each credit reporting agency, including links, phone numbers, and postal addresses, is available on the Consumer Financial Protection Bureau's (CFPB) website.
Your credit reporting agency has 30 days to look into your dispute after you've submitted it to them.
It's important to remember that you can only challenge false claims. You have no right to dispute a negative item on your credit reports if it is a true reflection of your behaviour.
2. Reduce any outstanding balances on your credit cards.
Reducing revolving debt (credit cards, lines of credit, etc.) is a quick way to improve credit.
The utilisation ratio this creates can have an effect on the "amounts owed" part of your FICO score. Simply put, a high utilisation ratio indicates that you are not making good use of your available credit. In this case, a credit card with a $1,000 limit and a $500 balance would be considered 50% utilised.
The recommended limit for credit card debt is 30%, or $300 of a total credit limit of $1,000. It's important to keep in mind that utilisation is computed both per-account and aggregated across all of your accounts.
Finally, let's define revolving credit. Loans secured by a person's property or their income are two other common forms of revolving credit (HELOCs). Using a revolving line of credit, you can take out money when you need it and pay it back as you go. Installment credit, on the other hand, refers to loans where the loan amount and repayment date are both determined in advance. Any credit you pay off in installments will not count towards your credit utilisation ratio.
You should try to keep your credit card balances low and pay them off on a regular basis. Around the end of the statement period, or about three weeks before the bill is due, these balances are often reported to the credit bureaus. Therefore, high utilisation can have a negative effect on your score even if you pay your bill in full every month.
Finally, using a personal loan to pay off credit card debt is an option to consider if you're having trouble getting a high balance under control. A hard inquiry from the application process will temporarily lower your credit score; however, as you pay down your revolving debt with the loan's proceeds, your score should rise.
3. If you don't already have a credit card, you should apply for one.
To establish credit, a credit card is not required. But if used wisely, a credit card is a potent tool for boosting your credit score, whether it's already in good shape and you're looking to take it to new heights or you need to rebuild credit after making some mistakes.
Most card issuers, but not all, report account and payment activity to all three consumer credit bureaus, so keep that in mind when shopping for a new card. There is a missed opportunity if you are using a credit card that only reports to one or two credit bureaus.
A secured credit card may be an option if your credit is less than stellar. Secured credit cards require you to put up collateral, usually a deposit, with the issuer equal to the amount of the credit limit you want. However, aside from the security deposit, a secured credit card operates similarly to any other credit card and can even help build credit.
And if your credit is good to excellent, you have choices. Credit cards that offer cash back rewards and those with introductory periods of zero percent interest can be helpful whether you need to make a large purchase or consolidate high-interest debt from another card.
4. Think about signing up for Experian Boost.
Experian's free service lets you raise your credit rating by making on-time payments for things like your phone bill, utilities, and select streaming services that wouldn't normally be taken into account.
According to Experian, the average increase in credit score after using Experian Boost is 13 points (using the FICO Score 8 model). Although this service will only improve your credit score for lenders who check with Experian, it may be worthwhile for consumers with little or no credit history to sign up.
Five, be patient as negative information on your credit reports expires.
The desire to swiftly raise one's credit score is understandable, but some things simply take time. Numerous unfavourable items can remain on credit reports for seven years or more. However, negative items will be removed from credit reports over time. Timelines for the expungement of various forms of blemishes are as follows:
- Bankruptcy under Chapter 7: 10 years
- 7 years after filing Chapter 13 bankruptcy
- Seven-year billing cycle
- Seven years of payment delays
- For in-depth investigations, plan on spending at least 2 years.
6. Apply for new credit infrequently, if at all.
If you're looking to improve your credit score, applying for a new credit card may be a good idea. However, applying for too many different types of credit at once can have the opposite effect. In a number of ways, applications can make things worse for you:
inciting serious investigation. A "hard inquiry" occurs when you apply for credit, and the lender accesses one or more of your credit reports to determine your creditworthiness. Credit scores can drop anywhere from 5–10 points after a hard inquiry, and the negative impact can last for up to two years (though the negative impact ceases after one year).
By decreasing your typical account age, you can improve your financial situation. The average age of all your accounts contributes to the 15% of your FICO Score that is devoted to the length of your credit history. In particular if you are just starting to establish credit and don't have many other accounts to balance things out, opening new accounts will lower your average account age.
showing your desperation by your actions. Lenders are more likely to reject your applications if they notice a high volume of recent inquiries on your credit reports, which may indicate that you are desperate for credit and unlikely to repay what you borrow.
7. Do not be late with any payments:
Since 35 percent of your FICO Score is based on your payment history, timely payments are crucial.
If you find it difficult to keep track of when bills are due, autopay can be set up with your credit card company or your bank. Some services even allow you to schedule email or SMS alerts to remind you of upcoming deadlines.
A budgeting website or mobile app can also be useful, especially if you use multiple credit cards, as you will be able to keep track of when purchases are made.
The good news is that creditors typically won't report late payments to the credit bureaus until they're at least 30 days overdue. However, a late fee and a higher penalty interest rate may still apply, so it's best to avoid being even slightly late whenever possible.
To what extent would it be wise to hire a credit repair agency?
There is no magic bullet for improving your credit score, and any credit repair service that promises instant results is probably trying to trick you. The Federal Trade Commission (FTC) has even set up a website specifically for the purpose of warning consumers about credit repair scams.
Rather than paying a credit repair company, there are legitimate things you can do on your own.
Get started on our course right away, and once you've mastered everything, you can take the exam and receive your certification in as little as a week. You don't have to pay anyone to get your credit straightened out.
Late Payments - Understanding Late Payments
If you're only a few days late, or even 30 days late with that payment, you'll be glad to know your mortgage lender won't be aware of it. That is, the fact that you paid after the due date won't appear on your credit report or affect your credit score as a delinquent payment. You are, however, charged a hefty late fee anytime you miss the due date, as you might already know all too well if indeed "this is an every month thing."
So, just how late does a late payment have to be before showing up on your credit report as a delinquency? There are two key dates each month that determine when a late charge is assessed, a payment is considered past due and when the account is reported — whether positively or negatively — to the credit bureau: the due date and closing date.
This is the date, typically about 25 days after the prior closing (or statement) date, by which your minimum monthly payment must be received to avoid a late fee, and is most likely the date you've been missing by a few days each month. Yet despite consistently paying after the due date and incurring a late fee, your account has probably been reported to the credit bureaus as "current." That's because the designation of a past-due payment for late fee purposes is different from the guidelines for reporting an account as past due to the credit bureaus.
Closing (statement) date
The closing (or statement) date falls on the same date each month and marks the beginning and end of the time frame for all account activity, such as charges, payments and adjustments, to be recorded onto the monthly statement. While a payment made after the due date and before the next closing date, as you've been doing, won't appear as delinquent on the next statement, the late charge will. If the payment not only misses the due date, but also the next closing date, the statement will indicate that payment as past due.
Reporting to the credit bureaus
Each month, information such as the card's balance, credit limit and payment status is taken from your latest billing statement and reported to the credit bureaus on or shortly after the closing date. This information is then used in the calculation of your credit score the next time it's requested. But what's not always reported to the credit bureau each month, though it may be reflected on your statement, is the past due status of the account. As such, your statement could show a past due payment at the same time the account is reported to the credit bureaus as current.
To address your question more specifically, an account is reported to the credit bureaus as past due when the minimum payment for one month fails to be made by the second closing date following the initial due date. In other words, not only do you have to miss the first and second due dates, but you also have to miss the closing date following that second due date.
Sound confusing? If so, the following scenarios should help illustrate how due dates and closing dates can determine the reporting of an account's payment status to the credit bureaus, which, considering that payment history makes up about 35 percent of your FICO score, can mean the difference between future credit approval and denial:
To summarize the message in these examples, as long as you can keep from missing more than one payment in a row, not only will your account consistently be reported to the credit bureaus as having been paid on time, but your score will continue to look favorably on your recent payment history and your mortgage lender will be none the wiser.
Disputing 1099C when charged-off?
FDIC v. Cashion, 4th Circuit Court of Appeals, 2013
The plain language of the regulation leads us to conclude that filing a Form 1099-C is a creditor's required means of satisfying a reporting obligation to the IRS; it is not a means of accomplishing an actual discharge of debt, nor is it required only where an actual discharge has already occurred.
Citing subsection (a) of the regulations discussed above, the IRS responded that it "does not view a Form 1099-C as an admission by the creditor that it has discharged the debt and can no longer pursue collection." In the second letter, the IRS assured a concerned creditor that filing a Form 1099-C satisfies the reporting requirements of statute and implementing regulations, neither of which "prohibit collection activity after a creditor reports by filing a Form 1099-C.
Credit Repair Act - Understanding CROA
WHAT YOU NEED TO KNOW ABOUT THE
CREDIT REPAIR ORGANIZATION ACT
Because of bad actors in our industry, Congress stepped in and decided to regulate credit repair companies...harshly. Here are the major points you need to know about the CROA to stay compliant. Here is Credit Repair Organization Act statute.
CROA Prohibited Acts
If you are offering to improve someone's credit report, history or score in return for your money you are governed by this statute.You are prohibited from:
Making any untrue statement or coaching your client from making any untrue statement to any credit reporting agency creditor or prospective creditor;
Making any untrue statement or coaching your client from making any untrue statement to a CRA or any creditor with the intention of misleading them as to your identity;
Making any untrue statement in connection with your services as a credit repair professional
Take any action that would tend to defraud a person in connection with your services as a credit repair pro.
Accepting any payment in advance of services performed.
What this section means:
You cannot lie to the CRAs. If your client has an accurate derog on their credit report that your client knows is accurate, don't dispute it. You can ask for verification of it, but do not lie to the CRA and say "Not mine" or "I have no knowledge of it." Those are lies that violate the law.
Don't get your client another social security number. It's a felony. It's just pure fraud. If anyone even suggests this as an acceptable practice, disassociate yourself from this scumbag immediately.
Run your credit repair practice honestly and ethically. Treat every client as if your own mother is considering you as her credit repair pro. Would you lie to your mom? Don't lie to your clients, either. Be transparent. You will never regret it.
Payments in advance of perform services are forbidden! Don't even think about. You must perform the services first and then you get paid. This presents special issues with credit repair pros who do pay per delete. You see, some entities such as the Better Business Bureau believe that all negatives must come off before someone using a pay per delete can get paid. Industry standard, however is different. Many CROs who use the pay per delete model, charge fees as items come off of the credit reports. Personally, I think the industry standard is correct.
The Disclosure Sheet you must give to your clients prior to their signing a Contract
Here are the things that you must tell your client BEFORE they sign a contract. Be sure to give it to them in writing and as a separate document from your contract. Have them sign and date a copy of this Disclosure Sheet to acknowledge their receipt. You are required to keep this Disclosure Sheet for 2 years from the date that it was signed. You can scan and keep a .pdf of it.
The Disclosure sheet must state as follows (Do NOT change any of the words, please):
"Consumer Credit File Rights Under State and Federal Law"
"You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any credit repair company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years."
"You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud."
"You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations."
"You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it."
"Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur."
"You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then re-investigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau."
"If the credit bureau's re-investigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you."
"The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact: The Public Reference Branch, Federal Trade Commission, Washington, D.C. 20580".
The CROA CONTRACT
You cannot provide services to your clients without a signed and dated contract. Moreover, there is a 3-day cooling off period. The consumer has 3 days from the date that they sign the contract to change their mind and void the contract. Hence, wait 3 days before performing any services under it.
Be sure that your client walks out with a signed and dated copy of their contract along with 2 copies of the Notice to Cancel (see below):
Your contract must include:
Your company's name and address
The terms and conditions of payment and the total of all payments to be made by the consumer
Full and detailed description of all services to be performed including:
Any guarantees of performance and
An estimate of the date by which the services will be performed completely or the length of time necessary for perform these services completely.
The Consumer's Right to Cancel the Contract must be prominent.
Above the Client's signature line, you have to put a conspicuous statement "You may cancel this contract without penalty or obligation at any time before midnight of the 3rd business day after the date on which you signed the contract. See the attached notice of cancellation form for an explanation of this right."
The consumer can cancel the contract without penalty or obligation by midnight of the 3rd business day (not weekend day or holiday) following the date that he signed the contract. In fact, at the same time that you give your client your contract to sign, you also have to give them a form, in duplicate, that allows them to cancel. The form must state:
NOTICE OF CANCELLATION
You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day which begins after the date the contract is signed by you. "To cancel this contract, mail or deliver a signed, dated copy of this cancellation notice, or any other written notice to [ name of credit repair organization ] at [ address of credit repair organization ] before midnight on [ date ] "I hereby cancel this transaction, [ date ] [ purchaser's signature ]."
If you fail to comply with the CROA contract requirements, your contract will be void. This means that all of the services that you provide to your client will be for free since the client will be able to get all of his money back. Hence, do NOT:
vary any of the terms required by CROA;
ask your client to waive any right to anything at all;
Liability for Failing to Comply with CROA
Damages – The consumer is entitled to the greater of actual damages or amounts paid to you;
Punitive damages – these are those damages meant to punish you for failing to comply with the law. Juries can come back with high dollar figures on these. Runaway juries have been known to come back in the millions for Plaintiffs.
Attorneys fees and costs of the action. These can be substantial.
Statute of Limitations
The statute of limitations for enforcement of a CROA action is 5 years. That is a pretty healthy length of time especially considering that the FDCPA is 1 year and the FCRA is a 2 year statute of limitations.
States requiring licensure
AR MA OH UT
CA MD OR VA
DC MN PA WA
DE MO SC
IA NE TN
ID NV TX
States NOT requiring a license or bond, but with state specific requirements for credit repair contracts:
States without any regulation of Credit Repair
The only State where credit repair by a for profit company is illegal – GA
Federal Trade Commission and Consumer Financial Protection Board
The FTC and the CFPB both enforce CROA. They fight fraud that impacts businesses. While some people are not crazy about the FTC, they do serve a purpose. They kick the bad actors out of our industry.
WARNING – If you think you are too small to get on the FTC's radar, I am here to tell you that you are wrong. In any event, if it can happen to me, it can happen to you. Practice ethically and in compliance with the law.
The CFPB is a relatively new governmental agency. It was born out of the recession of the 2007. Anyways, it's a very scary agency. They report directly to the President. They have complete discretion to assess fines and costs and indeed, they have been doing so with a very heavy hand. They hand out multi million dollar penalties quite readily and easily. Just recently, they took aim at four California based credit repair companies. Again, if you run an honest, ethical and legally compliant practice, you have nothing to fear from any governmental agency.
Knowledge Base Categories
Business & Marketing
Credit Repair Act
Foreclosures & repossessions
Other or General