Many people are confused as to the legality of repairing their credit. First, it is helpful to understand what is illegal to repair your credit.
- It’s illegal to change your Social Security number to get a clean credit. If any company offers you this as a type of credit repair, you should immediately report them to the proper authorities.
- Disputing every item on your credit report, regardless if you know it to be true or not is illegal. Per the Fair Credit Reporting Act, only items that are unverifiable, misleading or inaccurate should be disputed. Items that you know to be true and reflect your credit history should not be disputed.
- It’s illegal for any credit report service to charge you for services not completed. This will protect you the consumer of any fraudulent companies that charge for services they never complete.
So, what exactly is considered legal credit repair?
Legal Credit Repair involves removing negative items from a credit report. There are several different methods of going about this; however, the most common and effective are as follows:
“Goodwill” Negotiation – Negotiating with creditors to remove negative items from your credit reports for mild late-pay accounts. No law exists that requires negative items to stay on your credit reports for any amount of time. As a result, creditors have the ability to remove these items if it works to their benefit, even if it simply pleases a customer.
Credit Disputation – The Fair Credit Reporting Act gives consumers the right to contact credit bureaus directly and dispute items on their credit reports. Consumers have the right to plead “not guilty” to negative information on their credit reports and the burden of proof is on the credit bureaus, just like in a court of law. Consumers can dispute any and all items on their credit reports that they believe are inaccurate, unverifiable, or misleading. If the credit bureaus can not verify that the information on a credit report is correct, then those items must be deleted.
How Does Having Bad Credit Affect You?
Most people don’t realize that having a poor credit score will cost them hundreds or even thousands of dollars per month. The reason they aren’t aware is that most people don’t run the numbers. If they did, they’d be surprised!
Many people with bad credit when purchasing a car or home don’t realize that if they had better credit their interest rate would be lower, thus their monthly payments would be lower. Many people purchase cars and homes and just look at the monthly cost and not the interest rate.
Most prime credit cards are out of reach from consumers with bad credit. The few credit cards that are available (known as “sub-prime” credit cards) typically require expensive setup fees or recurring monthly fees, often require cash deposits, offer very low credit lines and most of the time don’t report as positive credit activity to the credit bureaus.
Let’s take a look at automobile financing and determine the cost of poor credit. If you plan on financing a car, you will end up paying $5,000 to $9,000 more because of your bad credit. The higher the interest rate, the higher your monthly payment which adds up to significant money over the years. See sample calculation below.
Another area where having bad credit can really hurt is your home mortgage. A typical house will cost you $50,000 to $130,000 more in interest if you are buying a home with poor credit. See sample calculation below.
Improving your credit score is vital before making major purchases.
FQA About Credit Repair
Will a negative item on my credit report come back after I succeed in deleting it?
Credit bureaus will sometimes delete a negative listing temporarily if they haven’t heard from a credit grantor within 30 days. If a credit grantor then reports a negative listing, the credit bureaus will often reinsert the negative listing on the credit report and reverse the credit repair. However, many times, the creditor will fail to respond and the negative listing is permanently deleted and repaired.
Credit bureaus must follow strict procedures, per the Fair Credit Reporting Act, to notify you if they decide to re-report a listing on your credit report.
Are negative items such as bankruptcies and foreclosures impossible to remove from the credit report?
There is no type of negative listing that can’t be removed and repaired from a credit report. It has been done many times. However, negative items such as unpaid debt and bankruptcy are very difficult to remove and repair.
Do I get a new credit report if I declare bankruptcy?
Bankruptcy is to the credit rating what a nuclear bomb is to the battlefield. When an individual files for bankruptcy, every credit account that’s included in bankruptcy becomes an “included in bankruptcy” item. Bankruptcy discharge listings and filings will appear in the court records section of the credit report. With so many negative items are attached to a bankruptcy, it will be extremely difficult to remove all traces of the bad credit, if at all. As a result, it is advised that you should avoid bankruptcy at all costs.
It is true that disputing items on my credit report is easy and can be done by myself?
It is true that disputing items on your credit report is very easy. However, getting results (and actually repairing bad credit) is very difficult, complex, and can be very infuriating. Repairing your credit is like repairing your car transmission or representing yourself in court; it is possible but is it smart to do. It can be very time-consuming and risky.
The Federal Trade Commission (FTC) receives more complaints against credit bureaus than any other type of business. As a matter-a-fact, if you call the FTC to report a complaint about a credit bureau, their phone system will prompt you to press one if your complaint is about a credit bureau or press another number if your complaint is about another type of business anything else.
Will my account show as “paid” and no longer considered negative when I pay off a past-due account?
It is very difficult to repair your credit without taking care of your outstanding debts. Paying off your debt will improve your credit rating by much, if at all. Negative credit stays on your credit report for a maximum of 7.5 years, except for bankruptcy which can stay on your credit report for 10 years.
Paying off outstanding diligent debt will change the account status to “paid was charged off”, “paid collection, or “paid was late”. This will stand out as a very negative item. When you have outstanding debt, it is recommended that you seek professional help to settle it without further damaging your credit. Sometimes, it is possible to negotiate a deletion of negative credit as part of the payoff.
Do creditors read my 100-word statement on my credit report explaining my side of the story and do they take my statement into consideration?
Most creditors do not look at the credit report when a credit application is completed. They are most interested in the numerical credit score to determine whether or not they should extend your credit. Your FICO score does not take into consideration the content of your statement.
However, the statement does very that some of the negative listings on a credit report are technically accurate. This makes a credit repair job more difficult and the word statement should be the first thing to delete from your credit file.
Can I trick the credit bureaus into starting a new credit file under my name if I change my social security number or by using an EIN (Employer Identification Number) tax number?
This scheme is known as “file segregation” and is promoted by many credit repair operators. Some individuals have been successful in using a false Social Security Number and have tricked the credit bureaus into giving them a new identity. The scheme is totally illegal and lying on any personal information on a credit application is a federal crime.
The scheme is very complicated because you must change almost all identifying information about yourself and be very careful to never use the old information again. Some people make the error of using their old information only to mix the old with new and get in trouble. They will end up with both credit reports merging their information which then becomes suspicious to the credit bureaus.
Worst yet, some people have been charged with crimes or terminated from jobs for using false information.
Will by bad credit be improved if I build enough good credit?
Any amount of bad credit limits your chances of being approved by a credit grantor. Most creditors do not look at your credit report but instead have a computer pull your credit report, rates your credit standing, income, indebtedness, and stability, generate a number (or FICO score,) then determine an acceptance or denial.
A simple one or two slow payments can trigger a credit card or personal loan denial. The smallest amount of negative credit will cause the interest on a loan (home, auto, personal, etc.) to skyrocket
Is it illegal for creditors to take an accurate negative listing off my credit report?
The fact is that the law demands that negative listings appear on your credit report for no longer than seven years. The credit bureau or credit grantor can choose to delete the negative credit listing whenever they like.
Will the Consumer Credit Counseling Service help me repair my credit, especially if I can’t pay all my bills?
CCCS or Consumer Credit Counseling Service is a nonprofit debt counseling service funded and controlled by the credit grantors and the credit bureaus. CCCS helps individuals who are over their heads in debt.
Often, CCCS provides beneficial services to consumers, however, because there is an allegiance between CCCS and the credit bureaus, you cannot reasonably expect CCCS to do anything that the credit bureaus would not like such as help you repair your credit.
If you decide to leave CCCS before finishing their program, they can list your failure to complete the program as a negative listing on your credit report (although this is rare.) When you participate in the CCCS program, your creditors will often note it on your credit report. If you want to keep your perfect credit, do not use a credit counseling service because their process will generally make you late on your bills at least 30 days, thus creating negative listings on your credit report.
Using a debt counseling program is a red flag for prospective credit grantors. Paying off your debts is a good start in the right direction, but it does not repair your credit. Consumer credit counseling can really help you if you’re over your head and need some help.
How difficult is it to repair my credit?
Repairing your own credit by yourself is possible, however, the credit bureaus want you to fail and have experience in discouraging consumers. However, some consumers have been successful in repairing their credit without professional assistance. Keep in mind that the process can be very time-consuming and you have to educate yourself on the process. The process can take 12 and 18 months and take a lot of hours per month. It is definitely a good idea to get some help from companies like Lexington Law.
Can Negative Information on Your Credit Report Be Erased?
Good news, yes negative information on your credit report can be erased. The fact is every day negative credit listings are deleted from individuals’ credit reports by the thousands every day. However, these individuals did get some help.
Lexington Law has reported helping clients remove about 50,000 negative credit listings in about two years. However, this doesn’t include bankruptcies that can’t be deleted.
Well, how is this possible? It’s possible because the Fair Credit Reporting Act (FCRA) allows consumers to challenge the information on their credit reports on the basis of “completeness and accuracy.”
When a consumer files a dispute, the credit bureaus must contact the source of the credit information (the creditor) and confirm that the information is accurate, verifiable, and not obsolete.
However, in some circumstances, the credit bureau is required to go beyond a simple verification of the creditor’s own computer record. If within 30 days the credit bureau has not received verification from the creditor, then the credit bureau must promptly delete the credit listing.
To help clean up your credit report consider contacting LexingtonLaw.com. Lexington Law is a law firm that has been around for 17 years that specializes in credit repair. They have served thousands of clients since 1991. Lexington Law works closely with credit bureaus and creditors to help clients clean up their credit. The process is simple; you give Lexington Law all the information they need, you then sit back and relax and they will go to work for you.
How You Can Benefit From a Debt Consolidation Loan
A debt consolidation loan can combine your multiple debts into one loan, help you save money, and handle your finances better.
It is quite easy to fall into a debt trap but it is always difficult to dig yourself out of it. If you have piled up a huge amount of high-interest debts and you’re finding it difficult to keep up with your monthly debt payments, one solution to lower them and get out of debt is a debt consolidation loan.
Why A Debt Consolidation Loan Is Beneficial for You
The idea behind a debt consolidation loan is simple. You are acquiring a new loan at a reduced rate than your present debts that frequently carry higher rates charged by retailers and credit card companies. Subsequently, you utilize the money to repay your existing debts. This leaves you with just one monthly payment rather than multiple payments. As the new loan is available at a reduced rate, you would also enjoy a reduced payment and it would be less than the aggregate of your earlier payments. This indicates that you can get out of debt faster.
An instance of how a debt consolidation loan works:
- You are obliged to repay $4,000 for a store credit card that has an interest rate of 17.5% and monthly payment for this is $80.
- Your bank credit card has an outstanding balance of $5,000 at an interest rate of 18.9% and monthly payment for this is $100.
- You have a car loan of $15,000 of which $11,632 is outstanding at an interest rate of 6.97% and monthly payment for this is $359.
- Your overall debt amount (not considering your mortgage) is $20,632 and your overall monthly debt payment is $539.
- At this payment level, you’re not paying down your debts rapidly. To make things simpler, you obtain a 60-month home equity loan for the same amount ($20,632) at an interest rate of 7%. Your new monthly payment becomes $409.
- You can utilize this loan to repay your other creditors. With the considerably reduced interest rate, your new monthly payment amount is lower than your previous one by $130. Furthermore, your debt would be repaid in five years and the overall amount of interest payable by you is $3,880. This is less by $5,541 than what you would have paid for your original loans.
Utilizing A Line Of Credit Or Home Equity Loan
One popular form of debt consolidation loan is a line of credit or home equity loan. As the loan is guaranteed by your home equity, the lender can offer you a cheaper interest rate. The loan amount you can avail of is dependent on the amount of equity you have. Usually, lenders would offer you an amount that is equivalent to 80% of your home equity.
The interest payable for a home equity loan might be tax deductible and this successfully lowers the loan costs. You can discuss this with a tax consultant. Nevertheless, keep in mind that home equity loans require your home as collateral and in case of a default, you have the risk of losing your home.
Utilizing A Personal Loan
For consolidating your debts, lenders also provide personal loans. For this type of financing, it is hard to obtain an interest rate that is sufficient to better your condition, particularly if your credit score is less than adequate. If it is an unsecured personal loan, the interest rate would be more than a home equity loan. One technique to obtain improved terms and conditions is to have a friend or family member as a co-signer, assuring repayment.
Compare Loan Offers
Be cautious prior to signing the dotted line. For effectively lowering your debt, a debt consolidation loan must have an interest rate that is substantially lower than your existing rates. You should also know that your payments might be reduced by extending the repayment term but at the same time, this can result in increased interest costs. Verify if there are any commissions or additional charges along with needless costs like credit insurance.
Rectify Your Spending Habits
It is essential to keep in mind that a debt consolidation loan would only be useful if you prevent accumulating new debt or else, you would land up in similar types of problems that you had in the past. A debt consolidation loan can help you get back on track. However, it would work if you select the correct loan and rectify your spending habits to stop piling up new debt.
Repairing Your Credit
According to the Federal Fair Credit Reporting Act (FCRA), credit bureaus must investigate and verify, upon request, the completeness, and accuracy of the information on your credit reports. The FCRA provides consumers the legal right to dispute inaccurate, incorrect, or misleading information on their credit reports.
Credit bureaus are given 30-45 days to investigate a credit dispute. If the bureaus determine they’ve been reporting inaccurate information, or if they are unable to verify the item, they either correct or remove the item in dispute. The bureaus then supply the consumer (you) with updated account information, usually in the form of new credit reports.
There are companies that will help you navigate the laws in order to increase your credit score. Credit repair companies will complete the necessary paperwork to report information that is inaccurate with the goal of having it removed. Removing negative information can increase your credit score significantly.
There are a few services online that you can use to repair your credit. Below we have listed a few of them.
Ovation offers a personalized and proven credit repair program that will get you results. You can sign up online which only takes a few minutes. Ovation can help remove or improve questionable items on credit reports which include late payments, collections, charge-offs, bankruptcies, inquiries, judgments, liens, repossessions, foreclosures, identity theft, fraud, and incorrect personal information.
Lexington Law is a law firm that has been around for 17 years that specializes in credit repair. They have served thousands of clients since 1991. Lexington Law works closely with credit bureaus and creditors to help clients clean up their credit. The process is simple; you give Lexington Law all the information they need, you then sit back and relax and they will go to work for you.
Veracity helps consumers decipher credit reports and choose which information should be disputed. Veracity’s specialists have analyzed thousands of reports, and they can quickly help you identify areas of potential concern. Whether you’re dealing with duplicate information, paid accounts that still show as unpaid, or a collection account that keeps “resetting” the date of last activity. Correcting such problems can increase your credit score dramatically.