Common Credit Repair Questions

• Secret History of the Credit Card from PBS.

• What does the law say about repairing your credit?
   

• What is the truth about credit repair companies? Can they really do what they say they can do?
   

• How long can the credit bureaus keep a negative item on my credit report and what actions will restart that date?
   

• How long do the credit bureaus have to respond to a dispute letter when credit repair is attempted?
   

• What if I dispute a debt with a creditor or a collector and they ruin my credit report anyway?

• Download the essential Credit Repair Guide

On this issue, there is much confusion. Almost every so-called credit repair expert has a different opinion regarding the actual credit reporting period allowed by law.

Most negative listings may be kept on your credit report for a period of 7 years beginning on the date that you were last reported late before they repair themselves. This means that if you were late every month from March to August of 1995, that your date of last activity would be on August of 1995. In this case, the item would be due to repair itself on August of 2002. You don't have to live with 7 years of Bad Credit.

There are several exceptions to the seven year rule. Bankruptcies may be reported for 10 years from the date that the bankruptcy was discharged. Liens and judgments may be reported for seven years or until the statute of limitations in that state (usually between seven and ten years) runs out, whichever is longer. However, credit bureaus usually keep these listings on the report for the seven year period regardless of the local statute of limitations, unless you repair them first.

The other interesting exception is in the case of a negative listing that has been sent to collections or has been charged off. The seven year limit begins 180 days after the last late payment before the account was charged off or sent to collections. In other words, if you didn't pay a certain bill from January to March, and the creditor sent the account to collections in June, then the negative listing could remain on your report for 7 and 1/2 years from that last payment in March unless you repair your credit first.

Under the most recent version of the Fair Credit Reporting Act, the credit bureaus must complete a reinvestigation within 30 days of receiving a dispute letter from the consumer.

However, the credit bureau still has the right to consider a dispute letter "frivolous and irrelevant" at their own discretion, if they feel that someone is attempting credit repair. While the credit bureaus are careful not to overuse this privilege, they may deem virtually any dispute frivolous or irrelevant without having to justify their decision or point to credit repair methods. Learn how to get the credit repair companies to take positive action on your dispute.

While the credit bureau is required to complete their reinvestigation in 30 days or less, the consumer has little recourse against them if they don't. Many consumers assume that the credit bureau must repair all disputed credit if the investigation isn't completed within the required time. This is not the case. The credit bureau may take as long as it likes to repair the credit. The only real recourse a consumer might have would be to gather a class-action lawsuit to penalize the bureau for taking too long. At Trans Union, for example, it is common practice to receive the credit repair dispute letter, take a week or two to process it, then send the consumer a letter saying that the reinvestigation will begin on the date that the credit repair dispute was finally processed. This often gives them a total of six weeks from the date of receipt of the dispute to complete the reinvestigation.

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On this issue, there is much confusion. Almost every so-called credit repair expert has a different opinion regarding the actual credit reporting period allowed by law.

Most negative listings may be kept on your credit report for a period of 7 years beginning on the date that you were last reported late before they repair themselves. This means that if you were late every month from March to August of 1995, that your date of last activity would be on August of 1995. In this case, the item would be due to repair itself on August of 2002. You don't have to live with 7 years of Bad Credit.

There are several exceptions to the seven year rule. Bankruptcies may be reported for 10 years from the date that the bankruptcy was discharged. Liens and judgments may be reported for seven years or until the statute of limitations in that state (usually between seven and ten years) runs out, whichever is longer. However, credit bureaus usually keep these listings on the report for the seven year period regardless of the local statute of limitations, unless you repair them first.

The other interesting exception is in the case of a negative listing that has been sent to collections or has been charged off. The seven year limit begins 180 days after the last late payment before the account was charged off or sent to collections. In other words, if you didn't pay a certain bill from January to March, and the creditor sent the account to collections in June, then the negative listing could remain on your report for 7 and 1/2 years from that last payment in March unless you repair your credit first.

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Under the most recent version of the Fair Credit Reporting Act, the credit bureaus must complete a reinvestigation within 30 days of receiving a dispute letter from the consumer.

However, the credit bureau still has the right to consider a dispute letter "frivolous and irrelevant" at their own discretion, if they feel that someone is attempting credit repair. While the credit bureaus are careful not to overuse this privilege, they may deem virtually any dispute frivolous or irrelevant without having to justify their decision or point to credit repair methods. Learn how to get the credit repair companies to take positive action on your dispute.

While the credit bureau is required to complete their reinvestigation in 30 days or less, the consumer has little recourse against them if they don't. Many consumers assume that the credit bureau must repair all disputed credit if the investigation isn't completed within the required time. This is not the case. The credit bureau may take as long as it likes to repair the credit. The only real recourse a consumer might have would be to gather a class-action lawsuit to penalize the bureau for taking too long. At Trans Union, for example, it is common practice to receive the credit repair dispute letter, take a week or two to process it, then send the consumer a letter saying that the reinvestigation will begin on the date that the credit repair dispute was finally processed. This often gives them a total of six weeks from the date of receipt of the dispute to complete the reinvestigation.

As the credit bureaus computerized their processes and greatly expanded their reach and influence in the late 1960s and early 1970s, consumer complaints began to pile up at the FTC and state attorney generals' offices. The credit reporting agencies quickly became huge bureaucracies second only in size to the federal government. Yet, the credit bureaus expressly served only the needs of their clients, the credit grantors.

Many consumers were negatively effected by the credit bureaus, but they had no way to correct or change their credit information. The American consumer lay completely at the mercy of the credit bureaus. The United States Congress enacted the Fair Credit Reporting Act (FCRA) in 1971 to insure that the credit bureaus investigate the credit items disputed by consumers. This federal law set procedural guidelines which gave the consumer the right to challenge the accuracy, validity, and verifiability of the credit listings appearing in their consumer credit report. It also required that the credit bureau repair any credit listing if it was inaccurate or could not be verified.

In theory, the FCRA charges the credit bureaus with responsibility to the consumer as well as the credit grantor. In reality, the credit bureaus resist, resent, and reject consumer disputes. The credit bureaus would rather be left alone to make a profit. And, each time a consumer challenges his credit, profit is lost.

The credit bureaus first defend their profits by erecting walls of stall tactics, including requests for more information, further clarification, and additional identification. The vast majority of consumers give up before they even receive copies of their credit reports. If a consumer manages to get a credit report, decipher the codified information, write a coherent dispute, and mail it, the bureaus may still find some reason to disregard the challenge. The entire dispute system is designed to frustrate and discourage the consumer.

Many consumers have the idea that the credit bureaus must complete their investigation within thirty days or be forced to remove all disputed information. They threaten to sue the credit bureaus if they don't conclude their investigation in time and repair their credit. In practice, such thinking is delusional. Nobody forces the credit bureaus to do anything.

However, if you manage to submit a valid dispute letter, and the credit bureau investigates your dispute, the chances of success are good - whether or not the negative listings are accurate! Accuracy actually has little to do with the deletion of negative items.

If a credit bureau cannot verify an item before completing its investigation, that item will be removed. Many creditor grantors are simply reluctant to take the time to verify the data. While the credit bureaus may be in the business of reporting credit histories, creditor grantors are not.
 

What is the truth about credit repair companies? Can they really do what they say they can do?

Many "credit repair" companies claim to remove negative credit with the flick of a wrist. Their advertisements make bold assertions and money back guarantees; "Bankruptcy, tax liens, judgments, . . . no problem!! One hundred percent guaranteed!! Credit report 100% cleared in 30 days!!" Can they really make such sweeping guarantees?

While some credit repair companies are outright frauds, others are not frauds and they use the dispute process to obtain impressive results. In fact, they delete thousands of negative credit listings every day - regardless of whether or not the listings are technically accurate. In truth, credit repair fraud is less common today then five years ago. Vigorous regulatory sweeps by state and federal regulators have cleared away most of the illegitimate (and some of the legitimate) credit repair companies.

Unfortunately, it's risky to trust anyone to help you repair your credit. It is estimated that credit repair companies have bilked Americans out of more than fifty million dollars. The majority of credit repair companies were started by entrepreneurs with a penchant for marketing. Consumers have flocked to these "credit doctors" only to discover that their advertisements proved far more impressive than their results. Hiring a credit repair company is like playing Russian roulette. Many of them are effective and legitimate, but it is difficult to tell a rip-off from the real article.

Working within the credit bureau maze requires substantial background knowledge; knowledge it takes credit repair companies years to learn. In fact, U.S. District Court Judge J. Wexler entered the following legal opinion in the Federal Supplement. "Since allowing third parties to assist consumers will likely lead to the expedited correction of credit reports, it will further the purposes of the [Fair Credit Reporting] Acts."

So, can credit repair companies really guarantee results?

Not a chance! No credit repair company is so good that it can guarantee a specific outcome. It would be like a defense lawyer guaranteeing that the jury will find his client innocent. Guarantees are a sure sign of credit repair fraud. A warranty, where the credit repair company promises a refund if certain results don't occur, is a better, more realistic claim.

Not surprisingly, the credit bureaus have declared war against the credit repair companies and those selling instruction on how to do-it-yourself. The bureaus lambaste credit repair companies in the media and send anti-credit repair literature to anyone whom they suspect of using credit repair services. The bureaus unflinchingly deny that accurate information can be removed from a credit report.

Some time ago, a couple in the Northwestern United States, who were using the services of a legitimate credit repair company, received a scathing letter of reproach from their local credit bureau. The letter chastened them for relying on the "unethical" methods of credit repair, and pointed out how all their efforts had come to nothing. "As you can see," the letter chastened , "your credit reports remain unchanged." The couple was bewildered because almost all of their many negative credit listings, including a bankruptcy, had long since been deleted.

The simple truth is that you don't have to endure bad credit for seven to ten years. It is possible to repair your credit within a much shorter time.

However you decide to address your credit challenges, realize that regardless of what you may hear in the news media, thousands before you have sought help and repaired their credit. They can show you their homes, cars, and credit cards. Despite the newspaper articles, TV reports, and other credit bureau propaganda to the contrary, you can repair your credit.

Creditor Direct Strategies

Settling Your Debts
Many times we have been asked, "Can I just delete the negative listing without paying the debt?" In most cases, the question comes from someone attempting to dishonestly escape a financial obligation. While it is true that negative debt listings can be deleted from the credit report - even while the debt remains unpaid - it is also true that these listings stand a good chance of reappearing on the credit file sooner or later. There is a better alternative than attempting to escape the debt.

You can create a true win-win situation by settling the debt with the creditor. It is our experience that the average consumer settles a debt for about 75 cents on the dollar. It is also our experience that a professional negotiator will settle an average debt for about 60 cents on the dollar, including their fee. There is rarely a good reason to attempt your own debt settlement. Creditors will not take you half as seriously as they will take your attorney. Handled properly, you will save time and money by seeking a good attorney to negotiate with your creditors.

Understanding the True Risks and Realities of Overdue Debts
Most consumers overestimate the risk involved with overdue debts. They worry about possible repercussions such as wage garnishment and property seizure by their creditors. When the debt relates to a secured property, such as an automobile or a home, the possibility of repossession is serious, but unsecured debts, such as credit cards and deficiencies are much less pressing.

In fact, very few creditors will push all the way to a garnishment on a relatively small unsecured debt. Garnishment and seizure are a creditor's most terrifying weapons used to collect past due debt, but they are expensive and time-consuming. Even if the creditor went all the way to recover the debt, they probably wouldn't be able to recover enough to offset their collection costs. There is little risk of a creditor taking an unsecured debt past simple collections.

It is important to remember, however, that the creditor would be in his rights to get a garnishment and seize property, even for a small debt. There is some risk of financial reprisals when a debt goes unpaid. Many consumers fold under the perceived strain of unpaid debts. Hundreds of bankruptcies take place in the United States each week for amounts under $5000.

These consumers are so intimidated by their creditors, that they flee to bankruptcy, even though bankruptcy can bring total financial devastation for at least the next ten years. If these same consumers had simply waited, and ignored the threatening letters and telephone calls, they would have realized that their creditors were all bark and no bite. Bankruptcy is the best option for a few consumers, but it is much over-used. And, when a consumer files for bankruptcy, everyone loses - especially the creditors.

The risks of judgments, garnishments, and property seizures must be properly balanced against the likelihood that such drastic collection measures will ever happen. The risks, and the decision to take that risk, are entirely yours if you're in such a position.

Which Debts Can Be Settled?
An unsecured debt is a debt where there is no collateral. Unsecured debts include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. Most unsecured debts can be settled. But, utility companies generally won't settle for less than the full balance. There are some few creditors, who will never compromise, but most will take a less-than-full payment as settlement in full to close a troublesome account.

Secured, collateralized debts, such as a home or automobile, are another story. If the creditor can simply repossess the property, why should he negotiate? You can often renegotiate a short payment relief with a secured debt, but don't attempt to settle the account while you still possess the property.

Also, the creditor must have a good reason to want to settle. If the account is paid current, and there is no recent history of late payment, it will be difficult to convince the creditor that it is in their best interest to settle. This should not be read as a recommendation that you stop paying your current bills. If you stop paying your current bills, you will almost certainly make your credit situation worse. Perhaps bad credit is not an issue for you at this point and you feel you must stop paying your bills in order to settle them and get back on top of your debt load. If this is the case, you make such a decision at your own risk.