Have you ever wondered what the professionals do when they “fix” credit?
One of the most common questions that I see pop up online and in my inbox pertains to credit. Credit is one of those financial topics that people are aware of, but may not fully understand. They know that credit can either allow them to be approved or denied for the thing that they’d like to purchase, but that seems to be the extent of their knowledge. Because of this, I often get questions around what to do when…
– what to do when your score is this…
– what can you qualify if your score is that…
– how can you fix such and such…
While online yesterday, I saw a question pop up concerning credit repair. The person said that the money that they’re paying the credit repair company could be going toward the debt that they owe. They asked what should they do about it? The post had been up for maybe 30-45 minutes at the time that I saw it. In that time there were hundreds of responses. Of course, I’m curious and somewhat nosey, so I started scrolling through the comments to see what people had to say. There were the typical responses such as
– don’t pay for credit repair
– how much are you paying (I wanted to know too)
– which company are you using
One response in particular caught my attention. This person said, and I quote “If y’all don’t want us paying anyone. Can you guys please include the steps and letters that are needed to fix the credit? That would save all of us time <ugh emoji>!
This comment stood out because she had a point. There were tons of people giving opinions disguised as empty advice, without providing any meaningful guidance. Based upon the tone of the comment, this person was clearly frustrated by the lack of helpful information. I’d wager that this person was following the thread because she’s dealing with the same circumstances as the person who made the original post. Her credit is likely damaged in some way, and it’s affecting other areas of her life. Maybe she wants to buy a house, but unable to qualify because of her credit. Maybe she wants to buy a car, but again, her credit is a hinderance. If by a slim chance she’s able to be approved for a car loan at all, it’ll likely have an incredibly high interest rate. Say she wants to rent an apartment or establish utilities in her name, bad or damaged credit can be a hinderance.
Considering the frustration in the tone of the comment, this person was likely looking for guidance that I’m going to share below.
The basis of credit repair centers around the report itself. I know that a lot of people only think of the credit score, when thinking of credit in general. However, the score is only a numerical value used to rate the overall report. Because the score is influenced by the report, it will improve as the report improves.
As such, step 1 is to pull a copy of the credit report.
Another common misconception is that you hurt your credit by pulling the report. That’s not true. You as a consumer are entitled to see your credit report as often as you’d like. The only impact to your credit is if someone else pulls your credit report, like a bank or credit card company or something like that.
You’re actually entitled to receive one free copy of your credit report once a year from each of the three credit bureaus: TransUnion, Equifax, and Experian. To see the reports multiple times per year, Credit Karma good resource to see the report from two of the three bureaus: TransUnion and Equifax.
Step 2 is to review the contents of the report. Begin by looking to see whether the information listed is accurate.
- Personal Information Section: Name, Address, Phone Number, Date of Birth, Marital Status
- Public Records Section: Lawsuits, Bankruptcy, Liens, Judgments
- Credit Accounts Section: Incorrect Account Histories, Late Payments, Incorrect Date of Delinquency, a Voluntary Vehicle Surrender incorrectly listed as a repossession, Incorrectly Listing You as a Cosigner, Duplicate Accounts, any other adverse information
- Inquiries Section: Inquiries that you did not provide written consent
Highlight all inaccuracies in preparation for step 3, which is to dispute.
Companies are required by law to only report correct information to the credit bureaus. If they fail to do so, that incorrect information can negatively impact the consumer. Obviously, these companies don’t know their customers personally, so it is possible that they could report incorrect information without knowing it. If you as a consumer do not regularly review your credit report, it’s unlikely that you’d know whether the information is being reported accurately either. Moral of the story, review your report regularly.
If and when you find an inaccuracy on the credit report, dispute it. The dispute process, simply informs the credit bureau that the information is being reported incorrectly and needs to be corrected. In response to the dispute, they have to either have to correct what they’re reporting or remove it altogether.
The person who made the comment that sparked this line of inquiry requested the steps and letters to repair credit. By letters, she’s referring to dispute letters. Before things became as virtual electronic as we know them to be today, one had to manually write letters to the credit bureaus in order to have things corrected or removed. Now, one can file a dispute electronically by going directly to the each of the credit bureau websites, by simply clicking the dispute link and completing a short form. Answer a few questions about the inaccuracy, and click submit. Some may choose to do it the old fashioned way, by mailing letters. It’s a matter of preference.
Once the dispute has been filed, whether by mail or electronically, the credit bureau has 30 days to respond. During that time, they perform research on their to confirm whether an error has been made. If they confirm that an error has been made, they fix it. If they confirm that the information is actually correct, they’ll respond saying so. Either way, they have to respond.
Conversely, there may be instances where the negative items are reporting correctly. What happens if in your initial review, you found things that are correct. What if you had an account that actually went into collections? What if you had a vehicle repossessed? What if you actually maxed out the credit card? What do you do then?
One of the strategies that professionals use is to dispute all negative items. The reason for this goes back to my earlier comment that companies are legally required to report only accurate information. In order to ensure the accuracy of the information that they report, they must retain evidence. In the case of a dispute, they have to prove that their information is correct by providing evidence. Oftentimes, companies fail to retain the necessary evidence and are unable to verify their reporting. As such, the reported item(s) must be deleted from the credit report altogether. The company’s negligence benefits the consumer.
I did this with one of my clients who had a repossession reporting on his credit. The account was reporting as a repossession, despite the client having voluntarily surrendered the vehicle. My client disputed the negative item, and the company was unable to verify. As such, they were required to remove that $10k negative item from my client’s credit report. You can guess what something like that does to the actual credit score.
This simple 3 step process is one of the most powerful tools that consumers can use.
- Pull a free copy of the credit report.
- Review all of the information listed.
- Dispute the negative and inaccurate items.
If you’d like to learn more about making your finances work for you, click here to schedule a free call today.