This is an all inclusive guide to credit. All of the information here is provided free to you to help you correct and remove "questionable" and "inaccurate" entries if they are contained in your credit report files and help you build new credit. Free Sample Letters in MS Word format are at the bottom of the page.
Financial institutions, such as banks, mortgage companies, finance and credit card companies, do not just give loans or issue a line of credit to anyone. But it is impossible for these organizations to personally know everyone of their customers so they rely upon credit reporting agencies.
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If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file contains information on where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy.
Companies that gather and sell this information are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau. The information CRAs sell about you to creditors, employers, insurers, and other businesses is called a consumer report.
Payment history
Your accounts with different creditors are listed, showing how much credit has been extended and whether you've paid on time. Related events, such as referral of an overdue account to a collection agency, may also be noted.
Inquiries
CRAs must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.
Public record information
Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.
Creditors will use the information in these credit reports to help them decide whether or not you are able and/or likely to make the payments on the loan or account, based on your past credit experience. Most creditors actively cooperate with the credit bureaus, by giving them the very information that is later resold. The Bureaus work as an information exchange center for these institutions. For your information, here is the law limiting the permissible uses of credit reports.
Inaccurate information contained in credit reports is widespread, estimates that nearly 50% of the credit reports contain some type of inaccurate information. Some of the errors are serious enough to prevent you from qualifying for credit. Credit reports have errors of some kind and the only way they are corrected is at your request. You are the person with the vested interest in the report, the credit bureau is paid each time it provides your report, regardless of the accuracy of the items it contains. Serious errors like false delinquencies and judgments that don't belong to you will prevent you from obtaining credit. I have personally seen credit reports that listed a consumer as deceased, try getting a loan if you are dead. (death seriously impedes your ability to repay)
The FCRA is designed to promote accuracy and ensure the privacy of information used in consumer reports. Recent amendments to the Act expand your rights and place additional requirements on CRAs. Businesses that supply information about you to CRAs and those that use consumer reports also have new responsibilities under the law. The laws established by this act require the credit reporting agencies to remove all obsolete, inaccurate, irrelevant, outdated, misidentifying, incomplete, incorrect, erroneous, and misleading information from their credit reports.
Here is a link to the full text version of the Fair Credit Reporting Act
Easy Mortgage Approvals Even With Bad Credit
The process is not difficult but it requires patience and commitment.
Under the law, both the CRA and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under the law, contact both the CRA and the information provider if you have a dispute.
As you proceed through these steps, keep copies and records of all correspondence you send and receive. When corresponding with these agencies, send everything by registered mail, return-receipt requested. Make sure you obtain a cash receipt and retain a copy of the registered mail receipt. These will serve as your proof of mailing. If information that was removed from your credit report should reappear later, you will have the documentation to force the credit agency to permanently delete this entry. You should treat these documents with as much importance as your birth certificate or passport, put them in a safe place in the event you need these records in the future.
There's no charge if a company takes adverse action against you, such as denying your application for credit, insurance or employment, and you request your report within 60 days of receiving the notice of the action. The notice will give you the name, address, and phone number of the CRA. In addition, you're entitled to one free report a year if you certify in writing that (1) you're unemployed and plan to look for a job within 60 days, (2) you're on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a CRA may charge you up to $8 for a copy of your report.
You will also receive an updated copy of your report after your disputed item is removed. Dispute a specific erroneous item with each of the three credit bureaus, and after their investigation is complete, you will receive updated credit reports. To be effective, you must have specific knowledge of an erroneous item on your credit report, and it will take two months before you are likely to see the update.
Now available: Thanks to Q.Space you can now order your personal credit report, or even a merged (3-bureau) report, right from their website! For the purposes outlined here, the merged report is highly recommended. In one combined report, you will see all items reported by each of the three credit bureaus, and you can start the process of correcting disputed items within days, instead of weeks. Definitely Well worth the money.
For Immediate gratification there is a service which will let you get 1 Online Credit Report (30 seconds) right now.
For a complete review of your credit profile, I still recommend a Merged Report.
Either order online from Qspace.com (recommended for speed and ease), or follow the format in the sample letter at the bottom of this page, and write to each of the three major credit reporting agencies, at the addresses posted on their web sites, or available from the 800 numbers below:
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Equifax |
Experian PO Box 949 Allen, TX 75013 (888) EXPERIAN (397-3742) |
Trans
Union PO Box 390 Springfield, PA 19064-0390 (800) 916-8800 |
Within 30 days you should receive a copy of your credit report from each of the agencies.
Each credit reporting agency follows their own format, but they provide the information which will help you decode your credit report.
For each credit report, carefully note any records which you believe to be inaccurate, incorrect, erroneous, misleading or outdated. It does not matter whether the information is negative, neutral, or even positive, if it is in anyway erroneous it should be removed.
Once you have noted each questionable item, you should list them. Rank the most damaging information first, followed by the next most damaging, etc., until those items which are neutral. Do this for each credit report, as they may not all have the same questionable information on them.
The following ordered list should give you an idea of the significance of derogatory information:
You will find that some of the questionable information is duplicated on one or both the other credit reports. You should send a dispute letter to each of the three major credit reporting agencies, for each questionable item appearing on their report.
First, tell the CRA in writing what information you believe is inaccurate. Include copies (not originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one below. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures. CRAs must reinvestigate the items in question within 30 days, unless they consider your dispute frivolous. It is very important that each questionable item is dealt with individually. If you attempt to have the credit reporting agency correct several items, or even all items, at once, it will be easier for the agency to claim that your request is frivolous or irrelevant.
They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so that they can correct this information in your file.
If your file shows an account that belongs to another person, the CRA must delete it.
When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice of its intent to reinsert the items that includes the name, address, and phone number of the provider.
If you request, the CRA must send notices of any correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.
In addition to writing to the CRA, you should tell the creditor or other information provider in writing that you dispute an item. Be sure to include copies (not originals) of documents that support your position. Many providers specify an address for disputes. If the provider continues to report the disputed item to any CRA after receiving your notice, it must include a notice that you dispute the item. If you are correct—that is, if the information is not accurate—the information provider may not report it again.
The specific law regarding disputes is found in US Code, Title 15, Chapter 41, Subchapter III, Section 1681i, entitled Procedure in case of disputed accuracy.
You now need to write a letter to each credit reporting agency, requesting an investigation to verify the status of the most damaging item reported by any of the agencies, and asking that they correct the information. Make sure your letter has a clear statement that the accuracy or completeness of specific information is "disputed" or "challenged", otherwise your letter might not be construed as an exercise of rights under the Fair Credit Reporting Act. A sample letter is on the bottom of the page.
Note the addresses to which the credit reports direct you for disputes. They will not be the same as the addresses you used to obtain the credit report.
| Equifax PO Box 740241 Atlanta, GA 30374-0241 (800) 685-1111 |
Experian PO Box 949 Allen, TX 75013 (888) EXPERIAN (397-3742) |
Trans
Union PO Box 390 Springfield, PA 19064-0390 (800) 916-8800 |
Follow the format in the sample letter, and send it in. Send it registered, return-receipt requested. Be sure to keep a copy of the letter for your records, the post office cash receipt, the registered mail receipt, as well as the return receipt, when you receive it. They will serve as your proof of mailing.
Within 10 to 30 days you will receive a letter from each credit reporting agency telling you that they are investigating your dispute. Within another 10 to 30 days, you should receive an updated credit report, indicating that the disputed item has been removed.
As soon as a credit reporting agency provides you with an updated credit report showing that the item has been deleted, you should send another dispute letter, in regards to the next most damaging item.
Repeat this process, until each and every questionable item has been deleted.
In some cases, the credit reporting agencies are slow to respond to your dispute. If this should occur, you may choose to write another letter, strongly reminding the credit bureau of their obligations under the law. You may follow the format in the Follow up sample Letter and be sure to again send it registered, return-receipt requested. Again, retain a copy of the letter, all the receipts, as well as the return receipt when you receive it.
Should the credit reporting agencies ignore that letter, you may follow the format in the Complaint Letter, but tailor it specifically to the your circumstances and be prepared to contact the FTC to file your formal complaint, if this letter does not get you the desired response.
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Collection Agencies are a major source of inaccurate information. The two most common situations are:
Many of you have had a bill turned over to a collection agency. What happens is the original creditor lists the item as a collection in your credit file. After a short period of time your account may be transferred to a collection agency who also lists the item as a collection in your credit file. Accounts may be sold, or reassigned to another agency or reassigned by the original creditor to a new agency. The problems is often that the account is being listed several times on your report and even if you pay the original creditor or the last agency to collect on the account, chances are very high that the duplicated collections will remain on your record for SEVEN years, unless you get it corrected.
Another Major headache has surfaced. Consumer Financial Services corp. (CFS) specialized in buying VERY OLD out of statute credit card collection accounts. CFS went out of business in the midst of scandal and formal charges. The problem is that other collection agencies purchased these accounts in bulk and started reporting them as new collections. Many of them without proper notation of the original creditor, date of last activity, etc. I personally know a person who worked for CFS prior to their demise and they said that they believed CFS had some of the poorest records and record keeping procedures and did not even know who the original creditor was in many instances. I strongly suggest that you thoroughly investigate any collection with CFS listed as the listing creditor or original creditor.
You may be the kind of person that ALWAYS pays every bill on time, but your health insurance company does not. You may be surprised at the amount of collection items in your file.
Collection agencies and collectors must comply with the Debt Collection Practices Act, 15 USC § 1692, which strictly regulates debt collector's actions in acquisition of location information, communications in connection with debt collection, harassment or abuse, false or misleading representations, unfair practices, validation of debts, multiple debts, legal actions by debt collectors, furnishing certain deceptive forms. If you find yourself the target of debt collection action, make sure that the collector is staying within the law, or they can face civil liability $$$ . Here is a recent example. Here is a link to Bud Hibbs, one of America's consumer credit experts.
you can use a letter like the sample letter if you are contacted by a collection agency, attempting to collect a debt which you do not owe. They cannot continue to collect, until they have verified that the debt is actually valid, once you have sent them this notice. You must send this letter, as all the others, registered mail, and retain copies and all receipts as proof of mailing.
Collectors have a limited amount of time to
attempt collection of payments. The first thing
you should do is determine if the statute of limitations for collecting a debt in your state have
passed. If the debt is older than the statute of limitations, tell the bill collectors they are
wasting their time by harassing you for an un-collectable debt, as the original creditor or the
assigned collection agency cannot take you to court to get a judgment.
Debts Which are Good Candidates For Settlement
Most unsecured 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,
deficiency balances remaining after foreclosure or repossession, and bounced checks. There are a few creditors who will never compromise, but most will take a less-than-full payment as settlement-in-full.
You have the natural advantage in debt settlement, because you have something the creditor wants. You must hold out for your terms until the creditor gives you what you want. Once you've written that settlement check, your advantage disappears.
Get your terms in writing before you even open your checkbook. Everything must be in writing
and, even then, you will probably have to push to make the creditor live up to his end of the bargain.
Penalties and extra interest should be your first target in reducing the debt
Most companies would be agreeable to get you to pay the original debt even without the extra penalties they add on and will usually be
willing to waive these fees.
Time is on your side. The longer the debt remains uncollected, the better your chances will be of getting a good settlement. Eventually, the creditor will
have to consider the bad debt a loss in order to receive a corporate tax write-off. This does not necessarily mean that they won't pursue you for the debt. The corporation may then collect on the debt themselves, sell or assign the debt to a collection agency, press for a judgment and garnishment, or temporarily ignore the debt. The course of action chosen by the creditor will vary widely between corporations and debts.
If you're contacted by more than one collection agency for the same debt, it means that the original creditor has hired a secondary or even tertiary collection agency. This indicates that the original creditor and even the first collection agency has given up on you. A collection agency that agrees to take your debt at this time will insist the original creditor pay a
fee (usually 50%-60% of what is owed). Many secondary and tertiary agencies will take 33-55 cents on the dollar. If the agency hasn't been able to reach you by phone but knows that you are receiving its letters, it
may be willing to take even less.
Never look too eager to settle. If you tell a creditor that you really need to get this debt settled to get into your dream home, you can forget any kind of
affordable settlement. The creditor will most likely insist on the full balance.
Remind the creditor that the statute of limitations is approaching on the debt and
know when the statue is up on each debt and be prepared to give the creditor the time line.
Negotiating your credit rating
You should always ask for a Good Pay Rating. Your goal is to get the creditor to list your credit rating
after the settlement as "Paid as Agreed" or "Account Closed - Paid as Agreed".
Some creditors will not change the status to "Paid as Agreed", You may counter-offer that the creditor list
the account as "Paid" This is an accurate indication of the status of the account and many creditors will concede and agree to this wording.
You should insist that the account show "Paid" only and that all other negative notations (such as "Charge-off," "Repossession," late notations, or "Collection") are deleted at the same time. A simple "Paid" notation on a regular trade line is
neutral and should not hurt your credit.
If it pays them to restore your rating to Good, they will do this. Talk to them in terms of money,
For instance, "I know you would like to receive the
$1500 balance on the account, but it will not help my credit report if you can't change my rating to 'Paid as Agreed'.
This is all I have and I will pay it to other creditors who will agree to change my credit rating in writing."
Collection agencies will agree more readily to delete the negative listing than banks or credit cards. Why? They can change their
rating but you are still stuck with the original creditor reporting you late.
It is better to negotiate with the original creditor because it is the ratings
on your "applied for" accounts that determine your creditworthiness.
Upon settlement of the account verify that
your credit report (all three) have been updated. If you send a copy of
the letter you received showing the account has a zero balance to the CRA, you
can have the collection account removed, The Fair Credit Reporting Act states that you cannot have more than one listing per delinquent account
(you can have the original creditor report you late but you cannot have a collection listed for this same account)..
One gauge of your creditworthiness is having three open trade lines with twelve months of good payment history. Get three credit cards for example and use them responsibly for a year. Even if the only things you charge are your groceries and gas for your car. Always pay timely, don't fall into a poor credit rating after all of the hard work it took to get you back on your feet. You may have to get a secured credit card, that is where you place a deposit with the issuer and they issue you a card, eventually after showing you will pay on time they will return your deposit and increase your credit limits. You can get a new start with a new credit card here.
Go to your bank and get a $10,000 loan. It is very easy, let me explain. You borrow $10,000 from your bank to buy a $10,000 certificate of deposit (CD) from them. You pledge the CD as collateral for the loan, they hold the CD for safe keeping. You will have to pay a small spread on the loan, ie. the CD rate pays 5% and the loan is at 7% so your cost is 2%. You will want to pay the interest payment monthly so there is a pay history on the loan, the balance of the loan is due when the CD matures.
Make sure that your bank agrees to report the loan to the credit bureau and request that it is listed "secured" and not "secured by CD". This will work with any amount of money but a million dollar loan cost a lot of money in interest. Your credit scores will improve with your good payment history.
For years, creditors have been using credit scoring systems to determine if you'd be a
good risk for credit cards and auto loans. More recently, credit scoring has been used to help creditors evaluate your ability to repay home mortgage loans. Here's how credit scoring works in helping decide who gets credit -- and why.
What is credit scoring?
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is
collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
The steps outlined on this page should improve your credit files and credit scores and enable you to qualify for more favorable terms.
I strongly suggest You monitor Your Credit Files To Make Sure The Inaccurate Information Does Not Reappear, Especially After All of the hard work you have done to rebuild your credit. The service below will provide you with a merged report now and every 3 months so that you can monitor your credit file.
Sample letters are available from Michael Kielsky at his award winning site
Electronic Credit Repair KitTM
Mirrored at: http://mix6.com/credit or http://www.primenet.com/~kielsky/credit
Michael Kielsky's - Electronic Credit Repair KitTM
Mirrored at: http://mix6.com/credit or http://www.primenet.com/~kielsky/credit
Victims of fraud can call:
(800) 301-7195 - Experian Consumer Fraud Assistance Department
.This document is not meant to be construed as legal advice. You are responsible for yourself and your actions. If you are seeking legal advice you should consult an attorney.
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