The concept of credit something that’s difficult to grasp. It’s the idea that you can obtain goods or services without having physical money to spend. Instead, you promise to pay that money back in the future. It’s empowering, in the sense that it gives you the ability to reach milestones that the average person could never afford in one sitting.
Things like buying a card, a house, or even a wedding ring, are outside the grasp of the average citizen. Credit allows us to extend our means and obtain the things we want or need. Some people get in over their heads, however, and this can lead to their credit falling into disrepair.
In times like this, their options are limited and credit repair becomes a possibility. What is credit repair? Can it truly fix credit that has fallen into bad standing? Today, we’re here to answer that question.
What is Credit Repair? An Overview of The Concept
Credit repair is the process of leveraging your rights as a consumer to have items removed from your credit report that are damaging your score. Typically, when something hits your credit report, it stays there for 7-10 years. During this time, it can help or hurt your score depending on the nature of the item.
As a consumer, you’re entitled to a report that is fair, substantiated, and accurate. Unfortunately, many people have mistakes on their reports that don’t follow these rules. As a result, their credit score is lower than it should be and they have no idea.
A study done by the Federal Trade Commission found that 1-in-5 consumers have at least one mistake on their report. It’s within your rights as a consumer to have these removed. Now, there are two ways to do this:
1. DIY Credit Repair
As part of the laws in place, you can DIY your credit repair and handle the process yourself. If you take this route, you’ll be responsible for everything. You’ll need to obtain your credit reports from the three credit bureaus: Experian, Equifax, and TransUnion.
Once you have these reports, you’ll need to check all three of them for inconsistencies and errors. Each of the bureaus obtain their data from different sources, so it’s entirely possible that one report has something the others don’t.
Beyond these simple low hanging fruits, you’ll also need to look at how items are reported. For example, if it says you made a late payment in October of a previous year, but you have evidence that you paid on time, that’s a potential dispute.
The reason why DIY credit repair is so difficult, is that there’s so many factors. You need to know what to look for, and what can be disputed. Once you reach that point, you still have to figure out what documentation is needed to make your case.
Bureaus and creditors have up to 30-days to respond to disputes, so it’s important that you have a good basis for your dispute, or risk losing a month of time to something that won’t work. Now, let’s take a look at the other option.
2. Credit Repair Services
The other path you can take involves hiring a credit repair company to help you pinpoint and dispute items on your report that shouldn’t be there. These companies are formed using people with both legal and financial experience. They are trained experts in their field and have the ability to accurately find and remove items from your report.
The backing of a company also ensures that more disputes will go out each month. Depending on which one you choose, they may dispute with the bureaus and your creditors as well. This will give you better opportunities to have items removed.
These companies have month-to-month plans that can be canceled at any time. People only use credit restoration services for as long as they need them, so it’s not something you have to commit to long-term. The time needed to repair your credit will vary greatly depending on your situation and the items you’re targeting.
For most people, four to six months is about all they need before they’ve removed a significant number of items and seen an increase in their score. This is the better solution, because it leverages experience and knowledge to more efficiently perform credit repair.
Your Rights as a Consumer
While you can have inaccurate information removed from your report, you cannot legally have everything negative removed just because you don’t want it there. You do have the option to request an investigation into anything on your file you believe is inaccurate or incomplete. This is done through the dispute process and does not cost you anything.
According to credit laws, these are your rights:
- You are allowed to get a free credit report if a company has taken “adverse action” against you. If they deny you for credit, a loan, or employment, you can request a credit report within 60-days. You also can get a free report once a year if you’re unemployed and want to find a job, if you’re on welfare, or if you believe you’ve been the victim of fraud/identity theft.
- Each of the credit bureaus are required to give you a free copy of your credit report once every 12-months if you request one. You can do so, by going to annualcreditreport.com or by calling 1-877-322-8228. You can order reports from them all at once, or order each of the three reports throughout the year.
- You do not have to pay for any investigations done as a result of disputes you sent to credit bureaus or creditors. They are also responsible for correcting any information found to be inaccurate on your report.
These rights, and any others you have as a consumer, are given to you via four separate laws. Let’s take a look at these pieces of legislation and how they affect your credit.
The Four Laws That Govern Credit Repair
Creditors, lenders, and the bureaus are all businesses looking to make money. Were it not for regulations and laws in place, it would be very difficult to protect consumers from shady practices or dishonest business decisions.
Thankfully, there are four laws in place that are meant to protect consumers. Let’s take a look at them in detail:
1. The Fair Credit Reporting Act
Our first law is abbreviated as the FCRA, and it’s the original law meant to protect consumer credit. It is a federal piece of legislation that controls how information about your credit is obtained and used.
Credit bureaus, also known as credit reporting agencies (CRAs), are responsible for finding and accumulating all the information they can about your finances. The first section of the FCRA demands that they offer you a free credit report annually. They must also verify the accuracy of any item you feel is reported in error.
If something on your report is indeed incorrect, they have to remove it. If the item in question turns out to be accurate, they can also put it back on your report at a later time. If this happens, they are required to notify you five days ahead of time.
The next portion of the law states how long items can remain on your report. For most items, the minimum time is 7 years if it is indeed accurate. Bankruptcy, however, stays for 10 years. The FCRA also dictates how information is reported to the bureaus.
Creditors, collection agencies, courts, and employers can only report information that is wholly complete and accurate. If a mistake is identified, they must fix it within 30 days. If they believe the item is accurate, they also have 30 days to notify you. They must also notify you of negative items being reported in this time frame.
If you apply for credit or a loan, and you’re denied or given a higher interest rate. They must tell you where they got their information from so you can ensure it’s accurate. If the creditor or bureau fails to comply with this law, you can recover your damages or $2500.
You can also pursue further damages and legal fees by suing the offender within 5 years of the date you found the error.
2. Fair Credit Billing Act
This is part of a larger law called the Truth in Lending Act, but it’s goal is to ensure that you’re not victimized by unfair billing and it also defines how errors are corrected on reports. This protects you from things like these:
- Being charged for something you didn’t buy
- The amount you are charged is incorrect
- You never received the items or they were damaged
- You don’t get credit back for payments
- Statements are sent to the wrong address
To leverage this law, you have to follow certain protocols to the letter. It starts by sending a traditional letter to the “billing inquiries” address of the bureau or creditor. Once you’ve spotted the error, you have to make sure the creditor is notified within 60-days of the statement date.
While some creditors allow you to dispute items online, doing this could cause you to waive your protection under this law. Make sure you check, and if in doubt, send the letter via mail.
3. Truth in Lending Act
The Truth in Lending act, abbreviated as TILA, is also known as the Consumer Credit Protection Act or sometimes Regulation Z. It regulates how companies disclose their terms and costs to you. It ensures that there’s a uniform method for calculating finance charges.
As a result of this law, you can look for the lowest possible rates. They must also show you their rates in a plain and fair way that doesn’t require an advanced knowledge of finances. In short, this law forces creditors to calculate their APR the same way and disclose it to you.
This law’s ultimate purpose, was to stop creditors from advertising false or misleading interest rates.
4. Fair Debt Collection Practices Act
This important law is designed to protect consumers from the aggressive practices of debt collectors and collection agencies. Whether it’s someone directly involved in collecting, or a lawyer involved in the process, this law affects both.
It forbids collectors from engaging in “abusive and deceptive” behavior when collecting debt. These kinds of practices aren’t allowed:
- Contacting you after you’ve requested a validation
- Calling you when they know you have an attorney
- Calling after 9 pm or before 8 am local time
- Contacting you at work
- Non-stop calling
- Reporting or threatening to report false information
- Publicly embarrassing you via debt postcards, or stamps on letters.
- Talking with anyone else other than your spouse or attorney about the collection
- Making threats or using abusive language
Credit repair is your legal right as a result of these laws. Whether you decide to DIY your credit repair, or you want to hire a legitimate credit repair company, we have options for you here on DebtSteps.