With the current state of the economy, having a strong credit score is more important than ever. Unfortunately, common misconceptions about credit and how your credit score can be improved ultimately do more harm than good. With a sea of credit repair companies promising flawless credit, it can be easy to succumb to misinformation. Here are three common credit myths that could potentially damage your credit score:

Myth: Once a Debt is Charged-Off, I Don't Have to Pay It

Charge-offs may seem like a positive at first, namely because the term sounds very similar to a "discharged" debt, which is one that has been cleared. Charged-off debts, despite the similar-sounding name, do not clear you of the obligation to pay the debt. Instead, it is an indication that the company does not believe you will pay the debt and therefore it has been removed from their accounts receivable. It essentially makes your debt an expense on the record books of the company, but that does not relieve you of responsibility. Charged-off debt classifies you as a 'high-risk' to many credit issuing companies, and can severely impact your ability to get future credit.

One Caveat: if the debt is past the time allowed by your state to collect, you don't have to repay the debt, whether it's been charged-off or not. Typically, the age of the debt has to be anywhere from 4-6 years before this is the case, but because these regulations vary by state, it's best to check your local laws to be sure you’re in the clear.

Myth: Credit Repair Services Can Erase All Negative Credit Information, Even if it's Legitimate

Reputable companies won't promise to erase legitimate debts. Under the Fair Credit Reporting Act, you are allowed to challenge debts that you believe to be erroneous or questionable. That does not mean that you should challenge any and all debts. In fact, doing so may result in collection agencies and bill collectors ignoring any legitimate requests you may make to have truly erroneous information removed. This is because if the company feels that your dispute is 'frivolous' they can ignore it, and leave the debt on your credit report.

There are numerous ways to have negative items on your credit report removed. Disputing them is not the only way. If the debt is legitimate and being reported correctly, you may want to try to negotiate a pay for delete. When using this method, remember to always get the terms in writing.

Your best bet is to choose a credit repair service that has a reputation for success, and that uses ethical and legal methods to improve your credit score. You may not be able to get rid of all negative information, but the removal of even a few items could see your credit score improve dramatically.

Paying Off Old Debts Will Improve My Credit Score

Surprisingly, paying off old debts will not always improve your credit score, and may actually worsen it. This is because paying on an old debt can sometimes make the debt appear to be new. If the amount you owe is substantial, this can make it seem as though you’ve just taken on a lot of new debt. While the credit bureaus are working on finding ways to eliminate this setback, currently there is still a chance you could see your credit score fall as a result of old debts being paid. Be particularly vigilant when it comes to knowing when your debt's statute of limitations for collections has run out – you don’t want to pay on a debt that is no longer enforceable by law unless there are very special circumstances.

Keeping the truth behind these three myths in mind can help you to avoid unnecessary declines in your credit score. If you need help improving your credit score, always deal with a reputable agency, and be sure to check the facts to be certain the law is on your side in your quest for better credit.

Labels: charge offs, charged off debt, credit repair services, credit report dispute, credit scores, FCRA, paying off debt

Simply put, the Fair Credit Reporting Act (FCRA) is the federal law that governs credit reporting. The FCRA is enforced by the Federal Trade Commission. It was designed to protect consumers regarding the use, accuracy and privacy of consumer credit reports. The law was originally passed in 1970 to ensure that consumers have access to information being reported about them by the credit bureaus. It gave consumers the right to see the exact information that creditors, insurers and employers use to make decisions about providing credit and other services.

Amendments

Amendments to the FCRA were passed in 1996 to provide new consumer rights to improve the accuracy of credit reports. Another amendment was made in 2003, called the Fair and Accurate Credit Transactions Act (FACTA). Under FACTA, consumers are able to receive one free credit report a year.

Consumer Reporting Agency Guidelines

FACTA also gave the consumer reporting agencies (CRAs) new guidelines, including the following:

1. CRAs must take steps to verify the accuracy of information disputed by a consumer.

2. If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within 5 days, in writing.

3. CRAs may not report negative information for an excessive period. Most negative items must be removed within 7 years from the date of delinquency with exceptions to bankruptcies (10 years) and tax liens (7 years from the time they are paid).

Creditor Guidelines

Creditors and other information furnishers were also given new guidelines:

1. They must provide complete and accurate information to the CRAs.

2. They must to investigate disputed information by consumers.

3. They must inform consumers about negative information which has been or is about to be placed on a consumer's credit report within 30 days.

Users of Information Guidelines

Users of consumer information for credit, insurance, or employment purposes (including background checks) also have guidelines in which they must follow under the FCRA:

1. Users must notify the consumer when an adverse action is taken on the basis of such reports.

2. They must identify the company that provided the report, so that the accuracy of the report may be verified or contested by the consumer.

Civil Liability for Violations of the FCRA

A consumer may seek a maximum of $1,000 in statutory damages, plus actual damages, punitive damages and reasonable attorney's fees and costs for willful noncompliance of the FCRA. If you believe your rights are being violated you may consult with an attorney and file suit in state or federal court.

Labels: consumer credit repair, consumer reporting agency, FACTA, Fair Credit Reporting Act, FCRA

Having good credit is very important in today’s culture. We now live in a world where credit determines how much interest you’ll pay on your house, car, boat etc. Your credit scores are used by landlords, employers and insurance companies to determine whether or not you get an apartment, a job and what your insurance rates will be. It can also mean the difference between having to pay no deposit for a cell phone (or other utility) and having to deposit $500 or more.

Which side of the fence do you want to be on? Do you want to go through life with good credit or bad credit? The decision really is up to you. Below are some top credit repair tips for consumers with credit problems.

1. Become familiar with the Fair Credit Reporting Act.

Right off the bat, let’s start with one of the best tips I could ever give you. It doesn’t sound like much fun especially when you see it on paper, but it really is very important and it won’t take that long. I’m not saying you need to read all of the technical legalese from top to bottom, but get familiar with what the FCRA is all about.

2. Any information can be disputed on your credit report.

I don’t know how else to put this: ANYTHING on your credit report can be disputed – personal information, public records, accounts, inquiries...ANYTHING!

3. Credit repair is a process.

If you have 20 negative accounts reporting on each credit report, do NOT dispute every single account. Credit repair is a process, not a one time deal. The credit bureaus are more likely to label your dispute as frivolous if you trying disputing that many items. Dispute no more than 3-5 accounts at a time.

4. Keep your dispute letters simple.

Unfortunately, many amateurs on the net are giving people long, drawn out, unnecessary "sample letters". Sample letters are fine, but it’s unnecessary to mention laws, procedures, court rulings, or threaten law suits, etc. The credit bureaus know the law. There is no need to be condescending or act like you are a professional. That won’t get you very far.

Simply dispute the accounts you would like to have removed or updated. If your letter is confusing, it will more than likely get returned or thrown away. There is also no need to tell them your life story or why you were late or why it should be removed. They do NOT care. Keep it short and simple!

5. Procedural Request - Ask for Method of Verification.

So, after you’re first dispute you got a few accounts deleted – that’s great! But, what about the ones that came back as "verified"?

Send them a procedural request. If you request it, the credit bureaus are obligated by law to provide you with the method the creditors used to verify the information that they are reporting on your credit report. By requesting this information, you are forcing the credit bureaus to actually provide you with what they received from the creditor as valid proof. If the creditor replied to your dispute stating that the account should remain on your credit report, they need to have proof. The creditor rarely provides the credit bureaus with this information. So, when you do this you are putting pressure on them to either "prove it or remove it".

Keep records of everything the credit bureaus and your creditors send you in case you should ever after to sue them for violating your federal rights.

Labels: bad credit repair, credit repair, credit repair tips, credit report repair, dispute credit reports, dispute letters, FCRA, method of verification, procedural request

Debt validation is the process of forcing debt collectors to verify the validity of the debt in question, as well as their attempts to collect. The right to dispute the debt and receive validation are part of the consumer's rights under the United States Federal Fair Debt Collection Practices Act (FDCPA) and are set out in §809[1] of that act. Under the FDCPA, the collector bears the burden of proof.

For legal purposes, any entities that are not original creditors – including lawyers – are considered collectors. Lucky for you, collectors must adhere to the guidelines of the Fair Debt Collection Practices Act (FDCPA), which will be the basis of your debt validation proceedings. It applies even to those collectors who legally have bought your debt (i.e. they still do not become your “creditor”.)

Generally, debt collectors must be able to prove that:

1. They own the debt legally and have been authorized to collect it from you.

2. The full amount of the debt that they are pursuing is accounted for and documented by your original creditor.

3. They can provide a copy of the original legal contract that you signed with your creditor.

The following is a step-by-step guide of actions to take to demand your right to debt validation:

• Send the collections agency (or lawyer, etc.) a certified debt validation letter asking them to validate your debt. Allow them 30 days to respond to your request. If they fail to do so, they are in violation of the law.

• Meanwhile, if you do not believe they have the right to collect from you, send the credit bureaus (Experian, Equifax, and TransUnion) a certified letter disputing collections actions on your report.

• If the collection agency responds in writing with proof of the three FDCPA requirements listed above and you wish to pursue your dispute further, you may find out whether or not they are authorized to collect in your state. If they are not, write another letter stating the violation and threaten to sue if they do not both cease collections efforts and alert the credit bureaus.

• If the collection agency responds in writing and does not provide sufficient proof, write them another letter specifying their violation of FDCPA. Tell them either to cease collections efforts and alert the credit bureaus or you will file a lawsuit. Allow at least two weeks for a response, and then follow through with your threat in small claims court.

Most collectors will give in before you will have to get the law involved, and some cases may be much easier than others. If a collector has bought or has been assigned your debt, they inherently do not “own” your debt and therefore cannot prove your obligation to pay (unless there is a clause in your original contract). Similarly, unqualified and deceitful collections agencies probably will want to rid themselves of your situation as quickly as possible.

It should be noted that creditors may take legal action against you, so it almost certainly is not in your best interest to just ignore a debt that you think cannot be proven. If you fail to take action and demand proof (or lack thereof) from a collections agency, it really does not matter what you believe to be just and accurate. You still may find yourself with a judgment against you.

Attempting debt validation might sound a bit daunting, but the financial benefits that you may gain from enforcing your rights certainly make it worthwhile for many people. FDCPA and contract laws are usually on your side. And if a collection agency lacks proof of your obligation to pay, well then...you might as well not.

Labels: collection agency, debt collectors, debt validation, Fair Debt Collection Practices Act, FCRA, FDCPA, validation letters

For starters, let's put aside the idea that the credit reporting agencies exist to ensure the safe keeping of your private financial data. The credit bureaus are not official government agencies and they do not create your credit reports for your benefit. They are not in the business of making sure your credit reports are accurate and they do not willingly provide you with a yearly copy of your credit reports.

What the credit bureaus are is something much different from what most people believe. Put simply, the credit bureaus are massive, for profit corporations who make money by selling your information. They sell it to creditors, employers, insurance companies, marketers, and even back to you.

The big three credit bureaus, Equifax, Experian, and TransUnion, all trace their ancestry to small, local investigative companies. These early credit bureaus would collect every bit of seemingly relevant information they could about a person including employment history, marital status, age, race, religion, testimonials, and any other information they could get their hands on. They would then provide this information to creditors who used it to determine whether or not a person was worthy of a loan and how much interest they would be required to pay.

Over time, the credit bureaus grew and merged until the credit reporting system moved from one with many local credit bureaus to the current system of three major nationwide credit bureaus. As this happened, the large credit bureaus became so powerful that it became necessary for them to be regulated. This resulted in the Fair Credit Reporting Act (FCRA) being passed to protect you from the growing power of the credit bureaus.

Credit scores had become increasingly important and it was the credit bureaus that had full control over the information used to create these scores. The problem was that the credit bureaus, as is the case today, are primarily motivated to collect your information and then sell it off. This meant that even though the credit bureaus were the definitive source for your credit information, they had no motivation to ensure its completeness or accuracy. They merely took the information they were provided, added it to your credit reports, and sold it off.

The FCRA was passed to add accountability to the credit reporting process. The credit bureaus were no longer able to collect whatever they wanted and to not tell you what was on your credit reports. As a result of the FCRA, you have a right to a free yearly copy of your credit reports (see AnnualCreditReport.com) and you have the right to dispute the accuracy of the items in your credit reports. While this does not mean the credit bureaus now make sure your reports are accurate, it does give you recourse when the credit bureaus unfairly report your credit history.

Unfortunately, however, the FCRA did not eradicate all the problems of the credit reporting system. The credit bureaus are still enormous corporations with enormous power. They are also still primarily motivated by the money they make by selling your credit information. Providing you with credit reports and investigating credit disputes is something they are forced to do and not something they were willing to do on their own. As such, the credit bureaus do what they can to avoid these practices.

Specifically as it relates to credit repair, the credit bureaus have developed a full arsenal of tactics to keep from investigate disputes. These tactics range from general propaganda, to strong-arm tactics, to methods of questionable legality.

How many times have you heard that credit repair is impossible, the only way to improve your credit is to wait seven years, and any company who offers to repair you credit is a scam? It is surprising so many people believe some or all of these statements when not a single one is true. This misinformation is the best friend of the credit bureaus as it dissuades so many people from even attempting to dispute their credit. No wonder the credit bureaus are so quick to promote this flawed perception.

Knowing the history and the motivations behind the credit bureaus is your tool to understanding the nature of the credit reporting system. When you know the true persona of the credit bureaus, you can then see why you are granted access to your credit reports, why you have the right to repair your credit, and why it can be beneficial to have a credit repair expert working on your side.

Labels: credit bureaus, credit repair, credit reporting agencies, credit scores, FCRA