Just the thought of looking at your credit reports may make you cringe but repairing bad credit does not have to be difficult. Credit repair can take from 90 days to 9 months, depending on the amount of negative information in your credit files. The amount of time it takes to repair your credit is well worth it and the benefits will be immeasurable.
Bad credit doesn’t necessarily prohibit you from getting credit cards, a mortgage, auto or personal loans, but there’s a big possibility that any credit you obtain will come with higher interest rates and less favorable terms. The good news is there are steps you can take to repair your credit report and improve credit scores.
(1) Know the Consumer Laws
Get to know the laws enacted to protect consumers from unfair practices of creditors, collection agencies and credit reporting agencies. The following federal laws are essential in credit repair:
- Fair Credit Reporting Act – is primarily designed to guarantee the information supplied by the major credit bureaus as well as other consumer reporting agencies is accurate.
- Fair Debt Collection Practices Act – protects consumers from abusive or harassing treatment by debt collectors and establishes guidelines for the industry.
- Fair Credit Billing Act – establishes procedures for resolving billing errors on credit card accounts.
- Direct Dispute Rule – allows consumer to dispute inaccurate information directly with furnishers of that information.
Many states have their own consumer reporting laws and in some cases give you more rights. Be sure to review your state laws also.
(2) What the FCRA means to you
During your credit repair journey you will probably depend on the Federal Fair Credit Reporting Act (FCRA) more than any other consumer reporting law. The FCRA was created to promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
There are many types of consumer reporting agencies, including the 3 major credit bureaus (Experian, Equifax & Transunion) and specialty agencies (such as agencies that sell information about check writing histories (ChexSystems, Telecheck, EWS), medical records, and rental history records).
Here is a brief overview:
You must be told if information in your file has been used against you.
Anyone who uses a credit report or another type of consumer report like a ChexSytems report to deny your application for credit, insurance, or employment – or to take another adverse action against you – must tell you, and must give you the name, address, and phone number of the agency that provided the information.
You have the right to know what is in your file.
All consumers are entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.
You are entitled to a free file disclosure if:
- a person has taken adverse action against you because of information in your credit report;
- you are the victim of identify theft and place a fraud alert in your file;
- your file contains inaccurate information as a result of fraud;
- you are on public assistance;
- you are unemployed but expect to apply for employment within 60 days.
You have the right to dispute incomplete or inaccurate information.
If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous.
Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information.
Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a consumer reporting agency may continue to report information it has verified as accurate.
Consumer reporting agencies may not report outdated negative information.
In most cases, a consumer reporting agency may not report negative information that is more than 7 years old, or bankruptcies that are more than 10 years old.
You may seek damages from violators.
If a consumer reporting agency, or, in some cases, a user of consumer reports or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.
(3) What the FDCPA means to you
The major protection against third party debt collectors is the Federal Fair Debt Collection Practices Act (FDCPA). The FDCPA gives you rights to ensure that attempts to collect a claimed debt from you are done in a proper and respectful manner. The FDCPA also gives you the right to direct the debt collector to cease contact with you.
Who must comply with the FDCPA? Collection agencies, collection attorneys and purchasers of debt after the debt is in default.
Debt collectors’ activities are restricted by the FDCPA. Understanding the following restrictions can help you know how to deal with collectors and understand what is acceptable and unacceptable. Here are some of your more important rights:
- No early morning or late night calls.
- No calls at work, once you request it.
- Debt collectors may not harass you by calling numerous times a day about an unpaid bill.
- A debt collector may not use threatening or profane language when contacting you about a debt. A debt collector may not falsely imply that you have committed a crime by failing to pay a bill.
- A debt collector may contact people that know you, but only to find out your address, your phone number, and where you work. In most cases, a debt collector may not tell anyone other than you or your attorney that you owe money.
- A debt collector may not demand more money from you than you actually owe.
- A debt collector may not threaten to have you arrested if you do not pay your debt. Debt collectors may not threaten to sue you, unless they actually intend to file a lawsuit.
- Within five days of contacting you, a debt collector must send you a written notice telling you the amount of money you owe and the name of the creditor. This notice also must explain what actions to take if you believe you do not owe the money.
- A debt collector must verify all disputed debts. This is also referred to as debt validation and is probably the most important right you have.
What is Validation of Debts? When dealing with collection entries on your credit reports you will want to familiarize with debt validation. Section 809 says a debt collector must provide a consumer with a written notice, either in its initial communication or within five days of the initial communication, that contains:
- The amount of the claimed debt.
- The name of the creditor to whom the claimed debt is owed.
- A statement of the consumer’s right to dispute the claimed debt.
- A statement of the consumer’s rights to have the claimed debt verified and to have the original creditor and account information identified.
- The consumer then has 30 days to dispute the debt. The debt collector then has to verify the debt and until they do, they cannot pursue collections. This is the provision of the FDCPA you will probably utilize the most. Many debt collectors will send consumers a one-page document with the name of the original creditor and the amount owed as debt verification. But this is insufficient.
There have been several court cases that suggest debt verification should enable the consumer to “sufficiently dispute the payment obligation.” In order to do this consumers should be provided with no less than an itemized accounting detailing the transactions in an account that have led to the debt. An itemized accounting would: (1) Show a consumer without a doubt the account actually belongs to them; (2) Reveal an error in the records of the debt which could lead to cancellation of the debt; or (3) Reveal the underlying dispute between the parties that may be resolved.
Unfortunately you will encounter many debt collectors that do not even bother to respond to debt validation requests. Collection agencies rarely purchase the necessary back-up documentation from the original creditors that would prove you owe the debt. Requesting debt validation is a good strategy to use against debt collectors.
Pay for Delete Collection Items. For some consumers it may make sense to just get rid of small collection amounts with a pay for delete agreement. Keep in mind a debt collector is not required by any law to delete a collection account from your credit report in exchange for payment, but some will. You can read more about “pay for delete” transactions here.
(4) Order Your Credit Reports
There are three major credit reporting agencies that you will need to obtain a credit report from in order to begin the dispute process. The three major credit bureaus are Experian, TransUnion and Equifax. The reason you need all three credit bureau reports is that not all credit reporting agencies contain the same information. Mistakes and errors will have to be dealt with individually on each credit report. For dispute purposes I advise that you pay for your credit reports, unless you have been denied credit (in that case you are entitled to a free report).
Here is why you should pay for your reports:
The credit bureaus have 30 to complete an investigation under normal circumstances. But if you order your credit reports from www.annualcreditreport.com under Section 612 of the FCRA “Free Annual Disclosures” it says the credit bureaus have 45 days to complete an investigation. You don’t want to extend the time for credit bureaus to respond to disputes. Give them 30 days to verify, correct or delete.
To order fee-based copies of your reports use the methods below:
Experian: Call “1-800-204-1410” and use the Automated system
Equifax: Call “1-800-685-1111” and use the Automated system
Transunion: Use their disclosure request form and choose option 9.
When you opt out, you make it more difficult for lenders and others to access and profit from your private credit information and financial dealings. Unsolicited “prescreened” offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address from the lists these offers are based on. You may opt-out with the nationwide credit bureaus at 1-888-5-OPTOUT (1-888-567-8688) or online.
(6) Dispute old addresses first
You should dispute old addresses and request they be deleted. Your credit report contains lots of identifying information per each account listed. Part of the dispute process involves matching your information for the account in dispute. Never trust a credit bureau to actually investigate a dispute. They may simply match your address with an account then state they have verified the account. This is not a real investigation of a disputed account.
If old addresses are deleted, the credit bureaus will be forced to spend time to actually verify the dispute instead of matching addresses. If the furnisher (company that listed information) does not respond to the credit bureaus, then the account must be deleted. Even if there is a delay in the furnisher’s response beyond the 30 day investigation time frame, the account must be deleted.
The furnisher may no longer be in business, then the account must be deleted. This is why you want an actual investigation to be conducted and not simply addresses matched. Spend the time disputing old addresses before you start disputing negative accounts.
(7) Review and Analyze your Credit Reports
Once you receive your credit reports make copies. You want to be free to make notations and highlight items directly on the copies. Do not write on your original credit reports. The information in your credit reports are coded in different ways across the three major credit reporting agencies. Do not become overwhelmed with the amount of information contained in the reports. Review and analyze one report at a time.
(8) Dispute Negative Credit
Decide what negative accounts to dispute. Here are the types of information you may want to dispute:
- Incorrect information, including accounts that are not yours, payments that have been incorrectly reported late and incorrect amounts owed
- Late Payments
- Collection Accounts
- Outdated Negative Information
Use different color highlighters for each type of information to help you easily make a credit repair plan. You’ll use a different strategy for incorrect information than you would for a past due account so using different colors saves time. Many consumers have experienced success in disputing “not mine” when the account really belongs to them. I don’t advocate this method. I suggest finding an actual error or inaccuracy in the listing for best results. Here is a list of common errors found on credit reports.
Dispute with Credit Bureaus First. When you send your dispute include any proof you have that supports your dispute. It’s important that your dispute is clearly written. For example: “In reference to credit card account no. XXXX, I was never late in the month of XXXX. Please delete this inaccurate information.” If you don’t send enough information about the dispute, the credit bureau can decide the dispute is frivolous and decline to investigate or update your credit report.
What happens during the Dispute Process. The credit bureaus will send a form called an ACDV (Automated Credit Dispute Verification) to the furnisher of information. This ACDV form is then sent to the furnisher of the disputed information via an Internet based system called e-OSCAR, which stands for Online Solution for Complete and Accurate Reporting. You can read more about e-Oscar. It is essentially a quick method of reducing your dispute to a specific code.
When Disputes are Verified. Once the creditor or collection agency (data furnisher) receives the dispute via e-Oscar, they verify that what they reported to the credit bureaus is correct or incorrect by reviewing their records. If they believe what they sent is correct then they respond, via e-OSCAR, that what they sent is correct and no changes are made. If, however, they determine that what they sent is incorrect they’ll make corrections and the consumer’s credit reports will be updated. The credit bureaus will send the consumer an updated credit report or just a communication stating the results of the investigation.
Credit Bureaus typically have 30 days to respond to a dispute. FCRA Section 611 covers consumer disputes. Generally, the credit bureaus have 30 days to complete the investigation process when you challenge something on your credit report. However, if you supply supplemental information during the initial 30-day time frame, you’ve just given the credit bureaus 15 more days to respond. Or, if you dispute credit items based on free credit reports from the website “annualcreditreport.com” the credit bureaus are given 45 days to respond to disputes.
What happens when credit bureaus fail to respond. The FCRA says credit bureaus generally have 30 days to respond to disputes. But keep in mind the FCRA allows 5-business days for them to get the response to you. If you mailed the dispute certified, return receipt then you have a good idea when to begin the countdown. You can pretty much start the clock on the date the credit bureaus received the dispute plus the 5 days they are allowed to get the response back to you. After 35 days it is time to get the Consumer Financial Protection Bureau involved and make a complaint for non-compliance.
You would request the account be deleted as dictated by the FCRA that essentially says the credit bureaus must correct or delete inaccurate, incomplete, or unverifiable information. Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. That’s why it’s a good idea to mail disputes certified, return receipt mail to make it easier to pinpoint and keep track of dates. It is reasonable for the Notice of Results of Re-Investigation to take from 35-40 days to get to your door.
Options when you don’t agree with dispute results. You should dispute with the credit bureaus first. It may be deleted and your work is done. On the other hand, if the item isn’t removed from your credit report, your report will be updated to show that you’ve disputed the information. Here are 3 options if you do not agree with the results:
- Add a useless personal statement to your credit report.
- Dispute the item again. It will likely yield the same result unless you have new information or new supporting documentation to include in the dispute.
- Request the Method of Verification (MOV).
Request the Method of Verification. Force the credit bureaus to reveal how the dispute was verified. You have the right to request the “method of verification” under the FCRA, Section 611 (a)(6) and (7). The credit reporting agency must give you the method of verification information within 15 days of your request. Here is more information on how to request the MOV.
Dispute Directly with the Furnisher of Information. You can also dispute directly with the furnisher of information. The furnisher could be the creditor, bank, collection agency or business that reported the negative information to the credit bureaus. They have the same legal obligation to investigate your dispute and remove inaccurate, incomplete, or unverifiable information from your credit reports. But, be aware that if you skip the credit bureaus entirely you can’t file a claim against them for violating the Fair Credit Reporting Act. You must give the credit bureaus an opportunity to correct any alleged inaccuracies before you can sue them for credit report errors.
Should all three Credit Bureaus receive Disputes. Creditors and collection agencies are not required to report to each of the major credit bureaus. It is possible that not all credit bureaus contain the same information. In this scenario you would only dispute information with the credit bureau that is reporting the inaccurate information.
(9) Sections of the FCRA most commonly used
§ 605. Requirements relating to information contained in consumer reports. Read the entire section as it deals with how long negative credit items can remain on your reports. This includes late payments, charge-offs, collection accounts, foreclosure, repossessions, bankruptcies, tax liens, judgments and other public records. The most common time-frame is 7 years.
Basically a creditor can charge-off an account 180 days after the first date you missed a payment. The date you became delinquent begins the “Aging” process and once the debt has matured 7.5 years (7 years + 180 days), it must be DELETED from your credit report. This section is good for getting outdated negative accounts removed. A negative account cannot be extended, unless it has been illegally re-aged, which is a violation.
§ 611. Procedure in case of disputed accuracy. Section 611(a)(1)(A) is a consumer’s weapon of choice. Take the time to read the full section over and over again. In general it says if a consumer disputes the accuracy of a specific item on credit reports, the credit bureaus must reinvestigate that information. After reinvestigation the credit bureau must record the current status in your credit files, make any corrections if the information is, in fact, inaccurate or incomplete. If the credit bureaus cannot verify the information, they must delete it.
Section 611(a)(5)(ii) says that if a credit bureau reinserts previously deleted information in your credit files, they must tell you within 5 business days of reinsertion of the information. The notice should be in writing, unless you have authorized some other acceptable means of notification. The credit bureau must also give you a written statement explaining that the information has been reinserted and that you may add a statement to the file disputing the accuracy or completeness of the information. This statement must also include the name, business address, and telephone number of the person who furnished the information to the credit bureau.
Section 611(a)(7) requires the credit bureaus to provide how they verified a disputed account as accurate. They have 15 days to provide you the “method of verification” after receiving a request from the consumer for that description. It is your right to know how negative information has been verified. Was dispute investigation really conducted.
§ 623. Responsibilities of furnishers of information to consumer reporting agencies. Read the entire section as it provides consumers several protections in dealing with businesses that provide information to credit reports. Anyone that reports information about you to the credit bureaus must provide accurate information. They cannot knowingly report errors, false or inaccurate information. The furnisher of information must cease reporting information that has been confirmed as inaccurate. To continue reporting the information after notice from the consumer would be a violation of the Act.
Get the entire Fair Credit Reporting Act here.
(10) Mail your dispute letter
Disputing online is often faster and easier, but leaves you with no paper trail. Send your dispute via certified mail with return receipt requested. This is your proof since credit bureaus have 30 days to investigate and respond to your dispute or they must delete.
(11) Deal with Past Due Accounts
Since payment history is 35% of your credit score having even one past due account can significantly lower your credit score. The more recent the late payment, the more detrimental to your credit score. Get current on past due accounts. It will help recover your credit score.
(12) Decrease Credit Utilization
The amount of debt owed makes up 30% of your FICO score. Credit utilization is the ratio of your credit card balances to credit limits as listed on your credit report. High balances on credit cards, especially balances that are near or over the limit, decreases credit scores. The FICO scoring model looks at your credit utilization in two parts. First, it scores the credit utilization for each of your credit cards separately. Then, it calculates your overall credit utilization which is the total of all your credit card balances compared to your total credit limits.
A high credit utilization in either category will lower your credit score. Pay down credit cards to ten percent and watch your FICO scores improve. For some consumers simply paying down credit card balances will be all that is needed to get better scores.
(13) Add Good Credit
A necessary step in repairing credit is adding good credit to your reports. There are unsecured, secured and retail credit cards along with loans for less than perfect credit. These are all good options as long as you can afford payments and the interest rates are competitive with the market.
Finally, if the thought of do-it-yourself credit repair is overwhelming and you prefer a professional, Lexington Law can assist. Lexington Law helped clients remove 10,000,000 negative items in 2017 alone. Those negative credit items included: Bankruptcies, Foreclosures, Tax Liens, Repossessions, Judgments, Collections, Late revolving credit payments, and Inquiries.
Disclaimer: Information on RebuildCreditScores.com does not contain legal advice. The Author is not your lawyer, and the strategies described here may not be appropriate to your situation. You are strongly advised to obtain competent legal advice before taking any actions which may have legal consequences.