What is credit repair? Credit repair is a Legal process of using the US Consumer Credit laws to challenge and remove inaccurate information from your credit report. Often the outcome of this process is a better credit report and improved credit scores. The four laws that cover us and our consumer credit are: the Fair Credit Reporting Act (FCRA), the Fair Credit Billing Act (FCBA), Credit Repair Organizations Act (CROA), and the Fair Debt Collections Practices Act (FDCPA).
You Have Rights As A Consumer and Debtor
You have many rights as a consumer in these Acts; in fact too many to cover in this article. What we suggest is that you have more rights and arguing power than you know.
Here are few terms you should know.
Credit Report – easy, this is where all the credit information that you have had in your life is reported. Who reports it? Creditors report it. Creditors are the folks who gave you the credit card, the car loan, the student loan, the consolidation loan, or the mortgage. Creditors report typically monthly or quarterly to the credit bureaus.
Credit Bureaus – Transunion, Equifax, Experian. These three companies are the major credit reporting companies who stockpile all of our consumer credit information. The credit bureaus are also who calculate our credit scores.
Credit Scores – these are the scores that creditors want to know when you apply for credit. Credit scores range from 350-850. I consider an excellent score to be above 700 and the national average credit score is somewhere around 680. A "bad" credit score I consider to be anything under 500. Personally the best score that I have seen was 829, and no it wasn’t mine.
Credit Agency – these companies are the companies that your creditors typically use to pull your credit. Credit agencies are like the middleman in between you and the credit bureau when you are dealing with a creditor. If you apply for a loan from a mortgage company, the mortgage company needs to pull your credit. They pull it through the credit agency, who in turn gets it from the credit bureaus.
Credit Repair Is Correcting Mistakes Not Accurate Information
Okay, enough terms, back to credit repair. Simply put, credit repair is asking the credit bureaus and your creditors to produce proof of what is on your credit report. If they cannot then that information should be removed from your report. If the credit bureau removes something negative from your credit report, then typically your credit scores go up. It probably does not need to be said, but higher credit scores means lower interest rates and low payments which means more money in your pocket.
What the U.S. Government has made law is that after a particular amount of time, things have to come off your report. For example, Bankruptcies have to come off your report after 10 years, and most other negative items must come off after 7 years. The exception to the rule here is tax liens to the IRS, to you State and Local Governments, and child support claims.
Furthermore, if physical proof of items on your report cannot be produced then those things must come off your report too. The time window that the credit bureaus and creditors have to produce proof, or correct inaccurate information on your report is 30 days. This paragraph is the basis of a lot of credit repair efforts.
Considering Credit Repair – Review The Basic Steps
If you are considering some sort of credit repair on your credit report, review the Basic Steps to Credit Repair and good luck. You can use a company to work on your behalf. Be careful however if the company or person you choose to help wants to be paid up front. It is illegal to ask for upfront fees before and work is done to help you. Many people have been burned by paying someone to work on their credit report only to have spent hundreds of dollars only to get nothing in return. In fact, this is such a hot topic that the U.S. Federal Trade Commission (FTC.gov) is heavily tracking Credit Repair companies for proper business practices.
Keep in mind, removing something from your credit report that is accurate is not the intention of credit repair. For more information on how to fix your credit scores review our article: Basic Steps to Credit Repair.