Are you dealing with less than perfect credit? It can be one the most frustrating tasks in the world, trying to exist in our brave new world if you have some dings on your credit file.
Beyond the hassle of trying to get financing for a car, let alone a home, your credit score can prevent you from moving in anywhere, and potentially even being hired for a new job. Forget about the exorbitant cost of living in our society paying outrageous fees and sky-high interest rates, on the rare occasion, we’re approved.
Congrats on taking the first step to clean up your credit report. And we should begin by sharing seven long, expensive, and embarrassing years is the maximum amount of time a negative item can remain on your credit reports, with the exception of most types of bankruptcy which is 10 years.
Did you catch that? Seven years is the maximum. There is no minimum! Let us repeat, there is no minimum amount of time any negative item must remain on your credit report.
Did you know in 2016 over 9 million negative items were removed from American’s credit reports? Many of these long before seven years, and legally using your rights as a consumer.
The point is it can be done, and long before seven years. It won’t be overnight, but you don’t just have to live with a low credit score for seven long years.
There’s a few federal statutes you’ll need to deploy to clean up and remove any credit report errors, and negative items. And you may need to settle some legitimate outstanding debts, in order to clear credit of that negative information.
We’re going to start at the top, which is getting a very current copy of all three of your credit reports. We need to know what’s on your credit history, and what items you want to clean up and potentially remove.
You’re entitled to one free copy of all three of your credit reports every 12 months. You can request your free credit reports by visiting AnnualCreditReport.com. And if you prefer you can call 1-877-322-8228 or fill out the Annual Credit Report Request Form and mail it to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Review Your Credit History
We’re next going to review each and all three of your credit reports with Experian, Equifax, and TransUnion. Naturally we need to identify any inaccurate, incorrect, or misleading information. These are the items we’re going to try and remove.
The Fair Credit Reporting Act (FCRA) is the federal legislation that places a legal maximum amount of time a negative item can remain on your credit report. It also empowers you and every citizen to challenge and dispute any items on your credit reports, so long as you believe the item is incorrect, misleading, or made in error.
This legislation was passed way back in 1970, and with the purpose of giving you a way to let the credit bureaus know there’s an error on your credit report. After all, even in 1970 we were still human society capable of making a mistake.
Over 40 years later and according to our government and a 2012 study by the Federal Trade Commission (FTC) we’re still making many mistakes. This study found one in five Americans have an error on their credit reports. Of these millions of Americans, one in ten, have an error serious enough to be causing them to have a poor credit score.
These are mistakes! These mistakes are costing American’s millions of dollars every single year. The takeaway is chances are your credit reports aren’t 100% correct, and this is the purpose of the FCRA, to give you a way to correct these mistakes.
Dispute Credit Report Items
Now if you have current debt collections, you may need to take action and settle some debts to most effectively fix your credit score. However we’re first going to share the actual credit dispute process to remove any dings and blemishes from your credit reports.
Once you’ve identified the items you’d like to challenge, we’re going to need to file our credit dispute. This should be done directly with the credit bureaus.
However there have been recent amendments that today allow you to dispute a lender, creditor, or collection agency directly. In other words, you can bypass the credit bureau and dispute the data furnisher or company that’s reporting this negative information about your account, directly.
For our example, we’re going to discuss credit bureau disputes. There’s three ways to file your credit bureau dispute: online, over the phone, or by mail.
Once the credit bureaus get your dispute, they first decide if it’s valid, and if so they’re required to investigate the item. However if they find it invalid, they aren’t.
During an investigation the credit bureaus will contact the data furnisher, company reporting negative information, and ask them to verify the account. If the account is verified, then it will remain on your credit report.
However if the item can not be verified, then it must be removed from your credit reports. And the good news is the majority of investigations result in an item not being verified, and subsequent removal. This is how to clear bad credit and legally.
And occurs for a myriad of reasons, but the challenge is getting the credit bureaus to first deem your dispute valid, and investigate the item. This is primarily because it costs them money.
Why else would Congress find it necessary to pass laws that require the credit bureaus to investigate? The reason the credit bureaus today are allowed to first decide if your dispute is valid or not, is we’re convinced the millions of dollars the bureaus pump into fancy schmancy Washington lobbyists every year.
Listen, to give the credit bureaus this type of authority is tantamount to saying we as a country are no longer going to employ a police force. Each and every citizen will be required to self-report their crimes from speeding tickets to murder.
It makes zero sense. Moreover the credit bureaus have proven over and over and over again that they’re unwilling to follow the FCRA, and have paid millions in dollars in FTC fines for allegedly violating consumer rights, time and time and time again.
The most recent is this year, 2017, where Equifax and TransUnion paid tens of millions of dollars to the Consumer Financial Protection Bureau (CFPB). The CFPB fined these two agencies for allegedly deceiving customers.
In 2013 a woman, Julie Miller, was awarded $18.6 million in a personal lawsuit against Equifax. She discovered some random persons 38 collection accounts were inexplicably being reported on her credit reports.
She invested two years, doing exactly what she was suppose to, according to the law. And Equifax continued to find her disputes invalid and continued to needlessly request additional information from her.
You see, the credit bureaus are for profit businesses just like your grocery store, local gas station, etc. Further, you and me aren’t their customers, the bulk of the hundreds of millions of dollars the credit bureaus report in annual revenue is coming from businesses, lenders, and creditors buying information about us, the credit bureaus collected.
This is one of many reasons we encourage our members to consider professional credit help. There’s many legal, affordable, and legitimate credit repair companies that can be very effective at leveraging your consumer rights.
Your Credit Score
The reason it’s so important to clean up credit report dings, blemishes, and any derogatory items is because your credit score is a lot like your Grade Point Average (GPA) in glory days past. If you’re acing all your classes but failing The Art of Walking (a real course by the way offered at a private college charging over $30,000 in annual tuition) it’s going to screw up your GPA.
This exact same principle applies to your credit score. Any and every negative item on your credit report is exactly like failing the Art of Walking, and it’s going to drag your credit score down.
FICO, the only credit score you need to concern yourself with because it accounts for roughly 90% of all lenders decisions, they openly acknowledge the better your credit the more it will be damaged by a negative item. For instance, they say a collection on your credit report can damage and drag your credit score down by up to 100 points. That’s huge!
How To Pay Off Collections
However this only changes the status of the collection on your credit report, to a paid collection. This is still a negative item and it’s going to damage your credit score. If you’re currently dealing with debt collections, please familiarize yourself with the Fair Debt Collection Practices Act (FDCPA).
This federal statute empowers you to request debt validation on your account. Essentially you’re able to ask the collection agency to first prove this is in fact your debt, who the original lender was, the dates, etc.
If they fail to validate your account, then by law, the debt is forgiven and it’s suppose to be removed from your credit report. If it’s valid, you’ll next want to see how old the account is.
You see, for most types of consumer debt you’re only legally responsible for a specific number of years. This is called the statute of limitations and it is a state law that varies, so investigate your local listings.
Generally this is about seven years from the first date of delinquency on the account. Once this time window expires the debt is no longer you legal responsibility, and in other words it’s legally forgiven. This applies to most types of consumer debt, with few exceptions such as federal defaulted student loans, and federal income taxes.
Assuming your debt is valid, and within the statute of limitations, you’ll next want to negotiate a settlement agreement. This should be a negotiated settlement, as in you pay much less than the total balance. This is standard to settle for less.
And in exchange for your payment, you get the collection agency to agree they’ll stop reporting your account information to all three credit bureaus. This way, after you make payment, you can file a credit report dispute.
Because when the credit bureaus investigate by contacting the collection agency, they won’t verify your account per your settlement. This means the credit bureaus must remove collections from credit report files, concerning this account, in order to comply with the FCRA.
Look, we want to believe folks with less than perfect credit are the stereotypical irresponsible adult child, living in his parents basement. This may be true of many folks with a bad credit score.
But it’s no more true than the belief we only have guilty criminals in prison. Did you see Netflix’s Making a Murderer? It’s true many prison inmates are guilty, but not all. And when it comes to your credit score, most Americans are assumed guilty.
Most people have less than perfect credit, and believe it or not most people would rather tell you how much they weigh, than their credit score. And it ain’t like America is known worldwide for our petite and slim citizens.
Our point is many good, honest, hard working people have experienced some of life’s lemons from divorcee to job loss, to illness and as such have a less than perfect credit history. It’s okay. This is life, it can be very messy.
Please don’t just live with the high cost and embarrassment of less than perfect credit for seven long and expensive years. The credit bureaus have been fined over and over and over again for violating consumer rights.
Surely we can all agree the collection agencies don’t always follow the rules? Companies in this industry are fined by our government every single year, for the most egregious behavior.
For these reasons and more, we encourage our members to consider professional credit repair companies to assist. In 2016 alone they helped folks remove over 9 million negative items from their credit reports.
One of the best credit repair firms are The Credit Pros. They’ve helped their client’s remove every type of credit report ding including: late payments, charge offs, judgements, repossessions, liens, and many more.
Get a free credit consultation with a certified FICO professional by calling toll-free 1877-418-7596. For more about how to fix credit with Dan Willis, sign up for our free newsletter and join our congregation.
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