Suffering from less-than-perfect credit? It sure can be annoying, frustrating, embarrassing, not to mention expensive.
If it’s any consolation, you’re not alone. Most people would rather tell you how much they weigh than their credit score, and it ain’t like America is a slim country.
Here’s the good news, in 2016 alone, over 9 million negative items were removed from consumer’s credit reports. This includes late payments, collections, charge offs, judgements, liens, repossessions, and many more negative items.
Further, this was done legally, and by exercising you federal, and in some case’s state-granted consumer rights. All the alphabet soup laws, we’ll be sharing coming up, are passed for you and your protection.
The point is you can get rid of bad credit, and long before the maximum seven-year time window expires. Listen, if O.J. can get out of real prison early, we’re confident you can get out of bad credit prison early.
How Long Does Bad Credit Last?
The Fair Credit Reporting Act (FCRA) is federal legislation that says precisely how long each and virtually every negative item can remain on your credit reports. For the vast majority of items, it’s a maximum of seven years.
In a few cases, such as with a charge off item, it takes six months for the account to actually be charged off by the lender, prior it’ll be reported as a delinquent account. In sum total, the negative consequences are for seven years and six months.
The few exceptions include chapter 7 bankruptcy, which will stay on your credit report for a maximum of 10 years. Unpaid tax liens, which the FCRA actually doesn’t mention will stay on your credit report, according to the credit bureaus roughly 10 years.
Have you caught our subtle hint? Most people don’t? Especially, folks that have already heard about this seven-year maximum time limit. That’s the maximum amount of time an item can remain on your credit report.
There is no minimum amount of time any negative item must remain on your credit report. Let us repeat, and let that really sink in, there is no minimum amount of time a negative item must remain on your credit report.
The purpose of this article is to share precisely how to get rid of bad credit, and hopefully long before the seven-year maximum time window. Because these dings, blemishes, and the negative items are the cause of a low credit score.
Look, your credit score is a lot like your Grade Point Average (GPA) in glory school days past. It doesn’t matter if you’re acing all your courses, if you’re failing underwater basket weaving, because this negative mark is going to ruin your overall GPA.
This is also true of your credit score. And why it’s of such paramount importance to clean up credit report dings, blemishes, and remove negative items. This is how to get your credit score up and earn the score you truly deserve.
On a sidebar, on July 1st, 2017 all three credit bureaus agreed to new data standard requirements concerning public records on credit report files. They’re now requiring a modicum of information, and which many of these items don’t contain.
Public records are judgements, tax liens, foreclosures, wage garnishments, and bankruptcies. In short, these new updates make it easier today than ever before to remove tax liens from credit report, along with removing judgements from credit report, and other public record items.
How To Deal With Debt Collectors
Chances are, some of your credit report dings are from debt collectors, as this is the most common type of negative credit item. If you have any legitimate outstanding debt in collections, you may need to settle and pay off collections, to earn the best credit score.
The Fair Debt Collection Practices Act (FDCPA) is the federal legislation intended to regulate the debt collection industry. In short, it says debt collectors are required to be honest, upfront, and not deceptive. Along, with giving you a modicum of respect and dignity.
Yes, the FDCPA is broken about as often as our drug laws. Evidence of this can be found in the many fines to companies in this industry, every single year. Nevertheless, if you’re dealing with the endless phone calls, demanding letters, and negative credit report information, follow the steps below for dealing with collection agencies.
1. Request Account Validation
The FDCPA gives you the consumer right to request debt validation on your alleged collection account. This is best if it’s done in writing and sent using certified mail, with return receipt requested.
You see, since we didn’t do any business directly with any debt collector, so when we request validation, we’re saying prove this is my account. They’re required to provide you with evidence, documents, and paperwork doing just this within 30 days of receipt of your validation request.
If they fail to validate your account, then in compliance with the FDCPA, the debt is legally forgiven. As in you’re no longer legally responsible for repayment. Further, they’re supposed to notify all three credit bureaus to have them remove collections from credit report files, regarding this account.
2. Statute of Limitations
If they do validate your account, we want to review the paperwork they send in detail. We’re looking for your last date of account activity.
You see, you’re not legally responsible for repayment for most types of consumer debts forever. In fact, our state lawmakers passed the statute of limitations which says exactly how many years, you are legally responsible for repayment.
Generally, this time window is about seven years from the first date of delinquency. However this is a state law, and it does vary by state, so check your local legislation for full details.
Once this time window expires, so does your legal obligation to repay. This applies to most types of consumer debts including charge off debt, credit cards, medical collections, retail, utilities, telecommunications, and so many more. The few exceptions include federal income tax, and defaulted federal student loans.
Beware. One of the sneaky debt collection industry tactics is to re-age consumer accounts. This is often done illegally, and for obvious reasons, so they can continue to attempt to collect payment.
3. How To Pay Off Collections
If your account is validated, and within the legal time window, we now need to discuss how to pay off collections. Please, whatever you do, don’t just pay off debt in collections, and nothing more, and expect to see your credit score improve.
You see, the only thing that happens when you just pay off collections is the status of the item is changed on your credit reports. It’ll be changed to a paid collection.
This is still a negative, damaging, and derogatory item to have on your credit reports. Anthony Sprauve, a spokesman for FICO, says collections on your credit report can damage and drag your credit score down by up to 100 points.
We need to negotiate with debt collectors and create a settlement agreement. There’s two parts to your agreement, the first is to always negotiate to settle and pay off your debt for less than the total balance.
Often, you’ll be able to negotiate and settle for as little as 15% up to around 45% of the total balance. For instance, with a $1,000 debt, you may be able to settle for just 20% or $200. The exact amount will depend on the type of debt you have, and the age of the account.
The second part of your agreement is mission critical. We must get this collection agency to agree they’ll stop reporting your account information to all three credit bureaus, in exchange for our payment. This way we’ll be able to remove the item, when we dispute your credit report, coming up shortly.
We need to dispel a common internet myth, which is the pay for delete approach. If you’re unfamiliar this is where we demand the collection agency, first delete the item from our credit reports, and then we’ll submit payment.
Unfortunately, as terrific as this sounds, it’s wishful thinking. We’ve personally helped folks fix credit for over a decade now, and have yet to hear of one instance where this has happened.
Moreover, having made a career of studying the debt and credit industries in our great country, we can virtually guarantee no debt collector would ever be willing to agree to this. It’s not practical.
Instead, they will agree to stop reporting your account information, in exchange for your payment. This is a much more pragmatic, and effective approach.
How To Get Rid Of Bad Credit
The primary way to get rid of bad credit is by using more of your consumer rights under the FCRA. Specifically, we’re talking about how to dispute credit report items.
This federal legislation originally passed way back in 1970 is what gives us the right to challenge and dispute any item on our credit reports, so long as we believe it’s inaccurate, misleading, or made in error.
We’ll need to begin with current updated copies of all three of your credit reports (Experian, Equifax, and TransUnion). You can get these for free, once per year, by visiting annualcreditreport.com.
We need to review each of these credit reports, and individually, because they may contain different information. Our lenders and creditors aren’t required to report our accounts to all three credit bureaus, and some don’t.
We want to identify all the items we’d like to dispute and potentially remove. Once you’ve done this, our next step is to actually file our credit report dispute. And you can do this three ways: online, over the phone, and by mail.
By the way, you’ll need a reason for your dispute such as: not my account, balance is wrong, dates are wrong, etc. Once the credit bureaus get your dispute, they first have to deem it valid, which is another conversation for another place and time.
So make sure to sign up for our free newsletter for more help with credit score with Dan Willis, and join our congregation. Once the credit bureaus get your dispute and deem it valid, they’re required to investigate the item.
They call it a re-investigation. Nevertheless, they’ll contact the creditor, collection agency, or data furnisher reporting the negative information on your credit reports, and ask them to verify your account.
If your account is verified, it’ll remain on your credit reports. And it may be updated with accurate information, however, this is not the result of most investigations.
You see, many of the credit bureau investigations result in an item not being verified. If this happens, and to comply with the FCRA, the credit bureaus have to remove the item from your credit reports.
This is how to clean up credit report dings, blemishes, and remove negative items. And do so legally, by exercising your consumer rights. Because every item on your credit report has to be verifiable.
This is also why if you’re paying off debt in collections, we need to get the debt collector to agree to stop reporting our account information to the credit bureaus. Because when the credit bureaus investigate by contacting the collection agency, and asking them to verify your account.
They won’t, verify your account during the credit bureaus investigation, because of your settlement agreement. This means the credit bureaus must remove the item from your credit reports, to comply with the FCRA.
There have been amendments made to the FCRA in the four decades it’s been law. Most notably, today, you can now dispute the data furnisher (company reporting your account information) directly and bypass the credit bureaus.
The Road Block To Fixing Credit
Look, the most common roadblock when fixing credit is in getting the credit bureaus to find your dispute valid. Most likely, you’ll get a response saying your dispute is frivolous and they’ll ask for more information.
Comply with their request, and send the information. However, you need to understand this is nothing more than a stall tactic. The purpose is to frustrate you, in hopes you’ll just give up, and go away.
Because most people do. Listen, the credit bureaus are not your friend. They don’t care about your credit report, and couldn’t give less of a flip, if it’s accurate or not.
In 2012 the Federal Trade Commission (FTC) studied the accuracy of consumer’s credit reports. What’d they find? Straight from their press release: “One in five consumers had an error on at least one of their three credit reports.”
That’s millions of American’s. And these are errors, not disputed items or muddy waters, these items are total, blatant, errors costing real money. This is what the FCRA was originally intended to remedy.
So here’s the million dollar question, if the FTC studied how accurate, or more accurately said, how inaccurate our credit reports are, and found millions of Americans with errors. Then, why are the credit bureaus so unwilling to actually investigate and fix all these millions of screwed up credit reports?
In one word, money. Yes, most people don’t know, and those that do, won’t tell you, but it only costs the credit bureaus money to investigate and fix even the most obvious of errors on anyone’s credit reports.
In this estimated $4 billion annual revenue producing industry, not one stinking nickel is earned by the credit bureaus investigating consumer disputes. This is why more than four decades ago, Congress passed federal law requiring the credit bureaus to do this.
This money is only an expense. This money would otherwise be profit, and returns paid to stockholders. Given this, doesn’t it seem reasonable in the four decades plus, the credit bureaus have invested a tremendous amount of time, money, and energy into figuring out at least the best ways to minimize this expense?
Of course. And the most effective thing they’ve discovered is to just stall. Make it as complicated, frustrating, and as annoying as all get out, and most people will just give up and quit.
In recent years, 60 Minutes featured a story about just how darn near impossible it is for the average consumer to dispute and remove the most legitimate of credit report errors. In 2015, all three credit bureaus collectively agreed to settle and pay $6 million to 31 state attorney generals for allegedly violating consumer rights, and ignoring their disputes.
Both the FTC, and the Consumer Financial Protection Bureau (CFPB) have repeatedly fined the credit bureaus for violating consumer rights. In addition, to individual consumer lawsuits.
In 2013, Julie Miller was awarded by a federal jury $18.6 million in a lawsuit against Equifax. Julie woke up one day, and discovered 38 bogus collection accounts were on her Equifax credit report. So she did what she was supposed to and followed every letter of the law, and disputed Equifax.
Over the next two years, Equifax continuously claimed that Julie’s dispute was frivolous and they’d request more information. Julie complied, and sent her W-2’s, tax returns, pay-stubs, hair samples, DNA, and her firstborn child. Yes, small exaggeration.
But, all to no avail, she was still getting the run-around, and finally had enough. So she sued, and won. The award was later reduced by a federal judge to $1.8 million, Julie’s compensatory award was a mere $180,000. This is to make her life whole again, the real-life damages.
Her punitive award was for $1,620,000 a full nine-times her compensatory damages. In other words, a federal judge found Equifax’s behavior so reprehensible he gave Julie nine-times as much money just for the aggravation, frustration, and annoyance of it all.
Again, given this information readily available to anyone and everyone, why would our so-called elected politicians decide to let the credit bureaus first say if your dispute is valid or frivolous? They haven’t followed the rules for over 40 years, it seems to any objective observer, they’d be the last person on the face of the earth that should have the power to make this decision about the validity of your dispute.
Again, one-word answer, money. The credit bureaus, every year pump millions of dollars into Washington lobbyists to influence our crooked poli-tricksters. Because giving this power to the credit bureaus, is tantamount to giving them the power to decide if they want to spend money or keep that money as profit.
Pretty clear, easy to see, massive conflict of interest. Shocking, right? This author never believed this is how our credit and debt systems work, but they do. We don’t share this to discourage you.
We share it in the spirit of the timeless book The Art of War, because you must know your adversary before going into battle. And hopefully your battle won’t be as tough as Julie’s to improve your credit score, but it’ll be grueling, nonetheless.
Look, in addition to removing the negative items from your credit reports, you do need to use your current accounts responsibly, so you can build credit. These can be and should be done simultaneously, so you can experience credit score improvement, in the most efficient amount of time.
You’re going to have to get real tough, organized, and stay persistent if you go about repairing credit yourself. You can do it. However, we encourage our members to consider professional, legitimate, and effective credit repair companies to help with this.
Because in 2016 over 9 million negative items were removed from consumer’s credit reports. One of the best firms is The Credit Pros. They’ve helped client’s successfully remove late payments, collections, charge offs, judgements, liens, repossessions, foreclosures, and many more negative credit report items.
Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies about how to fix my credit score with Dan Willis, sign up for our free newsletter.
Get a FREE Credit Consultation