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Does Credit Repair Really Work? |
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the questions below for more information. |
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| Why
is it so common to hear that bad credit can't be repaired?
Credit is a way of life in America.
Without good credit, you have to take your seat in the
second-class section of our economy. But, if your credit is
in shambles, you may not be willing to wait for seven years
while your credit report repairs itself.
Is there anything you can do to speed
your credit repair?
Many authorities, such as the news
media, will tell you there is nothing you can do to repair
your credit. Newspapers, magazines, and TV news journals all
seem to be unanimous in discouraging you from making any
effort to repair your credit before the seven year limit.
How do these journalists explain
Lexington Law Firm? We have repaired over one hundred
thousand negative items from individual consumer
credit reports in the last two years. What about the
thousands of Americans who have repaired their own credit?
Why has the media repeatedly denied the possibility of
repairing credit when substantial evidence points to the
contrary? Who stands to gain from such a broad campaign of
disinformation?
The giant credit reporting agencies
(credit bureaus) have maintained a consistent public
relations effort to dissuade you from repairing the
information appearing on your credit reports. The credit
bureaus are especially intent on steering you clear of
"credit repair" companies that promise to help you
repair your credit. The bureaus claim that these companies
"cannot have accurate information removed from your
credit report."
If you are like 70% of Americans that
have less than perfect credit, you're sure to be interested
in the truth about credit repair. If there were a legitimate
alternative to seven years of credit denial, that
alternative could mean early parole from the bad credit
prison. |
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| What
does the law say about repairing your credit?
As the credit bureaus computerized
their processes and greatly expanded their reach and
influence in the late 1960s and early 1970s, consumer
complaints began to pile up at the FTC and state attorney
generals' offices. The credit reporting agencies quickly
became huge bureaucracies second only in size to the federal
government. Yet, the credit bureaus expressly served only
the needs of their clients, the credit grantors.
Many consumers were negatively
effected by the credit bureaus, but they had no way to
correct or change their credit information. The American
consumer lay completely at the mercy of the credit bureaus.
The United States Congress enacted the Fair Credit Reporting
Act (FCRA) in 1971 to insure that the credit bureaus
investigate the credit items disputed by consumers. This
federal law set procedural guidelines which gave the
consumer the right to challenge the accuracy, validity, and
verifiability of the credit listings appearing in their
consumer credit report. It also required that the credit
bureau repair any credit listing if it was inaccurate or
could not be verified.
In theory, the FCRA charges the credit
bureaus with responsibility to the consumer as well as the
credit grantor. In reality, the credit bureaus resist,
resent, and reject consumer disputes. The credit bureaus
would rather be left alone to make a profit. And, each time
a consumer challenges his credit, profit is lost.
The credit bureaus first defend their
profits by erecting walls of stall tactics, including
requests for more information, further clarification, and
additional identification. The vast majority of consumers
give up before they even receive copies of their credit
reports. If a consumer manages to get a credit report,
decipher the codified information, write a coherent dispute,
and mail it, the bureaus may still find some reason to
disregard the challenge. The entire dispute system is
designed to frustrate and discourage the consumer.
Many consumers have the idea that the
credit bureaus must complete their investigation within
thirty days or be forced to remove all disputed information.
They threaten to sue the credit bureaus if they don't
conclude their investigation in time and repair their
credit. In practice, such thinking is delusional. Nobody
forces the credit bureaus to do anything.
However, if you manage to submit a
valid dispute letter, and the credit bureau investigates
your dispute, the chances of success are good - whether or
not the negative listings are accurate! Accuracy actually
has little to do with the deletion of negative items.
If a credit bureau cannot verify an
item before completing its investigation, that item will be
removed. Many creditor grantors are simply reluctant to take
the time to verify the data. While the credit bureaus may be
in the business of reporting credit histories, creditor
grantors are not. |
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| What
is the truth about credit repair companies? Can they really
do what they say they can do?
Many "credit repair"
companies claim to remove negative credit with the flick of
a wrist. Their advertisements make bold assertions and
money'back guarantees; "Bankruptcy, tax liens,
judgments, . . . no problem!! One hundred percent
guaranteed!! Credit report 100% cleared in 30 days!!"
Can they really make such sweeping guarantees?
While some credit repair companies are
outright frauds, others are not frauds and they use the
dispute process to obtain impressive results. In fact, they
delete thousands of negative credit listings every day -
regardless of whether or not the listings are technically
accurate. In truth, credit repair fraud is less common today
then five years ago. Vigorous regulatory sweeps by state and
federal regulators have cleared away most of the
illegitimate (and some of the legitimate) credit repair
companies.
Unfortunately, it's risky to trust
anyone to help you repair your credit. It is estimated that
credit repair companies have bilked Americans out of more
than fifty million dollars. The majority of credit repair
companies were started by entrepreneurs with a penchant for
marketing. Consumers have flocked to these "credit
doctors" only to discover that their advertisements
proved far more impressive than their results. Hiring a
credit repair company is like playing Russian roulette. Many
of them are effective and legitimate, but it is difficult to
tell a rip-off from the real article.
Working within the credit bureau maze
requires substantial background knowledge; knowledge it
takes credit repair companies years to learn. In fact, U.S.
District Court Judge J. Wexler entered the following legal
opinion in the Federal Supplement. "Since allowing
third parties to assist consumers will likely lead to the
expedited correction of credit reports, it will further the
purposes of the [Fair Credit Reporting] Acts."
So, can credit repair companies really
guarantee results?
Not a chance! No credit repair company
is so good that it can guarantee a specific outcome. It
would be like a defense lawyer guaranteeing that the jury
will find his client innocent. Guarantees are a sure sign of
credit repair fraud. A warranty, where the credit repair
company promises a refund if certain results don't occur, is
a better, more realistic claim.
Not surprisingly, the credit bureaus
have declared war against the credit repair companies and
those selling instruction on how to do-it-yourself. The
bureaus lambaste credit repair companies in the media and
send anti-credit repair literature to anyone whom they
suspect of using credit repair services. The bureaus
unflinchingly deny that accurate information can be removed
from a credit report.
Some time ago, a couple in the
Northwestern United States, who were using the services of a
legitimate credit repair company, received a scathing letter
of reproach from their local credit bureau. The letter
chastened them for relying on the "unethical"
methods of credit repair, and pointed out how all their
efforts had come to nothing. "As you can see," the
letter chastened , "your credit reports remain
unchanged." The couple was bewildered because almost
all of their many negative credit listings, including a
bankruptcy, had long since been deleted.
The simple truth is that you don't
have to endure bad credit for seven to ten years. It is
possible to repair your credit within a much shorter time.
However you decide to address your
credit challenges, realize that regardless of what you may
hear in the news media, thousands before you have sought
help and repaired their credit. They can show you their
homes, cars, and credit cards. Despite the newspaper
articles, TV reports, and other credit bureau propaganda to
the contrary, you can repair your credit. |
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| How
do you go about completely repairing your credit and getting
new credit lines, mortgages, etc.?
Any credit repair consists of two
phases: removing the negative listings from your credit
report and adding new, positive listings.
Since just a couple of negative
listings will earn a rejection from most creditors, repair
of your negative credit should be the first priority. After
bankruptcy, for example, the credit report will show many
negative listings including the bankruptcy filing, discharge
and numerous "included in bankruptcy" listings.
While removing a bankruptcy from your credit report is no
easy proposition, it is possible and definitely worth the
effort. For more help, see repair
Your credit.
It is important to note that you may
be able to obtain much of the credit you need even without
repairing your credit report.
Most home loan guidelines (including
FHA guidelines) require that you have no negative credit
appearing within the last two years. This means that you may
have no late pays within the last two years and that any
collection, lien or judgment has been paid more than two
years ago. Even if you have some bad credit in the last two
years, you can often find a mortgage amongst the
"sub-prime" or "sub-A" lenders that will
finance you even before you repair your credit. These loans
will charge a higher interest rate and require more equity
or a larger down payment before they will close. If you have
good income and a reasonable debt to income ratio, a
sub-prime loan may be the key to refinancing or getting a
home while you repair your credit. In any case, if you are
working on your credit repair, you may be able to refinance
within a year at better terms.
Automotive financing will typically
allow some negative credit before credit repair, but with
less than optimal terms. If you have a few late pays, you
may pay a little more in interest (but it adds up fast, to
be sure.) If you have truly awful credit, you may still get
an auto loan, but at very high rates (but you should
definately repair your credit in the meantime.)
Standard rate credit cards seem to be
the most difficult when it comes to credit that still needs
credit repair. Most standard rate cards will reject you
immediately for any negative credit whatsoever. Yet, there
are many credit cards that work with bad credit and help you
to repair your credit. Some require deposits and others
require a significant annual fee. Most have low credit
limits.
So, once your credit repair is
underway, you can turn attention to adding positive credit.
You may have to accept some of these less-than-standard
credit options while you repair your credit. But, a word to
the wise, there are many credit repair scams out there that
prey upon the credit distressed. Even your local auto
dealership may take advantage of your vulnerable position
and your desire to repair your credit. Many phony credit
card offers exist that allow you a card, but one that is
only good for the company's limited line of merchandise.
Mortgage brokers often hide exorbitant fees in loans to
borrowers who need credit repair. It is not uncommon to
charge credit repair customers four to eight
"points" on a sub-prime mortgage loan. These
points amount to tens of thousands of dollars that you must
pay over the life of the loan. Make sure that you read the
fine print and compare your mortgage, auto loan or credit
card to the typical terms of regular financing if you are
applying before your credit repair is complete.
With that said, there are many good
options for repairing and rebuilding credit that you can
find on the internet or at your local credit union.
Maybe you've recently finished
repairing your credit or maybe you're young and haven't used
credit yet. In either case, here are a few tricks to credit
repair and building a positive credit history quickly and
cheaply. Most times you start building some good credit in
just a couple of weeks. But, beware, if you stack too many
open accounts, or too many credit inquiries, you will be
denied based on debt to income ratio and excessive credit
inquiries.
If you know someone (like a good
friend or parent) who has good credit, you can
"borrow" their good credit listings and begin to
repair your credit. This friend must have credit cards, and
must trust you enough to allow you to become an
"authorized user" on his or her credit cards. Just
have your friend call the credit card company and request
that you be placed on his card as an authorized user. A copy
of the card will be sent and you may simply return it to
your friend. Your credit file should soon show an open
account with all of the positive history that your friend
has created over the years with that credit card. A small
footnote will sometimes show that you are an authorized user
of that card. Remember, though, when a new credit grantor
goes to review your file, he may insist that the balance on
the card appear on your debt to income ratio. That shouldn't
disqualify you for credit if your income is sufficient and
you don't have an excess of debt on your file.
There are a number of good secured and
unsecured credit cards that advertise on the internet. These
cards are designed to help you to repair your credit.
Understand, however, that secured credit cards will appear
on your credit report as "secured" and will not
necessarily repair your credit history as much as an
unsecured card.
There are a number of creditors who
are traditionally more accepting of those with little credit
history or who are in credit repair. For example, many
college credit unions will extend low limit credit cards to
students without a credit history. Many department stores,
such as Sears, will extend a credit line to encourage you to
shop at that store, even if your credit repair isn't yet
complete. Electronics stores, furniture stores and cosmetics
shops are all usually open to extending credit to credit
repair candidates.
As with any line of credit, you must
make sure that you handle these new accounts responsibly. It
is a temptation to use a department store credit card
frivolously. Just remember that you have to pay back every
dime, with interest. |
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| Can
you add good credit to your credit report by having another
person add you as an authorized user to one of their credit
cards?
When another person adds you to a
credit card as an authorized user, the credit card company
will typically place the account on your credit report as
well, serving to help repair your credit. Often, the account
will carry a note indicating that you are an authorized user
rather than the primary cardholder. Even so, this serves to
substantially improve your credit history.
On the other hand, the account will
not typically show up with the entire account history, but
will show only from the time you were added as an authorized
user.
Beware: if the account goes
delinquent, it may negatively effect your credit report and
the credit card company may even attempt to recover payment
from the authorized user. If this happens, your credit
repair can slip even further behind. Click Here to Learn More about Credit Repair. |
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