Tools of Credit Repair

by : Marc Chase

Credit Repair can be easy if you have the right tools. One of the hardest parts of repairing your credit report is deciphering the laws. This "how to" article is written in terms that are easy to understand and cut through the legal jargon.

Debt Validation:
Let's say you owe Mike (original creditor) $100.00 and a Guy named Steve (collection agent) comes up stating he wants $100.00 on behalf of Mike. Would you just hand him your money, or ask for proof of who he is and that he has the right to collect the $100.00?

This is called debt validation and is a very powerful tool for credit repair. Let me explain.

You can write Steve and ask for the following and he must provide it all or he cannot collect the $100.00, nor can he report it to the credit bureaus.

* - A contract between him and Mike proving he owns the debt or was hired to collect it. Think about it. If he cannot provide that contract, he is just some guy named Steve asking for $100.00

* - Account statements from Mike. Perhaps you paid mike $20.00 of the $100.00. Mike will have records of that. Steve has to provide you with that and IT CANNOT BE his own statements - they have to be from Mike.

This is important! Steve (collectors) like to provide their own printouts and this is not legal. It must be Mike's original accounting and come directly from Mike. So, here's the process to credit report repair, using Debt Validation:

Step 1: Send a letter to Steve Requesting the above information e.g. proof he has the right to collect the debt and Mike's original statements which itemize the debt and payment history.

Step 2: Dispute the debt with the Credit Bureaus at the same time.

Step 3: Wait about 30 days and you'll get a letter from Steve which will have one of the following results.

Most Common: Steve's own printout which is a violation of the FDCPA, you can then sue Steve and have it removed from your credit report. Remember, it must be Mike's personal records.

Pretty Common: No response in which case it will be removed from your credit report.

Somewhat Rare: Steve Provides the contract showing he has the right to collect the debt, a copy of the contract you signed with Mike and your payment history.

The latter is the legal method for Steve and is Rare. For some reason, Steve (collectors) still are not smart enough to follow all the rules. However, if he finally got smart and provided all the information that is required, you have one more trick.

Check and see if he is licensed in your state to collect debts. Most states require licenses, bonding and insurance to collect debts. It is very common for Steve to get those items in his own state, but not each state he attempts to collect in.

If your state requires those things, Steve must obtain them in your state and any state he attempts to collect in or he has no right to collect.

Debt Re-Aging:
The most frequently abused rule of the FDCPA and FCRA is collection agents re-aging debts. If a collection agent re-ages a debt, there is a great chance you can have that removed.

So what is re-aging?

First, let's look at the definition of re-aging debts.

Definition: Creditors change the date that the debt went bad. Usually they like to report the date as the day they bought the debt from the original creditor. Obviously, if they bought the debt 6 months after it actually went bad, that is not fair to you since it moves the date it will be removed from your credit report up by 6 months.

How it should be reported: A debt is legally considered bad 30 days from the date of your last payment. For example; if your last payment was January 1st 2001 the debt will go bad approximately February 1st 2001

This date is important because the statute of limitations begins from that date. Think about it, if a collection agent buys the debt 6 months later and dates it from that day, that's 6 months more its hurting your credit. It's also a violation of the FCRA and an opportunity for you to have it removed from your credit report all together.

How big of a violation is this on behalf of the debt collectors?

Here is a lawsuit by the FTC themselves.

One of the nation's largest debt-collection firms will pay $1.5 million to settle Federal Trade Commission charges that it violated the Fair Credit Reporting Act (FCRA) by reporting inaccurate information about consumer accounts to credit bureaus. The civil penalty against Pennsylvania-based NCO Group, Inc. is the largest civil penalty ever obtained in a FCRA case.

Dispute Letters:
Here is the proper way to send dispute letters to give you the best possible chance of getting negative items removed from your credit report.

Once you've compiled a list of all the negative information on your credit report you want to prioritize them in order of most damaging first. Start with your personal information e.g. names, social, addresses and employers.

Often times debts are "connected" to your address. Dispute any of the above personal information that is not current. The goal is to have it completely removed, not adjusted.

You want to dispute the most negative item first and you must give an outcome you would like. For example, this account is not mine, please remove it from my credit report. If you don't give an acceptable outcome, they could adjust an account when you really wanted it removed and visa versa.

Additionally, you want to use verbiage that is convincing to the bureaus that you're not using a credit repair agency. In other words, write it like a surprised and pissed off consumer. If it's a perfectly formatted letter and they recognize it, you'll probably get the "frivolous" comment and no changes.

I've written letters that say things like "what the hell is this on my report? Please get this trash off of here immediately."

Sounds stupid, but its something an angry consumer is likely to write and it's worked many many times.

Once you've sent your letters, it's very likely you'll get a response back within a week or two asking for more information - namely "what credit repair company you're using" This is a stall tactic, do not answer them. They do this because if they receive new information, they are allowed another 15 days to investigate.

If your credit reports come back verified, no change, don't panic. You can re-dispute the item only for different reasons. If you sent the first one stating "not Yours", then next letter can take the angle of "wrong account number" or wrong balance. This gives them something new they must look into and a greater chance of the creditor not verifying it.

If you've tried all of this, you still have recourse. You can request their method of verification. How did they verify the information, who did they talk to? You want to ask them the business name, address and telephone number of the furnisher of the information. That is your legal right to request that information and a very powerful tool in credit repair.

This works because credit bureaus verify your information via a computer system and a two digit code. When you ask for names and numbers, this is often a big problem for the credit bureaus.

Once you begin seeing items removed, repeat steps above until your persistence pays off.