Self-help credit repair 101 Lesson 2



Credit Repair 101

As I considered writing this second credit repair lesson I must admit I had some problems getting started.  I didn’t want to write the same old information that is already all over the Internet because much of it is false and not very well researched.  And while the principles of credit repair are much easier talked about than they are to put into practice, it is still quite challenging to write a generic article about credit repair when the process depends so much on knowing a client’s particular circumstances.   Therefore, this lesson is not going to include any strategic information on how to restore your credit.  It will include information about how the credit industry works, when you should consider consulting a consumer rights attorney, and how to organize yourself before you begin the dispute process.  It makes no sense to me to include any information on particular FCRA or FDCPA laws when you will not need to use them at this stage of the dispute process.  That information will become more useful when and if you decide to file a lawsuit.  However, if your situation is complicated, the above stated laws and others are required reading if you want to be as effective as possible in dealing with the credit bureaus and collection agencies.

Many of the theories you hear or read about simply do not work all the time in the real world of credit repair.  Original creditors are difficult to contact by phone, and they rarely call you back.  Collection agencies lie to you and mis-quote the law.  Credit reporting agencies pretend to care about customer service, but really don’t care about their customers at all.  Most business, (generally referred to as original creditors or issuers of credit by the FCRA) and everyone in the credit reporting business is out to make as much money as they can off of your unfortunate circumstances.  Collection agencies, credit card companies, and all other original creditors make it difficult for anyone trying to restore their credit as they have a vested interest in keeping consumers’ FICO scores as low as possible.  If everyone had an 800 FICO score and always paid their bills on time, collection agencies would have no business, original creditors could not charge exorbitant interest rates on late pays, and everyone would be eligible for a near zero APR on everything they bought on credit.  There would be no sub-prime loan companies because there would be no sub-prime credit.  Take a look at these statistics from a report by the non-profit, National People’s Action:

The nation’s largest payday loan companies have earned a record $1.5 Billion in combined annual revenues from high-cost payday loans.

• The nation’s major banks including Bank of America, JPMorgan Chase, and Wells Fargo finance approximately 42% of the entire payday loan industry nationwide.

• State regulators report that payday loans cost borrowers a minimum of $3.4 Billion in fees annually.

• Every year an estimated $3.1 Billion in wealth is “stripped” from the pockets of needy borrowers directly into the coffers of the nation’s payday lenders.

• The segment of the payday loan industry funded by the big banks results in a minimum of $1.5 Billion annually in wealth-stripping from excessive fees paid by payday loan borrowers nationwide

My point is that when you decide to actually start doing something about your bad credit, or investigate errors you might find on your credit report, you are up against an army of vile, unscrupulous vultures not unlike the creatures from the movie, "Lord of the Rings."  The good news is that you have the law on your side.  The biggest challenge for the layman trying to restore their credit rating is understanding their legal rights, and effectively communicating it to the bureaus and collection agencies.  The ideal solution is to hire a consumer protection attorney, but not everyone can afford to do that.

Not everyone will need an attorney.  Thousands of laymen deal with the bureaus and collection agencies effectively all the time and get their credit file fixed or raise their FICO scores.  However, be warned that if your credit situation is complicated, it is likely you will need assistance from a legal professional who specializes in consumer rights law, because it also likely you will have to sue to get your credit report restored and corrected.

Credit repair, at its core, is the ability to recognize errors on your credit report, communicate those errors to the powers that be in such a way that clearly demonstrate that you have a VERIFIABLE LEGAL CLAIM.  Therefore, you must be ready and willing to take your case to the courts of law if necessary.  I say this because that is really the only thing that will get their attention and compel them to act.  All of the credit reporting bureaus, collection agencies, credit card companies and other original creditors know their business practices can usually be characterized under what the Federal Trade Commission calls “unfair and deceptive practices” but they count on the average person being too intimidated or too poor to do anything substantial about being treated that way.  Most people can scarcely handle keeping food on the table, and making the house payment.  And because of the current economic recession, thousands are not able to that anymore.

In lesson three I am going to first cover the legal claims that can be made by a consumer in a civil lawsuit as opposed to the legal claims that must be initiated by federal regulatory agencies such as the Federal Trade Commission, the Consumer Financial Protection Bureau, or the Office of Comptroller of the Currency.  Because the laws that regulate the credit industry are federal laws, when the FTC initiates a law suit against a company like Experian, the legal caption says: The United States v. Experian, and the case is litigated by the US Justice Department in federal district court.  And the Justice Department usually wins because of the egregious business practices of the many businesses that control our credit information and issue credit in this country.
It has only been since the very recent creation of the Consumer Financial Protection Bureau that companies that are investigated by the CFPB for unfair and deceptive business practices have been required to pay extreme penalties and fines (similar to Punitive damages in civil lawsuits) for their actions as well having to pay back the money they received from consumers.  For example, in July of this year, the Consumer Financial Protection Bureau tacked on a $35 million restitution penalty in addition to the $150 million settlement with credit card company Capitol One for violating section 5 of the Federal Trade Commission Act for unfair and deceptive business practices.
Now, let's discuss the consumer dispute process and how to write an effective dispute letter to the credit reporting bureaus, collection agencies, (CA) and original creditors (OC).

Before you Begin
The entire re-investigation process is initiated by the consumer disputing the accuracy of information in their credit report, but before you even think about writing a letter or making a phone call to anyone, you MUST get organized.  Below is a brief list of the items you will need to prepare for the dispute process:

1. A notebook (s) to write down all conversations with creditors, credit bureaus or whomever you call about your credit report
2. A computer with word processing software like Microsoft Word so you can transfer what you write in your notebooks to an electronic or digital format
3. A monthly calendar to make appointments, record dates of phone conversations, and keep up with time deadlines
4. A postage budget to send everything via certified mail
5. Full copies of the FCRA, FDCPA, CROA, and the FACTA

Sending your first dispute letter
Opinions vary on what constitutes an effective dispute letter.  Some believe a consumer should send a letter that indicates their knowledge of their rights under the FCRA.  Others believe a consumer should adhere to the “kiss”(keep it simple, stupid) rule.  The truth is, both are equally effective if done correctly.  Personally, I believe if a consumer is writing the dispute letter a simple letter works best. Credit bureaus do not like, nor do they care if you know the law.  They only care if you are going to utilize it.  Complicated dispute letters that quote the FCRA don’t compel anyone to do anything.  Remember, you are not going to intimidate anyone with a letter that has all kinds of quotes from the FCRA.  The minimum wage worker at a credit bureau who receives your fancy letter is not going to care about you quoting the law.  It certainly will not further your cause at that point in the dispute process.  Moreover, they have lawyers who deal with lawsuits all the time.  Believe me, it doesn't impress or intimidate anyone.  Reserve that language for when you actually intend to sue.  That is what the, “intent to sue letter” is for.
Your first letter to the credit bureaus should be simple.  Below is a list of information that you should include in your letter:

1. Full legal name
2. Current address (include a utility bill for proof)
3. Social security number (include a photo-copy of your ss#)
4. A photo-copy of your legal picture ID
5. Phone number
6. List of accounts (include account #’s) you want to dispute.  Highlight those same items on the copy of your credit report you send with the letter
7. Brief explanation why you think the accounts are inaccurate (with supporting documentation if possible)

Remember to send everything by US Postal Service with Return Receipt so you have documented proof they received it. Document what you did in your notebook or on your computer.  As for the number of items you can dispute, some say don’t dispute too many at once.  I believe a consumer should dispute everything that is inaccurate on their report.  That includes identity information like a wrong letter in their name, a wrong number in their address, a wrong past address – anything and everything that is inaccurate!
A few points to remember
Always be professional when dealing with creditors, credit reporting agencies and collection agencies.  Be nice, but don’t be naïve! They are often dishonest and won’t think twice about lying to you.  That’s why they get sued so much.

• Don’t ever initiate a dispute by filling out a form over the Internet at the the credit bureaus’ website.  You might loose important rights by doing this, and it legally extends their time to re-investigate the dispute.
• Don’t write an overly aggressive letter.  It doesn't help your cause to be nasty to anyone.
• Don’t make threats to sue if you don’t intend to follow through.  If you intend to sue, send a “intent to sue” letter and be prepared to file you claim with the courts.

I have included a link to a sample dispute letter from the Federal Trade Commission website that you can use as a guide along with all of the information in this lesson.  There is other information on the FTC website that you might find useful, including the link to annualcreditreport.com where you can get a free credit report from all three credit bureaus.  You will find information on how they think a consumer should start and manage the dispute process.  They also have contact information for all three credit bureaus.