Credit Repair 101–Lesson One

Credit Repair 101

This is the first in a series of articles on self-help credit repair. In this article I will cover the various consumer protection laws that relate to how credit reporting agencies conduct business, and which government agencies have the legal jurisdiction to enforce those laws . I will also show you the correct way to initiate the credit repair process and how to prepare yourself before you start the process. The most popular advice you will find on the Internet with regard to repairing your own credit will go something like this: order your credit reports, study them, find errors, then write your dispute letter(s) to the credit bureaus, and hope they investigate and delete the items you highlighted. While this simplified approach can work for some, for most others it won't and will be the cause (among other reasons) that they give up before they see any results.

To initiate a solid and comprehensive credit repair program, you must have a plan, a financial plan. To start, you must be in a position to save money. If you think you are not ready or able to start a savings program, you should re-evaluate your decision to fix your credit because even if you do raise your FICO score you will end up in the same predicament in six months because inevitably something unexpected could (and usually does) happen and you won't be prepared for it. If you don't have a reserve set aside for such eventualities, you will have to spend money that was already allocated for another debt responsibility. If you are not sure, you should create a household a budget and try to stick to it. If you are able to do it successfully for a couple of months (or if you think you can) then you should consider credit repair. The point is, you MUST get into the habit of paying your bills on time, and setting a little bit aside for emergencies.
There have been thousands of books written on personal finance. According to Mint.com, every one of those books can be broken down into three principles:

1. Spend less than you earn
2. Make your money work for you
3. Prepare for the unexpected

Household budgeting information is all over the Internet. You can download a household budget spreadsheet for that very purpose from a Microsoft website here. Also, try Mint.com (see link above). They should have free budget spreadsheets as well.
Before you ever consider DIY credit repair, you must understand that the entire credit industry is regulated by several federal laws. You MUST have a basic understanding of these laws before you can hope to be successful at repairing your own credit. The object here, is to KNOW the law so you can use it to your advantage, and use it in your communication to your creditors and the credit bureaus, not just quoting the law in an ineffective dispute letter. Quoting the law in a letter never works. The list is below. Please click on each one of the highlighted listings to see the laws for yourself and study them. There are also several concepts and some industry information with which you must familiarize yourself. In lesson two, I will show you the pertinent sections of the law that specifically apply to credit repair tactics. So let's get started.

First let's get you caught up on some REQUIRED reading in order to help you gain a basic understanding of why DIY credit repair is not only legal, but very necessary for anyone to protect themselves from fraud, poor credit decisions, and in some cases, financial ruin!
The articles below will enlighten you on how vulnerable most Americans are to the big three credit bureaus and how they do business. Pay attention to the statistics on errors found in consumer credit reports. Therein lies not only your motivation, but the reason why all consumers should meticulously examine their credit reports.
http://www.usccra.com/site-content/mistakes-do-happen.html:
http://www.cutimes.com/2004/07/14/us-pirg-credit-reports-inaccurate-credit-bureaus-tolerate-mistakes
If you have read the two articles above, you should now understand why it it's important to examine your reports.

Overview of the law: Federal Trade Commission Jurisdiction
The United States Federal Trade Commission (FTC) works alone, and in concert with other federal agencies, to administer a wide variety of consumer protection laws. The overall goal is to afford consumers a deception-free marketplace and provide the highest quality products at competitive prices. The FTC is an independent federal agency with five Presidentially-appointed, Senate-confirmed Commissioners.
Created in 1914, the FTC has two principal goals:
1. to protect consumers by preventing fraud, deception, and unfair business practices in the marketplace and

2. to maintain competition by preventing anti competitive business practices.
The FTC’s Bureau of Consumer Protection aims to achieve the first goal, and is the focus of this section.

The FTC derives its consumer protection authority primarily from Section 5(a) of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.”
According to the FTC, deception occurs when there is a material representation, omission, or practice that is likely to mislead a consumer who is acting reasonably under the circumstances. Deception occurs when there is a material representation, omission, or practice that is likely to mislead a consumer who is acting reasonably under the circumstances. Unfair practices are those which cause, or are likely to cause, reasonably unavoidable and substantial injury to consumers without any offsetting countervailing benefits to consumers or competition. In addition to its authority under Section 5(a), the FTC has enforcement and administrative abilities under forty-six other statutes, thirty-seven of which relate to the FTC’s consumer protection mission.
Among these laws are credit-related acts, such as the Truth in Lending Act, Fair Credit Billing Act, Fair Credit Reporting Act, and the Equal Credit Opportunity Act, as well as continuing enforcement of industry specific acts, such as the Petroleum Marketing Practices Act, and the Comprehensive Smokeless Tobacco Health Education Act of 1986, and additional laws relating to consumer privacy such as the Do-Not-Call Registry Act of 2003.


Consumer Protection Laws
1. Fair Credit Reporting Act (FCRA) requires:

• Creditors to notify consumers of the name and address of credit reporting agencies (credit bureaus) whose reports were used as a basis for adverse credit decisions.
• Credit reporting agencies, upon request: To disclose to consumers the nature and substance of information in their credit bureau records; to re investigate disputed information and make corrections; and, to allow consumers to file their explanations if reinvestigation do not resolve disputes.
• Credit reporting agencies to notify recent recipients (as specified by the consumer) of the credit reports, of corrections that may have been made, or, in certain instances, the consumer's side of the story, and to include this material in future reports.
• Credit reporting agencies to exclude from consumer reports adverse credit records more than seven years old (ten years for bankruptcies.)
• Credit reporting agencies to furnish reports only to those who have a Permissible purposes for the information.

2. Equal Credit Opportunity Act (ECOA)prohibits creditors from:

• Discriminating against credit applicants because of sex, race, color, national origin, age, marital status, religion or because a consumer's income comes from a public assistance source (e.g., social security or disability benefits). The act does permit the use of gages as a variable in an empirically derived, statistically sound, credit scoring system provided that the age of an elderly applicant (62 or over) is not assigned a negative factor or value. In addition, creditors may not discount or refuse to consider income because it comes from retirement benefits, part-time employment or alimony/child support.
• Denying credit because the consumer, in good faith, exercised rights under the Consumer Credit Protection Act (such as disputing a credit card bill under the Fair Credit Billing Act or a credit bureau report under the Fair Credit Reporting Act.)
• Failing to provide written notice of adverse action within specified time frames when a consumer's application is denied or when certain other adverse actions are taken. The notice must either disclose the reasons for the denial or adverse action or inform the consumer of the right to obtain those reasons.

3. Fair Credit Billing Act (FCBA) (effective 1975) applies only to open-end credit transactions. Among other things, the act specifies a step-by-step procedure for error resolutions. The procedure is as follows:

• The consumer must give written notice of a billing error, in a letter, within 60 days of receiving the bill in question.
• The creditor must respond within 30 days and resolve the dispute within two billing cycles, but not longer than 90 days. Within 90 days, the creditor must either explain why the bill is correct or correct the error.
• During the resolution period no collection activity is permitted on the disputed amount and no finance charges may be collected as well. The account may not be reported as delinquent, nor can it be closed nor restricted because of the consumer's failure to pay the disputed amount, and/or related charges.
• If the consumer still believes the billing to be in dispute after the resolution period, the consumer must again notify the creditor in writing. During this period, the creditor may not report the account delinquent without also reporting that the amount is in dispute. The creditor must also report to the consumer the name and address of each person to whom the creditor is reporting information about the delinquency.
• The creditor must also report how the matter was resolved, to anyone who received a report on the delinquency.
• Creditors must include an address on periodic statements to which consumer billing inquiries can be addressed.

4. Fair Debt Collection Practices Act (FDCPA) applies to everyone who collects consumer debts for someone else, including attorneys who collect consumer debts. While creditors collecting their own accounts are excluded from the act, most creditors follow the act's mandates and prohibitions in the interest of using sound and fair business practices. Debt collection prohibitions under the act include:

• Threatening or using violence.
• Using obscene or profane language.
• Publishing a list of consumers who allegedly refuse to pay their debts.
• Causing a telephone to ring, or engaging a debtor in telephone conversation, repeatedly or continuously.

The act also places the following restrictions on debt collector contacts:

• Contacts should be limited to between 8:00 a.m. and 9:00 p.m.
• A debtor may be contacted at work unless the collector knows or has reason to know that the employer prohibits an employee from receiving such calls or that it is inconvenient for the debtor to receive debt collection calls at work.
• If a debtor is represented by an attorney, a collector cannot communicate with the debtor unless the attorney grants permission or fails to respond to the collector's communications within a reasonable time.

Note: In addition, the act specifies: which third-parties can be contacted about a debtor for debt collection; how and when collectors can communicate to third-parties for debtor location information; and, what acts are considered to be false, misleading or unfair.
How to initiate the credit repair process
Initiating the credit repair process is fairly straight forward. But before you start communicating with the credit bureaus you MUST be organized. Below is a simple list of items you will need, and steps to take in order to be most effective in your communications or phone calls with the bureaus, collection agencies, and your creditors:

1. Be prepared to make a physical or electronic record of your progress on each account, each collection agency, and each credit bureau from start to finish. Write down EVERYTHING. When you make a phone call, write a letter, answer a phone call (related to your case) or engage in ANY communication with the bureaus (CRA's), collection agencies (CA's), or original creditors (OC's) make sure you take meticulous notes!! When dealing with collection agencies, this cannot be stressed enough. They are notorious for not knowing who the person is that you spoke with last time you called. You will want to have a record of WHO you spoke to, WHAT was discussed, and WHEN you spoke to them. The best way to do this is with a word processor like Microsoft Word, or a program I use called EverNote. Also, make personal notes about things that come to you while you are working on an account- if you don't do this you risk forgetting what you were thinking about if you have to come back to that issue at a later date.
2. Be prepared to send all written communications by Return Receipt via the US Postal Service. Doing this will cost you more, but it is worth it in the long run if you ever have to go court and file a lawsuit (or threaten to file) because you will have a record of whatever you sent to them, and a record that they actually received it!
3. Get copies of your credit reports from ALL THREE credit reporting agencies (Equifax, TransUnion, Experian). If you have access to the Internet, go to www.annualcreditreport.com. Anyone can get one free copy of their persoanl credit report every 12 months by providing some personal information and following their simple directions.

Okay, that's it is for lesson one. That should be enough to keep you busy for a while!
In lesson two, I will cover the specific sections of the FCRA, and other laws that relate to the consumer dispute process.