Sample Credit Repair Letter

An Example of a Sample Credit Repair Letter

The following sample credit repair letter may be used if you are writing to a credit agency to dispute some item/s on your credit report.:

Before sending the letter, it is important that you make sure of your facts and have all the information necessary to dispute your credit report. This means having to hand documentation to support your claim. This can be in the form of receipts, bank statements or any other appropriate hard copy paperwork.

Date
Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

You will see from the above that it is important to keep your letter polite and factual. It is also essential to provide copies of the appropriate documents.

It may take a while for your dispute to be processed, anything up to a month is not unusual, however there is no harm in calling the agency after say a week to check that they have received your letter.

If you use the sample credit repair letter as a template, submit it with the necessary enclosures you will be demonstrating to the credit agency that you are serious about your claim and stand a much better chance of success.

Credit Report Errors

Credit Report Errors – Mistakes Can Be Made

Credit report errors can and do happen. As we’ve said before, your credit report is very important to you as well as your credit score.  People are human and the information contained in your credit report is entered in by human hands.  Sometimes those hands make mistakes.

Maybe you paid off a past due bill and it’s still showing on your credit report as delinquent.  There are all sorts of things that can be reflected incorrectly on your credit report, so it’s important that you take steps to make corrections as soon as you can.

The first thing you need to do is check over your report and dispute any old negative reports you can find.  Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as “not mine.”

The older and smaller a collection account, the more likely the collection agency won’t bother to verify it when the credit bureau investigates your dispute. Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.

If there are significant credit report errors, you need to be sure and get them removed right away.  However, there are also some mistakes that you can ignore and it won’t impact you negatively.

Your credit score is calculated based on the information in your credit report, so certain errors there can really cost you. But not everything that’s reported in your file matters to your score.

Here’s the stuff that’s usually worth the effort of correcting with the bureaus:

• Late payments, charge-offs, collections or other negative items that aren’t yours.

• Credit limits reported as lower than they actually are.

• Accounts listed as “settled,” “paid derogatory,” “paid charge-off” or anything other than “current” or “paid as agreed” if you paid on time and in full.

• Accounts that are still listed as unpaid that was included in a bankruptcy.

• Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report.

You actually have to be a bit careful with this last one, because sometimes scores actually go down when bad items fall off your report. It’s a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance.

Some of the stuff that you typically shouldn’t worry about includes:

• Various misspellings of your name.

• Outdated or incorrect address information.

• An old employer listed as current.

• Most inquiries.

If the misspelled name or incorrect address is because of identity theft or because your file has been mixed with someone else’s, that should be obvious when you look at your accounts. You’ll see delinquencies or accounts that aren’t yours and should report that immediately.

However, if it’s just a goof by the credit bureau or one of the companies reporting to it, it’s usually not much to sweat about. Two more items you don’t need to correct:

• Accounts you closed listed as being open.
• Accounts you closed that don’t say “closed by consumer.”

Closing accounts can’t help your score, and may hurt it. If your goal is boosting your score, leave these alone. Once an account has been closed, though, it doesn’t matter to the scoring formulas that did it — you or the lender. If you messed up the account, it will be obvious from the late payments and other derogatory information included in the file.

So say you’ve found some significant credit report errors and you need to correct them.  There are certain steps you need to take in order to make sure that the error is corrected and ultimately removed from your report.

1. Make a copy of your credit report and circle every item you believe is incorrect.

1. Write a letter to the reporting agency (the address will be printed on the report). Explain each dispute and request an investigation to resolve the issues. If you have supporting paperwork, send it along, coding pages to match dispute paragraphs. Do not send your originals.

1. Send all materials by certified mail, return receipt requested, so that you can prove the packet was received.

1. Send a similar letter of dispute to the creditor whose reporting statements you disagree with.  Refer to a billing statement to find the correct address for disputes, because it’s usually different from the payment address.

If your dispute involves personal information, such as your current address, enclose a copy of your driver’s license or a utility bill in your name to verify your residence.

The reporting agency will initiate an investigation, contacting your creditors to verify the accuracy of the information. If the creditor cannot verify that the entry is correct, it must be removed. When the investigation is complete, the agency must send you a free copy of your report if changes were made.

If the investigation uncovers an error, you have the right to ask that a corrected version of your credit report be sent to everyone who received the report during the past six months.

It’s a good idea to contact your creditor first, then allow a bit of lead time before you submit the dispute to the reporting agency. By the time the dispute is verified, the creditor will hopefully have corrected the error.

You can also make changes online directly with the credit reporting agency.  When you are on their website, they will usually have links that allow you to click a button to dispute incorrect information.

You can initiate an investigation from many online credit reports by following the links provided and checking the disputed items as directed. There sometimes isn’t a place for remarks–you’ll simply check a multiple-choice reason for each dispute.

If the credit reporting agency says the original information is accurate, it must provide you with a written notice that includes the name, address, and phone number of the person who made the report. If you still disagree, initiate a second investigation.

Unfortunately, in the real world the reporting agencies often try to sidestep that requirement, giving you standard, computer-generated information rather than the facts you need to find the person or department who made the negative report. Keep plugging away until you have the answer you’re looking for.

If your attempts to correct an entry are unsuccessful, you can ask the reporting agency to insert a 100-character explanation next to it that explains your side of the story.

Under the Fair Credit Reporting Act, the credit bureau is required to solve the problem in a reasonable amount of time, generally 30 days.   If you feel that a credit bureau has not responded promptly and fairly to your situation, contact the attorney general of your state or the Federal Trade Commission in Washington at 202-FTC-HELP.

Credit Repair Errors Related Articles

• How to Fix Credit Reporting Errors to Improve Credit Scores (consumer-rights.suite101.com)
• How to Fix Bad Credit and Repair your Report (encourageblogging.com)
• 3 Steps to Start Credit Repair Work Yourself (creditrepair.org)

Debt Consolidation Credit Counseling

Debt Consolidation Credit Counseling – What Are The Differences?

These companies have started popping up everywhere. In fact, as I am writing this book, there is a commercial on television for yet another credit counseling company. It seems like they are everywhere. It also seems like they can really help you with your debt problems. But can they?

There are some credit counseling agencies and debt consolidators that can actually help get people out of debt. But there are also others who are simply trying to get money (that you don’t have) without helping you at all.

There is a difference between these two types of companies. Credit counselors will help you get out of debt and stay out of debt. That means that they will help you realize where you went wrong on the financial road and then help you get out of debt. After that, they will put you on a budget and offer services that can help you stay out of debt and live a financially stable life.

Debt consolidation companies are different, though not entirely. They also will help you get out of debt, but they do so by working with your creditors to help combine all of your debts into one large debt with one monthly payment. That usually entails getting some type of loan on your behalf that will pay off your creditors and you will pay the loan company instead.

Because of the services they provide, many people would rather go with a credit counseling service. That’s because they need someone to help them stay away from the mindset that got them into debt in the first place. There are many, many credit counseling companies out there.

What do you need to look for in a reputable credit counseling company? Here are a few suggestions:

They should be associated with the Better Business Bureau. The service’s website should have a BBB logo and a link to their record on the Better Business Bureau website. Click through the link to check that there are no unresolved complaints against them.

Many people only think about the Better Business Bureau after they’ve been cheated, but by then there’s not much you can do. Working with a credit counseling agency that is a member of the Better Business Bureau means that you can go to them to help mediate any dispute you might have with the service provider.

Reputable credit counseling services will be accredited by an independent nonprofit, just as many schools are. One such accreditation body is the National Institute for Financial Counseling Education.

A good credit counseling agency will charge a small, reasonable monthly fee, usually around $30. Some also charge a fee upfront, though this fee should be reasonable (around $50 tops). It may be possible to get a hardship waiver of these fees if you truly do not have the $30-50.

You will have to fill out an application when you decide to go with a credit counseling agency. The application must clearly say what the fees to be paid are, what the services to be provided are, and in what timeframe all of this will be provided.

Run far, far away from any organization that proposes to “wipe out” your debt for you, rather than simply helping you to repay the debt. Short of your creditors just deciding to forget about the debt (unlikely), there is no way to erase debt–even bankruptcy leaves a huge mark on your credit report for ten years.

True, your car may not go missing from your driveway if you stop paying unsecured debt (i.e., debt that is not “secured” with collateral, like most credit cards, unlike most auto loans). But you are still legally obligated to pay the debt, and the possibility of being taken to court will loom over you. You will likely be unable to get even “bad credit” financing if you still have debts in collections–good luck buying a car or house.

Now let’s look at how a reputable credit counseling service will work. First, they will negotiate with your creditors to establish a debt management plan (DMP) for you. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

After joining a DMP, the creditors will close the customer’s accounts and restrict the accounts to future charges. The most common benefit of a DMP as advertised by most agencies is the consolidation of multiple monthly payments into just one monthly payment which is usually less than the sum of the individual payment previously paid by the customer.

This is because the credit card banks will usually accept a lower monthly payment from a customer in a DMP than if the customer were paying the account on their own. Some DMPs advertise that payments can be cut by 50 % although a reduction of 10 to 20 percent is more common.

The second feature of a DMP is a reduction in interest rates charged by creditors. A customer with a defaulted credit card account will often be paying an interest rate approaching 30 percent. Upon joining a DMP, credit card banks sometimes lower the annual percentage rates charged to 5 to 10 percent and a few will eliminate the interest altogether.

This reduction in interest allows the counseling agencies to advertise that their customers will be debt free in periods of three to six years rather than the twenty plus years that it would take to pay off a large amount of debt at high interest rates. That’s a very attractive advantage – especially for people who are in debt quite a bit.

A third benefit offered by credit counseling agencies is the process of bringing delinquent accounts current. This is often called “re-aging” or “curing” an account. This usually occurs after making a series of on-time payments through the DMP as a show of good faith and commitment to completion of the program.

For example, a client with an account that has a monthly payment of $50 but that monthly payment has not been paid in two months might be considered by the creditor to be 60 days past due. After joining the DMP and making three consecutive on-time monthly payments, the creditor could “re-age” the account to reflect a current status.

After that, the monthly payment due on the statements would be the monthly payment negotiated by the DMP and the account would be reported as current to the credit bureaus. Now this process does not eliminate the prior delinquencies from the credit reports.

What is does is merely give a fresh start and opportunity for the client to begin building a positive credit history. Like all negative credit information, only the passage of time will lessen the impact of the negative marks when credit scores are calculated.

So how do credit counseling companies make money? They do charge a fee to you for their services, and it is important for you to get all of that information in writing before you sign on the dotted line. However, this fee is not usually enough to make them a huge profit.

The credit counseling companies make most of their compensation from the creditors to whom the debt payments are distributed. This funding relationship has led many to believe that credit counseling agencies are merely a collections wing of the creditors.

This fee income, known as “Fair Share,” consists of contributions from the creditors that originally earned the agency 15% of the amount recovered. However, in recent years, Fair Share contributions have dwindled steadily, with contributions of 4-10% being the most common.

There is a lot of criticism, in fact, when it comes to credit counseling agencies and their effectiveness as well as legality. The Federal Trade Commission has filed lawsuits against several credit counseling agencies, and they continue to urge caution to consumers when it comes to choosing a credit counseling agency.

The FTC has received over 8,000 complaints from consumers about shady credit counselors. Many of those complaints concern high or hidden fees along with the inability to opt out of so-called “voluntary” contributions. The Better Business Bureau also reports high complaint levels about credit counseling.

Not surprisingly, the IRS has also weighed in on the subject of credit counseling and has denied non-profit, tax-exempt status to around thirty of the nation’s 1,000 credit counseling agencies. Those thirty agencies account for more than half of the industry’s revenue. Audits of non-profit credit counseling agencies by the IRS are ongoing.

The lobby against credit counselors arises from the belief by the collection industry that the not-for-profit status of the credit counselors gives them an unfair financial and market advantage over them. The IRS apparently agrees.

The tax exempt revocations seem to be centered on whether or not a tax exempt credit counselor actually performed their mandated mission by assisting the community at large as opposed to offering their whole attention to their own DMP customers in a “collection practice”. However, that has yet to be proven.

Congress has also investigated the credit counseling industry and has issued a report that says while some agencies are ethical, others charge excessive fees and provide poor service to consumers. The report also states that NFCC member guidelines, if applied to the entire industry, would go a long way toward eliminating the abuses they have uncovered in other parts of the industry.

When it comes to debt consolidation companies, you are talking about an entirely different concept. What a debt consolidation company does is negotiate with creditors to get a lower pay-off amount for your debts and then obtain a loan on your behalf to pay off those creditors allowing you to make just one payment instead of multiple ones.

The two types of companies are similar in nature, but with debt consolidation, the only thing they do is negotiate with credit lenders and then get you one payment instead of many. They do charge a fee for their services as well just as the credit counseling companies do.

The thing about debt consolidation companies is that they do what you can do yourself with just a little bit of work. You can call your creditors and negotiate a pay-off balance for your accounts and then obtain your own loan as a debt consolidation loan. Even if you have less than perfect credit, most banks and lending institutions will have debt consolidation loans available to almost everyone.

Really, the bottom line when considering either a debt consolidation company or a credit counselor is to weight the advantages and disadvantages first. Then check out the company you are considering to make sure they are reputable.

These types of companies can really and truly help people who are seriously in debt. But proceed with caution and choose wisely lest you get yourself involved in yet another problem besides your debt!

Now that we’ve addressed no credit, bad credit, and people who can help with credit problems, let’s focus on your credit report and your credit score. Often, there are mistakes that are on your credit report, and correcting them is essential

Debt Consolidation Credit Counseling Related Articles

• Credit Counseling Office Helps Clients Get Back on Track (personal-debt-management.suite101.com)
• How To Know When You Need Credit Counseling (revenueherald.com)
• Credit Counselling (mytotalmoneymakeover.com)

Some Things To Avoid When Trying To Improve Your Credit Score

Want To Improve Your Credit Score?

When trying to improve your credit score or credit history, avoid any of the following:

1. Asking a creditor to lower your credit limits. This will reduce that all-important gap between your balances and your available credit, which could hurt your score. If a lender asks you to close an account or get a limit lowered as a condition for getting a loan, you might have to do it — but don’t do so without being asked.

2. Making a late payment. The irony here is that a late or missed payment will hurt a good score more than a bad one, dropping a 700-plus score by 100 points or more. If you’ve already got a string of negative items on your credit report, one more won’t have a big impact, but it’s still something you want to avoid if you’re trying to improve your score.

3. Consolidating your accounts. Applying for a new account can ding your score. So, too, can transferring balances from a high-limit card to a lower-limit one, or concentrating all or most of your credit-card balances onto a single card. In general, it’s better to have smaller balances on a few cards than a big balance on one.

4. Applying for new credit if you’ve already got plenty. On the other hand, applying for and getting an installment loan can help your score if you don’t have any installment accounts, or you’re trying to recover from a credit disaster like bankruptcy.

By the way, all these suggestions work best if you have poor or mediocre scores to begin with. Once you’ve hit the 700 mark, any tweaking you do will tend to have less of a positive impact.

And if your scores are in the “excellent” category, 760 or above, you’ll probably be able to eke out only a few extra points despite your best efforts.

There’s really no point, anyway, since you’re already qualified for the best rates and terms. Here’s one area where it’s really OK to rest on your laurels and worry about something else.

If you are in serious, serious credit problems, sometimes the only solution is to file for a bankruptcy.  This is a last-ditch thing, though, and should only be done if you’ve dug yourself in so deep that the odds of getting out of debt are little to none and you see no opportunity to improve your credit score.

Improve Your Credit Score Related Articles

• Is Your Credit Score Keeping You Awake At Night? (lifescript.com)
• How to Sink Your Credit Score (money.usnews.com)