The following is a step-by-step method to erase bad credit. This is the same
method used by attorneys and credit consultants:
To begin, you will need a current copy of your (3)
credit reports. It is important
to note that there is more than one credit reporting agency, so make sure you get
a copy from each. Some creditors may report to one agency but not another.
Just because something doesn't show up on a credit report from one bureau doesn't
mean it isn't on report at another.
There are two ways to get copies of your
credit report. One way is to pay
the fee required by the reporting agency. The other is to apply for credit
and get turned down. Within 30 days of being turned down for credit you are entitled
to a free copy of your credit report. However, applying for credit and getting turned
down shows up on your report as an inquiry that did not result in credit. It
is a small black mark that stays on your report for one year. To avoid this,
it may be better to pay the $10-20 fee. The credit agency will require ALL
of the following information:
FULL NAME,
ADDRESS,
SOCIAL SECURITY NUMBER,
DATE OF
BIRTH,
SEX and
OCCUPATION/EMPLOYER.
The three major credit bureaus are:
Equifax
Order Credit Report: 800-685-1111
Report Fraud: 800-525-6285
http://www.equifax.com/
Experian
Order Credit Report: 888-397-3742
Report Fraud: 888-397-3742
http://www.experian.com/ |
Trans Union
Order Credit Report: 800-888-4213
Report Fraud: 800-680-7289
http://www.tuc.com/
Once you have copies of your credit profile, check all the personal information
(name, address, etc.) to make sure it is accurate. Note any changes that need
to be made. Understand that recent address changes or changes in employer
may result in being turned down for credit, so every item on your
credit report
is important.
Before going further you may need to learn how to "read" a credit report.
Credit bureaus use codes, and the following is a sample of these codes and what
they mean:
Who is Responsible for the Account
J = Joint Account
I = Individual
T = Terminated
M = Maker (signer)
C = Co-Maker
U = Undesignated
A = Authorized User
B = On behalf of another
S = Shared Type of Account
O = Open account (30 or 90 days)
R = Revolving or option account (open-end)
I = Installment Account (fixed number of payments) Current Method of Payment
O = Approved, but too new to rate
1 = Pays account as agreed
2 = Pays (or paid) after 30 days of due date but before 60 days, not more than one
payment due at any given time.
3 = Pays in more than 60 days, but less than 90, or two payments past due.
4 = Pays in more than 90 days, less than 120, three payments past due
5 = Pays in more than 120 days.
7 = Making payments under wage-earner plan or similar arrangement.
8 = Repossession
9 = Bad debt, placed for collection; written off
These symbols are often combined, such as R2, which means it is a revolving account
and has been at least one payment late less than 30 days. Often each payment is
recorded, showing if it was late, how late, by how much. Your objective, then,
is to get all R1's or I1's. Understand that credit bureaus are not responsible
for what is on your report. Their only function is to provide the information
to creditors that are provided to them. It is your responsibility to see that
your report is accurate. Check it at least annually and make any necessary
corrections. It has been estimated that at least 25% of all
credit reports
contain inaccurate information that can cause credit problems. It is not unusual
for accounts to appear that you never had. So check your credit report thoroughly
and often. If you do not, you will have no one to blame but yourself.
Now that you know what is on your report, the next step is to list the names and
account numbers of every derogatory item on your report, even if it is valid and
true. Write a letter using these guidelines: State that you have reviewed
your profile and found certain items you believe to be in error. List all
bad items by name and account number. Request they investigate these items
as they are highly injurious to you. (Use the words HIGHLY INJURIOUS.)
List discrepancies in the personal information first, and provide the correct information,
then list the accounts. At the end of the letter state that these items do
not agree with your records and you wish to have them removed immediately if not
substantiated. Also state you want an up-dated copy of your report issued
to you showing any changes made.
Note: at the beginning of the letter be sure to include all the personal information
you provided when you requested your
credit report.
Also, if possible, choose a busy season to send your letters. Many businesses
will be too busy to respond to the credit bureau during busy holiday seasons.
When you mail the letter be sure to send it registered mail. Always register
any mail to any credit bureau or creditor, and always keep a copy of your correspondence
to them for your own records.
Once the bureau receives your request they are required by law to contact the creditor
who listed each contested item and ask for substantiation. If the information
is not true, the creditor will not be able to substantiate. The real beauty
of this, however, is that many creditors will not bother to respond. Either
they no longer have the record handy, or they are busy, or the letter got lost in
some pile, or maybe they really just don't care. Whatever their reasons, if
they do not provide documentation to the bureau within a reasonable time (usually
30 days) the credit bureau is required by law to remove the item from your report.
If you do not receive an up-dated copy of your record within 45 days, send a registered
letter requesting the up-date, stating the date you had disputed some items.
Again be sure to include all personal information, as this is how they locate your
report. When you have the up-date check it against the original and note the
differences. You should find that many, if not all derogatory items have been
removed.
If any remain, do not despair - you have just begun. To remove any items that
are still plaguing you, your next step should be a repeat of the prior one.
Send another dispute letter stating you still believe these items are in error and
to please investigate again. This time when the bureau contacts the creditor,
the creditor may not respond this second time. Why not? Perhaps he thinks
it is a duplicate request sent by mistake. Or perhaps he will just say to
heck with it - he responded once and simply will not waste any more of his time.
Or maybe the letter gets lost in the Incoming pile, or he is busy, or...
Whatever the reason, he may not send documentation a second time. If not, the item
is removed from your report.
Again request an up-dated copy showing any changes. When it arrives, check it thoroughly.
If any bad items still remain, you have other options at your disposal, including:
Offer the creditor a cash
settlement provided he removes the item from your report,
or has it marked "settled". Your first cash offer should be 50-60% of the
amount claimed. Even if you settle at 80% you are still ahead of the game,
and the creditor at least gets most of his money. All he loses, really, is
the profit margin on the item you bought on credit.
Offer to pay the amount in full, in monthly payments you can afford. The
written agreement should include that, after 3 on-time payments, the creditor will
re-write your account and mark the old account "settled" on your report. Then,
when you make the payments on time it shows up on your report as a GOOD reference.
If necessary, and if you can afford it, offer to pay the debt in full, provided
the creditor immediately notifies the reporting agency that the account has been
paid in full.
If you cannot get the creditor to work with you, you still have a powerful weapon
left. This is where keeping copies of registered letters will pay off.
You have a legal right to enter a 100 word statement showing proof that you made
attempts to settle this account but the creditor refused. If the debt truly
is not owed by you, the statement can be used to prove you do not owe this account.
The statement is attached to your report and issued to every creditor who checks
your credit. You may also request that a copy be sent to every creditor your report
was sent to in the last 90 days. Often, your honest account, accompanied by
documentation, will convince creditors that you are a good risk.