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Credit Repair Illustrated

The following illustration is a true example of how one woman, whom we will call Mary, improved her credit rating.  She transformed her credit report profile from that of a deadbeat to a person with perfect credit using the consumer rights provided under the Fair Credit Reporting Act.

Background:  Mary received several offers in the mail for secured credit cards.  She was puzzled by this because she thought she had decent credit. Her only bad payment history were several late payments with a credit card company a few years previously at a time when she was between jobs, but that was the only time she had ever been late paying a creditor.  Mary ordered copies of her three credit reports from the major credit bureaus.  She discovered that each of the agencies did not have the same information about her since her creditors did not subscribe to all three agencies.  TransUnion had hardly any information about her, while Experian had the most complete file.  Mary found mistakes on all three credit reports.  In fact, she was shocked by some of the errors she found.  What follows are the negative entries Mary found and what she did to fix them.

Negative Entry #1: Mary used student loans to finance her college education.  Students are allowed to defer repayment of their loans until after graduation when they become employed.  While in school, Mary had submitted the proper deferment forms and the lender had agreed to the deferred repayment; but for some reason, the lender had reported Mary's student loans as delinquent.   Mary had eight student loans shown as 90 or more days past due on two of her credit reports!

Solution: Mary protested the entries to the credit bureaus using the dispute forms sent to her with her credit reports.  She made copies of the student loan deferment forms that had been signed by the lender and sent them as proof.  She also wrote a nasty letter to the lender and demanded they remove the negative entries since they were untrue. Mary received a reply from the lender stating that they would request the credit bureaus to change the "90 days or more past due" notation to "deferred repayment", which was done in about one month on all eight of the loans, greatly improving Mary's credit rating. 

Explanation: The FCRA requires that false information be removed from a consumer's credit report within a timely manner.  It is important to note that credit bureaus strongly favor lenders and creditors (since they're paying the bills).  Therefore, it is very important that you keep all financial records and cancelled checks for seven years in case you need proof.  If Mary had not kept copies of the signed deferment papers, it would have been her word against the lenders that she was not delinquent.  Perhaps Mary wouldn't have succeeded in having the negative entries removed without proof.  Keep all your cancelled checks, payment stubs, etc. for at least seven years.  Not only does the IRS requires you to keep financial records for seven years in case you're audited, but you need to keep this information to fix errors on your credit report.

Negative entry #2:  Mary found eight open credit card accounts she hadn't used in many years on one or more of the three credit reports she had received:  Sears, Spiegel, Firestone, Lerner's, JC Penney's, Dillard's, and a Visa card she didn't even remember applying for.  This was in addition to the three credit cards she used on a regular basis.  Mary had 11 open credit card accounts with more than $30,000 of available credit.  Since the average American has seven open credit card accounts, she closed four of them, reducing the amount of credit available to her and raising her credit score.

Mary found the addresses of all these creditors from her personal records or from the addresses shown on her credit reports.  She wrote letters to each of them and asked them to close the accounts and report them as "closed by accountholder" to the credit bureaus.  Within six weeks, notations appeared on Mary's credit reports next to each of these accounts that stated "account closed by card holder".   

Explanation:  Too much available credit was lowering Mary's credit score, but this isn't always the case.  Closing accounts can sometimes lower a credit score, particularly if one carries balances on credit cards.  For example, if the total available credit on all of your credit cards was $10,000 and you owed $7,000, closing one credit card with a $2,000 credit limit would mess up your debt-to-credit-limit ratio and lower your credit score.  However, Mary's case is different.  Since Mary has a modest income and is planning to apply for a mortgage loan in the near future lenders seeing all of those open accounts might deny her financing because she has "too much available credit."

Negative entry #3:  Mary had a dispute with a landlord almost seven years ago, refusing to pay a $330 bill the landlord claimed she owed for damages after she moved out of the apartment complex.  Mary claimed the bill for damages was just an attempt to not only keep her security deposit, but to cheat her out of additional money.  When the bill was turned over to a collection agency, she sent them a certified letter refusing payment.  She never heard from them again.  She was not aware until she saw her credit report that the collection agency had reported this $330 debt to Experian.

Although Mary was angry with her former landlord, she decided to save herself lots of time and trouble and let the whole matter drop. Because the $330 debt was reported almost seven years ago, it would be permanently removed from her credit report in only a few months and the statute of limitations barred the landlord's ability to try and collect the debt anytime in the future.

Explanation:  The FCRA requires that negative information be removed from a consumer's credit report after seven years (bankruptcy remains for ten years).  If you find any negative information on your credit report older than seven years, ask the credit bureau to remove it immediately from your credit report.   Credit bureaus are good at automatically removing outdated information; Experian automatically removed this entry from Mary's report two months before it became seven years old.

Credit Repair Illustrated continued >>
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