Your complete guide to understanding credit scoring, managing your
scores and improving your credit rating.
Including: Free & Legal ‘Credit Repair’.
Fair, Isaac and Co. is the San Rafael, California Company
founded in 1956 by Bill Fair and Earl Isaac.They pioneered the field of credit scoring for financial companies.They have expanded their enterprise to cover decision systems, analytics
and consulting.Every credit agency,
and most lenders, calculates your credit score using software from FICO (Beacon)
or in house software based on the FICO rating system.
What does your score mean? This rating system is meant to develop a snapshot of the risk you currently
represent to a lender.Several
parameters in your credit file, including length of credit history, number of
open accounts, loans, mortgages, public records, and others are formulated to
produce a three-digit score between about 300 and 950.
There are other scores used by lenders and insurance companies
(some of which are developed by FICO) such as Application and Behavior scores.These other types of scores take other information into account.
Usually a lender will use a combination of your credit score with other factors
when determining your risk.All
lenders have the same objective; to determine the borrower’s potential risk.Regardless of whether the score was generated by FICO or a system based
on FICO parameters, they all yield an industry standard three-digit score.This score places the borrower in one of three main categories.
Prime and Sub-Prime or Worse
Prime - If your credit score is above 680, you are considered a
"prime borrower" and will have no problem getting a good interest rate
on your home loan, car loan, or credit card.
If your credit score is below 680, you are considered a "sub prime
borrower”, and will likely pay a higher interest rate on your loan.
Worse - If
your credit score is below 560, you can still get a credit card but you will
likely be hit with a security deposit or high acquisition fee.In addition to that your interest rate will likely be 22 to 23%.You can forget about most home loans and the majority of new car loans at
Below 560 is no place to be.You will pay much, much more in higher interest and unnecessary fees.You may even pay more for your insurance rates.A very low score can even prevent you from getting a job with many
How much does a low score cost you?
Credit Cards – Most, if not all, prime credit cards are entirely out
of reach to consumers with bad credit.And
the few credit cards that are available to them (known as “sub-prime” cards)
typically require exorbitant setup fees or recurring monthly fees. They offer
very low credit lines, require cash deposits, and in most cases do not even
report your positive credit activity to the credit bureaus.
- If you are making payments on a car, you are probably paying between $5,000
and $9,000 more just for having bad credit.This added interest shows up every month in a higher payment.Take a look.
car paid over 5 years:
- Bad credit in auto financing can really hurt, but it is nothing compared to
the cost of bad credit when a home is involved.A typical home can cost between $50,000 and $130,000 more in interest if
you are buying the home with bad credit.
$100,000 home paid over 30
As you can see, a low score can cost you hundreds of dollars
per month.This is why it is so
important to obtain and maintain as high of a score as possible.
How are credit scores calculated? The methods of calculating your FICO may differ slightly depending on the
credit bureau.When obtaining your
score from one of the Credit Bureaus it is important to understand that your
score does not come directly from FICO.It
is adapted to each bureau and is given its own name: Equifax uses “Beacon”,
Trans Union uses “Empirica”, and Experian uses “Experian/Fair Isaac.”These scores are also referred to as your “Bureau Scores.”
Since your score is derived from your bureau data, it will
change every time your reports change.However
your score is calculated, it will always take into consideration many categories
of information.No one piece of
information or factor determines your score.As the information in your credit report changes, the importance of one
or several factors may change in your FICO score.Lenders look at many things when making a credit decision, including your
income and the kind of credit for which you are applying.However, your FICO score does not reflect these facts as it only
evaluates the information retained by the credit reporting agency.
What factors affect your credit score? There are five factors which are used in credit scoring calculations that
determine your overall credit score.
A lender wants to
know what your payment history is like.Have
you paid everything on time, and are you late on anything now?Your payment history is just one piece of information used in calculating
your score, although it can be the very important.
score takes into account:
history on your accounts: These include credit cards, retail accounts
(department store credit cards), installment loans, finance company accounts
and mortgage loans.
items and Public records: This includes judgments, bankruptcies, suits,
liens, collection items and wage attachments. Most of these are considered
quite serious, although older items count less than recent ones.
all in the details: This includes specific details on late and missed
information/late pays are determined using three factors.
- How long ago was the last delinquency?
How old is the late pay?A
30-day late payment made just a month ago will affect your score much more
than a 90‑day late payment from five years ago.
- What level of delinquency was reached?
How late was the payment made?30
days, 60 days, 90 days or worst of all, is the payment still
- How many credit
obligations have been delinquent?
What is the amount of negative items as compared to your total amount of
instance, 5 accounts showing 3 late payments are much worse than 10
accounts showing 4 late payments.One
of the biggest sub factors is how many accounts show no late payments.A good track record on most of your credit accounts will increase
your overall FICO score substantially.
2) Current Level of
Indebtedness (Amount Owed) 30%
How much is too much?Can
the borrower pay me and still afford to pay his other bills?Not necessarily. Having available credit can actually help your ratio of
debt to available credit.These are
the types of questions that most borrowers want to know and the answers are
almost as important as your previous credit history.
Your score takes into account:
amount owed on all open accounts.Paying
off your credit cards in full every month does not mean that they won’t
show a balance on your report.Your
total balance on your last statement is generally the amount that will show
in your credit report.
types of accounts, such as credit cards and installment loans are scored
differently and in conjunction with the overall amount owed on all open
accounts.This also factors
into your balance on each specific type of account.For instance, you have a credit card with a very small balance and no
late pays.Even though the
balance is low, this still looks very good as it shows that you are able to
manage your credit responsibly.
many accounts do you have open and how many have balances?A large number of open accounts, even with small balances, can
indicate a higher risk of over-extension.This is weighted in your FICO score but most lenders leave it to
their discretion as they have access to your income amount.For the most part, though, it is good not to have more than three
open revolving accounts. Usually, three is the maximum.
much of the total credit that is available to you are you using?In other words, are you close to maxing out?For example, if you have a credit card with an available credit line
of $1000 dollars and you have a current balance of $850.00 or more, then you
are nearly “maxed out.”Several
credit cards or other debts with balances approaching the credit limit will
affect your score negatively.Even
if you have made your payments responsibly. Your FICO score will factor your
overall ratio of debt to your overall limits.
* It is important to note that the FICO scoring method pays closer attention
to revolving (credit card) credit than installment (home/auto loan) credit
to determine if you are “maxed out”!!
3) Amount of Time Credit Has
Been In Use (Length of Credit) 15%
Generally speaking, the longer the
credit history the better your score.However,
this factor only makes up 15% of your total score so even young people, students
or others with short histories can still score high overall as long as the other
factors show good.If you are new to
credit then there is little you can do to improve this part of your score.Open an account and be patient.
Your score takes into account:
your credit accounts have been open or the number of months you have been in
the credit bureau’s file.
of your oldest account and the average age of all your accounts are taken
it has been since you used certain accounts as well as the mix of older and
new trade lines.
4) Pursuit of New
Credit is much more popular today.Just look at the number of credit card offers you get via the Internet
and in the mail.Consumers can now
shop for credit and find the best terms to meet their needs.Each time someone runs a credit check on you, it creates an inquiry.
Fair Isaac has changed some of its calculations to account for
these new trends!! Specifically, they treat a group of inquiries — which
probably represents a search for the best rate on a single loan — as though it
was a single inquiry (note: this only applies to auto or mortgage loan
inquiries.)For example, auto loan
inquiries that are within 20 days of each other only count as one inquiry.
Whereas home loan inquiries within 30 days are counted as one inquiry.
Your score takes into account:
How many new credit obligations have recently been
assumed?Opening several credit
card accounts at the same time can look bad.What FICO looks for is “To what extent is this consumer trying to
open new credit accounts?”
recent were these efforts?How
long it has been since you opened a new account? Primary consideration is
given to the following:
of inquiries in last six months
of trade lines opened in last year
of months since most recent inquiry
There are no good inquiries.Inquiries are typically seen as a request for credit and thus are
factored as if you are searching for credit.Every time you fill out one of those credit card applications to get
a free t-shirt or hat, you are also getting an inquiry.Every time you fill out an online application for a credit card, or
other type of loan, you are getting an inquiry.Too many inquiries look bad. While there are no good inquiries there
are neutral inquiries. Neutral inquiries are most often known as:
Consumer initiated- A request for your credit report shows as a consumer inquiry
when you run a credit check on yourself. (provided that you don’t call
your mortgage broker buddy to pull your report)
Pre-Approval - If a potential lender has viewed your
credit reports to determine whether they want to offer you a loan, these
are not factored into your score. However, once you fill out a
credit application, your full report will be reviewed and a “bad”
inquiry will appear on your reports.
Periodic Review - Many lenders will periodically review
the credit reports of their current customers to see if there have been
any major changes to their credit reports. If the lender discovers that
your credit score is now too low for their standards, they may close your
created as a result of the periodic reviews are not supposed to be
factored into your credit score.
Applied for one dept. card
Two mortgage apps within 30 days
of each other counts as only one inquiry
counted at all if within 30 days of first inquiry.
These two don’t count at all
as they were within 30 days of the first app and within 15 days of each
How inquiries are computed is somewhat complex.The above table is meant as a basic guide but does not cover all the
different calculations.As a
reasonable measure you should avoid unnecessary inquiries.The FICO system is designed to take into account ‘rate shopping’,
but things like applying to credit card offers will add inquires to your
Types of Credit Experience (10%)
healthy mix of different types of credit, like installment loans, retail
accounts, credit cards, and mortgage.This
score is not normally a key factor in determining your score but it can help a
close score.It’s not a good idea
to try and open different types of accounts just to try and make this factor
better.It will likely reduce your
score in other areas.You should
never open accounts you don’t intend to use anyway.
What type of accounts you have,
and how many, can make a big difference.The
optimal ratio of installment versus revolving accounts depends on your profile
and differs from person to person.One
factor that seems to have significant influence is your percent of open
installment loans.Too many can
lower this portion of your score.
Cracking the code
If you are denied credit, you will receive four reason codes which indicate why
you were denied.These codes appear
in order of importance, below.The
first code has the strongest impact, followed in declining impact by the second,
third and fourth reason.
A typical readout your lender
might view follows.This
particular readout presents information from all three credit
agencies.In the example
below, the individual failed to qualify for each credit agency and
the reasons are listed in descending order. ***** BORROWER: JOHNSON, MIKE A. *****
TU Score: 
three credit agencies do not always have the exact same information therefore
your three scores will differ slightly. As a general rule though, if you
fail to qualify at one agency you are likely to still be denied if one of the
other bureaus is checked. Most mortgage loans companies will run all three
credit agencies and take the lowest score.
Amount owed on accounts is too high
Delinquency on Accounts
Too few bank revolving accounts
Too many bank or Nat’l revolving accounts
Too many accounts with balances
Consumer finance accounts
Account payment history too new to rate
Too many recent inquiries last 12 months
Too many accounts opened in last 12 months
Proportion of balances to credit limit too high
Amount owed on revolving accounts is too high
Length of revolving credit history is too short
Time since delinquent is too recent or unknown
Length of credit history is too short
Lack of recent bank revolving information
Lack of recent revolving account information
No recent non-mortgage balance information
Number of accounts with delinquency
Too few accounts currently paid as agreed
Time since derogatory public record or collection
Amount past due on accounts
Serious delinquent, derogatory, public record or
Too many bank or Nat’l revolving accts w/ balances
No recent revolving balances
Proportion of loan balance to loan amt. too high
Lack of recent installment loan information
Date of last inquiry too recent
Time since last account opening too short
Number of revolving accounts
Number of bank revolving or revolving accounts
Number of established accounts
No recent bankcard balances
Too few accounts with recent payment information
Note that these codes change
often, and may not represent the current codes as of this writing.
Improving your credit score
Now that you know how your score is calculated, you can begin making changes to
your current financial planning. The best things you can do are simple.
bills on time. Sounds simple, but this is the biggest thing you can do
to keep your score high. Delinquent payments and collections have a
major negative impact on a score.
your balances low on unsecured revolving debt like credit cards. A high
outstanding balances can affect a score.
amount of your unused credit is an important factor in calculating your
score. You should only apply for credit that you need.
sure the information in your credit report is correct. If its not,
dispute it with the credit agencies and/or with the creditor directly.
negative items on your credit reports has the biggest impact on your FICO
score. Generally, negative items stay on your reports for seven years
but you can utilize credit repair tactics to speed that process in most
About Credit Scoring
Most anyone who has obtained a home mortgage in the past 5 years or so has heard
about credit scoring. How many of you have been told "your scores are
great", or "if your score were 10 points higher, your rate would be
better by 1/4 point"? Probably most of you. We in the industry started to become aware of "scoring models",
as they are called, as early as 1994. The use of scoring models in the mortgage
industry came about as the major secondary market players, known as Fannie Mae
and Freddie Mac, started to develop automated underwriting systems. They had
been in use for a long time for auto lenders and credit card issuers.
The early creators of the automated underwriting systems felt that, if someone
could go to a Mercedes dealership at 10 am and drive off the showroom floor an
hour later with a $100,000 car (still more expensive than homes are in many
parts of the country), they ought to be able to obtain a home loan the same way.
The logic in this should be obvious... after all, cars are rolling stock, so
they can disappear, they depreciate and usually people don't live in them.
Houses are attached to a foundation, they usually appreciate and people usually
live in them. Using that logic, the industry should be able to make the home
buying process easier for everyone.
This theory sounds good, but it is only in the last year that we have seen some
relief from the mountains of paper that go into loan files, and it is because
the scoring models have become more refined. Still, there is progress yet to be
made and the industry is grinding slowly in that direction. Scoring models
figure prominently in the future of how people obtain home mortgages.
Most people know that most creditors use credit report agencies for obtaining
information on a person when they have applied for any type of financing.
However, there are actually two levels of credit reporting agencies. There are
three major repositories of credit and background information. They are Equifax,
Experian and TransUnion. When someone obtains credit, the creditor reports the
payment history to these repositories. This is usually done monthly but may be
done on an irregular basis. These repositories simply accept the information as
it comes in electronically and they DO NOT check the accuracy of the
The credit repositories and other agencies also maintain other background
information on every person in the country who has a Social Security number or
other identifying information. The other agencies may include the Department of
Motor Vehicles, the Medical Information Board, the FBI, local law enforcement
agencies, the county recorders for each county (public records repositories),
etc. Even the mortgage industry has a central repository for borrowers and
lenders who may have been involved in fraudulent activities in the making of
Credit Scoring and the Lending Industry
When you apply for a mortgage, your lender will request a credit report from a
credit reporting company. This is usually a local or regional company. This
company pulls together a credit report electronically. It usually comes from one
or more of the major repositories, but it can come from several sources.
Along with the information, the local credit reporting company receives a
numerical score. The score represents a composite of the borrower's credit
history, employment, ability to save, and so on. The most famous of these scores
is known as the FICO score, which was a model developed by the Fair-Isaacs
Company a number of years ago. It is believed that the Beacon and TransUnion
scores are really scoring information provided by the Fair-Isaacs Company, but
have been tweaked somewhat by the other bureaus. That is partly true, but what
most people don't know is that, with information streaming into their credit
file almost everyday, the scores can change daily. That is why someone can apply
for a mortgage with one company today and have a FICO score of, say, 717, and
apply with another lender a week later and that score can be higher or lower,
depending on the information received at the repositories in the interim.
The truth is that the Fair-Isaacs Company and the major credit repositories do
not divulge how the scoring model works. Due to the level of erroneous reporting
to peoples' credit files, there has been pressure on Congress lately to make the
credit repositories more accountable for the accuracy of the information they
report AND to divulge what goes into the scoring models, so that people can know
what to do to improve their scores.
Why is this important? The lending industry is moving toward
"risk-based" pricing. In plain English, this means that the higher
one's credit scores, the less paper they will have to provide to prove that they
are creditworthy AND the interest rate and/or fees a borrower pays will be based
on the level of their scores.
This system, while perhaps unfair to some, will be great for those who maintain
impeccable credit. It's one way that good credit risks can be rewarded. In the
past year, we in the industry have already seen a dramatic reduction in
paperwork requirements and "risk-based" pricing (rates and fees) has
If you have recently obtained your credit report and you are not happy with what
was reported, you can take steps to correct the erroneous information on it.
There are also proactive things you can do to improve your scores, if you are
anticipating applying for a mortgage anytime soon. While I intend to go into the
details of correcting erroneous credit information in Part II, I can give you a
few hints now as to how to be proactive in improving your scores from where you
The first is the most obvious. Pay all your payments on time. The second is,
don't apply for any new credit unnecessarily. Every time you sign and return a
new credit card offering, or open that second account at a department store
because you get a 15% discount, an inquiry will be generated and that will
reduce your score. The third is that if you must maintain credit card balances,
try to keep them at a level that is 35% - 40% of the maximum credit limit. In
other words, if the credit limit is $1,000, try to keep your running balance
below $400. Believe it or not, consolidating all your credit cards onto one can
hurt you, if the balance is at the credit limit. The fourth is, if you get into
a dispute with the phone company and it isn't a huge amount, pay it and move on.
Having one or more collections, even if they are small amounts, can really hurt
There are many more tidbits, but I will save them for the next sections, when I
will also discuss how to correct erroneous credit information.
Dealing with Credit Bureaus
It is essential to understand that Credit Bureaus are
nothing more than record keepers.
Simply put, they keep a record of who has given you credit, when they gave you
credit, how much credit you are given and whether or not you paid it back on
time. When you want to obtain credit cards, loans, financing for a car or home,
leases, apartments and sometimes even employment, the lender or bank will check
your credit to see your financial history.
Credit Bureaus are paid by the people who request your credit file.
Credit Bureaus have no legal power over you. Banks, police or the government
does not run them; so don't be intimidated by them. They are the Credit Bureaus
because they own large computer systems capable of storing credit information on
everyone in the
. However, because of the tremendous amounts of information on their computers,
their method of storing information is very basic and ridden with many errors.
Since the bureaus have made so many errors in the past, all Federal Laws
regarding credit information are very much in your favor.
The only thing you legally need to supply the credit bureaus for a copy of your
report is your name, your social security number and a legal mailing address
(P.O. Box is a legal address). If you don't want to chance harassment by
creditors at this time, it may benefit you to acquire a P.O. Box. Did you know
that many of the collection agencies are owned by the credit bureaus?
NEVER give credit bureaus more information than they
The bureaus also have a right to request a copy of your social security card,
but only give a copy of the front. They also may request a copy of something
showing your address if it is different than what is showing on the report. Send
them a billing statement that has your address. Do not send them a copy of your
driver’s license as they request. Remember these bureaus are
information-gathering companies who sell your information, not only for credit,
but also for promotional reasons.
Before going any further, you should have copies of your current credit reports.
If you don't, you can use the sample letter on the following page as a guideline
for requesting your credit reports from the 3 major bureaus.
The Credit Bureaus must send you copies of your credit file, free of charge if
you were recently denied credit. They will also provide you with one free copy
each year. We advise against having anyone you know get your credit file for you
because this creates an "Inquiry" on your credit report, and makes it
appear as if you are trying to borrow money from somewhere.
If you are in a hurry and cannot wait 5 to 10 days to receive your credit
report, simply look in your local Yellow Pages under Credit Bureaus. If the
Credit Bureaus have a local office or affiliates in your area, you may go there
directly and obtain your credit file without delay.
When you get the reports, there will be an information page telling you how to
read your report. And all three agencies use different formats. The first step
is to find all the derogatory items.
Look for collection accounts. Equifax lists them at the end of the report, Trans
Union mixes them throughout the report. Experian gives a brief paragraph
explanation of all accounts. The collections may have a collector’s name or
account number you do not recognize.
If you don't recognize the account as being one of yours, please don't assume
that it is!
How to Request A Credit Report
The following is a sample credit report request letter:
January 1, 2001
The Credit Agencies Name
P.O. Box 8030
To whom it may concern,
Please send me a copy of my current credit file. The following is my current
John K. Smith
1111 Perfect Lane
Collection, NY 11234
I have lived at the above address for the last three years.
I was born
My Social Security # is 111-222-3333
Print your name
IMPORTANT: Included along with this form
must be a proof of address. Show them a driver’s license, phone bill, utility
bill, billing statement from any major creditor, etc. It must be a copy of
something with your name and current address. Also send them a copy of the front
of your Social Security card.
About Hiring Credit Repair Agencies
You see the advertisements in newspapers, on TV, and on the
Internet. You hear them on the radio. You get fliers in the mail. You may even
get calls from telemarketers offering credit repair services. They all make the
"Credit problems? No
"We can erase your bad
credit -- 100% guaranteed."
"Create a new credit
identity -- legally."
"We can remove
bankruptcies, judgments, liens, and bad loans from your credit file
Do yourself, and your wallet, a favor. Don't believe these statements. Only
time, a conscious effort, and a personal debt repayment plan will improve your
If you decide to respond to a credit repair offer, beware of companies that:
Want you to pay for credit
repair services before any services are provided;
Do not tell you your legal
rights and what you can do -- yourself -- for free;
Recommend that you not contact
a credit bureau directly; or
Advise you to dispute all
information in your credit report or take any action that seems illegal,
such as creating a new credit identity. If you follow illegal advice and
commit fraud, you may be subject to prosecution.
You could be charged and prosecuted for mail or wire fraud if you use the
mail or telephone to apply for credit and provide false information. It's a
federal crime to make false statements on a loan or credit application, to
misrepresent your Social Security Number, and to obtain an Employer
Identification Number from the Internal Revenue Service under false pretenses.
Thanks to the new Telemarketing Sales Rule, it's also a crime for
telemarketers who offer credit repair services to require you to pay until six
months after they've delivered the services.
What to do if you've
had problems with credit repair agencies:
Many states have laws strictly regulating credit repair companies. States may
be helpful if you've lost money to credit repair scams.
If you've had a problem with a credit repair company, don't be embarrassed to
report the company. Contact your local Consumer Affairs Office or your State
Attorney General (AG). Many AGs have toll-free consumer hotlines. Check with
your local directory assistance.
You also may wish to contact the FTC. Although the Commission cannot resolve
individual credit problems for consumers, it can act against a company if it
sees a pattern of possible law violations. If you believe a company has engaged
in credit fraud, send your complaints to: Correspondence Branch, Federal Trade
The National Fraud Information Center (NFIC) also accepts consumer
complaints. You can reach NFIC at 1-800-876-7060,
, Monday - Friday, or at http://www.fraud.org
on the Internet. NFIC is a private, nonprofit organization that operates a
consumer assistance phone line to provide services and help in filing
complaints. NFIC also forwards appropriate complaints to the FTC for entry on
its telemarketing fraud database.
How to Remove Negative
The following techniques will
help correct your credit and should be done with all Credit Bureaus.
In this section you will learn the ways of removing negative items from your
credit file. These methods are sometimes referred to as "Credit
Repair". These are the exact same methods credit repair clinics and
attorneys charge up to $3,500 to perform. Since they do not always do it
correctly, consumers have been taken for millions of dollars over the past
years. We will also show you all the jealously guarded secrets on how to
outsmart creditors who are damaging your credit!
What the Credit Bureaus Don't Tell You
1. Each item on your credit report must be proven or it cannot remain in the
report. If the credit bureau cannot verify the item when investigated, it must
be removed from your file whether or not it's true.
2. Every negative entry on your report can be denied or challenged at any time.
The bureau must reinvestigate and if that item cannot be verified within a
"reasonable amount of time", it must be removed from the file.
3. Items when challenged can be mistakenly erased. Consumers say they often
experience computer operator mistakes.
4. Many times the creditor does not re-verify in time or the credit bureau is
busy and does not handle your dispute properly. It must then be deleted.
5. The older an item, the more difficult re-verification is. It is possible it
cannot be verified because records may no longer exist after 1 or 2 years.
Steps to Repair Your Credit
1. Obtain your three credit reports.
2. Review the reports and locate the negative items.
3. Dispute the negative items with the credit bureaus.
4. Disputed items are removed or corrected. Items that were not re-verified are
5. Negotiate with creditors and collection companies.
6. After negotiating and making payment, creditors delete the negative accounts
or change them to a positive rating. Get this agreement in writing before you
7. State the item you are disputing, but do not use dispute forms or file
numbers provided by the bureau. This will cause fewer delays by the credit
bureau asking for clarification.
8. Do not confirm the account if any information about the item is wrong.
9. Do not use letterhead (you don't want to raise any Red Flags).
10. Do not photocopy a fill in the blanks form letter (another Red Flag).
11. Send disputes during busy times of the year. For Example: The first to
middle of November can cause a delay in verification because of Thanksgiving.
Christmas rush for the creditor and the bureau can catch them before they can
thoroughly investigate within a reasonable time.
All Federal Laws are in the consumer's favor. This means you have the advantage.
The specific law used here is the Federal Fair Credit Reporting Act.
One part of this law states that when you dispute any information contained on
your credit file, the Credit Bureau must verify the accuracy of the information
with the creditor who reported the information within 30 days. If they are
unable to verify the information within 30 days, it must be removed.
Congress passed The Fair Credit Reporting Act (FCRA) because they felt we all
deserve a second chance. This act gives you the right to correct, update, amend
and tell your side of what happened to the credit community. These laws do not
work though unless you initiate and use them. A copy of the FCRA is included in
the Appendix for your review.
The Fair Credit Reporting Act sets certain guidelines which credit bureaus and
your creditors must follow when reporting your credit file, as well as giving
the consumer certain rights.
All of this brings us to the fascinating task of working on your credit reports.
Begin by getting defensive about your credit report. Remember that these credit
reporting bureaus are just private companies selling information about you and
are not your friends. You never authorized your creditors to sell this
information and you are not sharing in the profits they and the credit bureaus
Your Six Basic Rights under The Fair Credit Reporting Act
1. You, the consumer, have the right to challenge the accuracy of your credit
report any time.
2. The credit bureaus must reinvestigate anything you challenge without a
3. The credit bureaus must reinvestigate within a reasonable amount of time. 30
days constitutes a "reasonable amount of time" unless the bureau
notifies you otherwise (so keep accurate records).
4. If the credit bureau finds an error in the challenged item, they must delete
or correct that information in your files immediately.
5. If the credit bureaus cannot or do not confirm the challenged item within 30
days, they must delete that information from your files immediately.
6. You have the right to submit a Consumer Statement of your view of the
problem. If you, as a credit consumer, dispute the accuracy of certain
information in your credit report and it is verified by the creditor as correct,
then the credit bureau is required to include your explanation of your dispute,
if you request, in your credit report. Limit your explanation to no more than
Remove Negative Credit:
Important Information on Credit Repair
Important: You do not
want us or any other company to file a dispute for you because if the dispute is
sent from anyone other than you, the credit bureau will suspect that you have
paid someone to repair your credit and this will not work as well as it could
have if you sent it directly.
As the Credit Bureaus did not lend you money, they are not as concerned as you
if the information they have is correct or not. They are only paid to store the
Consumers working on their credit reports say many times their letters are
ignored by the credit bureaus. It is believed the credit bureaus try to
discourage consumers from working on the reports by making it difficult.
Consumer’s say even with proof an item is not theirs, its removal from their
report can take three or four challenge letters. When the credit bureaus say
they have verified or confirmed an item, it seems all they have done is verified
it is in their computers. THIS IS NOT ENOUGH PROOF!!! They need to provide
greater proof, so read on.
Sending your dispute letter by CERTIFIED RETURN RECEIPT MAIL greatly increases
your chance of a response. This should not be done with the first attempt. Keep
a record of when you sent the dispute letters and what date you should expect a
response. If you have received no answer to your dispute after 30 to 37 days,
attack the credit bureau with a certified return receipt letter, for an updated
credit report demanding the disputed items be deleted. If the bureaus do not
reply within the 30 days, it must be that the information was either inaccurate,
or it could not be verified. In either case, according to the Fair Credit
Reporting Act, the items must be immediately deleted.
Consumers have found it possible to eliminate negative marks on credit reports
simply by going through this process of disputing items over and over again.
Since many creditors won't take the time to defend the negative item, eventually
you can "repair" your credit through default by your creditor not
responding to the credit bureaus request to verify the item. This commonly
occurs. The creditors do not always have time to deal with a bothersome piece of
paperwork and that is your advantage. We'll go into this more later.
When you get the updated report carefully review it to see if you have lost the
negative items and to see if anything else has changed. Consumers working on
their credit report have found while disputing one negative item, for no
apparent reason, another negative item or two disappeared. Usually some progress
is made each time you challenge, but do not get discouraged if you don't get
results each time. Remember, the credit bureau would like you to quit bothering
them because if you aren't disputing the report, they can legally continue
selling it as profitable information.
After you have received your response, repeat the process all over again.
Consumers who have successfully cleaned their credit report say that they have
denied a bankruptcy or judgment and have received verification from the credit
bureau that it was in public record. They denied a second time and some even a
third time, and finally the credit bureau deleted the bankruptcy from the
report. So do not get discouraged! Patience and persistence are important keys
to incredible success in repairing a damaged credit report.
The creditors who reported the items to the bureaus must be the ones to provide
information to verify the dispute. These creditors do not always have the staff
and proper records to verify all disputes within 30 days to keep the item from
being removed. So you can see how possible it is to remove negative information
from your credit file. How well is this going to work for you? The only way is
to try. However, our research has shown that certain items are easier to remove
Easier Items To Dispute And Have Removed
* Items older than 2 years
* Discharged bankruptcies
* Late payments
* Accounts that were late but are now paid off
The reason these items are easier to remove is simple; when you dispute an older
account or an item that is now charged off, the creditor is not too concerned
with the account any more. They may not even be able to find the necessary
information to verify the dispute. Even if the account was once seriously past
due, but now is paid off, they usually will not take the time to verify the
dispute since they have already been paid.
More Difficult Items To Dispute And Have Removed
* Accounts that are currently past due
* Recent Bankruptcies
* IRS or State Tax Liens
* Current collection accounts
These are more difficult because creditors keep these types of accounts in their
current files and they are expecting you to pay them. That is why it will be
much easier for them to verify the information and keep the item on your credit
file. However, it is always worth a try.
Important: It is completely legal for you to dispute items on your credit file
even if you know they are correct. You are simply testing to see if your
creditors have maintained the proper records to verify the dispute. You have a
very bad memory and forgot that the negative accounts on your credit file are
Federal Laws require that the Credit Bureaus verify
all disputes. If they are unable to verify your dispute, the law says it must be
removed from your file.
Step 1: To dispute a negative item on your credit
file you need to first identify the negative items that you want removed.
Once you know which items to dispute, DO NOT complete the Dispute Forms that the
Credit Bureaus included with copies of your credit file that they sent you. It's
much more effective to easily follow the outlines of these sample letters that
Be sure to include a copy of your credit file and keep the original for your
records. Highlight or underline the items you are disputing. Mail the dispute
forms to the address listed on each credit file.
To dispute an inquiry, simply write that you never applied for credit with that
Make a photocopy of your dispute letter for your records and be sure to send it
by Certified and Return Receipt Mail from your local Post Office. Mail your
dispute form to the address provided with your credit file. Repeat the above
process for each item that you want removed or changed.
Step 2: After reviewing your updated credit file and finding that most or
all the negative items have been removed, you may now focus on building a
positive credit profile. Positive information will always outweigh a fewnegative items that may remain on your file.
Step 3: This technique is extremely effective in removing any negative
information that was supposedly verified as correct after your dispute.
Important: Always remember that if the dispute is sent in from anyone other than
you, the Credit Bureau will suspect that you have paid someone to repair your
credit. This raises all sorts of Red Flags. Since they make so many mistakes it
is imperative that they believe you are working alone and trying to fix a real
If there is a negative item that you want removed from your credit, such as a
bankruptcy, charge off or collection account, you may want to write that this is
NOT your account and you want it removed immediately.
If the account is now paid off, but was seriously past due at one time, DO NOT
write that it's not your account. Instead, write that it is your account but was
NEVER past due and you need it updated to say that everything has always been
An Extremely Powerful Technique...
This auditing technique is usually only practiced by attorneys. It would be very
expensive to hire attorneys to do this for you. However, by following the
instructions you'll get similar results as any attorney (you just won't have to
If the Credit Bureaus were able to verify any disputed information as correct,
it would remain on your credit file. So you'll need to contact the creditor who
is reporting the information. The creditor who reported the item is listed on
the left or bottom of your credit file. If their phone number is not provided,
call directory assistance in their city and ask for the creditor's telephone
number. Call and ask them to mail you written proof and documentation that this
is actually your account, since you do not believe the account belongs to you.
Almost all creditors and collection agencies use computers to store information
about debtors and they throw out original, signed contracts along with other
original documents. This makes it easy for creditors to store and organize
information BUT makes it impossible to actually prove the account is really
yours and not just another mistake.
Federal Law requires that upon your request, all creditors must show you written
proof that the account in question is in fact yours. Written proof is a copy of
the contract you signed with the original creditor. As we explained before, you
are stored on the creditor's computer and chances are excellent that they have
thrown out all the proof that this is your account.
The only creditors that may have proof are the courts (Recent Bankruptcies,
Unpaid Tax Liens, Unpaid Judgments & Unpaid Child Support).
Again, all Federal Laws are in your favor. If you say
an account is not yours and the creditor does not have written proof that the
account belongs to you, they must remove the account from your credit file and
cease all collection activity. If they don't have written proof that the account
is yours, there are two ways to get the item removed (see items A & B
in the next section***).
Important Only allow a creditor 7 days to get the proof into your mailbox (3
days to find it and 4 days for the mail). If it takes any longer they probably
do not have proof and you should start taking the action listed below. If the
creditor does supply you with all the written proof that the account belongs to
you, go to Step 4.
Get The Edge Above Your Creditors A. ***Contact the Attorney Generals Office
in the city of the creditor who is damaging your credit. Get the phone number
through directory assistance. Tell them that you have a creditor who is damaging
your credit by reporting an account that is not yours. You have requested proof
that the account belongs to you and they do not have it. They will contact the
creditor and have the account removed from your credit file. This is free legal
service and almost guarantees they will get the item removed.
B. If you want to make some money off of the creditor then take them to Small
Claims Court. To do this, you will need to call your county courthouse and ask
about the proper procedure to follow to get a court date. It's very easy and you
can do it all yourself. You'll be asked to fill out one or two simple forms
stating your complaint. You may want to write that you wish to remove the item
from your credit file since it is not yours and the creditor has no proof that
it is your account. After you receive a court date, mark it in your calendar and
make sure to attend at the proper time, place and date. Bring in the receipts
from the registered mail you used for your disputes along with your phone bill
and sue the creditor for your expenses and emotional stress. Remember, if they
do not have proof that this is your account you will win and the account will be
removed from your credit file! Also, if the creditor is out of state and does
not show in court, you win by their default.
So far, we have not yet heard of any creditor showing up in court. They are
simply far too busy to waste time on one person when they have thousands of
other people to be concerned with. You may contact an attorney in your area for
a free consultation about what your rights are concerning your particular
Step 4: If the creditor is able to supply the written proof you request,
offer to settle the debt for 10 cents on the dollar provided that you have the
money. If you don't have the money go to Step 5. If you owe $1,000, offer the
creditor $100. If they refuse, tell them that you will file Bankruptcy and they
will get nothing. This will certainly open them up to negotiating with you.
Whatever you agree to pay them, it should be a lot less than you originally owed
them. Do not agree to pay interest charges or penalties on past due or
Step 5: If you don't have the money to make payment arrangements, start
back at Step 1 of this section. Remember that the laws are in your favor and you
are legally allowed by Federal Law to dispute the negative items on your credit
file every 30 days. You are allowed to repeat this process as many times as you
wish until the Credit Bureaus cannot verify the item and must remove it. As you
already know, the creditors do not have the staff to handle all the disputes
they receive, so if you persist, eventually the items may be removed.
Sometimes the Credit Bureaus may sometimes reply telling you that they already
verified the information as correct. If this happens, write back telling them
that it's a Federal Law that they must verify your disputes and that you'll sue
them for $5,000 for each dispute that they do not handle properly. Once they
know that you are aware of your rights, they'll become very cooperative.
If you agree to make payment arrangements with any creditor, do so only under
one condition. The condition is that before you pay any money, the creditor must
mail you a written agreement that they will report the account to the Credit
Bureaus as current, paid off and never late! Otherwise, it may still remain on
your credit file and may not be worth paying.
of the original signed loan agreement or credit card application.
If they haven't sent you satisfactory proof, send a copy
of your receipt for your registered mail, a copy of the first letter you
sent and a statement that they have not complied with the FDCPA
and are now in violation of the Act. Tell them they need to immediately
remove the collection listing from your credit report or you are going to file
a lawsuit because they are in violation of the FDCPA, section 809
Wait 15-20 days to hear back after this second letter to
the collection agency. They will either remove it or not respond.
If they do provide a contract with a signature from the
original creditor showing that you owe the debt, there is one more thing you
can try: see if they are legally licensed to collect the debt in your state.
Here is a good
site to begin your search.
Not all states require licensing, however. Here's a little
cheat sheet (Word Doc) to see what the collection licensing laws in your
state are. It's got a bunch of other handy dandy state law information as well.
If you believe that they are not licensed and
licensing is required in your state, write them another letter and tell them
they are in violation of your state's collection laws and are subject to
prosecution and fines. (You'll have to cite your state's fines and procedures
here. This is a last ditch effort, but has worked in some cases.
Typically, your work will stop here, as most
collection agencies will bow down to your demands and send you a letter
agreeing to remove the listing. Now all you have to do is send a copy of the
letter to the CRAs.
If the collection agency did not agree to remove the
listing, then you need to move on to the next steps.
If the collection comes back as "verified"
from the credit bureaus, you now have proof of further collection activity
from the collection agency (as the assumption is that the credit bureau
contacted the collection agency to verify the debt). Since the collection
agency did not validate the debt, further collection activity is a violation
of the FDCPA.
Contact the credit bureaus, and tell them that the
creditors did not verify the debts under the FDCPA,
and send copies of your proof. Request the method verification, which is
your right under the FCRA. It is crucial to contact the credit
bureaus before filing a lawsuit. Make sure you state that the collection
agency did not respond to your request for debt validation.
You can try sending them this letter
to see if they will budge. They may tell you that the request needs to come
from the creditor. This is baloney. They are basically being an accessory to
the collection agency's illegal act of reporting you in the first place, and
are teetering on the edge of "willful non-compliance"
under the FCRA. Tell them so.
File a small claims suit in court on the credit bureaus, on the basis of defamation
of character. This is the easiest thing to prove since the fact that a
collection exists on your credit report hurts your character.
Have the papers served. (You can find a paper server on
the internet for about $25). Here is a great link where you can search for
the local office of the credit bureau near you. http://www.llrx.com/columns/roundup14.htm
Notify the bureaus that you are suing them.
You can use this letter.
The credit bureaus will call the creditors and find out that there is a
question about whether the debt is legitimate. They should delete it
immediately. If you want more legal ammo, you might also try looking up
similar cases to cite. We have a list of on-line resources here.
If you don't want to spend the $25 to serve the agencies
(it is well worth it, though, in my opinion), make sure you note the case
number and court in which you filed the suit when you notify the credit
bureaus you are suing them.
I hope these tips have encouraged you. Good luck on pursuing financial
Suing in small claims court is often called the "poor man's class
know the old sayings, "Money talks" and "Vote with your
dollars." Well, most companies (the credit bureaus and creditors included),
are not going to change their ways unless it is in their best interest to do so.
All of these companies have stockholders to report to, so if one of their
practices is costing them a better bottom line, you better believe they will act
to change their ways. One of these ways is for you the consumer, to take action
legally against these companies when your rights have been violated.
best news is that typically, each violation can be a $1,000 fine, so it's money
in your pocket. In addition, you are going to help make someone else's life
better by suing someone who has broken the law. If everyone took action when
their rights were violated, the credit bureaus would lose a fortune in legal
disputes. It's time to protect your rights as a consumer as well as protecting
the rights of your fellow United States citizens.
So Who Can
You Sue and What Can You Sue For?
Creditors if they report your credit history inaccurately
Defamation, financial injury
US Court of Appeals, Ninth Circuit, No. 00-15946, Nelson vs.
Extent of damages incurred by the wronged party as deemed by the
Creditors, if you dispute a debt, and they fail to report it as
disputed to the credit bureaus
Protection under the FCRA
Creditors if they pull your credit file without permissible
Injury to your credit report and credit score
FCRA Section 604 (A)(3)
Credit bureaus if they refuse to correct information after being
Defamation, willful injury
CUSHMAN, v. TRANS UNION CORPORATION US Court of Appeals for the Third
Circuit Court Case 115 F.3d 220
June 9, 1997, Filed (D.C. No. 95-cv-01743).
Extent of damages incurred by the wronged party, as deemed by the
Credit bureaus if they reinsert a removed item from your credit
report without notifying you in writing within 5 business days.
Consumer protection afforded by the FCRA
FCRA Part (A)(5)(B)(ii)
Credit bureaus if they fail to respond to your written disputes
within 30 days (a 15 day extension may be granted if they receive
information from the creditor within the first 30 days)
Consumer protection afforded by the FCRA
FCRA Section 611 Part (A)(1)
Creditors or collection agencies, and credit bureaus if they try
and “Re-age” your account by updating the date of last activity on
your credit report in the hopes of keeping negative information on your
Consumer protection afforded by the FCRA
FCRA Section 605
(c) Running of the reporting period
If you dispute a debt, the collection agency fails to report it
disputed to the credit bureaus
Protection under the FDCPA
Collection agencies if they do not validate your debt yet
continue to pursue collection activity (file for judgments, call or write
Consumer protection afforded by the FDCPA
Section 809 (b),
opinion letter Cass from LeFevre
Collection agencies if you have sent them a cease and desist
letter and they still call you
Consumer protection afforded by the FDCPA
Section 805 (c)
Collection agencies if they have not validated your debt and they
still continue to report to the credit bureaus
Consumer protection afforded by the FDCPA
Section 809 (b),
FTC opinion letter Cass from LeFevre
Collection agencies if they: - Cash a post-dated check before the
date on the check
- Cost you money by making you accept collect calls or COD mail
- Take or threaten to take any personal property without a judgment
Consumer protection afforded by the FDCPA
FDCPA 808 Section
If a collector calls you after at night or
before 8 AM
Consumer protection afforded by the FDCPA
FDCPA Section 805. (a)(1)
Calls you at your place of employment if the debt collector knows
or has reason to know that your employer prohibits the consumer from
receiving such communication.
Consumer protection afforded by the FDCPA
FDCPA Section 805. (a)(3)
Calls any third part about your debt like friends, neighbors,
relatives, etc. However they can contact your attorney, a consumer
reporting agency, the creditor, the attorney of the creditor, or the
attorney of the debt collector.
Consumer protection afforded by the FDCPA
FDCPA Section 805. (b)
The collection agency can not use any kind of harassment or
Consumer protection afforded by the FDCPA
FDCPA Section 806
Collector cannot claim to garnish your wages, seize property or
have you arrested ***
Consumer protection afforded by the FDCPA
FDCPA Section 807
Collector must you in a county in which you lived when you signed
the original contract for the debt or where you live at the time when they
file the lawsuit
Consumer protection afforded by the FDCPA
FDCPA Section 811 (a) (2)
a good grounds for getting a judgment vacated
(1) The use or threat of use of violence or other criminal means to harm the
physical person, reputation, or property of any person. (2) The use of obscene
or profane language or language the natural consequence of which is to abuse the
hearer or reader. (3) The publication of a list of consumers who allegedly
refuse to pay debts, except to a consumer reporting (4) The advertisement for
sale of any debt to coerce payment of the debt. (5) Causing a telephone to ring
or engaging any person in telephone conversation repeatedly or continuously with
intent to annoy, abuse, or harass any person at the called number. (6) Placement
of telephone calls without meaningful disclosure of the caller's identity.
the collection agency get a judgment against you, then they will be able to
garnish your wages and seize property, but until that time, no.
Contacting the credit bureaus
Equifax Equifax Credit
Information Services, Inc P.O. Box 740241 Atlanta, GA30374
To order report: 1-800-685-1111
To report fraud: 1-800-525-6285
Web site: www.equifax.com
(formerly TRW) National Consumer
Assistance Center PO Box 2002 Allen, TX75013
To order report: 1-888-397-3742
To report fraud: 1-888-397-3742
Web site: www.experian.com
TransUnionLLC ConsumerDisclosureCenter P.O. Box 1000 Chester, PA19022
To order report: 1-800-888-4213
To report fraud: 1-800-916-8800
Web site: www.transunion.com
** Note: When dealing with Equifax, some states are
covered by CSC Credit Services. This is a company that Equifax purchased and
still does business under the CSC name. It is OK to deal with them…..However,
all initial disputes should go through Equifax FIRST.
AND…. Always send verification with your letters of
communication. If CSC sends a ‘Verification Letter” to you, they are
STALLING!!! If this happens, send verification to BOTH CSC and Equifax.
Verification is a photocopy of your Driver’s License,
Social Security Card, an electric bill with your name and address…. Ect.
Verification is for YOUR protection, but it is sometimes used as a stall
technique by the agencies.
Important:Never, ever, ever copy the letters that follow this
only, and meant to get you started. For best results, you want to
personalize this process so the agencies do not wrongly conclude that you have
hired a professional credit repair organization to represent you. The use of
personal language proves that you are emotionally attached to the issues being
disputed. You will have better luck if you show emotion.
of all dispute letters are from credit repair clinics….. and the ‘Big
Three’ credit reporting agencies do not like credit repair clinics since they
eat into their profits by mass mailing out dispute letters. SO MAKE IT
PERSONAL!! General Dispute To Collection Agency Date
RE: Acct. # ...
To whom it may concern:
When living in New Jersey, I received service through
________________ Telephone Company. During that time, there were numerous
billing errors. I kept being mixed up with another family. Though time consuming
and aggravating for me, the phone company always found and corrected the errors.
Before moving to New York, I stopped service and paid
the final bill. I never thought I would continue to be plagued with
__________________ Telephone Company errors.
I am sure if you speak to a human being and not a computer at ________________
Telephone Company, there will be a record of the problems we were having with
wrong billings. I am also certain you will discover this is not my debt.
Though I was assured by the phone company at the time that my name was not the
cause of the errors, I'm not so sure.
I would truly appreciate your assistance.
Dispute of Collections Account Date
RE: Acct. #...
Dear (Credit Bureau Name):
I have just received my credit report and have noted that it contains erroneous
information regarding the following accounts. I would like them deleted from my
Collection Account ______________This is not correct, please remove.
1st Nationwide Mortgage - This is not mine.
Mobil Oil (acct. # ______________) When I questioned Mobil Oil about this
they told me they requested this be removed from my credit report. How were you
to confirm it?
American Express ___________________ This is not mine
Sears _______________ This was not mine
Lamont Furniture ____________ This is not mine.
Please re investigate and delete these disputed items. 30 days constitutes a
to check these out. Please notify me if it takes longer. Please send names and
business addresses of those persons you contacted for any verifications Also, as
per the Fair Credit Reporting Act, please send me notification that the items
have been deleted. Please send an updated copy of my credit report to the
Social Security Number
Dispute to Collection Agency Date
RE: Account number __________________
Your company is showing a collection account number __________, on my credit
report that I have no knowledge of. You are listing the client as
Please explain this account and who your client is. I do not agree that this
belongs to me and this is the first I have heard about it.
Your cooperation in this matter is greatly appreciated.
Negotiating a Settlement
RE: Account # __________________
I am writing to request assistance in correcting erroneous information
pertaining to my accountant #__________________ shown on my credit report.
I was involved in a traumatic divorce which necessitated leaving my home. All
outstanding accounts were to have been taken care of in the proceedings.
With changes to my address and marital status, perhaps any billings that were
sent, concerning unpaid accounts, missed me.
While trying to rebuild my life, I discovered these accounts such as yours that
were never settled. I am trying to correct my credit after going through this
set back by trying to settle these accounts, and doing the best I can.
The outstanding account # ________________ has a balance of $2296.00 which is a
large sum for me at this time.
I am writing to inquire if there is any hope for a reduced amount to satisfy the
account in full. In this way I may realistically be able to settle this
outstanding balance with you.
I am also concerned about the negative information now on my credit file. I am
advised this negative information you have placed on my files could remain in my
credit reports for 7 years after payment is made. However, I have the right to
remove any information from this credit report through the suppliers of
I am requesting, because of my horrible situation, your company notify the
to delete this account from my files when paid in full, as it does not reflect
my personal willingness to pay my debts.
Thank you in advance for your attention to this unfortunate situation.
Negotiating a Settlement with Utility Companies Date
To whom it may concern:
Please be advised that this correspondence is an effort to once again satisfy
the obligation listed with your company as account number _______________ and
with (Credit Bureau Name)
as account number ___________ in the amount of $_____________.
You state, "In order for us to maintain the integrity of all the accounts
that we refer to Equifax, we will only cancel accounts if they have been
referred due to an error on our part."
I doubt that this is the first time a meter was not transferred from one owner
to another correctly.
My request does nothing to breach your integrity concerning other accounts
with(Credit Bureau Name).
It is the popularly held standard that the Fair Credit Reporting Act concludes
that paid collection accounts may be reported for seven years from the date of
last activity. Thus, if a consumer, such as myself, were to pay off a debt, one
would be burdened with the negative trade reference for an additional seven
years above and beyond that time which may have already passed.
It is my goal to be free from an additional seven years of negative credit data
pertaining to this account. In my last correspondence dated ____________, ( see
enclosed copy), I requested your assistance in putting this error to rest by
making payment, even though I was not the recipient of the services being billed
for. I thought I had made it clear chat this proposal is being made only for the
purpose of compromise and is not in any way to be construed as an admission of
any liability, wrongful or negligent conduct or bad faith on the part of either
Accordingly, I am again requesting your help in deletion of this account from my
credit reports when payment in full is received as this is not accurately
portraying what happened. In this instant matter, your company will collect the
obligation in full and I will face no more of a credit reporting burden than
that already sustained.
Negotiating Settlements with Creditors Date
RE: Account # __________________
I am writing in an attempt to settle the account you are listing under my name
and social security number.
I agree ___________________ Company should have been paid for service rendered
but I do not agree with this being on my credit report as a bad debt. I would
like to put this account to rest as I hope you would. I did not use your
services but am negligent in not making certain the person buying the residence
had changed the billing from my name to his. I never received a statement or
overdue notice. I no longer was living in the home so I had no reason to suspect
a payment problem.
My concern is if I made payment to you in an attempt to stop negative reporting
to the credit bureau, the balance in my credit file would show Zero PAID
COLLECTION, and then those negative ratings would continue for another seven
This would be wrong as it is not a true indicator of my willingness or ability
to pay debts.
I believe I am caught in the computers and a credit reporting system that does
not tell what truly has happened.
I am requesting your help in deletion of this account from my credit reports
when payment in full is received as this does not accurately portray what has
happened. I have been informed by reputable source that this can be done and is
within the purview of the law.
I look forward to your prompt attention to this matter and an expedient
After NO RESPONSE from a Credit Bureau
ATT: Consumer Assistance
RE: __________________ Social Security Number
Dear (Credit Bureau Name):
On March ___________ and April ___________, I sent you letters requesting items
be investigated on my credit report. (see enclosed copies).
As of yet I have not received a response from you. Under the Fair Credit
Reporting Act you are required to respond within a "reasonable period of
I am sending this letter certified so I will know you did receive it. In this
way I will have no option but to pursue my legal rights if I do not receive a
Social Security Number
Disputing Specific Items and Inquiries Date
RE: Acct. #...
Dear (Credit Bureau Name):
Going over my credit report I have found it has many errors. I request your
investigation of the following:
1. Sears I spoke with Sears again to verify my records. They confirmed this as
my account and that there were no late payments to this account. They will draft
a letter if needed to correct this error. Please contact this creditor
2. Foreclosure 5/92 I did not have a foreclosure in 1992 or since then. Please
3. Collection Account _____________ I have tried to get to the bottom of this
with the information your company supplied. How are you able to confirm when I
cannot? (See enclosed copy). This is not mine. Please remove this.
The consumer has no protection against automobile salesman who are not concerned
about a persons credit report or what problems multiple inquiries can cause.
Your credit bureau has legal responsibility in this matter. There should be more
supervision on access
to credit files by salesman with these dealerships.
I did not authorize the following inquiries and demand they be remove from my
1. GMAC There are 4 different days in November of 19**. Why would this be?
Please remove 3 of these entries. I only authorized one time.
2. Nissan Motor Acceptance Corp. I only authorized one.
Please remove the other 4 entries.
These listed accounts are not my debts nor my authorized inquiries. Please
correct this by the removal of these items from my credit report. Please send a
copy of my corrected possible to my address listed below.
Social Security Number
Request a Reinvestigation of Items Still on Your Credit Date
ATTN: CUSTOMER RELATIONS DEPARTMENT
Dear (Credit Bureau Name):
I have been around and around with your company regarding the errors which I
And they continue to remain in my consumer credit report.
I am again noting that problems have been discovered and they continue to remain
I don't know how to better state my problem nor do I know how to correct the
The following accounts are not mine.
Account Name & Numbers
Since you have not given me names of persons with their business addresses that
you contacted for re-verification of the information, so that I could follow up
as I requested,
I assume that you have not been able to verify the information I have disputed.
If this problem continues and I am forced to seek some form of professional
you have been forewarned of the harm which this problem is causing me.
I shall assume that 30 days constitutes a "reasonable time" to
complete these actions
unless you immediately notify me otherwise.
Send me an updated copy of my credit report with these items deleted.
Social Security Number
When Credit Bureau's Request More Information Date
ATTN.: CUSTOMER RELATIONS DEPARTMENT
RE: Investigation of credit file.
Dear (Credit Bureau Name):
On ____________ (date), I wrote to (Credit Bureau
Name) at this address and filed a dispute of information in my credit
report. This dispute indicated that the information was in dispute and
identified the data from the language used in the credit report.
I also gave my address and copy of my drivers license. And I’ve enclosed those
documents again now.
Please expedite my original request dated ____________. It has now been 14 days
and I am still burdened with inaccurate credit reporting.
Social Security Number
How to Speak with Representatives from the collection agencies. When
you contact a person by phone always ask them what their name is and write it
down. This helps put you in control and keep accurate records.
"Hello, who am I speaking with? My name is and I would like to speak to
someone about my account, please."
"My account number is _______________________
"My social security number is __________________
Be aware that your creditor is reviewing your credit report and knows you are in
trouble. During your conversation always maintain your composure and be humble,
(even if you want to yell).
Listen to what they have to say and don't offer any information.
You want to find out your balance, the interest owed, penalties and your past
Key points to emphasize and go back to during conversation:
"My intentions are to honor this debt"
"My economic situation has changed since our agreement"
"Please work with me so I can realistically make payments"
"I would rather do it this way instead of going bankrupt"
"This is an effort to pay my debt"
"This is only a temporary situation"
are: To get the
interest lowered or stopped.
To stop penalties.
To establish a payment plan you can realistically maintain.
Always use "please" and "thank you". Always keep you
If you get lost or feel you are loosing control, just excuse yourself by saying:
"Excuse me (persons name), may I have your phone number and extension. I
have a small emergency and will need to call you back. When would be a good
Attempt to Validate Debt.
Under the Federal Debt Collection Practices Act, you are allowed to
challenge the validity of a debt that a collection agency states you owe to
them. Use this letter and the following form to make the agency verify that the
debt is actually yours and owed by you. Keep a copy for your files and send the
letter registered mail.
123 Your Street Address
Your City, ST 01234
ABC Collections 123 NotOnYourLife Ave Chicago, IL
Re: Acct # XXXX-XXXX-XXXX-XXXX
To Whom It May Concern:
This letter is being sent to you in response to a notice sent to me
on September 30, 2002). Be advised that
this is not a refusal to pay, but a notice sent pursuant to the Fair Debt
Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed
and validation is requested.
This is NOT a request for “verification” or proof of my mailing
address, but a request for VALIDATION made pursuant to the above named Title and
Section. I respectfully request that your offices provide me with competent
evidence that I have any legal obligation to pay you.
Please provide me with the following:
·What the money you say I owe is for;
·Explain and show me how you calculated what you say I owe;
·Provide me with copies of any papers that show I agreed to pay what you
say I owe;
·Provide a verification or copy of any judgment if applicable;
·Identify the original creditor;
·Prove the Statute of Limitations has not expired on this account
·Show me that you are licensed to collect in my state
·Provide me with your license numbers and Registered Agent
At this time I will also inform you that if your offices have
reported invalidated information to any of the 3 major Credit Bureau’s
(Equifax, Experian or TransUnion) this action might constitute fraud under both
Federal and State Laws. Due to this fact, if any negative mark is found on any
of my credit reports by your company or the company that you represent I will
not hesitate in bringing legal action against you for the following:
of the Fair Credit Reporting Act
of the Fair Debt Collection Practices Act
If your offices are able to provide the proper documentation as
requested in the following Declaration, I will require at least 30 days to
investigate this information and during such time all collection activity must
cease and desist.
Also during this validation period, if any action is taken which
could be considered detrimental to any of my credit reports, I will consult with
my legal counsel for suit. This includes any listing any information to a credit
reporting repository that could be inaccurate or invalidated or verifying an
account as accurate when in fact there is no provided proof that it is.
If your offices fail to respond to this validation request within
30 days from the date of your receipt, all references to this account must be
deleted and completely removed from my credit file and a copy of such deletion
request shall be sent to me immediately.
I would also like to request, in writing, that no telephone contact
be made by your offices to my home or to my place of employment. If your offices
attempt telephone communication with me, including but not limited to computer
generated calls and calls or correspondence sent to or with any third parties,
it will be considered harassment and I will have no choice but to file suit. All
future communications with me MUST be done in writing and sent to the address
noted in this letter by USPS.
It would be advisable that you assure that your records are in
order before I am forced to take legal action. This is an attempt to correct
your records, any information obtained shall be used for that purpose.
Cease & Desist Letter This makes
collection agencies ‘Go Away’
[Your Mailing Address]
Certified Mail, Return Receipt Requested # [Insert
the Certified Mail Receipt Number here]
[Insert name of collection agent, if available]
[Insert name of collection agency]
[Insert address of collection agency]
[Insert City/State/Zip of collection agency]
either the original account number or the collection agency's account reference
name of debt collector calling--if available--here]:
1. You are hereby notified
under provisions of Public Laws 104-208, also known as the Fair
Debt Collection Practices Act, that your services are no longer desired.
2. You and your organization
must CEASE & DESIST all attempts to collect the above debt. Failure
to comply with this law will result in my immediately filing a complaint with
the Federal Trade Commission and the [Insert
your home state here]
Attorney General's office. I will pursue all criminal and civil claims against
you and your company.
3. Let this letter also serve as your warning that I may utilize telephone
recording devices in order to document any telephone conversations that we may
have in the future.
4. Furthermore, if any
negative information is placed on my credit bureau reports by your agency after
receipt of this notice, this will cause me to file suit against you and your
organization, both personally and corporately, to seek any and all legal
remedies available to me by law.
5. Since it is my policy
neither to recognize nor deal with collection agencies, I will settle this
account with the original creditor.
Give this matter the
attention it deserves!
And have a nice day. [Sign your
Method of verification - secret
credit repair tool!
Everyone, it seems through mass media coverage, knows how to dispute negative
credit listings on your credit report. This is a good thing. However, many
people are foiled in their disputes because of the way the credit bureaus
"investigate" the disputes.
If you get a notice from your the credit bureaus telling you the information
you disputed has been verified as accurate, you can request the method
of verification, which is your right under the FCRA section 611 (a) (7). The
credit bureau must give you this information within 15 days of the request.
Why the CRAs are not doing their job
Each credit reporting agency has a different process for handling credit
report disputes, but all three use a similar system. The three bureaus
collaborated through their trade organization to automate the entire
reinvestigation process using an online computer program, E-Oscar.
All disputes received by the credit bureaus are done via written letter, the
telephone or the credit bureaus online dispute service. Even if the credit
bureau receives a written dispute highly detailed and with documentation, each
dispute is reduced to a two-digit code - the best guess of a minimum wage
Under the FCRA, the credit bureaus are required to send the information on to
the furnisher of the consumer's account (in other words, the original creditor),
but all they receive is the two-digit code.
According to testimony
from Leonard A. Bennett, Testimony Before Subcommittee on Financial Institutions
and Consumer Credit of the Committee on Financial Services Regarding "Fair
Credit Reporting Act: How it Functions for Consumers and the Economy," June
4, 2003, Leonard A. Bennett P.C. on behalf of the National Association of
Consumer Advocates (http://www.naca.net):
The employees of all three CRAs operate under a quota system whereby
each employee is expected to process all of the disputes of an individual
consumer in less than four minutes. Worse still, the "codes"
used by both the CRAs and their subscribers (the furnishers) are limited
in number and rarely describe the actual basis for the consumer's dispute.
For example, in two of my recent cases, both identical, consumers wrote
dispute letters to all three bureaus. The disputes were conveyed in great
detail and explained that the consumers were not responsible for the
disputed accounts and that any signatures claimed to be theirs were
forgeries. Each consumer dispute letter also enclosed copies of
handwriting exemplars such as signatures on driver's license, military IDs
and other credit cards. <Name omitted> had also obtained a copy of
the forged note and included it in his dispute letter. When Equifax and
TransUnion received the letters, their employees simplified the disputes
to a code and the description "not his/hers." The [two-digit
code indicating "not mine"] was all the furnishers received.
In a deposition taken in a
case, TransUnion's responsible employee explained the CRA's
Q. [T]he dispute investigator looks at the consumer's written
dispute and then reduces that to a code that gets transmitted to the
Q. Does the furnisher ever see the consumer's written dispute?
Q. Are there any instances in which the dispute investigator
would call the consumer to find out more about the dispute?
is consistent with CRA testimony in every other case of which I am aware.
The Bureaus do not convey the full dispute or forward any of the documents
to the furnishers. As an expected result, nearly all consumer disputes are
verified against the consumers.
So how do you go about requesting method of verification? I'll
tell you about my own experience with a bogus tax lien which had appeared on my
I was refinancing my house and my loan officer called to tell me I was
approved but I would have to pay off my $5000
state tax lien. Excusez-moi??? I have never lived in
, so I wouldn't have needed to pay state taxes (you have to be employed in
for this to happen); therefore, it was impossible for this lien to be mine. I
explained this to the loan officer (who happened to be a friend of mine for many
years). As you can imagine, I was extremely embarrassed.
The conversation with Equifax
I called Equifax (the CRA who had this listed) and disputed the tax lien. To
my surprise, it came back "verified". I called the toll-free number
listed at the top of the report sent to me by Equifax and asked for method of
verification. The response: "We have documentation."
"What kind of documentation do you have?" I asked.
Silence followed. "Who did you call? Did you call the county
"We never call the original creditor," the Equifax employee
Stuttering in surprise, I asked for the number and name of the court house.
With disgust so palpable that I could feel it through the phone line, I was
given the name and number of the
My own investigation efforts
Naturally, I immediately called the
courthouse, asked for the records clerk and explained the situation. The very
nice woman on the other end of the phone said, "Well, I can tell you that
no credit bureau has ever called here." She then asked for my social
security number and name and after comparing them, "Honey, the social
security numbers aren't even close! This definitely isn't yours."
a sign of relief and asked, "Can I get a letter from you stating this tax
lien isn't mine?"
"I'm afraid we can't do that, as this information is private. The tax
lien isn't yours."
"Can I give Equifax your name and number and have them call you so you
can tell them what you told me?" The clerk assured me that would be fine,
and I wrote down the information.
Forcing Equifax to comply
I called Equifax back, and recounted what the clerk had just told me. I then
insisted that Equifax call the clerk to verify what I had said. "Oh we
can't do that," was the reply.
"You better do that, or I will sue you for willful non-compliance with
the FCRA. You are required to investigate my dispute, and consider all
"Does this mean you want to open up a new investigation?" I held
back the expletive which was on the tip of my tongue, and replied that yes, I
did want to open a new investigation. I gave her the clerk's name and direct
line. I was given a new confirmation number for my dispute.
10 days later I received a letter from Equifax that the account was removed
from my credit report. My loan went through.
After this experience, I did a little more investigation on the credit
bureau's methods of investigation and someone pointed me to the Bennett
testimony. Based on my own experience and what I learned, I came up with the
following procedure which seems to be working for people:
If verified, with a copy of the investigation result in
hand, call the CRA at the toll-free number listed at the top of the report.
(If not, you're done, you lucky dog!)
Give the report reference number and ask for method of
verification per FCRA Section 611(a)(7) .
They will have never called the OC (original creditor),
but will have relied on a third party database to verify, which they may or
may not admit to you. If they can't cite solid evidence like "we called
the OC and they verified", ask for OC's phone number.
Call OC and ask for the records.
If the OC doesn't have them (they will typically tell
you that the collection agency has them and they don't keep them), get the
person's name and direct line. If they do have them, demand a copy under the
new FACTA act.
If you are sent records, review them and see how good
they are. If they are not conclusive, take the next step.
If the OC has no records
the CRA back and tell them the OC has no records.
the CRA that they need to open another dispute. The new information for
the disput is the name and number of the person to whom you have just
called at the OC.
they refuse, inform them you will sue for willful non-compliance under
section FCRA § 616.
they still refuse, send the information via certified letter along with an
to sue letter. If not, they will give you a new confirmation
number (write it down! and the date!). This acts as a new investigation,
and the CRA has 30 days to get back to you.
If you have written records proving the OC can't back up
the negative listing(s) they are reporting on your credit report
them registered mail to the CRA along with an intent
to sue letter if the account is not removed.