If you’ve been searching for ways to repair your credit, you’ve likely heard that doing so is easy and straightforward. And you’ve probably read several articles that claim credit repair is simple whether you hire an agency to do it or you decide to go the do-it-yourself route.
But credit repair is not simple or easy and it does come with challenges and even some financial risk. This article will help you identify these issues and manage them.
Your Right To Repair Your Credit
Passed in 1970, the Fair Credit Reporting Act (FCRA) established guidelines that ensure the privacy, accuracy, and fairness of all consumer credit information. Detailed in the FCRA is your right to dispute any item on your credit report you feel may be inaccurate, incomplete, or fraudulent. Most of the time, this category of credit report disputes can be verified with documentation that prove the inaccuracy, fraud, or identity theft.
The Fair Credit Reporting Act also gives you the right to dispute negative items you feel are misleading, biased, and unverifiable (“questionable”). This includes late payments, hard inquiries, and even delinquencies or collections. In other words, the FCRA does not care whether the negative item is valid or not. But disputing this second category of negative credit report items is difficult and depends on a dispute methodology credit bureaus, debt collectors, and creditors have become adept at defeating.
Disputes with debt collectors also fall under The Fair Debt Collection Practices Act (FDCPA). While this Act covers a wide range of regulations, it can be summed up as “limiting how and when debt collectors can contact you, what they can do to get you to pay, and empowering you to dispute debts.”
6 Common Issues You May Encounter During The Credit Repair Process
Many people who start taking steps to repair their credit eventually run into one or more issues that can worsen the situation if not handled properly. Here are the 6 most common challenges you’ll likely encounter in the credit repair process.
1. Most Dispute Letter Templates Miss The Mark
Both the FCRA and FDCPA outline the process where a consumer can dispute negative items on their credit report. These processes have been codified in a series of dispute letter templates circulating widely online. And consumers have been led to believe that all they have to do is download the template dispute letter, fill in the blanks, and send it to the creditor or debt collector.
The problem with most dispute letter templates is that they are overly legalistic, threatening in tone, and contain inaccurate information. Plus, consumers believe a human will read their dispute letter and find the legal arguments compelling enough to remove the negative account. Unfortunately, human interaction in the dispute process is exceedingly rare.
Many advocates of credit repair state that both the FCRA and FDCPA set legal precedent and compel the credit bureaus, debt collectors, and creditors to remove negative items when proper documentation for those negative items cannot be provided or specific procedure is not followed. If this were true, canned dispute letter templates would work much better than they do.
But the ugly truth about the credit repair process is that credit bureaus, creditors, and collection agencies know they cannot be compelled to remove negative items unless a court order or judgment forces them. In other words, they know they can dismiss credit repair efforts until the individual files a lawsuit.
2. The Credit Repair Process Runs on Automation
While there is always a possibility that sending a single dispute letter will result in an inaccurate item being removed from your credit report, this isn’t usually the case. Why? The first reason is automation.
Some estimates peg the number of disputes received by the three major credit bureaus to be in excess of 20,000 per day. This has required that they automate the dispute response process which largely assumes that the negative entries are correct. Your letter is scanned into their computer system, assigned a 3-digit code for the type of dispute, and a message is sent to the creditor or debt collector asking them to verify the negative item. All that legalistic mumbo-jumbo contained in your heartfelt dispute letter template is never seen by a human being.
Your dispute letter may have asked for verification of the negative item or validation that the debt is yours. And with a few clicks of the mouse, the negative item is verified or validated. The matter is “resolved” and a letter is sent to you with the results.
But no one really checked. No human being made sure the late payment date was correct. No one looked at the original signed documents to verify it was your signature. And you will faithfully continue to send dispute letters expecting the outcome to somehow change.
3. The Dispute Letter Rejection Rate is HIGH
Consumers will receive numerous rejections when they send dispute letters. Creditors, debt collectors, and credit reporting agencies seem to rely on the fact that most people stop sending dispute letters if the first ones don’t receive a favorable response. The credit repair process is one of finding the right strategy and tools (credit repair letters), overcoming rejection, and exercising a great deal of patience and perseverance.
4. Attempts to Repair Credit May Trigger Aggressive Collection Tactics
Debt buyers and collection agencies love when consumers dispute negative credit items on their credit reports. What this information indicates to a collection agency is that you are very eager to improve your credit and make sure that any negative items are removed. They see a consumer eager to clear up her credit for a future purchase or credit event.
In many cases, collection agencies will respond to this information by implementing aggressive collection tactics that can include threatening letters, telephone calls, and legal proceedings in an attempt to collect the debt you owe. They do that because the consumer is more motivated than ever to settle past debts.
5. Credit Repair Always Takes More Time Than You Think
While there is always a possibility that sending a single dispute letter will result in an inaccurate item being removed from your credit report, this isn’t usually the case. Even if all of the evidence is on your side, this doesn’t mean that the item will be removed in a timely manner. Undergoing credit repair requires patience. If you believe that one or more negative items should be removed from your report, expect this process to take a minimum of six months. If you have several negative items, the effort could last a couple of years.
6. You and/or Your Credit Repair Company Lack Expertise
The vast majority of national and local credit repair agencies are professional, disciplined, and effective at customer service. However, it’s common for these companies to use the same canned language that’s present in rejected dispute letters. You should choose a company that has the expertise and skills needed to properly negotiate with creditors and credit reporting agencies.
If you want to complete the credit repair process yourself, it’s essential that you find information about credit repair from credible sources, which is more difficult than it might seem. An ample amount of research is necessary to ensure that the information you base your credit repair tactics on is legitimate. We hope you find the credit repair and credit repair letter resources on our website helpful.
Repairing credit is a right granted to everyone with a credit report. But cleaning up all negative items on your credit report is not easy. Now that you have a better idea of the types of complications and issues that could arise as you repair your credit, you should be able to resolve these issues or sidestep them altogether. Whether a credit reporting agency rejects your dispute letter or collection agencies employ aggressive tactics to get you to repay your debt, make sure that you remain focused on the goal ahead. In time, you should begin to see results.