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Tech bytes: Tips and tools from NAMB Technology Chair John G. Anthony II

Jun 11, 2006

Credit repair: The truth about what can and cannot be doneMortgagePress.comCredit repair tips Contrary to what the credit bureaus would like everyone to believe, credit repair can work and does work for most people in most circumstances. This is, of course, provided that the client is getting the best advice and has an experienced professional working his case. Anyone with a credit score below 720 can benefit in the long term from the advice and information provided through credit repair companies, if the advice is good; however, there are times when the client's limitations make adhering to this advice impossible. The two limiting factors are the client's financial situation and the time frame within which results are needed. It is possible to remove anything from a credit report—even accurate items—if the creditor does not adhere to the law that outlines the steps of what needs to be done and by when. But, just because a certain type of account is removed for one client, it does not mean the same type of item will be removed for the next client. As you can see, a hit-or-miss aspect exists in credit repair, because credit repair relies not only on the strategies of the person attempting to repair the credit, but also on the effectiveness or ineffectiveness of the creditors and credit bureaus in adhering to the laws. Sometimes you want the credit bureaus and creditors to follow the law and sometimes you don't—it all depends on the particular situation. The reason credit repair has received such a bad name is due to the abundance of scam artists who flock toward the easy money made available by people desperate for this type of service. Add to that the mortgage broker's desire to get approval for the client, and you now have an industry that is easy to exploit. Since consumers are familiar with stories of successful credit repair, the scam artists claim their companies get similar results every time, in order to get the easy sale. This unfortunate reality leads the credit bureaus and the Federal Trade Commission (FTC) to make blanket, untrue statements, such as, "Credit repair does not ever work, and there is nothing a credit repair company can do for you that you can't do for yourself." Not only is this statement untrue, it is entirely misleading. I myself, as an attorney, have several mortgage brokers that would submit my loan papers for me if I were to complete the paperwork and get the appraisals, inspections, etc. Given that fact, I would never even consider it, because it is not my specialty and I would waste 10 times the energy learning the ropes only to do a substandard job and risk not succeeding. You could also represent yourself if someone was suing you, but it doesn't mean that you would. However, given that more than 90 percent of all credit repair companies are scam artists promising you the world, but disappearing after you pay, the credit bureaus and the FTC are forced to make such bold statements. It would be impossible for them to explain the truth to consumers without causing them to make bad choices that would result in them getting scammed. As a result, the credit bureaus and the FTC must adhere to the "credit repair does not work" position. As I've stated, credit repair does work, but don't let anyone tell you that credit repair is effective every time, because its success varies with the number of players in the game—some of whom never perform consistently. Even if you were a true master of credit repair, you have to take into account that sometimes the other players perform in a way that throws you off your game. Take Shaquille O'Neal, for example. Although he has the ability to win every game for his team, there are going to be times when the other side has a formation that takes him outside of his normal game and causes his results to be less than optimal. Given that fact, you still cannot predict with any degree of certainty whether or not he will perform well or poorly the next time he faces the same team. Credit repair is similar. Sometimes those on the opposing side show up strong; other times they don't. Human error is always a factor at some level, and even if you follow the same approach with every situation that arises when doing credit repair, your results will still vary, due to the other players involved. So, the next time someone tells you that he can get everything repaired on your credit, run the other way, because, at best, he simply doesn't know his business. Credit repair limitations occur almost 100 percent of the time, when dealing with the following situations. These situations make it nearly impossible for credit repair to help someone needing results within six months to a year. Please keep in mind, though, that even when a client can't be helped in the short term, the advice that can be given now, if coming from a professional, can prevent him from making a mistake in the near future that may worsen his situation. Here are examples of situations where not much can be done within a six- to 12-month period. 1. If more than 50 percent of the negative accounts showing on the client's credit report appear as unpaid collections, charge-offs, repossessions or foreclosures and the client does not have the money to either pay the accounts in full or settle them, it is hard to significantly increase his credit score. Due to the accounts remaining unpaid, these items will simply reappear once they are removed. Why will they reappear? Any negatives, even unpaid accounts, can be removed. But, unless the account is current, paid or settled, it will simply reappear in 10-90 days, because an unpaid negative item that is in delinquent status usually gets re-reported each month or so, with that same delinquent status. The only way to prevent this is to bring the account current by paying the past due amount or, in the case of a collection, charge-off, repossession or foreclosure, pay it in full or settle it for pennies on the dollar. Unpaid accounts that do not have a collection, charge-off, repossession or foreclosure status require only that the past due balance be paid to be considered current. Unless the negative account is a public record, the only way to keep it from being re-reported is to make sure the status is current, paid, settled, transferred or sold. In other words, if deleted, any negative account that does not show at least one of those five statuses will most likely get re-reported, unless the account is a public record. Public records are the only negative items that do not need to be paid to prevent re-reporting. Because they are only reported once, public records, such as unpaid judgments and tax liens, can remain unpaid and, yet, will not reappear once they are removed. In fact, the only time they reappear is when the initial reason for their removal was the public record agency's failure to respond to the credit bureaus' verification of dispute requests within the 30-day period outlined by the Fair Credit Reporting Act, in which case the credit bureaus would reinsert the public record if and when the public record agency responds to them after that 30-day period. 2. The second situation where credit repair is nearly impossible is if the client can't pay his minimum monthly payments and keeps adding new late payments as the other late payments get removed. This is a spinning-wheel scenario that rarely yields much improvement to the credit score. In conclusion, credit repair is possible. The effectiveness of credit repair depends not only on the skill of the person doing the work and the client's willingness and ability to cooperate with the advice, but also on a little bit of luck. Even if you have all of the above variables working to perfection, the only difference between a credit score increase of 30 points and 100 points is Lady Luck, and that is something that no one can predict. Edward Jamison Esq. is the founding attorney of Los-Angeles-based consumer credit law firm Jamison Law Group and the creator of the "Credit Reporting Paradigm" Web-based credit reporting solution for mortgage professionals. He may be reached at (310) 268-0580, ext. 103 or e-mail [email protected].
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