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].
