The TEN-STEP strategy to repair your credit

With your credit report in hand and knowledge of your legal rights, you are ready to “repair” your credit rating. Follow this Ten-Step plan:

Step 1: Identify your credit problems

Find the negative remarks or dings in your credit file and circle them. The information on these reports is usually coded like your bank statement. However, the FCRA requires credit bureaus to explain anything on the report that you cannot reasonably understand. Each report contains a key to the coding symbols. Familiarize yourself with the symbols, and then look for damaging remarks in these four sections of your report:

1) The Historical Status is a record of your monthly payments. Ideally, this is free of past due symbols, which may be 30-, 60- or 90- day periods. Almost 90 percent of the bad marks come from past-due symbols. Many of these could have been entered accidentally, or because the mail was late, delays in processing your payment or you may have actually made late payments.

Remember that you must have your payments credited to your accounts before the due date, not just mailed by that time, if you are to avoid past-due symbols.

2) The Comments section may contain remarks such as Charged to P&L. P&L means profit and loss. When a company charges an account to profit and loss that means it has charged it off as a bad debt loss and does not expect to be able to collect. This, of course, implies that you are a bad credit risk.

3) Inquiries made by any bank, store or other company to which you applied for credit will be listed in the report. Too many of these may be taken by a potential creditor as an indication that you are in financial difficulty and may be seeking credit as a solution. Creditors often will refuse to give credit because of too may inquiries.

How many are too many is a subjective judgment by the individual creditor. As few as 4- 5 in 6 months may be too many for some creditors.

4) Public Records may appear in your credit repost as tax liens, bankruptcies, or court judgments that affected you. These entries should also be examined for accuracy.


Step 2: Determine your overall credit score.

Somewhere on your credit report, you will find a column with a title such as "Account Profile." This column contains a summary rating for each of your accounts. A summary may read positive, negative or non-rated. Positive means you are OK. Your payments are all on time. Negative means you have a serious credit problem. Perhaps you have defaulted on a debt. Non-rated means perhaps you have a few late payment here and there. This, however still puts you in a weak position, even though there is nothing strongly negative against you.

Each negative or non-rated entry has a code reflecting the nature of the problem. Your goal is to protest and eventually remove all negative or non-rated profiles.

Step 3: Draft a protest to the credit bureau disputing each "ding"

To exercise your legal rights, you must aggressively challenge any bad marks or "dings." The credit bureau will only verify the facts if you assert that they are in error. So do not be shy. Stand up for your rights! Draft a strong but polite protest for each item you want to challenge and tell them you are exercising your rights under the FCRA, 15 USC section 1681i.

For example, suppose you find the code "Charge off." This means that the creditor charged your account off to profit and loss and that the creditor thinks your debt is uncollectible. You could protest that this comment should be removed because, in fact, the debt was satisfied and therefore should not be reported as a charge off. Or, perhaps you later paid off the delinquent account, but the creditor failed to note this in your credit report.

Another problem might be a series of Past Due notations. You could protest that those payments were delayed due to a mix-up with the post office when you changed your address. Most often, the credit bureau and creditor will state that the payment was in fact late, and therefore it is correctly reported. However, if the mix-up really did occur, you could submit a consumer statement to the effect that the account is in dispute because the creditor did not deliver bills even though a change of address was furnished.


Step 4: Send your letter of dispute.

Using the sample letters provided, (I will post them at the end) write a letter of dispute to the credit bureau. Never send a form or pre-printed letter to the credit bureau. Retype or hand the sample letters using plain paper with no letterhead. The reason is that you do not want it to appear that your letter originated from a credit repair company or an attorney, because these are either automatically returned or sent to the bureau's legal department. A handwritten, nonprofessional letter starts the process sooner.

Carefully list each ding that you want to challenge. Be sure to include photocopies of any documents you provide to support your claims. These might include correspondence with your creditors, cancelled checks indicating payment, receipts or other documents.

Remember that the law states that you have the right to dispute any citation on your report if the information contained in that citation is inaccurate or incomplete. (Fair Credit Reporting Act 15 USC section 1681). The only limitation to your dispute is that it should not be "frivolous or irrelevant." When you have finished your letter be certain to make a copy for your records. Send your letter certified mail with return receipt requested so that you can be sure the bureau receives it. It is also a good idea to include a copy of your credit report to make sure the bureau check the right file. Use Sample Letter No. 3

Sample Letter No. 3 can be used when incorrect information is on file against you.

Sample Letter No.4 can be used to demand an update of your account, deleting outdated comments.

Sample Letter No. 6 can be used when you wish to "merge inquiry" with the account. This helps eliminate excessive "inquires" from your credit history.
 

Step 5: Record your actions.

As soon as you mail the letter, log the date for each ding or negative entry you have protested. Keep related disputes together in a file with a copy of the letter, the credit report and any other documents that you include with it.
 

Step 6: Wait for a response

By law, credit bureaus must respond within 30 days.

Step 7: Send a follow-up letter.

If the credit bureau does not respond within 30 days, you should write a follow- up letter. Point out that the federal law requires the credit bureau to respond to a consumer dispute within 30 days or the agency is in default. Should you wish, use Sample Letter No. 5 as a reminder. This will be sufficient to prompt a response from most credit bureaus. Should the credit bureau fail to respond within 30 days of the reminder, use Sample Letter NO. 7 as the final follow-up. Failure of the credit bureau to respond entitles you to have any negative mark on your report deleted, provided it was one that you challenged.

Remember- it is frequently possible to eliminate negative marks simply by going through the process of disputing these entries. Since many creditors will not take the time or effort to defend the negative entry, you can eventually "repair" your credit through the default of your creditors.

Note that if the credit bureau fails to immediately provide an updated credit report, free of the disputed entry, you have several recourses:

Step 8: Ask for an updated credit report.

At the end of your letter, always ask for an updated copy of your credit report. 15 USC section 1681i of the FCRA requires the bureau to send a free notification of any updates to anyone who has received a copy of the report within six months previous to any corrections or statements that are added to the report. Therefore, you are also entitled to receive a free update. However, you must request it to receive it. So be sure to make your request, and include a request to send an update to anyone else who has recently inquired about your credit.

Note: The bureaus are not required to send a copy of the entire report, but they will often do so because that is more convenient for them.

Step 9: Compare the new report with the prior report.

Most bureaus will send you an updated report. Compare carefully the updated report with the original one. Mark all improvements that you find. Highlight any negative that has moved up to non-rated or any non-rated or negatives that have moved up to positive. Chances are that you will not get results on every protest the first time. But some progress is likely. Notice that the bureau may delete some items only because a creditor failed to respond to its investigation in a timely manner. This commonly occurs. The creditor's failure to deal with a bothersome piece of paperwork has now been turned to your advantage and is helping to clear your record.

Step 10: Repeat the process

There are probably still some bad marks remaining. In addition, it sometimes happens that a dispute results in an update to an account that is even more negative than before. For example, reinvestigation could uncover the fact that you actually had more late payments than were previously reported.

So what do you do? Now it is time to go back to the beginning of the process and start over again. You should put your credit record through this process at least twice before going on to the next phase. Remember that credit cannot be rebuilt in a day. It takes patience and persistence. Also, remember that during this process you must be very careful not to allow any new problems to appear on your record. Keep all your accounts current or pay ahead of schedule.