Credit Repair: Repairing Your Own Credit

Credit repair is the process of either deleting inaccurate information or derogatory items from your credit report.  Inaccurate information are posted on consumer’s credit report all the time and if you have proof documenting the error, you can easily get it deleted it off your credit report.  Many consumers also try to use loop holes in the Fair Credit Reporting Act, also known as FCRA,  to try to delete derogatory items.  There are thousands of credit repair companies that can help you with credit repair, however, whatever a credit repair company can do, you can also do it yourself.  Deleting derogatory items will not necessarily improve your credit scores.  Older aged derogatory items have very little to no impact on your credit scores.

Derogatory Credit On Report Report

For example, collection accounts, charge off accounts, late payments, bankruptcies, foreclosures, deed in lieu of foreclosures, short sales that are reported on your credit report that are over two years old will have little or no impact on your credit scores.  You can still have many older negative items including open collections, charge offs, and late payments that are over two years old and still qualify for a residential mortgage loan as long as you have re-established your credit.  I have seen many times over people with credit scores of over 700 plus after two years of a bankruptcy, foreclosure, deed in lieu of foreclosure, open collections, charge offs, and late payments.

Establishing Credit

The key is having re-established credit.  You can always re-establish your credit by the use of secured credit cards.  Secured credit cards are powerful tools to re-establish your credit and start a good payment history and boost your credit scores.  For those who want to clean up their credit report and delete older derogatory credit items, there are techniques that you can use.

Dispute Negative Items To Credit Bureau

The FCRA, Fair Credit Reporting Act, is the federal law that regulated the information that can or cannot be reported on your credit report and the time a derogatory credit item can be posted.  The Fair Credit Reporting Act also requires that the credit bureaus needs to investigate any errors or disputes from public consumers and errors need to be removed within a certain specified time period from the intial dispute by the consumer.  Credit disputes can be made either online or by U.S. Mail, however, I strongly recommend you dispute your errors via mail.

Obtaining Your Credit Report

To initiate a credit derogatory or error, you first need to obtain your credit report.  List the items in dispute and write each of the three credit bureaus that is reporting your derogatory a letter with the creditor’s name, amount, date, and the reason of the dispute.  Examples of dispute letters are that the information is not yours, the amount has been paid off, or you were never late.  If you have documentation or proof, please provide that with the dispute letter.  Send your letter via certified or registered mail and make copies of all correspondences.

Disputing It With The Creditors Itself

You can also dispute the derogatory item with the creditor that is reporting you itself.  If the creditor realizes that there is an error or cannot substantiate the derogatory item, they need to notify the three credit reporting agencies of the errors and the credit bureaus will update your credit report.

Deletions Off Your Credit Report

In the event if the derogatory item is yours and you want it removed from your credit report, you can do so by requesting a pay for delete offer.  This technique is when you offer to settle for a derogatory debt only if the creditor is willing to remove the negative item completely off your credit report.  This is the only way you should pay a collection account or delinquent account.  If you have an older delinquent or collection account and you make payment on it, it will re-activate your older aged derogatory item and make it current and this will literally plummet your credit scores.  I have seen this happen many times over where in some cases, credit scores plummetted over 80 points by paying an older collection account.  You need to realize that older collection accounts have no impact on credit scores and you can still get a mortgage loan with outstanding collection accounts and prior bad credit as long as you have re-established credit.

Current Late Payment: Plead With The Creditor For Mercy

A current late payment on your credit report will devastate your credit scores and might ruin your chances for a mortgage loan approval.  If you have a current late payment and had always been paying on time with the subject creditor, you need to contact the creditor who reported you late and beg to please give you a goodwill one time late payment deletion.  Most creditors will offer you a one time goodwill pass in removing a recent late payment if you had a good payment history with them.  This often works and if the representative will not cooperate with you, request that you speak with a supervisor.  If you had a great long term payment history with your creditor, I can assure you that the creditor will give you a one time pass.  I recommend this technique all the time to my mortgage loan borrowers who just had a recent late payment.  Removing the late payment will sky rocket the credit scores.

Disputing Derogatory With Open Credit Balance During Mortgage Application Process

If you are planning in buying a home and will be applying for a residential mortgage loan in the very near future, NEVER dispute a derogatory item with a balance on it.  Fannie Mae, Freddie Mac, VA, FHA, USDA, prohibits a credit dispute with an open credit balance on it.  The dispute needs to be retracted in order for your mortgage application process to move forward, however, retracting a credit dispute WILL DROP your credit scores.  A recent case where a mortgage loan borrower retracted a credit dispute cost her over 80 POINTS so she needed to be off the loan application and the only way I could have done the loan was just using her husband.  Had a Hell of a time due to debt to income ratios but eventually we got the loan closed.

Gustan Cho

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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