Credit repair is the process of removing your derogatory credit information off your credit report so your credit report looks cleaner and to improve your credit scores. Credit repair is the processing of disputing the inaccuracies with the creditor and/or the three credit reporting agencies; Transunion, Experian, and Equifax. Each consumer normally has three different credit scores, one from each of the three giant credit bureaus.
The three giant credit reporting agencies do make credit reporting errors and every consumer should check their credit reports periodically to make sure that there are no errors on their credit reports. A low credit score can mean paying higher interest rates on mortgage loans, auto loans, insurance, and other credit. A wrong reporting date on a bankruptcy and/or foreclosure can mean being disqualified for a residential mortgage loan. A recent late payment which is reported erroneously can mean getting disqualified for a mortgage loan or other forms of consumer credit. Does credit repair work? The answer is YES. Anyone can repair their credit on their own if they have proof that the credit bureaus have made a mistake and reported the wrong information. For example, if you filed bankruptcy and the your discharge date was March 03, 2010 but the credit reporting agencies recorded it as March 03, 2011, you can definitely get all three credit reporting agencies to remove the errorneous date and post the actual recorded date. The way you do this is to mail a letter along with your discharge bankruptcy paperwork to all three credit reporting agencies and have them correct it. Same with other errors on your credit report such as collections and judgments. If your credit report is reflecting that you have unpaid active open collections and you have proof and cancelled checks proving it otherwise, you need to send supporting documents along with a letter disputing the inaccuracies.
Credit Repair Companies
Any credit repair that a credit repair company can do, you as a consumer, can do it yourself. However, many folks rather hire a credit repair company instead of taking the task of credit repair themselves. Like all industries, there are scammers in credit repair and every consumer should do their due diligence before they hire a credit repair company. I have seen reputable credit repair companies do magic and work diligently to help their credit repair clients. I have also heard countless of horror stories form my mortgage loan borrowers where they have spent thousands of dollars to credit repair companies with very little or no outcome. Yet, I have witnessed credit repair companies do more damage than good to their clients with their credit repair. It was not an intentional damage but many credit repair companies do not know too much about the mortgage industry.
Credit Disputes During Mortgage Process
In order for someone to qualify for a residential mortgage loan, you cannot have an active credit dispute on your credit report. If you have a credit dispute on a derogatory credit item on your credit report, the mortgage application process is halted until the mortgage loan borrower retracts the derogatory credit dispute. However, if you retract a derogatory credit dispute, your credit scores will plummet. A recent derogatory credit dispute from one of my mortgage loan borrowers plummeted her credit scores by 80 plus FICO points where she could no longer qualify for a residential mortgage loan. A credit dispute retraction will definitely drop your credit scores and you can bank on it. If you are intending on applying for a residential mortgage loan in the near future, please consult with a licensed mortgage loan originator before starting a credit repair program.
Medical Collections And Zero Balance Collection Disputes
Mortgage lending guidelines do not count disputing medical collections and collections with zero balances such as charge offs to qualify for a residential mortgage loan. Also collections under $1,000 dollars can be disputed. However, it is recommended that you do not have any pending credit disputes on derogatory information period unless you have hard evidence proving that the derogatory information is not yours.
Can Bankruptcy, Foreclosure, Deed In Lieu Of Foreclosure, Short Sale Be Deleted From Your Credit Report Through Credit Repair?
Yes. There are many cases where credit repair companies somehow remove bankruptcies, foreclosures, deed in lieu of foreclosures, and/or short sales from their client’s credit report. Removing these derogatory items will make your credit report look much cleaner and might improve your credit scores, however, removing the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale from your credit report will not get you a residential mortgage loan approval if those are valid and you do not meet the federal mortgage lending guidelines.
Automated Underwriting System
You might get an approve/eligible per DU FINDINGS or LP FINDINGS via the Automated Underwriting System but when you fill out a 1003 residential mortgage loan application, you will be asked whether you have filed bankruptcy, had a foreclosure, had a deed in lieu of foreclosure, or had a short sale. If you lie and state that you did not but in actual you did, you are committing mortgage fraud and you do not want to go there. Mortgage fraud is a serious offense and a felony that carries a maximum federal prison sentence of 30 years. Getting bankrupcies, foreclosures, deed in lieu of foreclosures, and/or short sales deleted from your credit report may improve your credit scores and can possibly get you unsecured credit cards or other credit but when it comes to residential mortgage loans, the deletions do not really count because you still need to fully disclose the fact that you have filed bankruptcy or had a foreclosure.
When Should I Start Credit Repair?
Many people try to get past derogatory credit items removed even though it actually belongs to them. Does this work? Yes it works and the older the derogatory credit item it is, the easier it is to get the derogatory credit item removed from your credit report. Fresh items that are newer than 6 months are next to impossible to remove. The credit repair process works like this:
You write a letter to the three credit reporting agencies; Experian, Equifax, and Transunion; stating that the derogatory credit item you are disputing is not yours. The credit bureau will then contact the creditor you are disputing to provide evidence that the creditor provide validity on your disputed derogatory credit item. If the disputed credit item is fairly current, the creditor will most likely have it handy and will provide it to the credit bureaus and it validates the derogatory credit item and that item will stay on your credit report. However, with older derogatory credit items, it may have been sold from one collection agency to another or the creditor may no longer be in business. If this is the case and the creditor cannot validate your credit derogatory dispute, then all three credit reporting agencies need to delete the derogatory credit items within 30 days of receiving your credit dispute letter. This is how basic credit repair works. So in reality, you can actually have negative credit items that belong to you removed from your credit report if the creditor does not respond to the credit reporting agency within 30 days.
Removing Negative Credit Items
As mentioned earlier, the older your derogatory credit item is, the easier it is to remove your negative item off your credit report. Unfortunately, the older your derogatory credit item it, the less impact it has on your credit scores also. Some derogatory credit items that are older than 2 or 3 years old will have very little or no impact on your credit scores. However, your credit report will look cleaner. Most employers who run credit background checks normally will not care about the employee’s credit scores but will look at the candidate’s overall credit history and credit report. More and more employers are using credit background checks as part of their hiring process and having a clean credit history does count so trying to remove older derogatory credit items may be beneficial for those job seekers. Those seeking positions in police departments, fire departments, and other government career positions may gain the best benefit in enrolling in an aggressive credit repair program because these employers are strict when it comes to having good credit and view a candidate’s credit report in judging whether the candidate is financially responsible.