Down But Not Out

InvestorDirector.com

Investors and homeowners who have recently lost homes to foreclosure think they have to take a time out from real estate…they need to think again.

Get busy livin’ or get busy dyin’; probably the best advice right now for investors and former homeowners who think they’re paralyzed with bad credit for several years after losing their homes to foreclosure. Sure they can lie down and give up; at the expense of missing what could be the best buyer’s market in U.S. history. This article is a tutorial designed to show both beginning and experienced investors, as well as prospective home buyers, how to fine tune their credit by first understanding their rights under the protective umbrella of the Fair Credit Reporting Act (FCRA). This article also teaches readers how to remove negative items from their credit report by systematically communicating with their creditors and the three major credit bureaus, which report credit scores. By exploiting legal loopholes in the credit scoring system, readers can raise their credit scores to levels they thought were unobtainable. More importantly, they’ll be able to prepare themselves for what could be their best home purchases ever.

Reporting Errors

It is estimated that half of all credit reports contain errors. This means that potential creditors evaluate your creditworthiness with no more accuracy than a simple a coin toss! Additionally, credit bureaus calculate and issue your credit report to potential lenders, meaning they clearly brandish power over your ability to receive financing for a home purchase. Though it’s good to know the truth about the reporting accuracy of the three credit bureaus, it would be a serious mistake to be scared into thinking that you have no choice but to live with the negative effects of simple errors or an overall bad credit report. There are plenty of things you can do to keep your credit in tip-top shape and keep the power out of the hands of credit bureaus. It first starts with your knowledge of the law, how it is designed to protect your credit and how it can be used as a weapon to defeat the credit bureaus and raise your credit score.

The FCRA and How it Protects You

In 1972, Congress passed the Fair Credit Reporting Act (FCRA) to protect consumers from the questionable reporting practices of the credit bureaus. The FCRA is federal law governing credit reporting. The FCRA gives you the right to dispute any information contained in your credit report. If you ever decide to dispute any items on your credit report with the credit bureaus, the FCRA states the bureaus have a 30 day window to verify the accuracy of the disputed information with that particular creditor reporting the information in dispute. If the bureaus cannot (or do not) verify the disputed account information within 30 days, that information must be deleted from your credit report. Even accurate data in your credit report must be deleted if it’s not verified!

What this means to you is that even the most damaging, yet accurately reported negative accounts such as foreclosures, judgments, federal tax liens, bankruptcies, mortgage late payments, credit card or auto late payments are to be deleted from your credit report if the credit bureaus can’t prove to you that the information is being reported correctly within a 30 day grace period. Remember: this is according to federal law under the FCRA. Why is it so important to know this? Because it is very widely believed that negative data in your credit report that is accurate cannot be removed (such as a foreclosure or a charged off credit card). This is totally false. As stated above, the FCRA stipulates that any disputed information must be verified by the bureaus within 30 days, or it must be deleted – whether it is erroneous or accurate. The burden of proof is on the credit bureaus; not on you, the account holder.

Credit Repair Method #1: Sending Account Dispute Letters to the Credit Bureaus

True errors are easy to remove with communication between the consumer, the creditor that’s reporting the error and the credit bureaus. Accurate errors that truly belong to the consumer such as foreclosures and late pays are harder to get removed. Creditors usually aren’t going to help you here. In this case, you’re not trying to have the creditors who are reporting you to help you remove the negative data – they won’t (nor should they – you paid late or defaulted!). In this case, you’re stepping over your creditors who know you’re in the wrong and you’re going straight to the credit bureaus to catch the bureaus not verifying the accuracy of the information within the 30 day grace period allotted to you by the FCRA. Remember: under the FCRA, the bureaus have to verify what you ask them to verify; even if you know, your creditor knows, and the credit bureaus know you paid late and are in the wrong. If you can spend the time to write the necessary amount of properly formatted credit request letters and monitor how the credit bureaus take action pertaining to your letters, you can repair your own credit.

The credit bureaus don’t have the manpower or resources to always follow up on your request letters which ask them to verify the accuracy of your negative accounts. By monitoring the credit bureaus, and catching them violating your rights under the FCRA by not taking the actions you request of them within the allotted timeframe (30 days), they have no choice but to remove any negative items you dispute.

Credit Repair Technique #2: Creditor Account Auditing Technique
The creditor account auditing technique is mainly practiced by attorneys. If you follow these instructions, you’ll get results similar to any good attorney.

When the Credit Bureaus verify any disputed information on your credit report as being reported correctly (such as a home you lost to foreclosure), that information will remain on your credit report. If you want information such as this removed from your report you’ll need to talk to the creditor who is reporting the information. A creditor’s contact information is usually listed on the last few pages of your credit report.

Step 1: Make contact with the creditor that’s reporting the item you want removed from your report. Ask that creditor to mail you written documentation that the negative account is actually your account and that it belongs to nobody else, since you do not believe the account belongs to you. Follow this request up with a letter to them asking them to remove the account as you already did over the phone. Do this using only registered mail. Doing so ensures they received your request.

It is crucial to handle all of your correspondence with creditors and the credit bureaus via registered or certified mail!

You must have some written proof or documentation of your dispute. There are many ways to get proof of a creditor’s promise to remove an item you’re disputing or that your letter was received:

1. Send your account verification letter via certified mail or registered mail. This costs no more than 2-3 dollars per letter. When you do this, you will be sent a receipt (a green postcard) which is your proof that your letter reached the intended party. Depending on which account removal tactic you elect to use, you often times may be including documents with the letter, which will require a trip to the post office. But if you are not sending any documentation along with your letter, the US Postal service just started a new service, where you can upload a letter, they will print it out and send it for you certified mail (for an additional fee). It’s a great time saver. The URL: http://www.usps.gov.

2. You can send account verification letters UPS, Federal Express, Priority or Express Mail, which will provide a tracking number proving your targeted party received your correspondence.

Almost all creditors and collection agencies store information about debtors (you) on computers and they throw out original, signed contracts along with other original documents. This makes it impossible for your creditors to actually prove the account that you want removed is really yours and not just another mistake in their database. Federal law under the FCRA requires that upon your request, all creditors must show you written proof that the account you are questioning actually belongs you. Written proof is defined as a physical copy of the contract you signed with the original creditor. Usually the only creditors that maintain clean original files and have proof of the item you’re disputing are the courts (Recent Bankruptcies, Unpaid Tax Liens, Unpaid Judgments & Unpaid Child Support).

All Federal Laws are in your favor. If you say an account is not yours (regardless of whether you know is truly yours or not) and the creditor cannot produce original written proof that the account belongs to you, they must remove the account from your credit file and cease all collection activity. There are two ways to get the item removed – see item A & B below.

After auditing a creditor for your original signed contract with an account validity dispute, only allow that creditor 7 days to get the original account contract you signed into your mailbox (3 days to find it and 4 days for the time it takes to mail the contract). If it takes any longer than 7 days, chances are they probably don’t have the proof you’re requesting and you should start taking the action listed in step #2 below. If the creditor does supply you with all the written proof that the account belongs to you, go to Step 3.

Step #2: Getting the Upper Hand on Your Creditors
A. Contact the Attorney General’s Office in the city of the creditor who is damaging your credit. Tell the representative you speak with at the AG’s office that you have a creditor who is reporting an account that is not yours and is damaging your credit by doing so. Let them know you’ve already requested proof that the account belongs to you and they can’t produce it. At this point, the Attorney General’s representative will contact the creditor and have the account removed from your credit report. This is a free legal service and almost guarantees the item will get removed.

B. The second option is to take the creditor to Small Claims Court. In this scenario you will need to call your county courthouse and inquire about the proper procedure to follow to get a court date. You’ll be asked to file a formal complaint against your creditor on a simple form the courthouse gives you. Plainly state that you wish to remove a specific item from your credit file since it is not yours and the particular creditor you’re opening this suit against has no proof that it is your account. After the courthouse evaluates your complaint, you will receive a court date and time. The courthouse will notify your creditor of the date and time as well, requiring they make an appearance to defend themselves in the case you’re opening. It is important to bring in the receipts from the registered mail you used for your disputes along with your phone bill (to prove you contacted them) and sue the creditor for your expenses, time and emotional stress. Remember, if they do not have proof that this is your account you will win and the account will be removed from your credit file. Also, if the creditor is out of state and does not show in court, you will win by default. Remember too that a small claims suit allows you to sue for a monetary sum usually capped at $2,000 – $3,000. By winning, you’ll be rewarded the sum you sue for.

Step 3: If the creditor is able to supply the written proof you request, offer to settle the debt for 10 cents on the dollar. If you don’t have the money, see Step 4 below. If they refuse to negotiate, tell them that you will file bankruptcy and they will get nothing. This will open them up to negotiating with you. Whatever you agree to pay them should be a lot less than you owe them. Do not agree to pay interest charges or penalties on the specific account you’re disputing. If you agree to make payment arrangements with any creditor, do so only under one condition: that before you pay any money, the creditor must mail you a written agreement that they will report the account to the Credit Bureaus as current, paid off and never late. They may not honor your request to remove the item you’re disputing otherwise.

Step 4: If the creditor is able to supply the written proof you request and you don’t have money to make payment arrangements, repeat Step 1 of this segment. This time, send your account request verification letters not only to the creditor you’re challenging, but to the three major credit bureaus as well. Remember to always use registered mail. Never forget that the law is in your favor. According to Federal law, you are allowed to dispute any negative items on your credit file every 30 days. You are allowed to repeat this process as many times as you wish until a specific creditor or the credit bureaus cannot verify the item. When this happens, they must remove it. As you already know, the creditors and the credit bureaus do not have the staff to handle all the disputes they receive, so if you persist, eventually you’ll catch either the creditor or the three credit bureaus make a mistake by not verifying the item is true within the 30 day timeframe the law allows for. When this happens, you’ll have all thee proof you need to get the items removed.