Credit Repair:
Ralph's Story
by Jack Mann
jmann@creditech.com
(recently we received a letter about how to repair bad credit. We forwarded the question to Jack Mann, our expert in the area. The question and his answer follows.)
I enjoyed reading your latest story, "Avoid Credit Repair Fraud". I recently have been troubled with bad credit myself. Here is my story. Back in '89, I had excellent credit and about 10 different credit cards, with everything on time. That summer, I went away to college. Over the years, I had problems keeping up payments. Eventually every- credit card went to collections and was charged-off.
By March '93, I was out of college and had a full-time job. My number one goal was to pay off every charged-off account to try to re-build my credit. By late '95, I successfully paid off every single charge-off credit card and collection agency. All three of my credit report now say "PAID CHARGE-OFF". I thought that when I paid for all these past due accounts that the "PAID" part would make my credit look more attrac- tive to creditors. I was wrong. Paid or not it was still late and charged-off.
I credit repair company named, "PREIMERE FINANCIAL", now claims that not only can they help me, the could contest all the information on my credit report and have it legally removed. Is this true? If so, can I do it myself? I have read a couple of books on this matter, but they all deal with late payments and charge offs. In my case, all my charge-offs are now PAID. I was told, I lost my leveraging tool by paying my creditors, when in fact I could of bargained to have all bad marks removed or lessened upon paying. All I got was the word PAID on my report, that's it.
My question to you is, "What can I do to rebuild my credit?". Should I try to contest every item on my report, knowingly that it is 100% correct? These charge-offs happened back in '91. It is about 5 years since the last one. "What should I do?" Thank You in advance for your opinion.
Regards,
Ralph - College Grad with Bad Credit
First and foremost, I believe Ralph should be given a big pat on the back and commended for his honesty and integrity. I wish everyone that made a mistake like Ralph had the wisdom to accept the mistake and do what was right to correct it. In the long run his honesty will definitely work in his favor.
My slanted view of Credit Repair Programs are not going to give much accreditation to most of these type programs. There is nothing a credit repair agency can do for an individual that they can't do for themselves in most usual circumstances. Frankly, I believe the individual once they understand what to do will have their best interest at heart. The repair agencies only concern may be with the loop hole that the law may have left open and the monetary benefit they will gain for finding that loop hole. Just this last week while surfing the net I found an attorney that said he would help individuals remove derogatory information from their credit files. According to him he can contest most file reports because the law states that reporting agencies must be able to substantiate their reports on file with consumer reporting agencies. Since many companies do destroy their files after 3 or 4 years it becomes almost impossible for them to prove their rating on an individual after this time. Once confronted by an attorney with this "letter" of the law approach I'm sure many creditors will give in and request their rating be removed just to avoid a lengthy and costly court battles. Naturally I'm sure the attorney is not doing this pro bona or free, I'm sure he is charging for his services. I do believe in some circumstances consumers need to acquire the assistance of an attorney so I don't want anyone to feel that I'm saying they can become their own backyard attorney when in fact they may need professional advice. Just become informed as to what you can do for yourself. Beyond this I do encourage you to seek professional advice.
Ralph has done the primary things that he needed to do up to this point. He has gotten his own credit bureau file which I strongly urge everyone to do. More importantly in the eyes of future creditors he has done the one other thing that is most important. He has stepped up and honored his original obligations by paying everything he owed. According to the intent of the Fair Credit Reporting Act all derogatory information such as collections, charges offs, suits and judgments will remain on a credit reporting agencies files for seven (7) years. Any reports of bankruptcy, regardless of the type, will remain on the file for ten (10) years. Derogatory information can only be removed by a reporting agency if they receive a written explanation and request from the original creditor that supplied the information to begin with.
Ralph does have one other thing I suggest he does to help a little more. My understanding is Ralph can supply a written explanation to those reporting agencies explaining "WHY" he got behind. This written explanation and his feeling of honoring his obligation which he has done should then be made a part of his credit file. In the future any creditor obtaining a file on Ralph can see where he not only met his obligation, even though it was late, but his explanation as to why he was unable to do so earlier. This can help any credit grantor understand what occurred in the past. Next the credit grantor will look at all his current obligations and how Ralph has been meeting them. The derogatory information will definitely be viewed harshly to begin with. Ralph's explanation can then alert a reasonable credit grantor to the facts and circumstances. Once they begin investigating further and see that his more recent credit has been good most likely they will basically overlook the derogatory information and extend him credit.
As usual I have a short story about a recent client. They were in a very similar situation with Ralph. They in fact had filed bankruptcy due to heavy medical expenses they were not able to avoid. They had lived in an apartment for years and wanted their two small sons to grow up in a home rather than an apartment. Their credit was such that owning a home was only a dream to them.
After only 15 months of working very hard with their budget they called and gave me the great news last week that they have been approved for a new mortgage loan. True, they had to give a very lengthy written explanation for all derogatory information on their files. Their recent credit showed they had been meeting all their obligations rated as "I 1". Next, the bank and the underwriters requested that I give them a written explanation of my views of the past and present budgeting success and my opinion of their future ability to meet their obligations. It did take a lot of extra work meeting all of the underwriters requests. But the main point here for Ralph is due to the information the creditor obtained, the derogatory information became a source for the creditor to start with. It became more apparent there were extenuating circumstances and legitimate reasons for what happened. More importantly Ralph like my client has done what's right. I don't believe looking for the loop holes necessarily meets the test for what's right.
If after sending an explanation to the credit bureau Ralph continues to have difficulties in getting credit maybe there is something else the creditors are looking at. As stated in my more recent article the Credit Risk Rating Guide used by creditors gives point factors for each individuals characteristics. Sometimes the "GUIDE" is taken too literally by the underwriter. Sometimes you have to ask for a second opinion or further review. Credit is based on the Three "C's" of Credit. Character- Capacity to pay- and Collateral so other factors may be involved.
If Ralph needs further assistance after this I suggest he contact me direct at " jmann@creditech.com " . I may request he mail or fax his credit report to me and give me an opportunity to see what creditors are looking at. Maybe then we can spot something else Ralph can do. I wish Ralph the best in the future, he deserves it. If I can be of further assistance just drop me a line.
First I want to start by saying I am NOT an attorney. My answer and suggestions to Ralph are from over 20 years of practical experience in the Finance Industry dealing with local, state and federal consumer protection laws based on several companies views of those laws. In the industry, creditors most generally work on the bases of the "intent" of the law and not the "letter" of the law. So my views are based on the "intent" of the consumer protection laws for the most benefit of the consumers themselves. Jack can be reached at jmann@creditech.com.
Do you have a time or money saving idea that wasn't included in this article? Please send it to tips@ stretcher.com. We get the best ideas from our readers!
Ancient Financial Wisdom
5 strategies from King Solomon
Stress-Free Frugality
How to get a good deal without driving yourself crazy
Surviving Limited Income
When you're working with a very small income
Wife hopes car loan will build credit
A wife is smart to apply for a car loan separately from her husband
4 ways to make cash online
In need of extra cash? Use the Internet to bring home extra bacon
