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June 21, 2017
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June 27, 2017

What is Credit Restoration?

What is credit restoration?  What does it mean to restore your credit…how do you do it?

FCRA, The Fair Credit Reporting Act, was enacted in 1970 to promote accuracy, fairness, and privacy of personal information assembled by Credit Reporting Agencies (CRAs).

CRA’s assemble reports on individuals for businesses, including credit card companies, banks, employers, landlords and others.  The FCRA provides important protections for credit reports, consumer investigatory reports, and employment background checks.  The FCRA is a complex statue that has been significantly altered since 1970 by Congress and the courts.  The Act’s primary protection requires that CRAs follow “reasonable procedures” to protect confidentiality, accuracy, and relevance of credit information.  To do so, the FCRA establishes a framework of Fair Information Practices for personal information that include rights of data quality (right to access and correct), data security, use limitations, requirements for data destruction, notice, user participation (consent), and accountability.

Credit Restoration can be defined as an attempt to correct the data that has been accumulated about you over time by all three major credit bureaus:  Experian®, TransUnion®, and Equifax®.  The problem lies in time and attention.  First, most of us have been purchasing for many years.  Most of us have credit cards, store cards, gas cards, signature loans, student loans, mortgages, car loans etc., and have paid little attention to our credit reports.  These creditors report to the bureaus, for the most part.  The problem lies in the fact that one creditor may only report to one bureau, a second creditor may report to a separate bureau.  A third creditor may report to two bureaus, and a fourth may report to all three.  There are many creditors that do not report at all.  So unless you are checking your credit report after every transaction, and monthly to be sure that everything you do is reported accurately, the mistakes build up over time.  You see the problem?

There are two types of credit repair:

Self-Directed:  “Do-it-yourself” credit repair can be as simple as writing a letter to a bureau explaining why there is an error.  First, you must know what to say to obtain the desired result.  Second, you must know how the Bureaus work in order to know whether to type the letter, hand write the letter, hand write the envelope, type the envelope, whether or not to include any examples or exhibits…it can all be very confusing.  There are self-help guides available both online for free and for purchase. You may view one of these by going to the website for a paid how-to manual, or to obtain free wisdom online.

Fee for service:  The credit restoration industry has grown substantially over the past few years, as more and more American’s have experienced painful job losses, overwhelming debt, and inability to pay bills in a timely way.  Therefore, the industry has risen to the task of providing the credit restoration services that are needed.  The expertise needed is substantial.  There are many laws and regulations governing the industry.  And of course, there will inevitably be those opportunists who take advantage of the needs of the many.  It is important that you check out the company you are deciding to pay to do this for you.  You need to trust that they will do what they say they will do, and in the time frame they say they will do it.  So, how do you check them out?  Certainly, read everything they have posted online.  But you can also go to any of three major websites to find out if there are complaints against them:  1); 2); 3)       This is not to say that there won’t be any complaints…anyone in business today probably has complaints against them.  However, it is your obligation to learn as much as you can and then make an informed decision to move forward.

The Fee for Service model has changed greatly in the past two years.  The Federal Trade Commission has interceded on behalf of thousand of consumer complaints to exert its influence in how credit restoration is to be paid for.  It is now against their regulations to charge any fees upfront before services have been rendered.  So this assures that the consumer is paying only for services successfully rendered, and in theory is protected from unscrupulous business practices.

A credit restoration company can, however, legitimately charge for reviewing your credit report and assisting you with decisions about what needs to be corrected on your report, as well as entering your information into a database and/or online portal website where the consumer can keep track of the activity on his reports.  A credit restorationr company may not charge you for any dispute before the results of that dispute have been proven.  In other words, they must achieve the results before they can charge for that service, one-to-one.

Let’s review the types of issues on your report that may need to be addressed.  This is important because a credit repair company may not tell you that they can remove legitimate items from your report.  For example, if you had a bankruptcy, you had a bankruptcy.  They cannot say that they can remove that item unless it was not your bankruptcy and shows up on your report.  Things that can legitimately be removed are erroneous or outdated addresses, marital status, and other personal information that may be reported inaccurately; credit cards, store cards, gas cards, collections, signature loans both secured and unsecured come under scrutiny as well, and must be reported accurately.  The credit restoration company may not tell you that they can add accounts that you may have that are not being reported by the creditor.

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