The Gallant Group

Using a company or an individual to fix your credit score may seem like a great idea at first, but it may have 0 effect on the future purchase or refinance of a home. Read this before you spend hundreds on credit repair.

Credit repair is a tried and partially effective way of getting rid of delinquencies and late payments on your credit report. Essentially, a credit repair expert disputes the derogatory items on your report on your behalf by sending letters that ask the credit bureaus to investigate specific unaccurate or unverifiable items. Through the Fair Credit Act, by law a credit bureau has 30 days to investigate the validity or accuracy of a certain item on your credit report if you choose to dispute it. If no proof is attained in those 30 days of the validity or accuracy, then the credit bureaus have to take the item off of your report.

Credit repair is all about timing. Essentially the theory behind credit repair is that if a certain item is being repeatedly contested, eventually the credit bureaus will be caught trying to prove the accuracy of an item that may be correctly showing up on your credit report but cannot be proven as belonging to you. A various cocktail of situations can lead to this desired result:

1) The company that put the disputed item on your report has gone out of business
2) The company had poor record keeping and your item was “lost” somehow
3) The company merged with another and amidst the consolidation of records, your item was deleted or misplaced
4) The credit bureau was not able to get a hold of anyone at the company
5) The credit bureau was slammed with other investigations and just didn’t investigate your inquiry in time

All of the above (along with some more that I haven’t thought of) will lead to a deletion of the disputed item. Or so goes the theory.

In reality, credit bureaus would be completely slammed with nothing but investigative staff if they decided to pursue every dispute. So, they’ve conveniently found ways to “prove” that a certain item exists and leave it up to you to disprove that their investigation was lacking. How do they prove the validity of the item? Simple. By telling you that they did. That’s all.

This practice is so ridiculous that once I chased down every known number of a falsely placed item on my credit report only to find that the collection company that put it there didn’t exist anymore and as a matter-of-fact had been out of business for 6 months. Yet every time I disputed the item, I got the same response from one of the credit bureaus “We have concluded our our investigation with us having verified XXXX as a valid account.” Finally, I had to threaten to sue the bureau to get someone to listen and it was not until I had an attorney send a letter in that I received a letter back stating that upon further investigation, the item was indeed invalid and it had been removed. I spent 6 months and almost $1000 getting rid of $250 credit card bill that was in my name because of identity theft.

Nowadays if you truly want to get an item off of your credit report, you must be prepared to go the extra mile, threaten to sue, and in some cases, actually back it up with a lawsuit.

But let’s forget all that. Let’s say you’ve got a splotchy credit history. You find a company or a credit repair expert that you like and want to delete those pesky 30, 60, 90 day lates on your mortgage so you can purchase another home or refinance and get into a better loan. Let’s even say that within 3 months the credit repair individual was able to delete all the junk off of your credit so that you look like a pristine borrower with a great credit history and a 700+ FICO score.

If you were one my clients or prospects, I’d tell you that even after all that your chances of getting a real estate loan are 50/50 at best. Even though the credit bureaus may remove negative items on your credit report, the companies that put them there will usually also have another record of your mortgage history in their internal database. On SOME programs, the lenders will ask for what’s called a VOM, or Verification of Mortgage, from anyone that has lent to you in the past. These VOMs will show all payment activity on the report and the lender will most likely decline your file. With the current tight money market, I expect lenders to start requesting more and more VOMs so that they can validate they are lending to people with clean credit histories and not just those that have cleaned up their credit.

So…is credit repair effective? The answer is yes and no. If you are getting rid of derogatory items on credit cards, auto loans, personal loans, credit repair may work well for your puposes. If, however, you’re trying to get rid of credit history on your mortage, chances are that credit repair isn’t worth the cost and the hassle. Often times a good real estate broker with good bank relationships, such as our firm, can submit borderline scenarios and have them go through without any credit repair necessary.

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This entry was posted on Thursday, April 5th, 2007 at 3:38 pm and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.