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How To Clean Credit Report

Is Pay For Delete Legal

Clean Up Credit Report

The Fair Credit Reporting Act governs credit reporting laws and guidelines. Anything that a debt collector, creditor, or credit bureau does regarding a credit report will be based on the FCRA, says Joseph P. McClelland, a consumer credit attorney in Decatur, Ga.

Technically, pay for delete isnt expressly prohibited by the FCRA, but it shouldnt be viewed as a blanket get-out-of-bad-credit-jail-free card. The only items you can force off of your credit report are those that are inaccurate and incomplete, says McClelland. Anything else will be at the discretion of the creditor or collector.

Report Credit Repair Fraud

State Attorneys General

Many states also have laws regulating credit repair companies. If you have a problem with a credit repair company, report it to your local consumer affairs office or to your state attorney general .

Federal Trade Commission

You also can file a complaint with the Federal Trade Commission. Although the FTC can’t resolve individual credit disputes, it can take action against a company if there’s a pattern of possible law violations. File your complaint online at ftc.gov/complaint or call 1-877-FTC-HELP.

Watch Out For Phantom Money

Lohrenz says a consumer with a history of collections may have outstanding balances on their report that are larger than they actually are because of the booming secondary market for collections. Heres how it happens: If a consumer has a credit card balance and becomes delinquent, the issuer will try to collect for a while, then give up and sell the account to a collection agency.

The card balance should then drop to zero, and a new account, this time with the collection agency, should appear on the report. Sometimes, though, the issuer doesnt strike that balance from its records, so it will appear as if the consumer has two outstanding debts.

If the debt is bought and sold numerous times, which is common, the problem can multiply.

Another instance of phantom money can occur when a consumer has a closed bank account that has an overdraft protection line of credit tied to it. In some instances, that line of credit will remain on a persons report even after the account is closed, says Steve Bucci, author of Credit Management Kit for Dummies.

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What Is Negative Credit Information

How to Clean Up Your Credit Report

Negative credit information is anything that causes creditors to consider you a risky borrower, including late payments, accounts in collections, foreclosures, bankruptcy and tax liens.

Once accurate negative credit information is reported to the credit bureaus, you cannot remove it on your own. However, time heals all wounds. The longer its been since the negative information was reported, the less it will affect your credit score. In time, negative information falls off your credit history.

This list details the length of time that negative credit information affects your credit score:

Late payments: Seven yearsBankruptcies: Seven years for completed Chapter 13 bankruptcies and 10 years for Chapter 7 bankruptciesForeclosures: Seven yearsCollections: Generally, about seven years, depending upon the age of the debt being collectedPublic records: Generally, about seven years, although unpaid tax liens can remain indefinitely

Rather than despair over negative information, there are actions you can take to add more positive information to your credit reports, which will then be reflected in your credit score.

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How Long Do Collections Stay On Your Credit Report

Collections stay on your credit report for 7 years . But, they may not affect your credit score the entire time.

With any credit scoring model, the more time that passes after the collection activity, the less it affects your credit score, but the collection remains on your credit report for the 7 years unless you use one of the above methods to delete it.

Get A Free Copy Of Your Credit Report

Its important to check your credit report frequently annually, if not more often so you can catch any irregularities early on.

Under federal law, you have the right to obtain a free credit report from all three major credit bureaus once a year. However, because of the pandemic, all three bureaus are offering free weekly reports until April 2022.

You can request yours through AnnualCreditReport.com, the only free credit report website authorized by the federal government. Make sure to request and check your reports from all three bureaus since its not uncommon for each one to get different information from creditors and lenders.

You can also request them by:

Phone: 322-8228

Mail: Download, print, and complete the request form and mail to:

Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

In addition to your annual report, you can request additional free copies if:

  • You were denied credit, insurance, or employment based on your credit in the past 60 days
  • There are sudden changes in your credit limit or insurance coverage
  • Youre receiving government benefits
  • You’re a victim of identity fraud
  • Youre unemployed and/or will apply for employment within 60 days from the date of your request

Other ways to get your credit report

Each of the major bureaus offers credit monitoring services that include access to your report and your score, among other benefits.

Experian

TransUnion

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Pay Off High Credit Card Debts

Next, youll want to eliminate any high balance . Credit card issuers report your balances once a month. This means each report will have a big influence on your credit utilization rate. shows potential lenders how much debt you carry compared to your total credit limit. Generally, you want to maintain a usage of 30% of your credit limit. Coming too close to the limit can make lenders think youre too eager to spend borrowed money.

Try adjusting your credit utilization rate to between 10% and 30% of your limit by paying off your huge debts. Doing so could improve your score within a few months. For the same reasons, avoid closing any credit cards during your credit report clean up. This is especially true if youve had the card open for over a year. Credit length history plays another big part in determining your credit score.

Avoid The Following Strategies

How To Clean Up Your Credit Report

While the following methods can be tempting options when trying to repair your credit, they can often cause more harm than good. Stay away from the following:

Closing a line of credit that is already behind on payments

Closing a card thats behind on payments doesn’t eliminate the debt. In fact, it can lower your credit score by increasing your debt-to-credit ratio, also known as credit utilization percentage. This ratio represents the amount of credit you’re currently using divided by the total amount of credit you have available.

For example, if you have two credit cards, each with a maximum credit limit of $5,000, your total available credit is $10,000. Owing $3,000 on one card and $2,000 on the other would mean you’re using 50% of your total available credit.

To improve your credit score, experts recommend keeping your credit utilization under 30%. Following the example mentioned above, that would mean using only $3,000 or less per cycle.

If you close one of your credit cards instead of paying it, you’ll have less available credit. Creditors evaluate your debt-to-credit ratio when you apply for new cards or loans. If your ratio is over that threshold, they might classify you as a high-risk borrower, offer you less attractive interest rates or even deny you credit altogether.

Filing for bankruptcy

There are two types of bankruptcies available for individuals: Chapter 7 and Chapter 13. A third type, Chapter 11, is meant for businesses.

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Removing Collection Accounts From A Credit Report

Whether your attempts to pay for delete are successful can depend on whether youre dealing with the original creditor or a debt collection agency. As to the debt collector, you can ask them to pay for delete, says McClelland. This is completely legal under the FCRA. If going this route, you will need to get that in writing, so you can enforce it after the fact.

What to keep in mind, however, is that pay for delete with a debt collector may not remove negative information on your credit history that was reported by the original creditor. The creditor may claim that its contract with the debt collection agency prevents it from changing any information that it reported to the credit bureaus for the account. That said, some debt collection agencies take the initiative and request that negative account information be deleted for customers who have successfully paid their collection accounts in full.

Before taking this step, consider how collection accounts may be impacting your credit score. The FICO 9 credit scoring model, for instance, doesnt factor paid collection accounts into credit score calculations. So if youve paid off or plan to pay off a collection account, then you may not need to pursue pay for delete if your only goal is improving your credit score.

Receive Guidance From A Trusted Lender

If youre just shy of meeting home loan program qualifications, talk to a lender about your credit weaknesses and next steps. They will get you started on removing credit inaccuracies, and improving your overall score, so youre able to purchase a home.

The minimum credit score youll need to buy a home depends on your loan program. And, the loan program you qualify for depends on all of the above factors. For best results, clean up your credit and be patient. Understand that bad credit wont go away overnight. It may feel exhausting, but the most significant savings will accompany a solid credit score.

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Pay Down Credit Card Balances

Take charge of your credit cards by paying down their balances.

If you have any outstanding balances, make room in your budget to pay down these debts bit by bit, every month until they are gone.

Know your credit limits and make every effort to stay well under the maximum when charging items.

Thats because credit bureaus analyze your debt load as a ratio. If you charge $500 on a card which has a $1,500 limit, youve used 33%, which is better for your credit score than charging the same amount on a card which has a $1,000 limit , both of which are better than being maxed out .

Pay these credit cards down, but dont cancel them. The total amount of available credit affects your score, even if you owe nothing.

How Can I Repair Credit Myself

How to Clean Up Your Credit Report in 2018

Start by checking your credit reports from the three major credit reporting bureaus Experian, Equifax and TransUnion by using AnnualCreditReport.com. Then follow these steps:

  • Dispute errors on your credit reports directly with the credit bureaus. All three bureaus have an online dispute process, which is often the fastest way to fix a problem.

  • Look for information that’s accurate but can’t be substantiated. Unverifiable information has to be removed, although it may be reinstated if it’s verified later. An example might be a debt to a retailer that’s now out of business unless the retailer sold the debt to a collection agency that can show ownership, it might be unverifiable.

  • Work on your payment history. Your record of paying bills on time is the most important factor affecting your credit score. Missed payments can drag down your score.

  • Use less of your available credit. How much of your available credit card limit you’re using is known as your credit utilization ratio. The lower it is, the better for your score. If you can afford to, consider making multiple small payments during the billing cycle, as well as other strategies to lower credit utilization.

Whether youre repairing your own credit or paying a company to do it for you, it’s smart to have a plan for building and maintaining your credit going forward.

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Get All Three Of Your Credit Reports

Your three credit reports from consumer reporting agencies Equifax, Experian and TransUnion are not identical.

The old debt in question might be listed in some credit reports but not others. To find out, get a copy of all three of your reports. Federal law entitles you to request a free copy of each report once every 12 months. You can download them for free at AnnualCreditReport.com.

Once you find out which bureaus are listing the debt, contact them. Your credit report will include contact information and dispute instructions. Equifax, Experian and TransUnion will give consumers free weekly credit reports until April 20, 2022.

Why this is important: If youre only looking at the copy of your credit report from one credit bureau, you may be missing inaccurate information that is on another report.

Who this affects most: Mistakes with credit reports can happen to anyone with old debt on any of your credit reports.

What Is An Unpaid Collection

As the name suggests, unpaid collections arent paid. Whether you dispute the debt or just ignore it, the unpaid collection looks worse on your credit report than paid collections.

When you make good on your debt, it shows lenders you want to do whats right. If you leave it unpaid, lenders assume youre financially irresponsible, even if there were circumstances that led you to that point. Lenders only know what the credit report shows.

Unpaid collections may look like:

  • You stop paying your credit card and the company sells the debt to a collection agency. You receive collection letters but ignore them, letting the collection sit unpaid for 7 years.
  • You miss a medical payment because you didnt know you owed it. The medical facility sends it to collections. You dont agree with the charge and try fighting it with the collection agency/medical facility. It sits unpaid during this time, making future lenders think youre financially irresponsible.

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Negative Credit Report Entries That Impact Your Score The Most

Most accurate negative items stay in your file for around seven years. Fortunately, their impact diminishes as time goes by, even if they are still listed on the report.

For example, a collection from a few years ago will carry less weight than a recent one especially if there arent any new negative items in your history. Improving your debt management after receiving a derogatory mark can show lenders you’re unlikely to repeat the issue and help increase your score.

These are the most common items that can lower your credit score:

Multiple hard inquiries

Multiple hard credit checks over a short amount of time are a red flag for lenders, as it tells them that you are applying for credit too often and, potentially, being denied.

However, there are some exceptions to this. For example, if youre looking to buy a home and want to compare interest rates between several lenders, you can. FICO and VantageScore, the two most commonly used credit scoring models, give consumers a window of around 14 to 45 to compare rates this is known as rate shopping. All credit inquiries done between this period of time will show up on your file as one item.

Delinquency

Foreclosure

Foreclosure can also cause a credit score to drop substantially. According to FICO, a score can drop up to 100 points from a foreclosure, depending on the consumers starting score. Foreclosures stay on your record for seven years.

Charge-offs

Repossessions

Judgments

Collections

Dispute Credit Report Errors

How To Fix Your Credit – Clean Up Credit Report

If you come across any errors on your credit report, initiate a dispute as soon as possible. You should start the dispute directly with the credit bureau that has the inaccurate information, and this can be done online or via mail.

If the dispute resolves in your favor, the credit bureau legally has to report the issue to the other two bureaus. However, you may also want to send notice to the other two bureaus to cover your bases.

And if the dispute was denied, you can still file a written statement that can be included in your credit report or take further action with FTC or the CFPB.

For more information, check out our step-by-step guide on how to dispute a credit report error.

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Common Credit Report Errors To Look Out For

According to the Consumer Financial Protection Bureau, these are the most common errors consumers find on their credit history:

Mistaken identity

  • Wrong name, address or phone number
  • Accounts from someone with a similar name
  • New credit accounts opened by someone who stole your identity

Incorrect account status

  • Accounts wrongfully labeled as open, past due or delinquent
  • Accounts that wrongfully listed you as the owner instead of authorized user
  • Wrong date for the last payment received, date the account was opened or delinquency status
  • Same debt listed multiple times

Data management

  • Information that is not removed, despite already being disputed and corrected
  • Accounts that are listed multiple times, with different creditors

Balance

  • Incorrect credit limit

Can You Remove Negative Information From Your Credit Reports

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Your credit reports are like a financial report card an extremely useful record that helps lenders evaluate the risk involved in loaning money to you.

They contain information about your credit history including some bill repayment activity and the status of your credit accounts. This information includes how often you make your credit card or loan payments on time, how much total available credit you have, how much of that credit you’re currently using and whether you have outstanding debt.

If you’re delinquent on your loan payments, your debt may be transferred or sold to a collection agency. At that point, a new lender will be added to your credit reports, meaning your debt will appear twice: once with the original lender and again with the collection agency. You will have a set period of time to pay off the debt with the collection agency. The debt will stay on your credit report for as long as it remains unpaid and can only be removed approximately seven years from when you were first found delinquent.

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