CONCEPT OF CREDIT REPAIR

The milestone in most young lives is the day they are setting up their homes, buying

necessary home appliances, and establishing their lives for years ahead. Part of that

process majorly involves establishing credit with banks, retail establishments, or other

lending institutions to complete their purchases. Merchants encourage them to apply and

receive a brand-new credit card associated with the merchant in building what should be

a long relationship based on trust. Once the credit is established, it's equivalent to

something of a rite of passage, acknowledging an entitled responsibility to borrow funds,

and over time, pay back the amount borrowed. These accrued transactions are used to

determine your spending habits and ability to repay debts easily. Several Credit

Reporting Agencies (CRA) emanated and becomes a multi-billion-dollar industry that has

been sustaining the economy. CRA uses consumers' data of previous transactions to

analyze and create a profile to ease the credit application process. Multiple credit card

industries such as Visa, Amex, MasterCard along with PayPal, Apple Pay, and other

internet-based platform had stimulated seamless transactions both offline and online and

becomes ubiquitous in our daily lives. Consumers with no or poor credit profiles could be

impeded from accessing the ever-growing internet-based economy. The evolvement of

online purchasing of airline tickets is a typical example. The online purchase with a credit

card avails you the opportunity to get a discount on booking tickets and the removal of

surcharges which is not available for those who book through phone orders. This is to

encourage consumers to book online.

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Credit Reporting Agencies (CRA) designate “creditworthiness” based on the outcome of

the secretively devised calculations which the prerequisite is not clearly stated. After

analyzing your profile, the outcome will determine your chance of getting credit. The

lower the score, the lesser the chance of getting approved for credit. Working toward

building higher credit scores has numerous benefits that have been detailed. Transunion,

Equifax, and Experian are the three major CRA that determine your creditworthiness.

Each has its metrics for determining creditworthiness, using its scoring algorithms, and

often produces three distinct scores for the same profile. The approach devised by each of

the three agencies to draw their scoring can be flawed with errors, misprints, mixed files,

misspellings, same last names, etc., that can be detrimental to the applicant submitting

their data for the credit card. This made getting and keeping your data at the higher

scoring levels extremely challenging. Banks and other institutions accrue profit by

charging you at a higher interest rate on loans and applying that to millions of consumers,

it's easy to see what incentives them. Consumers are issued cards with stipulations and

agreed-upon terms that are ever-changing, fees are modified and tacked on new rules

imposed and become an extension of a revenue source for these large institutions.

According to American Debt Statistics (March 2021), about 13% of Americans are

expected to be in debt for the rest of their lives. This is because some Americans cannot

afford necessary basic amenities without credit from banks and other financial

institutions. The 2020 debt statistics indicate that 80% of Americans have consumer debt

which is into 4 main categories: mortgage debt, auto loans, student loans, and credit card

debt. Mortgage debt is the biggest debt in America with $9.44 trillion owed collectively,

the average American household mortgage is $189,586, the next biggest debt is student

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loans, with the average amount per American household is $46,822, the average auto loan

debt is $27,804 and the average credit card debt per household is $5135, the average

consumer debt is $38,000 excluding mortgages, people aged 45-54 have the greatest

average debt when compared to other age groups, but they also earn the most money on

average, medical costs have increased by 33% in the past 30 years, while income has

only grown by 30%, the cost of raising a child in America is around $250,000 from birth

to age 18, 2 out of 10 Americans use at least 50% of their income to pay back what they

owe, only 1 in 3 Americans have a written budget, almost half of the families in the US

live paycheck to paycheck, 19% of Americans have $0 set aside for an emergency.

The Bureau of Labor Statistics stated that 33% of our monthly income is going toward

housing which includes mortgage repayment, utilities & bills, repairs & furnishings.

However, the amount of debt one can incur depends on the age group and stage of life.

For instance, people below 35 years have on average about $67,400 of debt and these are

made up of credit card debt and student loans. And from 35 to 44 years the focus shifts

drastically to mortgage debt which is the main source of debt for households as many

people buy houses and start families. Americans incur debt for medical purposes, home

improvement, and to cater to their children. About 37% of Americans delayed having

children to settle their financial burden and establish financial liberty. The average cost

associated with raising a child from birth to age 18 in America is $250,000, or

$13,889/year, which includes housing, food, & education. Adding children to the family

also includes the cost of medical care, which is increasing faster than our income.

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Medical bills can get incredibly expensive and accumulated easily, especially if it is an

emergency or accident. 40% of Americans report they could not cover an unexpected

expense of $400. And indeed, 15% of Americans are in medical debt of at least $10,000.

The rising cost of medical expenses is outpacing income growth. Unpaid medical bills

and the resulting accumulation of debt are a rising trend among Americans, many

families are feeling the burden of unpaid medical debt. The average cost of medical care

per person in America is $5000/year, which has doubled since 1984 (after adjusting for

inflation).

The cost of higher education is increasing as well. The median debt of students who

either attend or graduate college with an undergraduate is $49,000. Forty million

Americans have student loan debt, and 14% of those owe more than $50,000. The

percentage of Americans with student loans who default is at least 28%.

Males tend to earn more money than females, females have more student debt on average

than their male counterparts. Regardless of age, job type, industry, or seniority, men tend

to earn $11,791 more than women on average.

Currently, the amount of debt is positively correlated with the level of income. This

means that the amount of debt rises as the income rises. With more income, you can be

approved for a higher mortgage or auto loan. You have a greater ability to go into debt

because you have a greater ability to pay it back. Going into debt is borrowing from your

future. Some debt can be considered “good.” Mortgages or student loans can be used to

build your credit score and establish your credit history. However, bills can pile up fast,

and then you can find yourself stuck in a cycle where the mountain gets ever higher and

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harder to climb. The incurred debt will cause less available cash to pay for other things or

save for an emergency. It is pertinent to do more research and make a plan before

incurring debt. It’s easy to get into the spend then borrow cycle.

We can’t talk about debt without talking about budgeting. As we see the amount of

money we owe grow, we must ask ourselves where is our money going?, most Americans

couldn’t answer that question only about 1 in 3 people keep a household budget. Our

spending habits indicate that almost half our money is on luxuries. While there is nothing

inherently wrong with spending money on these things, we are treading dangerous waters

when we continue to live beyond our means and spend money we don’t have. While

some debt might be unavoidable, there is no reason to keep up with the Joneses. You can

be free from the burden of debt, just start with a simply written budget. Look at your

bank accounts, add it all up and see where your money is going. Look at the reality of

your situation, and don’t be afraid to make changes. Stop reaching for the credit card,

start budgeting, build up an emergency fund, pay back debt (and don’t incur more of it!),

and save for non-regular expenses. Start cooking at home instead of eating out, shop

second-hand, and take a stay-caution. It will take hard work and sacrifice but when

you’re finally debt-free, your standard of living will improve.

Anna started her College journey without any financial support from either family or

friends. She works three-shift on weekends and a shift on a week day to raise money to

achieve her academic goals. Combining both work and academics was a tedious task for

Anna as she was deviating from her academic objectives. Anna met with some financial

service providers and she was able to obtain a student loan to stimulate the

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accomplishment of her dreams. Anna completed her college education and secured a job.

She has been working for over six years but still having a financial crisis because of the

accrued debt. During one of my seminars, Anna had an encounter with me and express

her financial woes. I gave her some little tips to practice and within one year, Anna had

cleared all her debts and already making good financial progress.

Living in a financial mess is not the end, there are lots of successful people who started

with debt. They identified the need to address their financial crisis and work towards

rebuilding their credits scores. Anna started with debt, and by paying off her debt and

maintaining good credit, today her credit score can be considered “Very Good”. At a

stage, obtaining credit from financial institutions or credit facilitators is required to

achieve some goals or to execute some project and if your credit history is bad, it will be

difficult to access any credit. To boost your chance of getting any financial support, you

need to maintain a good credit score.

Credit repair as the name implied is the process addressing your poor credit rating which

can be altered by different factors. If you are having challenges obtaining a credit card,

getting your house rent renewed, securing the property of your choice, you need to

review your credit scores and see if there is a need to fix any possible credit issues. Credit

is pertinent and required for our daily activities. Every individual in society needs credit

to spur certain progress. Students, working class, artisan, business owners, and investors

can don’t do without the credit that is why it is essential to maintain a good credit

standing.

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Credit repair is the process of addressing the mistakes or disputes in your credit report to

increase your chance of borrowing money from the lender. It enables you to identify

inaccurate information and correct them.

CREDIT REPORTING AGENCIES

Credit reporting agencies (CRA) gather, process, and handle the data of the consumers.

CRA stimulate credit decision by providing relevant information to lenders, government,

and insurance companies concerning their client or customers. They have the information

of over two hundred million Americans. CRA gather information about the consumer

based on their purchase and credit habit. They use data from a credit provider or

information suppliers and public records. Information suppliers disseminate credit

information of the consumers using electronic devices to the credit report agencies daily.

CRA analyze these data to score the consumer and determine their creditworthiness.

Banks, insurance companies, credit unions, mortgage, and card companies use the

information from CRA to determine the qualification of their consumers for their

services. They also use the information to set the terms and conditions of the loan to the

creditors. Federal Trade Commission (FTC) and the Consumer Financial Protection

Bureau (CFPB) are in charge of the enforcement of the FCRA.

FAIR CREDIT REPORTING ACT (FCRA)

The Fair Credit Report Act was passed in the year 1970 by the government to regulate the

accessibility and disclosure of consumers’ credit data and credit reports. The aim is to

stimulate proper handling and the accuracy of the personal details documented by credit

reporting agencies. The two federal agencies in charge of the enforcement of the act are

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the Consumer Financial Protection Bureau and the Federal Trade Commission. The act

can be located in the US Code Title 15, section 1681. Each state also has its law

governing credit reporting. FCRA indicates the type of data that should be collected. The

data include payment, loan, and debt history, personal address, previously filed

bankruptcy, employment information, and child support details. FCRA restrict access to

consumers’ credit report, they only make them accessible to authorized agencies or

institutions. Such as insurance companies, government, and financial institutions. The

financial agency may request a credit report before offering the consumer financial

support such as a mortgage, car loan, or other forms of credit. And when an individual is

also seeking an insurance policy, the insurance company can request the credit report to

know the strength and standing of the client. In some cases, the credit bureau would

demand a written document from the applicant to indicate their consent before releasing

the credit report to the third party.

CONSUMER RIGHTS IN FCRA

By law, consumers are entitled to see their credit reports without any charges once in 12

months by contacting their bureaus. There is an authorized web page

(AnnualCreditReport.com) that was built for that purpose.

FRCA allows consumers to remove outdated or unwanted information after seven to ten

years of bankruptcy, verify the accuracy of their report when necessary, get notified

whenever third parties access or use the information in their files, consumers with a poor

credit report can also request a dispute, or ask for their incorrect information to be

corrected while attempting to repair their credit. Consumers have the right to express

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their displeasure if they are not satisfied with the response of any credit bureau by filing a

complaint with the Federal Consumer Financial Protection Bureau. Below are rights you

have as a consumer under Fair Credit Report Act.

 RESTRICTED ACCESS: The act protects your files and information, it gives

access to legitimate users such as employers, financial services, insurance

companies, and credit providers.

 ACCESSIBLE CREDIT REPORT: The act certified credit reporting agencies

to make your information available upon request, you can access a free credit

report from those agencies once a year.

 REQUEST FOR CREDIT REPORT FEEDBACK: if you request a credit,

seek employment, or insurance and you were denied based on your credit report,

you can meet with your agency and ask for feedback and the reason why you

were denied.

 REMOVED OUTDATED INFORMATION: You can meet with the credit

reporting agencies to remove outdated and unwanted information in your file after

seven years, bankruptcy can last ten years and criminal information may be there

forever

 MAKE MEDICAL INFORMATION PRIVATE: The act restricts creditors to

get your medical information or use it to make any credit decision.

 ACCURATE REPORTING: Any dispute information but be carefully checked

by the consumer reporting agencies. The agency has the power to remove the

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 information that cannot be verified. The information with the agency must be

accurate and error-free.

 DISCONTINUE UNSOLICITED CREDIT OFFERS: The law permits you to

unsubscribe from any unwanted credit offers. You can opt-out by calling (888) 5-

OPTOUT (888-567-8688).

 SEEK DAMAGES: the act gives you the right to sue or claim damages from

anyone who violates the Fair Credit Reporting Act.

 ACCESS YOUR CREDIT SCORES: you can contact any of the credit bureaus

to access your credit score. This will give you an idea of your standing and

current credit condition.

STEP BY STEP GUIDE TO REBUILD YOUR

CREDIT
How important is a credit score? Your credit rating has an influence on just about every

aspect of your financial life, from the interest rates you are allowed to the job you get. It

is a shame that this measure of assessing your financial health, which is so important, can

deteriorate so easily. If you skip payments on a loan or accumulate debt on your credit

cards, your credit rating could drop dramatically in no time. There is good news,

however. Even if your credit rating is at a dismal level, you are not necessarily doomed to

pay high-interest rates and fail credit checks for the rest of your life. It is quite possible to

restore your credit report, first and foremost, check your credit rating. Are you surprised

by the result? Obtain a copy of your credit report to verify that it is free of errors and that

no one has opened an account in your name. You can get your credit report free of charge

from Borrow ell or Credit Karma. If you anticipate a higher score, start by trying to

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understand the factors that caused your credit rating to drop. Then, to increase your score,

all you need to do is replace your bad financial habits with better ones.

CAUSES OF BAD CREDIT REPORT

1. Skipping monthly payments can wreak havoc on your credit score. If you have

any difficulty making your payment, you need to discuss with your lender

immediately you identify the problem, another method of payment can be

introduced to stimulate an effective payment process. The payment due dates on

your monthly bills are not just suggestions. If you skip credit card payments or

pay your bills late, you are signaling lenders that you are in financial trouble, and

it lowers your credit rating.

2. Accumulated debt is an impetus to bad credit scores. Most lenders limit the

amount you can borrow, but if you use too much of your authorized amount, you

can still damage your credit rating. What is at issue here is your credit utilization

rate, a measure that is the level of credit you are using relative to the total amount

of credit you are granted. Generally speaking, you shouldn't use more than 35% of

your credit limit if you want to maintain a good credit rating.

3. If you've been tried, filed for bankruptcy, or experienced similar financial

circumstances, your credit rating will drop significantly to educate potential

lenders about your level of credit.

4. Reduce your credit report. The length of time your credit history covers has a big

influence on your overall credit rating. Closing your oldest credit account could

therefore hurt your rating.

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The best way for rebuilding credit is to manage it properly and carefully. It's crystal clear

that there are no quick fixes to improving someone's credit score, the best way is to be

patient and follow every procedure needed to fix your dilapidated credit score. Let

consider the basic steps to fix your score, before we start here is the overview of how the

credit score is being determined.

HOW THE CREDIT SCORE IS BEING DETERMINED

Payment History consists of 35% of your score, paying all of your bills at the allotted

time is the fastest way to improve your credit score.

Amounts owed consist of 30% of your score, eliminating the amount you owe will go a

long way in improving your credit score.

Length of credit history is 15% of your score, the more open credit history you have, and

the better. Never close your oldest credit card.

New Credit is 10% of Your Score, every time you request a new credit card or loan, your

credit score will likely drop for at least a short time.

Types of credits used are also 10% of your score, a good mix of credit types (credit cards,

installment loans, and long-term loans, such as mortgages) will improve your credit score

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 STEP TO REBUILD YOUR CREDIT SCORE

1. GET A COPY OF YOUR CREDIT REPORT: To identify the error on your credit

report, you need to have a copy of the report. Therefore, the first action to fix your

credit is to request a copy of your credit report from any of the three listed

agencies Experian, Equifax, and TransUnion.

Write a letter to request a copy of the credit report.

Name

Address

Date

Subject: Fair Credit Reporting Act, Section 609

Dear Credit Reporting Agency (Experian, TransUnion, or Equifax),

I am exercising my right under the Fair Credit Reporting Act, Section 609, to request
information regarding an item that is listed on my consumer credit report: ABC
Collection Agency, account number 0123456789.

As per Section 609, I am entitled to see the source of the information, which is the
original contract that contains my signature.

Date of Birth: 01/21/1989

SSN: 123-45-67895e

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[If you have a lawyer, state you have legal representation and provide that contact
information]

As proof of my identity, I have included copies of my birth certificate, Social Security

card, passport, driver’s license, W-2, rental agreement, and a cellphone bill. I have also
included a copy of my credit report with the account I am requesting to have verified
circled and highlighted. If you are unable to verify the account with the original contract,
the information should be removed from my credit report within 30 days.

Sincerely,

[Signature]

You will need to assemble three separate packets and send one to each of the credit

reporting agencies (assuming all are reporting the same account). Include a copy of your

letter and copies of the supporting documents. Keep one set of the letter and documents

for your records.

2. CHECK YOUR CREDIT REPORT FOR ERRORS: After you have gotten the

credit report, the next step is to review it carefully and patiently and identify any

possible errors or discrepancies. You must pay attention to the following sections

 Payment history: As stated above payment history weighs 35% of your credit

score. Therefore, you must review it critically and digest every available

information. Compare your payments with what you have in the report and if you

get an error - for example, a late payment that you made before the due date -

mark it to dispute it.

 Duplicate accounts: Duplicate accounts appear when a debt - such as the

outstanding balance of a credit card or the remaining amount of your mortgage -

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 is reflected more than once. This lowers your credit score because it directly

impacts your debt-to-income ratio.

 Personal information: Verify that your report does not show errors in your name,

aliases, social security number, and address. All information must be up to date.

 Expired negative factors: Such as foreclosures, judgments, liens, or bankruptcies

that should have already been removed from your file.

 Credit inquiries that you have not authorized: There are two types of inquiries

regarding credit reports, the "soft inquiries", which are the reviews made by the

same user and which have no weight in your rating, and the "hard inquiries",

which are those made by banks, and lenders before approving you for a loan or

credit card. If there are more hard inquiries than you have authorized, you should

also dispute them because they do lower your score.

 Inaccurate balances and outdated account statements: Also check that the balance

of your loans and debts is up to date, since, if it is higher than the real debt, your

score could be negatively affected.

3. DISPUTE THE ERRORS IN YOUR REPORT: To fix your credit report, it is not

enough to just review your report and identify the errors, if you want to eliminate

them, you will have to kick start a dispute procedure. It is pertinent that when you

dispute the errors in your credit report you document the case properly, otherwise,

the dispute could be rejected. Complaints or disputes about errors are submitted in

writing to the credit bureaus. However, you also have the option of putting a call

through to the creditor or information provider before doing so to ask them to

correct the information. If this doesn't work, the Federal Trade Commission

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 recommends writing a letter to dispute the errors in the report. Below is the

template of the dispute letter obtained from the Federal Trade Commission.

Sample Letter Disputing Errors on Credit Reports to the Business that Supplied the
Information
Use this sample letter to dispute inaccurate information that a business supplied to credit

bureaus. Your letter should identify each item you dispute, state the facts, explain why

you dispute the information and ask that the business that supplied the information take

action to have it removed or corrected.

You may want to enclose a copy of your report with the item(s) in question circled. Send

your letter by certified mail with “return receipt requested,” so you can document that the

business got it. Keep your originals. Include copies of the documents that support your

request and save copies for your files.

[Date]

[Your Name]

[Your Address][Your City, State, Zip Code]

[Business Name]

[Street Address][City, State, Zip Code]

Subject: Disputing Information in Credit Report

I am writing to dispute the following information that your company supplied to [give the
name of the credit bureau whose report has incorrect information]. I have circled the
items I dispute on the attached copy of my credit report(s). This item [for instance:
retailer account at ABC Department Store and the account number] is inaccurate [or

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incomplete] because [describe in detail what is inaccurate or incomplete and why] I am
requesting that [business name] have the item removed [or request another specific
change to correct the information.]

[Add list and description of other disputed items, if that applies.]

Enclosed are copies of [my credit report and any other documents enclosed with a short
description, for instance, your record of payments made] supporting my request. Please
reinvestigate this matter and contact the national credit bureaus to have them delete [or
correct] the disputed item(s) as soon as possible.

Sincerely,

[Your name] Enclosures: [List what you are enclosing]

4. WAIT FOR RESPONSE: The process could take time, a month, or more. After

the whole process had been completed and the verification had been done, the

bureau would remove all the erroneous information from the credit report.

5. REPEAT THE PROCEDURE AS MANY TIMES AS NECESSARY: If you

observe too many errors when you review your credit report, you may need to file

several separate disputes. You can include a maximum of five disputes per letter

depending on the number of errors you have made, it may be advisable to make

sure that the reports of the other agencies do not have the same errors, if so, you

will have to file several disputes one for each credit bureau.

HOW TO MAINTAIN A GOOD CREDIT SCORE

1. START PAYING YOUR DEBTS ON TIME: One of the best financial practices

to fix and maintain good credit is to pay debts on time with no exceptions. What

does this mean? That you should start organizing your finances so that you can

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 pay all your bills before they are due. If for any reason you become late on any

invoice or payment, contact the creditor immediately! Thus, you can request a

payment rescheduling so that it does not affect your credit score.

2. CONTROL EXPENSES: You've already cleaned up your credit report, disputed

all the mistakes, and started paying off your credit cards and your monthly debts.

What else can you do to repair your credit for free? Stop the bleeding! It will be

useless if you acquire these good financial practices if you continue to spend more

than necessary.

Lastly, estimate how much monthly money you spend on entertainment, luxuries, gas,

and outings. Try to create a limit for each category and don't go overboard. For example,

if you tend to spend $ 2000 per month on groceries, you can try to reduce it to $ 1200 by

switching to cheaper presentations by weight, accessing loyalty offers or promotions, or

preferring a generic brand. Limit outputs to the maximum and examine your

subscriptions. Maybe you can get rid of a couple of them to have more money available

month after month.

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