Month: September 2014

Proposed Overhaul of Credit Reporting Agencies

At the very least someone is paying attention to the practices of credit reporting agencies. Maxine Waters, a member of the U.S. House of Representatives from the 43rd Congressional District (South LA County, CA), has proposed sweeping changes to the way the big 3 credit reporting agencies (Experian, Equifax, Transunion) handle consumer information provided by creditors.

credit reporting agencies

Proposed Changes under the Fair Credit Reporting Improvement Act of 2014

The Fair Credit Reporting Improvement Act of 2014 proposes the following changes which would increase millions of consumer credit scores immediately:

  1. Currently creditors have the legal right to report a derogatory credit item on consumer credit report for 7 years, or 10 years in the case of a bankruptcy. The new bill, if passed, would reduce these time frames to 4 and 7 years respectively.
  2. Paid or settled delinquent debt remains on a credit report as a derogatory account. The bill would eliminate this although it is unclear as to whether the item would be deleted, upgraded to a ‘Paid as Agreed’ status, or other.
  3. When a consumer’s account has late payments their credit report reflects those late payments for the previously mentioned 7 year period. The bill would allow for a consumer to make a certain amount of on-time payments (perhaps 9 consecutive months) and have the previous late payments dropped from the report.
  4. Currently when a consumer disputes an item on their credit report that dispute is reflected on the report preventing them from closing a home loan in some cases. The bill would eliminate reporting of disputes unless the dispute by the consumer is deemed frivolous. Of course, what is deemed frivolous is controlled by the credit bureaus so this may or may not have much positive impact.
  5. The bill would eliminate the credit bureaus from offering a ‘free trial’ program to obtain their credit score and then switching consumers to a ‘paid program’.
  6. Currently consumers have the right to one free credit report per year from each of the 3 credit bureaus but they still have to pay for their scores. The bill would force the bureaus to also provide free credit scores once per year.
  7. Approximately half of all employers run credit checks on applicants. This bill would drastically reduce the number of employers able to do so by categorizing those than can. How this will be done is still unclear.

But Are Positive Changes to the Credit Reporting Agencies Really Coming?

This may be a welcomed bit of news for those in the know of current reporting practices but it isn’t cause to get excited just yet. Business Week stated that the bill is “unlikely to pass”. Business Insider goes further and states that, “the newest credit reporting act doesn’t have a chance”.

Credit Restoration- Does It Work?

Most people when they learn about credit restoration, or what most people call credit repair, are skeptical that it is possible to have derogatory items removed from their credit report regardless of the reason those items are on their report. It simply comes down to understanding the law and perhaps using logic as well.

credit restoration

What Can Be Removed From a Consumer Credit Report?

There are 3 general types of accounts or trade lines that can potentially be removed from a consumer credit report with credit restoration. Obsolete items are those items that have a date of last activity older than 7 years, or 10 years in the case of a bankruptcy. Erroneous items have incorrect information that either must be updated or deleted due to the inaccuracy. And, items that can legally be reported but cannot or simply are not verified for accuracy by the creditor.

Understanding Credit Laws

The Fair Credit Reporting Act was passed by the U.S. Congress in 1971. Basically, it gives consumers the right to dispute any item on their credit report. If the creditor does not respond to that dispute or cannot verify the accuracy of the specific trade line, the law says the item must be deleted from the consumer’s credit report. What is happening here is that by not responding to the dispute the creditor is not verifying the accuracy of that reported item. Therefore, consumer protection kicks in and the item must be deleted. That part is pretty simple.

But why would a creditor not respond to a dispute, especially if the debt did not get paid and the date of the last activity on the account is within the last 7 years? This largely depends on the age and type of account, and if the creditor has a certain amount of debt owed to them.

Regarding items that are not obsolete or erroneous, there are those that have a higher probability of the creditor not responding, and those that have a lower probability. Nothing in this category is a sure thing that a creditor won’t respond, and therefore the item will remain. Yet, there is always a possibility.

Other Factors to Consider with Credit Restoration

In my experience as a professional in credit restoration it usually, but not always, comes down to the age of the account and the debt amount. An older account, at least 2 years but better when it is 4+ years, has a higher probability even if money is still owed by the consumer. The reason is that the account was charged off years ago by the creditor. In many cases the creditor wrote the unpaid debt off against income in a particular tax year recovering a significant portion of the debt. Then they perhaps sold the account to a collection agency recovering even more. Why would they, several years later, spend the time, energy, effort and money to respond to a dispute to all three major bureaus? Of course, an account that has a zero balance because the consumer eventually paid it but still shows up as a derogatory trade line, has a much better chance of the creditor not responding because there is no monetary incentive to respond.

However, an account that is less than 2 years old has a lower probability that the creditor won’t respond. Or, the collection agency that purchased the account from the original creditor may now be the creditor of record and they may respond.

Accounts that are still open but have late payments which is the reason they are showing as derogatory will not be deleted because the creditor is reporting on that account on a regular basis. The hope here is that the consumer has a recent history of paying the account on time and that the creditor will update the account to a “paid as agreed” status.

Consider the Value of a Higher Credit Score

What is stated above are generalities. There are no steadfast rules as to why a creditor will and will not respond to a particular item that can legally be reported for 7 years. Credit restoration is an attempt to restore credit regarding these type items. Given the disposition of the item and the creditor it works a significant amount of the time and therefore, is very much worth the attempt especially considering the value of a higher credit score.

Starting a Credit Repair Business – The Right Business Model for You

When considering starting a credit repair business there are many questions you need to ask and get answered in order to choose the right credit repair business model to satisfy your needs, goals and perhaps even limitations. I mention limitations because few of us come into a new business totally prepared with every skill set and requirement necessary. In most cases only after we are in a business do we realize certain elements that are required that we didn’t beforehand.

credit repair business model

There are actually 3 different business model types in the credit repair industry. Here are some questions you need to consider before choosing the right one.

What Are Your Goals?

a) Income (initially and long term)
b) Time (time to recuperate investment and hours a week to devote to the business)

What Is Your Skill Set & What Do You Like To Do?

a) Sales & Marketing
b) Administrative

How Much Can You Invest?

a) Start up costs
b) Marketing
c) Staff

Which Credit Repair Business Model Should You Choose?

Here are those credit repair business model types, what is required, and some of the advantages and disadvantages of each. Choosing the right one for you depends on your skills, your time, and the money you have to invest.

Starting Your Own Business

1) Federal & state laws and regulations
2) Software
3) Website
4) Training
5) Office (home or other)
6) Marketing
7) Competition
8) Sales skills
9) Admin skills
10) Limited income unless you want to expand & hire staff

Conclusion- You must have a substantial amount of time & money to invest, and also enjoy admin work, as well as understand that your customer base will be limited unless you hire staff.

Buying a Franchise

1) Significant investment $12,000 to $20,000
2) Still need to be concerned with Federal & State laws and regulations
3) Website, training, administrative should all be provided
4) Competition
5) Marketing skills
6) Sales skills
7) Limited income unless you hire sales staff

Conclusion- You must have a substantial amount of time & money to invest, and the franchisor must train you on how to market and sell against the competition

Owning an Independent Agency

1) Low start up cost- less than $500
2) The parent company has satisfied all state & federal requirements
3) Website, marketing materials, training, administrative are all provided
4) Training includes Sales & Marketing
5) The ability to add multiple Agencies provides unlimited income potential along with a residual income component
6) No staff needed

Conclusion- This is the lowest risk option providing potentially the highest reward. It also provides the ability to start making sales and earning income quicker.

For a more detailed explanation on the topic click Credit Repair Business Model to watch a very informative. If you are interested in discussing our Independent Agency business model or would like to discuss your options use the contact information below.

Email us- dale@eracreditservices.com
Visit us at www.eracreditservices.com/credit-repair-business-opportunity
Call me directly at 619-252-9670