FAQs – these are common questions that are asked when it comes to credit, credit repair, and the credit repair process. These questions include questions about credit scores. The most common answer to some of them is “it depends” because there are several reasons for the question to come up. These questions are not listed in order of importance. They are common questions that have come up multiple times in conversations with clients during credit repair.
1) Will Credit repair improve my credit score?
a. Credit repair may improve your credit score, but it may not go up immediately. Often times credit scores can go down as items are removed from credit reports. If the credit score does go down it is often temporary and will recover as good credit is built. Credit repair is a process and takes time. Credit scores will fluctuate depending on hard inquiries, average length of credit, balance to credit ratio, on-time payments, and other variables.
2) Can you guarantee me a specific score?
a. It is not possible, or legal under Credit Repair Organizations Act (CROA), to guarantee a credit score however it may be possible to estimate improvement – typically a range of improvement – that a client might see. (General rule of thumb – the higher the starting credit score, the smaller the improvement that may be seen through credit repair.)
3) If only one credit report is pulled to issue credit, why do we need to clean up all three?
a. Even if only one credit bureau is pulled to extend credit, often times you don’t know which of the three credit bureaus will be pulled. In some cases, two or even three of the credit bureaus are pulled for a specific type of loan. One example of a creditor pulling two or three bureaus would be for a mortgage. Mortgages typically pull all three – referred to in the industry as a tri-merge – if they can get it. Sometimes all that can be obtained is a two-credit bureau report – referred to in the industry as a bi-merge.
4) Why did my credit score drop when the negative trade-line was removed?
a. Removing an invalid, erroneous, or out of date trade-line does not automatically raise your credit score. Due to the way credit scores are calculated, a negative item may also have some positive aspects that help your score. Sometimes removing a trade-line that is negative can lower your credit score temporarily, this is often caused when the trade-line is older and has been used to increase your average length of time of all of your accounts.
5) Why do mortgage lenders pull all three credit bureaus?
a. Mortgage lenders pull a tri-merge report with scores because they base your loan on your “Mid Score”. To determine what you “Mid Score” is mortgage lenders will pull all three scores, they will drop the high score and the low score and base your loan application on the middle score. Sometimes only two reports are available – a bi-merge – if two of the scores in a bi-merge are identical then by process of elimination, that score is your mid-range score as well.
6) Why are you not requesting that the negative trade-line be removed from my credit report?
a. Negative items are not or should not be removed from your credit report for two reasons:
i. If the information is accurate, it cannot be removed from your credit report in accordance with the Fair Credit Reporting Act (FCRA), unless it is considered out of date (more than 7 years old for most information). Accurate information that is more than 7 years old is “too old to report” and as such should be removed from your credit report by the credit bureaus, if it is not it can be disputed.
ii. If the trade-line has been on your report long enough to impact your length of credit, as in the length of time the negative trade-line is longer than the average age of the accounts on your credit report, then removing it will have a negative impact on your credit score. A negative account that has a longer history than your average can have more of a positive impact than a negative one.
7) How long does credit repair take?
a. The length of time it takes to repair someone’s credit depends on how much work needs to be done to remove inaccurate or out of date information. It also depends on whether or not they already have active trade-lines building good credit. If there are no active trade-lines a new trade-line would need to be created, the hard inquiry that accompanies applying for credit may temporarily lower the credit score as well.
8) Which credit bureaus do the lenders pull for a car loan?
a. Car lenders may pull any of the three reports. At the time of the loan, you can inquire as to which credit bureau that they are going to be pulling to determine your loan application and the terms of the loan. The credit report used varies by location, dealership, and lender.
9) How does bad credit affect my ability to get a loan?
a. Depending on how bad your credit is, you may still have the ability to get a loan. The question then becomes will the terms of the loan be favorable or unfavorable? The lower your credit score, the higher your interest rates. This means the more you will pay for the item you have purchased whether it is a car or a house or just a personal loan to pay for items.
10) I am not planning a major purchase so why should I care what my credit score is?
a. Credit scores dictate what interest you pay for items whether it is a major purchase or credit cards. Even if the you are not planning on making a major purchase, sometimes things happen that necessitate an unplanned major purchase. It also dictates, in most states, what you pay for premiums on your insurance. Insurance companies charge higher premiums to people with low credit scores as they are deemed to be at a higher risk of claiming on the policy.
11) How does a bankruptcy affect my credit score?
a. Debts discharged in bankruptcy must be reported as such. Since a credit score is based on paying the debts you owe, a bankruptcy will lower your credit score this is a temporary situation. After the bankruptcy has been discharged, you can begin to rebuild your credit. This is generally done by applying for new credit. Applying for credit should be done carefully as applying for too much credit in a short period of time can be detrimental to your credit report as well.
12) Does a bankruptcy give me a “clean slate” on my credit report?
a. While bankruptcy will clear away your debt, it does not clear away the report of the debt with the credit bureaus. Creditors included in the bankruptcy should begin to report their accounts as “included in bankruptcy”.
13) I just had an item placed on my report, it is valid, how long will it be on my report?
a. If a negative trade-line is legitimate, it will remain on your credit report for up to 7 years from the date it was first reported. If the negative item is a report of a late payment on a trade-line, it will be reported for 7 years from date of first delinquency. If the trade-line is not valid, however, it can be disputed as inaccurate in accordance with consumer protection laws enacted by the Federal Trade Commission.
14) I have heard that I can get a new credit file by getting a new Social Security number (SSN) or an Employer Identification number (EIN), should I apply for one?
a. Obtaining a new SSN or obtaining an EIN to build a fresh credit file is not a valid, or legal, way to fix your credit problems. Obtaining an EIN for purposes other than starting a business, such as to build a fresh file is not legal. The best way to fix credit problems is to do so by the legal methods available to consumers through the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACT Act).
15) When can I expect to see an improvement in my credit score?
a. The most accurate answer to this is – it depends. The reason you have sought out credit repair help is one portion of why this question does not have a concrete answer. Each person has a very different credit history. Additionally, errors on the report or lack of errors can have an impact on how long it takes to see improvement in your score. If all of the negative items are legitimate then the only way to improve the credit report is with building good credit, and that takes time.
16) Does “debt settlement” improve my credit score?
a. While “debt settlement” does remove – in most cases – the liability for the debt, it may not improve your credit score. Settling a debt that has not been actively reported on your credit may make the debt appear current again. The best approach for settling debt is getting the creditor to agree to no longer report the debt in exchange for settling the debt or that the creditor report the debt as “paid in full/paid as agreed”.
17) A creditor sued me over the debt, it has been reported on my credit report, can it be removed?
a. A tax lien or judgment may be removed from your credit bureau due to incomplete identifying information. Most judgements and liens do not have at least three of the four pieces of identification that are considered basic identification information. Basic identifying information is considered a person’s name, date of birth, social security number, and address. Following a lawsuit in New York State, the credit reporting agencies agreed to remove any tax liens or law suits that did not contain at least three of the four identifying pieces of information.
18) How long will my negative credit history remain on my credit report?
a. Most negative marks should be removed from your credit report seven years from the date of first delinquency. This is something that the individual credit bureaus would normally do. If it is still being reported to the credit bureaus after the seven-year date, you can dispute the trade-line to the credit bureaus as “too old to report.”
19) How long can a judgment remain on my credit report?
a. A judgment can remain on your credit report longer than most other negative trade-lines. Judgments remain on your credit report for seven years and six months from date of judgment. The exception to this is if the judgment does not identify you with at least three of the four identifying markers. The four identifying markers are your name, date of birth, address, and social security number.
20) How long do bankruptcies remain on your credit report?
a. The length of time that a bankruptcy remains on your credit report varies by which bankruptcy you filed. In a Chapter 13 – (wage earner plan) which reorganizes your debt so that you pay all or part of your debt with the remainder being discharged – remains on your credit for seven years. A Chapter 7 – where your creditors do not receive payment for any of the debt that is owed – remains on your credit report for ten years.
21) If all of the negative items on my credit report are accurate, why should I bother trying to repair my credit?
a. Just because your credit report has negative items on it does not mean that you can’t improve your credit score. Unlike positive items, negative items have a finite length of time they can be reported on a credit report. As negative items age they begin to have less and less impact on your credit score, the reverse is true with positive items that are paid on time every time as they age. Building credit despite having negative items on your credit report can still raise your credit score and improve your ability to get a loan, improve your chances of getting a lower premium on your insurance, or lower the interest rate you can get on a credit card.
22) I filed bankruptcy; can you help me get my credit repaired?
a. Getting your credit repaired while in a Chapter 13 may help identify any items that may have been missed at time of filing. It may also help identify items that are not being reported correctly as “included in bankruptcy”.
23) Do I have to do anything to get my credit repaired?
a. Simple answer: Yes, however with credit repair there are no simple answers. Your involvement in your credit repair journey can be as simple as ensuring that you pay all of your credit items that report to the credit bureaus on time. This limited involvement would be if your credit report has valid negative trade-lines, no negative trade-lines, or have no trade-lines at all (a limited credit history). You may also be required to answer questions regarding the trade-lines and the information in them. You are more likely to have the information that is needed to dispute late payments on accounts, account open dates, credit limits, and balances.
24) If I am trying to build good credit, should I apply for credit?
a. This is one of the questions who have answers that depend almost completely on your situation.
i. No, would be the first answer, as each time you apply for credit a hard inquiry is generated. Multiple hard inquiries have a negative impact on your credit score.
ii. Yes, would be the other answer. You don’t have any credit currently but want to build credit, you would need to apply for credit. It is best to limit the number of inquiries as the negative impact of multiple hard inquiries can be difficult to overcome in a short period of time.
25) Can I do my own credit repair?
a. Simple answer: Yes, but there are no simple answers in credit repair as each credit file is different. We recommend you seek the advice and guidance of a credit repair specialist, because they spend time keeping up with what is going on where a consumer’s rights and consumer reporting are concerned. As a consumer, it is not likely that you will be up to date on the latest amendments to the Fair Credit Reporting Act. It is more likely that you will dispute something that appears on your credit that may cause your credit to go down. While some drop in the score is common when something is disputed, there are some drops that can be avoided with knowledge of how a credit score is calculated.
26) What is the best thing I can do to help get my credit repaired?
a. The best thing you can do to help repair your credit is to pay your creditors on time every time. By paying your creditors on time every time you will build your positive credit history. In addition to making your payments on time, keeping your balances low improves your credit score. The lower your debt to credit ratio, the better it is for your credit score.
27) I disputed all of the negative items on my credit report. Some of them were not removed and now my mortgage lender is telling me that I can’t get a loan with disputed items on my credit report. What can I do?
a. This is an example of why the advice of a credit repair specialist would have been helpful. Not all debt should be disputed, only debt that is factually inaccurate, erroneous, fraudulent, or out of date (as in more than 7 years old) should be disputed. Once information has been disputed, it can be undisputed by contacting the credit bureaus directly. Requesting that an item be marked as undisputed may lower your score. Again, if you have positive history that you are using to build your credit, this drop will be temporary.
28) I applied for credit and was told they couldn’t find a credit report on me. I have had credit in the past. Why can’t they find my credit file?
a. If you have previously had credit but have not had active credit for more than seven years, it is likely that your credit file has been cleared of all previous credit history. While this makes it more difficult to get new credit, it does give you a chance to build good credit from the start.
29) Is it better to repair credit or start with a clean slate?
a. It depends, in most cases, it is simply better to repair the file you currently have – it is also illegal to get an EIN to simply create a new credit file – as it is likely that there is room for improvement. Under certain circumstances you will have a clean slate on which to build a good credit history. Two ways to end up with a clean slate on which to build a credit history:
b. You are just coming in to your majority and have not applied for credit before of any kind (including student loans).
c. You have not had active credit of any kind (including utilities and collections) for longer than the last seven years.
30) My credit card has a high interest rate and I just got a card with a lower interest rate, should I close the first card with the higher interest rate?
a. A simple answer: No, although there are never any simple answers in credit repair. The credit card that has the higher interest rate has most likely been open for a while, if you received an offer of a card with a much lower interest rate. Closing an account that has been open for a while will affect your length of time that your credit has been open. A shorter credit history will cause your credit score to drop. While your credit score will recover from this drop, it will take time.
31) I have too many credit cards, should I close some of them?
a. Closing accounts because of there being “too many” can be as problematic as closing an account because of higher interest rates on a specific card. If the cards have a longer credit history than your average credit history, closing them will make your length of credit shorten and damage your credit score. It would be more advantageous to rotate which card you use – as this shows activity on the account – and not keep running balances on the higher interest rate cards.
32) My student loans are behind and I cannot pay the amount they are asking to bring them current. Is there anything I can do?
a. As with most creditors, your student loan provider will not know your situation unless you speak with them. Many of the student loans have programs to tailor your payment to a percentage of your “disposable income”.
33) Do I still owe a creditor whose tradeline was removed from my credit report?
a. It depends. In the case of some tradelines, the statute of limitations on collection has already run its course. Other tradelines are beyond the age that can be pursued under the statute of limitations for your state. If it is still within the statute of limitations, the creditor may be able to pursue legal means. A creditor – who has pursued legal means and received a judgment – may be able to renew that judgment even after the statute of limitations of the original debt – again it depends on the statute of limitations which varies by state.