2 A little background Have been doing in credit repair since 1991 Have been doing in credit repair since 1991Was trained and mentored by Former Security Chief of Experian (Formerly TRW)Have analyzed more than 60,000 credit reportsHave personally seen deletions of tens of thousands of negative entries from client’s credit reportsHave helped more than 20,000 consumers in the past 2 decades in restoring their credit
3 Current Economic Conditions 2 Million Americans filed for bankruptcy in 2010One million foreclosures in 2010 alone, more to come in 2011 and beyondMore than 5 million people have mortgage lates in 2010Tens of Millions more Americans have various types of delinquencies as a result of this current economic downturn80% of Americans have some kind of derogatory information on their credit reports
5 Fair Credit Reporting Act (FCRA) 611. Procedure in case of disputed accuracy [15 U.S.C. § 1681i](a) Reinvestigations of Disputed Information(1) Reinvestigation Required(A) In general. Subject to subsection (f), if the completeness or accuracy of anyitem of information contained in a consumer's file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency
6 directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whetherthe disputed information is inaccurate and record the current status of thedisputed information, or delete the item from the file in accordance withparagraph (5), before the end of the 30-day period beginning on the date onwhich the agency receives the notice of the dispute from the consumer.
7 Fair Credit Reporting Act (FCRA) (A) In general. If, after any reinvestigation under paragraph (1) of any information disputed by a consumer, an item of the information is found toBe inaccurate or incomplete or cannot be verified, the consumer reporting agency shall–(i) promptly delete that item of information from the file of the consumer,or modify that item of information, as appropriate, based on the results of the reinvestigation; and(ii) promptly notify the furnisher of that information that the informationhas been modified or deleted from the file of the consumer.
8 Fair Credit Reporting Act (FCRA) (3) Determination That Dispute Is Frivolous or Irrelevant(A) In general. Notwithstanding paragraph (1), a consumer reporting agencymay terminate a reinvestigation of information disputed by a consumerunder that paragraph if the agency reasonably determines that the disputeby the consumer is frivolous or irrelevant, including by reason of a failureby a consumer to provide sufficient information to investigate the disputed information.
9 Fair Credit Billing Act The Fair Credit Billing Act provides for the prompt correction of errors on open-end credit accounts (department store credit accounts, for example) and protects consumers' credit ratings while they are settling disputes.
10 Fair Credit Billing Act Under this law, if a consumer is disputing a charge, creditors cannot report the consumer's account as delinquent. This applies to open-end credit instruments, such as credit cards, revolving charge accounts, and overdraft checking. Consumers who question an item are responsible for notifying the creditor in writing within 60 days of receiving the bill. The creditor must acknowledge the notice within 30 days and may not do anything to damage the consumer's credit rating while the item is in dispute.
11 Fair Debt Collection Practices Act The Fair Debt Collection Practices Act promotes the fair treatment of consumers by prohibiting debt collectors from using unfair, deceptive, or abusive practices.
12 Fair Debt Collection Practices Act Debt collectors are permitted to contact people other than the debtor only to locate the debtor or make a reasonable effort to communicate with the debtor about the debt.After making contact, debt collectors are required to send written notice informing the debtor of the amount of the debt, the name of the creditor, and the fact that the debt will be considered valid unless disputed within 30 days.
13 Fair Debt Collection Practices Act Debt collectors are prohibited from harassing, oppressing, or being abusive in collecting a debt. This includes using threats or obscene language, publicizing the debt, making annoying or anonymous telephone calls, and misrepresenting the identity of the collector, the status of the debt, and the consequences if it is not paid.If debt collectors violate the Fair Debt Collection Practices Act, consumers can sue for actual and punitive damages.
14 Statute of Limitations Very important concept!The creditor has a limited number of years to sue you after you fail to pay your debt including real estate deficiency judgmentsThe time allowed varies state to state:California - 4 yearsArizona – 6 yearsNevada - 6 yearsFlorida - 5 years
15 Statute of Limitations If you are sued before the statute of limitations expires and the judgment rules against you, the time limit to collect against you is:CA – 10 yearsAZ – 5 yearsFL – 20 yearsNV - 6 years
16 Liens on your property After Judgment CA – 10 yearsAZ - 5 yearsFL – 20 yearsNV years
17 Q. Who are the credit bureaus and are they Governmental agencies? A. They are Experian, Equifax and Trans Union and they are for-profit multi-million dollar corporations
18 They make their money selling your credit information to: Financial institutions such as banks, lenders, credit card companies, etcCollection agenciesPublic recordsThese companies depends on the credit bureaus in order to make decisions on their customers
19 What is FICO?Created by Fair Isaacs and Co. based out of San Rafael, CAThey are a private company who have created a sophisticated computer scoring model to determine credit risks on American consumers
20 What is FICO? FICO Score range from 350-850 720-850 A Paper B PaperC PaperD PaperF PaperAs a consumer, your credit worthiness is based on the above scores
21 What is FICO?Creditors do not care about why you have a certain credit score. You can beg and plead all you want. You can provide all the reasons what happened to your life. At the end of the day, it is what it is. You are nothing but a 3-digit number
22 What are the Consequences of Bad Credit? Your bad credit will be on your credit report for years!Difficulty buying a Home, investment property, car, job, open a business, credit card, etcMay cost you tens of thousands of dollars or moreWithout good credit your financial future will be in jeopardy!
23 Types of Disputes Types of Disputes Bureau Disputes Creditor Disputes NegotiationLegal
24 Types of derogatory information: From most severe to least severe:BankruptcyForeclosuresShort Sales (Late payments)Charge-offsCollectionsJudgmentsTax LiensRepossessionsDefaulted Student LoansLate payments
25 Bankruptcy Typically Chapter 7 or 13 Chapter 7 is total discharged – all unsecured debts wiped outChapter 13 – 5 year repayment planOn your credit reports it will showCourthouse record BK date filed and BK date discharged
26 Bankruptcy Then each individual creditor will show: “Account included in Bankruptcy” -0- balance on their trade line. Therefore the more trade lines the more severe is your FICO scores.However, many original creditors on the credit reports still continue to show, incorrectly, unpaid charge-off with balance due
27 ForeclosureCredit reports will show:“Foreclosure Process Started”, date….etcShort Sale30,60,90 days lates
28 Unpaid Charge-offsBalance DueReported by original creditors such as major banks and credit card companiesTime line goes like this:About 6 months after initial non-payment, creditor charge it off on their books. Debt still enforceable however
29 Debt purchased by outside collection agency showing higher balance due to interest, penalty, fees, etcEvery 6 months thereafter, it may be purchased by yet another collection agencyThen one year later attorney representing collection agency pursue lawsuit, especially if the debt is in the several thousand range
30 You don’t show up in court, default judgment against you – another derog on the credit report Even after judgment, collectability of the debt is another challenge. Bottom line: Total of 4 derogs arising from one event!The above scenario is an example of a worst case scenario
31 What if with the passage of time, you decided to pay off this debt What if with the passage of time, you decided to pay off this debt? What happens to the credit reports?Does it mean the derogs will be deleted once you paid them? Answer: No
32 Updated credit reports will show: Original creditor: Paid Charge off, date…Paid Collection -0- balance, date…Judgment Satisfied
33 Although your debts have been satisfied, the paid trade line still are deemed derogs! Follow up action plan? Dispute to credit bureaus and cause removal of derogsQuestion: How soon can a derog account be disputed and deleted?Answer: It depends.
34 With respect to a foreclosure, you must wait at least 24 months from the date of trustee sale. Why? After 24 months of credit bureau reporting, the so-called “9-track” monthly reporting recurring tapes drops off.
35 Question: So, after the 24 months have lapsed and I start to dispute the foreclosure trade line, when can I expect the item to be deleted?Answer: Depends. Sometimes, after 30 days dispute investigation, the credit bureau are unable to verify the dispute IAW Sec 611 FCRA, the disputed item in question must be deleted.
36 But often they are verified after 30 days. Then what? You give up? No You wait for a few months and dispute it again. And again………….
37 Caution: removal of a derog on a particular creditor derog from one credit bureau report does not necessarily mean the other credit bureaus will follow suit. Each dispute is a separate, independent event. The ultimate goal is to remove a particular creditor account from all three credit bureaus (Experian, Equifax and Trans Union).
38 Question: If I have a recent late, whether it was a mortgage late or a credit card late, how long do I have to wait before I can dispute them?Answer: 24 months (nine-track tape reporting ends)
39 Question: What types of derogs whereby I do not have to wait to dispute? Answer:Bankruptcy (after the date of discharge)Outside collection agenciesJudgmentsTax LiensCharge-offs
40 Question: Let’s say I have an original creditor charge off or a collection agency account for $ How easy can I dispute them several times and get it removed?Answer: Relatively easy. Since the amount of the debt is relatively small, most creditors will not spend the time and efforts necessary to verify your dispute within 30 days.
41 Question: What if the charge off or collections is $1,000.00 or more? Answer: There is a small chance the derog can be deleted after several dispute investigations. But more likely, based on the high balance still due, not only the dispute may come back verified after 30 days, but it will probably trigger a aggressive response from the original creditor or the collection agency to come after you!
42 Question: So if this is the case, what should I do? Answer: Do your best to negotiate for lump-sum discount settlement to pay off the debt.
43 Question: Once I paid off the debt, they will delete the account? Answer: No. The credit bureaus will just merely update the derog to show paid charge-off or paid collection, still a derog account.
44 Question: So what then?Answer: Once it show paid charge-off or collection, go through the bureau and dispute the paid derog account and the chances are the derog can be deleted after several disputes because the creditor already received their money and will not bother to investigate the account in dispute.
45 Question: Can a defaulted student loan be removed? Answer: No. Once you have paid them it will be updated to -0- balance paid account but still a derog. Then you can pursue several dispute investigations to affect the ultimate removal of the paid defaulted accounts.
46 The foundation behind successful credit cleaning is based on the premise that a derog account is so old that the creditor and the credit bureaus does not have the ability to verify the dispute in question.
47 Question: How long does it take to clean my credit? Answer: It depends.How many derogs do you have?What are the balance due?Your ability to paid off some accounts through savings and negotiationIt can take as quick as 30 days or as long as 2 years to substantially improve your credit scores.Bottom line: There are no guarantees. We have no control whether credit bureaus can or cannot verify the disputed information.
48 Q: When can someone start the process of pursuing removing Foreclosures, mortgage lates, etc. from credit reports?A: Usually at least 18 months from the date of delinquency.
49 Q: How Long it will Take to Repair My Credit? A: Depends on..How many negative entriesTypes of negative entries, examples, Foreclosures, lates, Collections, Charge-offs, Tax Liens, repossessions, Judgments,Typically, it may take months
50 Q: Can anything be done to expedite the credit repair process? A: Not really. Perhaps negotiation or legal dispute methods
51 Question: How long is the time period a foreclosure before a consumer can be eligible to obtain credit to purchase a home?Answer: According to the current Fannie Mae conventions lending guidelines for homeowners, five (5) years from the date the foreclosure sale was completed. Exception is three (3) years if the borrower has “extenuating circumstances” that led to the foreclosure. Examples are divorce, medical conditions, and job lossThe minimum down payment is 10% and minimum credit score is 680 for homeowners. The purchase of investment property is not permitted.
52 Question: What is the time period after a Short Sale before a consumer can be eligible to obtain credit to purchase a property? Answer: Two (2) years from the completion date. No exceptions are permitted to the 2-year period due to extenuating circumstances.
53 Do you know what this formula stand for? 35/30/15/10/10Your ability to solve this formula can make or break your credit and financial future!35% - Payment history30% - Outstanding debt15% - Length of credit history10% - Credit mix10% - Search for new credit100%FICO Score range is
54 Payment HistoryWhat is your track record?Approximately 35% of your score is based on this categoryHave paid past credit accounts on time?Any public record or collection items?How many accounts with derogatory information?
55 Outstanding DebtHow much is too much?Approximately 30% of your score is based on this categoryWhat is balance owed on all accounts?How many accounts have balances?What % of installment loan account is owed?What % of revolving credit line is used?
56 Length of Credit History How established is your credit?Approximately 15% of your score is based on this categoryHow long have credit accounts been opened?How long since accounts have been used?
57 Credit MixIs it “healthy” mix?Approximately 10% of your score is based on this categoryScore considers mix of Open, Installment and Revolving credit accounts to include: Retail Credit Cards, Finance company, and mortgage loansWhat types of credit accounts? How many of each?
58 Search for New CreditAre you taking on more debt?Approximately 10% of your score is based on this categoryHow many new accounts opened?How long since new account opened?How many recent requests for credit?How long since most recent credit report inquiry?
59 Interpreting your FICO score Reason codes:Credit score are reduced by reason codesReason codes explain why score is not higherReason codes help determine how to improve score
60 Example from a typical Credit Report Reason Code 24 - no recent revolving balances08 – Too many inquiries last 12 monthsSerious delinquency and derogatory publicrecord or collection filed18 - Number of accounts with delinquency34 – Amount owed on delinquent accounts
61 At the end of the day you have 3 options: Do nothing – Wait until the statute of limitations runs out – 7-10 years+Do something about it: Do it yourself! Do you have the time, knowledge, etc to do it on your own?Hire a credit repair pro – Us! IFS
62 By: Seewing Yee The Nation’s Foremost Credit Expert (510)