A friend got delayed for four months in getting forebearances/deferments for student loans, and now her once-great credit rating is trashed, in spite of her present intense efforts to make up for those four months. SO now she wants me to find credit repair services for her. Does anyone have any experiences or recommendations in this area?
Recommendation: Don’t ever use a credit repair service. They’re all scams.
Student loan people are generally pretty easy-going. Once she gets current on her accounts, she should call the creditor and ask if they’ll remove the derogatory entries from her report. Once that’s done her credit rating will improve in subsequent months.
Tell her to contact the creditors directly and set up payment plans. That’s all credit repair people do, and they charge you for it.
You’re thinking of a “Credit Counseling Service” like Ameridebt or Consumer Credit Counseling Service.
CCS agencies take your money, starve your creditors out by non-payment, then offer ball-busting settlement offers. In the process they make your credit worse, and you’ll probably NOT manage to finish repaying them, based on statistics.
Credit REPAIR Agencies might include Lexington Law Firm’s credit repair division or a number of other agencies in that business. I think Lexington is the only decently large “name brand” in that industry.
These agencies basically mail you a bunch of “templates” for dispute letters to send to the big three credit reporting agencies. You print (or just sign, in some cases) the documents, and mail them to the big three.
Sometimes they’ll send the documents for you, or so I hear tell.
If it’s an unpaid debt, 97% (estimate from personal experience) of the time the person who owns it will just say the debt is real, and tell the reporting agency as much, and your credit report won’t change, although during the investigation the item MAY be flagged as “disputed” and removed from the computer’s scoring algorithm for your credit score.
If it’s a paid old debt, 70% of the time the former owners of the debt will bother to challenge your dispute, and you’ll lose.
Thus, if you send enough disputes, you can get rid of some of the negative items on your report.
Of course, if the creditor simply updates the item on your report in three months… well, it’s back on there. That’s more likely with newer, unpaid items, and less likely with older, paid items.
You can do everything a credit repair agency/organization can do for yourself.
The only advantage is having access to their template dispute letters and having them keep records.
I suspect it would not profit your sister to do this.
More or less correct, except for other categories such as “debts that were paid off timely but reported as late”, “debts that weren’t yours to begin with” “debts that are more than 7 years old and shouldn’t be there anyway”* and so forth. Certainly it would profit your sister to review her credit report(s) and dispute anything that is in anyway shape or form questionable or even just old or very small. But as Mr Slant says- you don’t need a “creidit repair service” to do this. There’s are scads of books out there, I think Nolo Press has one, and there are likely a couple at your public library. Get ahold of all three of your credit reports, and dispute away. BUT- this should not be used for significant recent debt, such as the Stuent Loan debt the OP mentioned. It’s useless and wrong to even try. In those cases, do as Freido said- get current and then ask nicely.
- Most credit reports will have significant errors such as these. Note that as Mr Slant said, sometimes they come back. It took me over a year to finally kill a outdated debt that kept creeping back onto my report every quarter, I had the threaten to sue.
How old must debts be in order to be succefully disputed? And from when does the timer start? When the debt was initially incurred, when it was sent to a collection agency (several months might have gone by then), since last contacted by the creditor?
Some helpful reading from your friends, the US Federal Government:
On a credit board I followed, a guy had hired one of the agencies, and they proceeded to dispute HER ENTIRE CREDIT REPORT.
By the time they were done, all items were gone. Everything. Collection items, past due credit cards, a few paid in full never late credit lines and car notes…
So, uh, if you use them, supervise them.
There used to be a couple of good message boards for this stuff, but the best one went downhill when its mod got replaced by a mod who didn’t care. Now I think there’s a good one, but don’t know the name.
One of my friends and one of my cousins used the same one, I forgot which, the one with lawyers from Chatsworth, CA. I think it was Lexington. Both had paid off, but really late debt and it was killing their credit score. I told them what I learned here, that they could have done it themselves. But, both were extremely busy and thought it was a good tradeoff. Both had their credit scores cleaned up immensely. My friend was able to buy a house, and my cousin was able to get the great financing on the car (even though he ended up not needing it b/c the lower price plus financing ended up cheaper than the 0% financing). I can’t remember what the exact process was, but it was pretty painless. They had to gather all the correspondence from the credit agencies and mail them to CA. My cousin did it for like 7 months (mainly because he was lazy) and my friend did it for like 3 months.
I don’t understand what you are saying here. How was she delayed? I take it she wasn’t paying the loans while she was “delayed,” right?
What is she hoping to accomplish?
From today’s headlines: Credit agencies punished “After investigating 41 of the largest consumer credit counseling agencies, the Internal Revenue Service has decided to yank tax-exempt status from every one of them …”
The names of the affected companies won’t be immediately released, but you can have a look here for names that look like they were involved with consumer credit.
She was ill & not online while the notices were going to her e-mail. The Loans Office was sending printed notices to her old address and attempting to call her old phone number, tho the office had been notified as to the address & phone change.
I’ve told her to just work to pay up the undeferred portion and the credit rating will probably be adjusted, but the office refuses to give her that assurance (probably thinking that such an assurance would take the heat off her to pay up).
Is she four months behind? Or does she just have some lates?
The lender might or might not agree to remove the lates. To do so they will have to say that they were reported in error, which isn’t true, right? She really was late.
Let me explain.
On a credit report, there is a section that talks about payment history for every trade line. It looks something like this (simplified version)
30 60 90
They report lates for given months. When they do so, they are asserting that the report is true. To change it, they’d have to say it was wrong, which isn’t true.
Individual creditors have no control over credit scores (or ratings); that’s probably why they aren’t willing to commit . The score is calculated based on all of the information in the report. Many creditors say that changing information on the report in order to get the debtor to pay is dishonest and unethical; it also violates their agreements with the credit bureaus. OTOH, sometimes you can get them to agree to do it.
Even if you don’t, the significance of the lates will fade with time. The score will increase over time, assuming she doesn’t do anything else to decrease it.
Here is a good book on credit repair, in case you want to read up: http://www.amazon.com/gp/product/0873378423/103-7970629-3689426?v=glance&n=283155
If I can throw $.02 in…
One option, if your friend is very late on some regular payments, is to call the creditor and ask if you can “re-age” the loan.
A typical problem on credit reports is the “rolling 30”, where somehow you got 30-days behind without realizing it and you have this eternal 30-days late notice on your credit report.
One problem in being 30, 60, or 90-days late is that you have to come up with extra payments to catch up, if you just start making regular payments again you keep X many days behind.
Re-aging is where the creditor “forgives” the 90-days late, tacking the due money on the end of the loan instead. It makes you current without having to find 3 extra payments.
Some creditors have a process for this if you can convince them that regular payments will be forthcoming. I had one creditor say that if you paid regularly for three months in a row, they’d re-age the loan & clean up the late-notices on my credit report.
Here’s a summary of how credit scoring works: http://www.myfico.com/Offers/myFICO_UYCS%20booklet.pdf
Good. The biggest one, CCCS, was an elaborate scam to allow the owners to reap (nearly) tax-free profits from the process.
This article supports my belief that the rest are similarly naughty.
I will note that in many cases their business practices involve misleading underinformed consumers, and that while I place them above Genocidal Madmen and Paedophile’s in Slant’s Hierarchy of Scum, I am doubtful as to whether or not they’re above Evil Used Car Salesman.
I want to point out here that we are confusing, if not apples with oranges, then at least Granny Smiths with Red Delicious. “Credit counseling” is for dudes with lots of credit card debts. When legit, these agencies will contact yoiur debtors and arrange lower interest, sometimes longer payments, and even get rid of some penalties. This does serve to help your creidt rating, but years down the road. It’s an alternative to Bankruptcy. If the “credit counseling” agency is legit (a HUGE “if”) this can be very helpful for those who are getting behind on their CC bills. It doesn’t seem that the OP has anything to do with “credit couseling”, thus the advice, while “good to know” isn’t directly german.
“Credit repair” is for dudes who have had some bad items or a few bad years some time ago, got a lot of “Derogs”, but now want to buy a house or something.
What they do is advise you how to “fix” your Credit report, usually by “disputing” those “derogs”.
Kinthalis- after 7 years, most debts can no longer be reported on your credit report (but it’s not uncommon to find them there anyway). Generally, after 5 years, it’s best to not restart paying on a debt that old- in other words, if it was *written off * 5 years ago, my advice is to not pay the *collection agency * now, even if the debt was legit. Any debt over 5 years old can likely be disputed, with varying degrees of success. 3+ years is possible, but if it’s the original debtor, maybe you should just contact them and see about settling up, and discuss them also taking off any “negative information/reporting”.
FriarTed- has she checked her credit reports? Do note that Federal law does discuss “last known address” so if they were sending the bills to an incorrect address, this is good leverage.
Mr. Slant, that’s a little over the top, fact-wise.
Non-profit status didn’t really get the owners “tax-free” or nearly tax-free profits.
Here’s what was really going on:
There’s a federal law called the Credit Repair Organizations Act. http://www.ftc.gov/os/statutes/croa/croa.htm 501©(3)s are exempt from that statute.
Membership in the NFCC is limited to non-profits. NFCC members get “fair share” payments from creditors. http://www.phil.frb.org/pcc/workshops/workshop1.pdf. The tax-exempt status of NFCC members permits the creditor to “donate” the money to them.
On preview: What DrDeth said about the difference between debt management or credit counseling and credit repair.