Specifically problem credit. I would love to be able to say that everyone I speak with has terrific credit unmarred by any mistakes or erroneous information. But that wouldn't be true. Unfortunately, in a large measure due to the issues stemming from 2008 and the ensuing recession, many, many people who previously had good to great credit have issues on their reports that can slow or stop them from achieving their dream of home ownership.
Some folks, due to job loss or medical issues that occurred while they were without a job and health insurance had lost the homes they had or have incurred medical debt that only a bankruptcy would resolve. Others got behind in payments and their credit scores are still suffering the effects. And...there is the simple fact that most people have incorrect information reporting on credit-plain and simple.
I often speak with people who are discouraged because they have been "working" on their credit for a year or two years and it doesn't seem to be improving. Many times what they are "working"on is paying off collections or disputing accounts that they feel are reporting inaccurately. What they don't realize is that paying off a collection doesn't guarantee that the collection company is going to report that the collection has been paid to the the credit bureaus. They might, but then again, they might not. Similarly, judgments don't always get reported upon release. These items remain on the credit report for years-so it is in the borrower's best interest to get them to report correctly. Many people try to "dispute" accounts which is to say, contacting the credit bureaus and asking them to investigate whether or not the creditor is reporting credit correctly. The usual result of this request is that the tag "information in dispute" is added to the credit line which resolves nothing. All that means is that the consumer has a question about about how the creditor is reporting. To correct a credit report, documentation providing proof of the error must be presented to all three bureaus-asking for resolution from one bureau isn't enough-all three must be addressed individually.
With collections this may be a daunting task. Let's say you had a medical issue that resulted in an expensive surgery. Medical billing companies are impatient entities. If your insurance doesn't pony up within 30 days it is possible that thousands of dollars of unpaid medical bills could end up as a collections on your credit report. Those bills could be paid within days of the time they hit the collection company, but too late. The original creditor (the hospital) may not go back and tell the collection company-"sorry, our bad, we just got paid." Or they might, but the collection company may not get around to correcting your credit report even though they mark the bills as satisfied. To make matters worse-collection companies sell their accounts to other collection companies so your collections could be sold, thereby tangling the web even further. Or maybe someone transposes a number of your social security number incorrectly and items that have nothing to do with you begin to appear on your report. How do you prove that whoever isn't paying these bills isn't you? This is what people encounter when they try to muddle through and "fix" credit themselves.
So okay, Ms Casey Smartypants, what is someone supposed to do?
If you have only one item that is reporting incorrectly, say a judgment that is showing unreleased and you have a copy of the release-this isn't hard to undo. Send copies of the release, a copy of your driver's license and a copy of a bill with your current address (and it needs to match your driver's license) for identification purposes, with a letter to each of the credit bureaus and ask them to show the judgment as released or paid. You have the proof. Normally within in 45 days the bureaus will inform you that this item has been corrected. One or two items of this nature are not too difficult for the average consumer to deal with. However, if you have multiple items and some of them are old-that is where it gets difficult- maybe you think they are paid, but you don't have receipts. You can call the creditor and try to get them to research the account and hope they do the right thing. 90% of the time you will be spitting into the wind. The job of collection companies is to get the money and they will take it more than once. I have had consumers that had to pay them a second time because they were still being reported as in arrears and they had no proof of payment. What do you do? Here is my suggestion. (You knew I had one, didn't you?)
You need professional help. The Fair Credit Reporting Act which was passed to protect consumers from incorrect reporting of credit and give them access to their credit, requires creditors to go through a series of extensive steps in order to report someone delinquent on credit. Unfortunately, most creditors don't go through the steps. What you need to do is require those creditors to report any deficiencies in credit correctly and legally. Which means you have to get them to correctly investigate each negative item on credit. So-the collection company would have to go back to the hospital and research whether or not that bill was ultimately paid by the insurance company and correct the credit if it was. But remember-the job of the collection company is to chase you down like a dog to get you to pay the bill-not figure out if it was paid. Few individuals have the time, expertise or sheer grit to handle the details of the follow up to do this. One caveat to the above advice-this is not for people who habitually default on their credit obligation or who are not in the habit of paying their bills on time. For those folks, enrolling in a program such as this is a bit like the mother who is running the sweeper with her three year old following behind trailing cracker crumbs on the carpet. It won't work. This type of program is for people who have genuine errors or concerns about how their credit is reporting.
There is an entire industry that revolves around credit clean up. In the course of originating loans I have worked with several companies that do an excellent job of repairing credit, correcting issues and getting credit scores back to where they need to be. It does cost money. Once again you are paying someone for their experience and expertise. It is your choice- you can continue to hammer away and try to do it yourself, but I will add this to the discussion. When I sit down with someone who has a credit report that is a non starter for a mortgage loan, and they tell me that they don't want to pay for the service, that they will fix it themselves; 98% of the time, a year later when we up meet again there is no improvement on credit. And I can tell you that of the people that I have referred to a credit repair company that have stayed with the program and done what they are told to do, 100% of those folks have come back to me ready, willing, and most importantly ABLE to buy a home. I have seen it repeatedly, and it works. I would caution anyone who is considering enrolling a third party company to assist, get referrals. There are those who will take your money and don't do much. So be sure you are referred to a reputable source.
I am always excited when I have a client I have referred to credit clean up call me and say, "My credit score is 680-I want to buy a house!" It is a perfect ending to a job well done.
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