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I recently saw a sign that said:  “720 scores in 30 days guaranteed.” Since no one can truly and legally make this kind of guarantee I naturally knew that something was wrong. My team and I immediately investigated to find out more information. The company was selling alternate social security numbers. These types of numbers are illegal, even though the company in question promised otherwise on their website, and something you want to stay away from. (By the way, I sent out a secret agent, aka “Credit Man,” to remove these fraudulent signs from the side of the road so no one else would have the chance to be taken advantage of or to fall for this scheme.)

Another common credit scam that has gained popularity in recent years is used by companies who will sell you seasoned credit cards to falsely elevate your credit scores. This practice is also illegal and you want to stay away from these companies as well. It is 100% possible to fix and improve your credit with a little time, a good plan, and some hard work. In the business of credit improvement, shortcuts are always either a scam or illegal. If it sounds too good to be true, then you want to avoid it.

Many people want help correcting inaccurate and erroneous information on their credit reports. Many others want help building excellent current credit but don’t who they can trust. It is important to be careful who you trust when it comes to correcting your credit report. There are a lot of companies out there who are scamming customers. These companies will take your money, will not help you to legally correct the errors, and – in the worse of cases – you may never even see them again.

Another factor to keep in mind when choosing a company to help you with your credit is that most companies desire to keep you in their program as long as they can. Why do these companies desire to keep you in their program so long? The reason is so they can continue to collect a monthly, residual fee for as long as possible. These companies are in no hurry to help you reach your goals. Our goal at HOPE, for over 12 years, has been to help you legally graduate from our program as quickly as possible. Because of this fact, our clients are our best referral source. When a HOPE client hears of a friend or family member having credit problems they are quick to say: “I know who can help you because they helped me.”

At least 25% of our clients have had a bad experience with ‘credit repair” companies in the past before they come to see our credit experts at HOPE. We love these customers because know we can restore their confidence that someone is doing things correctly. Integrity is at the center of all we do.

Remember, you always have the right to try to fix your credit on your own. However, most people simply do not have the time or the knowledge on the subject to do so. Also, those who try to fix their credit on their own usually pay more money in the long run than they would if they hired a reputable, professional company to assist them. If you would like to know more about the HOPE Program, please give us a call at 704-499-9696. Our team would love to hear from you and to answer your questions. You can be sure that the HOPE team will take great care of you.

About the author: Ron Lambright has been a credit expert for over 12 years and is the Executive Director of HOPE – a company he helped to found after struggling to overcome personal credit issues on his own twice before. He is a regular guest on radio talk shows and is featured weekly as the premier credit expert at training seminars in the Charlotte, NC region and up and down the East Coast.  Ron is an expert on teaching consumers how to achieve a “loan ready” credit report, improving credit scores, and an expert in the fields of business financing and business credit as well. You can connect with Ron on the HOPE Facebook page by clicking here.

What Are Dispute Notations?

When you dispute an account on your credit report, the credit reporting agencies (i.e. Equifax, Trans Union, and Experian) are  obligated under the Fair Credit Reporting Act [FCRA 15 U.S.C. § 1681s-2(b)] to report the account as “in dispute” on your credit report. Data furnishers (i.e. creditors and collection agencies) are also required to report the account as “in dispute” under the Fair Debt Collection Practices Act (FDCPA 15 USC § 1692e). The credit bureaus list an account as “in dispute” on a credit report by assigning the “XB” code on the disputed account. Whenever the “XB” code is placed on a consumer’s credit report a note or narrative appears with the account information which reads something along the lines of “Consumer disputes, investigation in process.” Translation: the credit bureaus received the dispute and they are in the process of investigating the consumer’s claim.

Why Do Dispute Notations On a Credit Report Matter?

Dispute notations on your credit report can make it difficult for you to be approved for a mortgage. The reason that lenders and loan underwriters often have a problem with the “XB” code, aka the dispute notation, is because the FICO scoring model treats accounts with the “XB” code differently than normal accounts. FICO will not allow an account which is in the middle of an active dispute to lower a consumer’s credit score. The account will still appear on the credit report; however, FICO will ignore the following: payment history and balance. For example, if a consumer is in the middle of an active dispute on an auto loan with late payments, then FICO will not consider those late payments when calculating the credit score. The result? The potential for a falsely elevated score—temporarily. This potential for the falsely elevated score is why underwriters typically require the removal of any dispute notations from a credit report prior to a mortgage loan approval, in order to ensure that they are seeing a consumer’s true FICO score.

What Happens After the Dispute?

When the 30 days of an active dispute cycle has been completed then the credit bureaus are obligated to do one of the following:

(1) Delete the disputed account if it was not properly verified by the data furnisher (aka the original lender or collection agency) or

(2) Remove the “XB” code from the tradeline and replace it with a persistent narrative code like -

(a) “XC” – completed FCRA dispute, consumer disagrees or
(b) “XH” – account previously in dispute, now resolved 

The “XC” and “XH” codes signify that the consumer disagrees with the way the account is being reported; however, FICO will NO LONGER treat the account differently by ignoring payment history and balance on the account. The result? The score NO LONGER has the potentially to be falsely elevated.

 Be Aware!

Unfortunately, the credit bureaus and data furnishers often make mistakes and leave the “XB” code on an account which is not currently in dispute. If an account is incorrectly marked with the “XB” code and contains incorrect dispute notations on the credit report after the dispute has been completed (30 days), then you have the right under the Fair Credit Reporting Act (FCRA) to ask the credit bureaus and data furnishers to correct the error. Typically, you would only learn of a problem with outstanding, invalid dispute notations on your credit report if (a) you apply for a mortgage and are turned down due to this issue or (b) you are working with a professional credit restoration service who catches the error for you ahead of time.

NOTE: Current members of the HOPE Program can request for their case manager to send dispute removal request letters on their behalf at no extra cost.

Removal of Dispute Notations

I mentioned that it is your right to request the removal of the dispute notation, the “XB” code, from your credit report on any account which is not actively in dispute. The question you are probably asking right now is “how?” What steps can a consumer take to get this error corrected? Here are 3 options to consider:

1. Call the Credit Bureaus
Often you can receive the removal of the “XB” code by simply calling the credit bureaus, letting the consumer service representative know that you no longer dispute the account, and asking them to remove the “XB” code from your report.

2. Write the Credit Bureaus
You can submit a written request to the credit bureaus and the data furnisher directly to request the removal of a dispute notation. Remember, online disputes are not recommended and the credit bureaus and data furnishers have 30 days, by law, to process your request.

3. Consider Settling the Account
It can be frustrating to settle an account which you do not believe is being reported accurately. However, especially in the case of low balance accounts, you may wish to consider settlement. A dispute notation usually does not matter to the mortgage underwriter if the account has a $0 balance. (Be sure to verify this fact with your loan officer or underwriter first.)

HOPE has developed a detailed, step by step, dispute removal handbook to help you. The HOPE Dispute Removal Handbook (Loan Officer Edition and Client Edition) contains direct phone numbers to all 3 credit bureaus and more detailed instructions to help make this process a little easier for you. Please feel free to contact us if you would like to request a free copy.

 About the Author: 
Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.

In my previous article, Credit Myth Buster #1: Paying Collections, I discussed the common misconception that paying a collection account will raise your credit scores. It is true that paying a collection account will not raise your credit scores and, in some cases, may even lower your scores if the account is illegally re-aged after payment. However, there is another credit myth which I would like to debunk today and that is the misconception that a collection account cannot be legally removed from your credit report.

The statement that a collection account cannot legally be removed from your credit report is simply untrue. When a collection account is deleted from your credit report the result is almost always a credit score increase – great news for the consumer! There are several legal ways that collection accounts can be deleted from your credit report. Let’s discuss a few of them:

Removal by Dispute - 

Have you checked your credit report lately? Chances are that, if you did so, you found errors and inaccuracies. In fact, a recent study released by the Federal Trade Commission found that 40 million Americans had errors on their credit reports. According to the Fair Credit Reporting Act (FCRA), you have the legal right to dispute any errors, mistakes, or inaccuracies with the credit reporting agencies – Equifax, Trans Union, and Experian. If any of the data is incorrect on an account (i.e. the balance, the date of first delinquency, the date of last activity, the date opened, the date reported, account notations, etc.) then you have the right to dispute it. Furthermore, there are other laws which allow you to dispute erroneous accounts with creditors and collection agencies directly.

Pay for Deletion -

It is possible for you to make an arrangement with a creditor or collection agency to pay an account in exchange for the deletion of the account from your credit report. You should know that it is extremely difficult to get a creditor or collection agency to agree to these terms. Some companies will reject a pay for deletion offer out right. However, it is possible and it is 100% legal. There is nothing in the Fair Credit Reporting Act which compels a creditor or collection agency to report an account to the credit bureaus. The reporting of accounts is 100% voluntary. Even though it is not illegal for an account to be paid for deletion, the act is frowned upon by the credit bureaus and most of the agreements that the bureaus have with collection agencies expresses that the collection agencies cannot engage in pay for deletion settlements. Finally, if you do get a creditor or collection agency to agree to a pay for deletion arrangement you will likely be required to pay 100% of the debt. As with any debt negotiation, it is always important to get agreements sent to you in writing since “he said, she said” will not hold up if a dispute arises later.

Goodwill Deletion - 

You can request for a creditor or collection agency to grant you a goodwill deletion after an account has been paid. It is a long shot to have a goodwill deletion request honored; however, it certainly cannot hurt you to ask.

These are a few of the legal ways that a collection account can be removed from your credit report. You have the right to try to employ some of these strategies on your own, though doing so will likely be time consuming and very difficult. You also have the right to hire a credit restoration company to assist you. If you would like to speak with a HOPE Credit Expert regarding your credit report please give us a call at 704-499-9696 or click here to schedule a no-obligation credit analysis today.

Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.

Paying collection accounts is usually the first place people start when deciding to try to fix a damaged credit report. However, the idea that paying off a collection account will boost a consumer’s credit scores is, unfortunately, very wrong. The FICO credit scoring model was built to help lenders predict the likelihood of a borrower going 90+ days past due on a loan within the next 2 years. If a borrower is likely to go 90+ days delinquent on an account within the next 2 years then a lender will probably consider the borrower to be a bad credit risk.

When a consumer pays off an outstanding collection account, even if a zero balance is reported to the credit bureaus, that does not erase the fact that the delinquency occurred in the first place. Therefore, the FICO scoring model still sees the consumer as a bad credit risk. It is the occurrence of the delinquency (aka the late payment) which lowers the consumer’s FICO scores, not the balance on the collection account. The fact that the delinquency happened is not erased when a collection account is paid. To further illustrate this point, let me ask you a question. Would a $1,000 credit card collection, a $100 credit card collection, or a $0 credit card collection lower your credit scores more? If you guessed that the 3 collection accounts would have the same impact upon your credit scores then you guessed right!

Additionally, if a paid collection account is illegally re-aged upon payment (an error which occurs commonly on credit reports), then the collection account would remain on your credit report even longer, damaging your credit scores longer than legally allowable, since the 7 year statute of limitations was manipulated. However, you do want to exercise caution when it comes to collections. If you have a collection account on your report which you know stems from a real financial obligation and you know that the balance is correct, then it may still be in your best interest to try to settle the debt. Unpaid debt can potentially result in being sued, wage garnishment, and judgments. Remember, if you owe a collection account, you can always try to settle it for a lesser amount and you can even hire a reputable professional to assist you in getting a better deal. Paying 100% of the collection will not affect your credit scores any more positively than paying a 5o% settlement in full. Neither scenario removes the collection account from your report, so do yourself a big favor and save yourself some money if you choose to settle any collection accounts. Finally, it is very important to always, always, ALWAYS get proof of the settlement and the satisfaction of the account in writing from the collection agency.

Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.