Friday, May 25, 2012

3 Credit Repair Practices To Avoid

The credit repair process can be tedious and take several months depending on how much negative information exists in your credit reports. Consumers engaged in credit repair often have a purpose and goal. It may be to purchase a home, refinance a mortgage, change careers, obtain a home equity loan or even buy a new car.

The time and energy involved in repairing your credit should not be wasted by making mistakes along the way. Here are 3 credit repair practices you should avoid in order to make the process smooth and result in a better credit report and increased credit scores:

1. Use of Boilerplate or Template Form Letters

When disputing items on your credit report the best practice is to customize your dispute letters. Credit repair manuals, credit repair companies and even some credit repair websites offer form letters to dispute negative credit.

The problem with form letters is the sheer number of consumers who may be using them to repair credit. The credit bureaus receive tons of dispute letters daily. Because the credit bureaus receive an enormous amount of dispute letters; they utilize a letter recognition technology which scans each letter, whether computerized or handwritten.

As a result of the letter recognition technology, the credit bureaus have amassed a huge database of letters from consumers and discovered many of them contain the exact same information -- word for word. This includes copying and pasting letters from the Internet. Duplicate form letters are easily recognized by the credit bureaus.

Using duplicate or form letters can get your dispute letter labeled frivolous or irrelevant. Once a determination is made that a dispute is frivolous the credit bureaus can terminate the dispute process. The consumer can be barred from disputing that item for several months. The one-size-fits-all dispute letters does not work.

2. Failure to Customize Dispute Letters

Failure to customize dispute letters is related to using boilerplate or template form letters. Any credit repair letter; even if the issue is minor, should be unique, customized and based on a factual error. It's hard to argue with facts. Disputing a factual error can get your credit repair letter taken seriously.

Customized letters get the attention of the credit bureaus. In addition to automating the process of reading dispute letters; the actual dispute process has been automated by a method called e-Oscar. The e-Oscar method of investigating credit disputes converts written dispute letters into a two or three digit code.

That code is transmitted to the creditor who is the subject of the dispute and the creditor verifies the accuracy of the code. Customizing your dispute can help ensure your dispute is actually processed and investigated. You want to make it as difficult as possible for the credit bureaus to reduce your dispute letters to a code which is simply transmitted to the creditor to verify as accurate or inaccurate.

Customizing a dispute letter also gives you the opportunity to attach supporting documentation. The more detail the better. By basing your disputes on factual errors you establish a good foundation in case the credit bureaus flag your disputes as frivolous or irrelevant. You will have the basis for the credit bureaus violating the Fair Credit Reporting Act by not conducting re-investigation of disputed items as required by law.

3. Dispute every negative item at once

All errors and inaccurate information should be disputed, but not all at once. Performing a blanket dispute of all negative items can also lead to the credit bureaus flagging your disputes as frivolous or irrelevant. They may even accuse you of using a third-party credit repair company.

The best way to dispute all negative items is to dispute a few errors at a time in intervals of 30 to 60 days apart. Bombarding the credit bureaus with multiple credit disputes is a sure way to get your credit report flagged and your credit disputes ignored.

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