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LEARN HOW TO START, RUN, OR GROW YOUR CREDIT REPAIR BUSINESS

Hack Your Credit Legally

By: Daniel Rosen September 14, 2021

Credit repair works when you understand the law and you use it in your favor. So if you’re just getting into credit repair or you’re brushing up, here’s a guide to the laws you need to know.  

Basically, once you’ve challenged information in your credit report, the credit bureaus and furnishers have 30 days to investigate and either verify it as correct or remove the disputed information.  

They are also required to mail you the results within 30 days. What happens then? Knowing the laws will give you a map of the exact steps you need to take next.

 


 

What are the basic laws you need to know?

  1. The Fair Credit Reporting Act is the primary set of laws that makes credit repair possible. 
  2. The Fair Debt Collection Practices Act is the legislation that governs the debt collection industry.
  3. The Statute of Limitations is a definitive amount of time items can appear on your credit and  how long debts can be collected.
  4. There are two main statutes of limitations: “Debt Collection” and “Credit Reporting.”   

How can you use each of these laws to your advantage?

 

  • The Fair Credit Reporting Act (FCRA) is the primary set of laws that makes credit repair possible.  

 

What does FCRA mean to you?

  1. You have the right to know what’s in your credit file. 
  2. You must be notified if the information in your credit file has been used against you.  
  3. You have the right to dispute incomplete or inaccurate information and the credit bureau must correct or delete it within 30 days from the time they receive your dispute.  
  4. Credit bureaus may not report outdated information. 
  5. Your file may only be shared with people or companies with a valid need to see it, usually to consider an application for credit, employment,  insurance, or renting.  
  6. You know all that junk mail you get from companies stating that you’re pre-approved? They get your information from the credit bureaus, they are called prescreened credit offers - and you have the right to block those companies from buying that information.  
  7. Another right you have as a consumer under the FCRA is to block your report if you feel you may be a victim of identity theft. You have the right to place a security freeze to stop the bureaus from releasing your personal information. You can also remove the freeze when you see fit.  
  8. If your rights were violated, you may seek damages.  

By the way, when I use the phrase: “You may seek damages”, the FCRA is very specific.  Each occurrence can leave the bureau or furnisher financially liable and you don’t need to sue them yourself – most credit repair companies work with local attorneys that will sue them for you on a contingency basis, meaning you don’t pay unless they collect. 

So that was a summary of the Fair Credit Reporting Act – it all seems pretty simple right? The FCRA is powerful when used properly. 

  • Fair Debt Collection Practices Act (FDCPA) is the next law you need to know about

The Federal Fair Debt Collection Practices Act is the legislation that governs the debt collection industry. For the sake of simplicity, in this article, I’ll call it the FDCPA for short.  

These laws were enacted specifically to provide limitations on what debt collectors can do when collecting certain types of debt. The FDCPA prohibits debt collection companies from using abusive, unfair, or deceptive practices to collect debts from you.  

Debt collectors include collection agencies, debt buyers, and lawyers who regularly collect debts as part of their business. 

Why is FDCPA important to you?

  1. Well, for one thing, the FDCPA restricts debt collectors from calling you before or after certain hours and also does not allow any form of harassment. Additionally, if you have an attorney representing you, the debt collector must contact your attorney instead of you after they know you have an attorney.  
  2. Most importantly, the FDCPA can help you place the burden of proof on the debt collector if you dispute the validity of the debt.  
  3. Also, debt collectors must send consumers a letter with some basic information on the debt within five days of first contacting them. It must include the amount of debt, the original creditor’s name, and a summary of your rights.  
  4. If you dispute a debt in writing or demand validation within 30 days of when you receive the required information from the debt collector, the debt collector cannot call or contact you to collect the debt or the disputed part until the debt collector has provided verification of the debt in writing to you. This is often very helpful in removing accounts from your credit report that cannot be verified.  

FDCPA personal case study

I have a personal story that shows you the power of FDCPA.

Back when I did one-on-one credit repair, I once helped a client that had a debt collector trying to collect a really large debt – it was over 60k! The debt collector was calling him at work, late at night, and really caused a lot of problems. When I became aware of the issue, I mailed a simple validation demand to the debt collector. I asked for the written contract for the account they were trying to collect and they were not able to produce it. Then, I disputed the account with the credit bureaus, and viola! It was deleted and the debt collector crawled back under the rock he came from.  

So, as you can see the Fair Debt Collection Practices Act is quite powerful, once you know how to use it!  

A brief recap of FDCPA 

  1. The Fair Debt Collection Practices Act is called the FDCPA for short. 
  2. The FDCPA covers when, how, and how often a third-party debt collector can contact a debtor.  
  3. The FDCPA makes it illegal for debt collectors to use abusive, unfair, or deceptive practices when they collect debts. Basically no harassment or unfair treatment.  
  4. If the FDCPA is violated, you can sue the debt collector in a state or federal court for damages plus legal fees, and some attorneys do it on a  contingency basis.  

 

Statute of Limitations  

A “Statute of Limitations” is the length of time an action is valid.  

There are statutes of limitations on all sorts of things. Today we’re talking about credit and debt so in this case, the Statute of Limitations is a definitive amount of time items can appear on your credit and how long debts can be collected. There are two primary statutes of limitations: “Debt Collection” and “Credit Reporting”.  

For the sake of simplicity, we’re going to call them the “Credit Time Clock” and the “Debt Time Clock.”  

Remember, the credit time clock is the maximum amount of time items can appear on your credit report. And, the Debt Time Clock is the maximum amount of time someone can bring legal action on a debt that you owe.  

The “Credit Time Clock” is essentially the Statute of Limitations for Credit Reporting.  

There's a bunch of names for it. Officially, it’s called "running of the reporting period,” and it’s also sometimes called the “statute of limitations for credit reporting” or the “7-year rule.” 

I call it the “Credit Time Clock” and it’s one of the most misunderstood parts of the fair credit reporting act.  

The Fair Credit Reporting Act describes how long items can remain on credit reports and when they must be removed. Some items have a seven-year expiration date like charge-offs and collections while other items remain for 10 years like bankruptcies - in the case of tax liens, they may remain indefinitely.  

The credit bureaus keep personal credit history for a specific amount of time-based on the items DATE of FIRST DELINQUENCY.  

The DATE of FIRST DELINQUENCY is when you stopped paying.  

The following information is taken directly from the FCRA and from the Federal Trade Commission's official interpretation of the "running of the reporting period."  

  • Derogatory Accounts can stay for - 7 years from the DATE of FIRST  DELINQUENCY!  
  • Inquiries – they can stay for 2 years from the date placed, some soft inquiries only stay for 6 months!  
  • Unpaid Tax Liens can stay “Indefinitely”  
  • Chapter 7 Bankruptcy is 10 years from the date filed.  
  • Chapter 13 Bankruptcy (also called a repayment plan) can stay for 7  years from the date the repayment plan ends…. This means that if you have a 4-year repayment plan, it could take as long as 11 years to “fall off” your credit report.  
  • The majority of Public Records like judgments and child support take 7  years.  
  • Closed or Inactive Accounts generally fall off after 10 years.  

One important thing to mention is that you would expect items to automatically “fall off” your credit report when the time clock is over. Unfortunately, this isn’t always the case!  

Sometimes, errors are made and OFTEN creditors or debt collectors will purposely report false “status” dates in hopes of keeping items on your credit report longer. The reason they do this is that the longer something negative is on your report, the more likely it is that you eventually pay it. 

The Debt Time Clock also called the “Debt Collection Statute of Limitations” is the length of time a debt collection agency can take legal action to collect a debt.  

The length of time to bring an action is determined by the type of contract  (Written, Oral, Promissory, or Open-Ended Accounts) and is also determined by the STATE in which the debtor lived in when the debt began.  

“Types of Debt” 

  1. Oral Contract: You agree to pay money loaned to you by someone, but this contract or agreement is verbal (i.e., no written contract,  "handshake agreement"). Remember a verbal contract is legal, but tougher to prove in court.  
  2. Written Contract: You agree to pay on a loan under the terms written in a document, which you and your debtor have signed.  
  3. Promissory Note: You agree to pay on a loan via a written contract, just like the written contract. The big difference between a promissory note and a regular written contract is that the scheduled payments and interest on the loan also are spelled out in the promissory note. A  mortgage is an example of a promissory note.  
  4. Open-ended Accounts: These are revolving lines of credit with varying balances. The best example is a credit card account.  

Ok, now - let’s chat about expired debt!  

I’d like to talk a little more about the debt time clock in relation to when the debt actually expires.  

It's determined by two factors:  

  1. The type of debt
  2. The state the debtor lives in

Knowing if a debt is expired or not gives you an edge

State Examples:

  • Florida

Let’s say you stopped paying a credit card debt in the state of Florida and it was sold to ABC collections, and ABC collections is coming after you. They’re calling you, sending letters, and threatening to sue. They want the money and they want it now! The statute of limitations protects you. In this example, if it is a “credit card”, that would mean it’s “open-ended”. Revolving accounts are accounts that you can use, payback - then reuse…  means “open-ended”. 

So in Florida, the length of time the creditor has to collect the debt is 4 years from the date of the last activity. The “Date of Last Activity” is when you last made a payment. If you never made any payments, it would be the date you opened the account. 

In this example, if your last payment was over 4 years ago, technically, you no longer owe this debt. it’s no longer valid.  

  • Louisiana

Let’s say you live in Louisiana, you had a personal loan and you stopped paying it. That would be considered a written contract. Once you've signed the written contract, you're bound by the terms of the contract. If you default on the terms of the contract by failing to make the payments as agreed, the other party may take certain actions to pursue you for what you owe. One of those actions could include filing a lawsuit against you to get you to pay up.  

If they decide to sue you, they would have 10 years before the debt would expire. Ok.  

I would also like to point out that they would be able to sue you after the 10-year expiration date—but if you can prove that the debt is expired, it’s highly unlikely they would win.  

Knowing when debts expire is helpful for many reasons

  1. Creditors and debt collectors know that most consumers don’t understand how long debts are valid, and being able to stand up for your rights or help clients do the same is very powerful.  
  2. Knowing when debts expire gives you a big advantage if you are ever sued.  
  3. It gives you leverage.  

So there you have it! Knowledge really IS power!

And now you have even more of the power you need to help you start or grow your own credit repair business. This is a huge confidence booster!

So, if you want to get certified in disputing and launch your very own credit repair business in just a couple of weeks, I invite you to join our Credit Hero Challenge!

It’s an amazing program that has helped tons of Credit Heroes get their first clients, get certified in disputing, and gain confidence in knowing they are launching their credit repair business on a solid foundation that allows them to grow and scale FAST! 

We’re starting again soon, so SIGN UP NOW at creditherochallenge.com!

Be sure to subscribe on your favorite platform below!

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Topics: Podcast

Transcript

Daniel Rosen 00:00

 

Knowledge is power, especially when it comes to credit repair. And if you know how to use the laws the right way, they're worth their weight in gold. See, credit repair is not about finding some magical letter or waving shiny objects. No, here's how it works. If you know your way around the laws, you will never need to guess what your next move is. And you will always know exactly what you can do to be a Credit Hero and change a whole lot of lives. So, if you want to learn just how easy it is to use the basic laws to your advantage, you better stick around!

 

So, the big question is this, how can we take our passion for helping people with their credit and turn it into a successful business without taking loans, without spending a fortune by bootstrapping it from nothing, so we can help the most people and still become highly profitable? That is the question, and this podcast will give you the answer. My name is Daniel Rosen, and welcome to Credit Repair Business Secrets.

 

OK, before I dive in if you are new to my podcast, be sure to click to subscribe and turn on notifications so you don't miss a thing. And if you want me to hold you by the hand as you launch your very own credit repair business, go to CreditHeroChallenge.com.

And one more thing, and this is new, and it's really, really cool. I started sharing this in my podcast because I want you always to remember, you are not alone. So, that's why in every episode, I'm now highlighting and spotlighting one of our new Credit Heroes inside our Credit Repair Cloud Facebook community so that you can see firsthand what real everyday people are doing as they launch and grow their credit repair business. Today's spotlight is on Miranda Dean Cole. Within just three days of launching her credit repair business, Miranda signed up three clients. That's one new client for every day she's been in business. Miranda, that's an awesome batting average, and I get the feeling we're going to be hearing a lot more wins for Miranda.

OK, let's get into this. Credit repair works when you understand the law and use it in your favor. So if you're just getting into credit repair, this is going to be a crash course in the laws that you need to know. OK, so once you've challenged information in your credit report, the credit bureaus and the furnishers have 30 days to investigate and either verify it as correct or remove the disputed information. They are also required to mail you the results within 30 days. So here's what you need to know. First, I'm going to give you the bullet points, and then I'm going to walk you through each law, OK?

Let's start with the big one. The Fair Credit Reporting Act is the primary set of laws that makes credit repair possible. The Fair Debt Collection Practices Act is the legislation that governs the debt collection industry. The statute of limitations is a definitive amount of time that items can appear on your credit report, as well as how long debts can be collected. Now, there are two main statutes of limitations. There's debt and collection. And then there's credit reporting. Now let's take a deep dive and see how you can use each of these laws to your advantage. The Fair Credit Reporting Act, which is the FCRA it's the primary set of laws that makes credit repair possible. So here's what these laws mean to you. First of all, you have the right to know what's in your credit file. You must be notified if the information in your credit file has been used against you, you have the right to dispute incomplete or inaccurate information and the credit bureau must correct or deleted within 30 days from the time that they receive your dispute. credit bureaus may not report outdated information. Now your your file may only be shared with people or companies with a valid need to see it. Usually to consider an application for credit for employment for insurance or for renting. You know all that junk mail that you get from companies stating that you are pre approved Well, they get their information from the credit bureaus. These are called pre screen credit offers, and you have the right to block those companies from buying that information. Now another right you have as a consumer under the FCRA, is to block your report, if you feel you may be a victim of identity theft, you also have the right to place a security freeze to stop the Bureau's from releasing your personal information. And you can also remove the freeze whenever you like. And finally, if your rights were violated, you may seek damages. And by the way, when I say you may seek damages, the FCRA is very, very specific. each occurrence can leave the bureau or furniture financially liable. And you don't need to sue them yourself. Most credit repair companies, they work with local attorneys that will sue them for you on a contingency basis, meaning you don't pay unless they collect. So that was a summary of the Fair Credit Reporting Act. It all seems pretty simple, right? The FCRA is powerful when used properly. 

Now the next law that you need to know has another long name, the Fair Debt Collection Practices Act. Now the Fair Debt Collection Practices Act is the legislation that governs the debt collection industry. So for the sake of simplicity, we're going to call this the FDCPA for short. OK, now these laws, they were enacted specifically to provide limitations on what debt collectors can do when collecting on certain types of debts. The FDCPA prohibits debt collection companies from using abusive, unfair or deceptive practices to collect debts from you. Debt collectors include collection agencies, debt buyers and lawyers who regularly collect debts as part of their business. So why is this important to you? Well, for one thing, the FDCPA it restricts debt collectors from calling you before or after certain hours, and also does not allow any form of harassment. Additionally, if you have an attorney representing you, the debt collector must contact your attorney instead of you after they know you have an attorney. Now, most importantly, the FDCPA can help you to place the burden of proof on to the debt collector, if you dispute the validity of the debt. Also, debt collectors, they must send consumers a letter with some basic information about the debt within five days of first contacting them. And it must include the amount of debt, the original creditors name and a summary of your rights. Now, if you dispute a debt in writing, or demand validation, within 30 days of one, you'll receive the required information from the debt collector, the debt collector cannot call or contact you to collect the debt or the disputed part until the debt collector has provided verification of the debt in writing to you. OK, so this is often very helpful in removing accounts from your credit report, if they cannot be verified. So here's a story from back in the day that shows you the power of the FDCPA I once helped a client that had a debt collector trying to collect a really, really large debt. It was over $60,000 and the debt collector was calling him at work. He was calling late at night, and he was causing a lot of problems. And when I became aware of this issue, I mailed a simple validation demand to the debt collector. I asked for the written contract for the account that they were trying to collect, and they weren't able to produce it. And then I disputed the account with the credit bureaus. And bingo, it was deleted immediately, and the debt collector crawled back under the rock that he came from. So as you can see the Fair Debt Collection Practices Act. It's very, very powerful once you know how to use it. So here's a quick recap. The Fair Debt Collection Practices Act is called the FDCPA for short, and the FDCPA it covers when how and how often a third party debt collector can contact a debtor the FDCPA it makes it illegal for debt collectors. jurors to use abusive, unfair or deceptive practices when they collect debts. So it's basically no harassment or unfair treatment. Now, if the FDCPA is violated, you can sue the debt collector in a state or federal court, and you can sue them for damages plus legal fees, and some attorneys do it on a contingency basis. 

Now let's talk about statute of limitations. A statute of limitations is the length of time that an action is valid. Now, there are statutes of limitations on all kinds of things. But today, we're talking about credit and debt. So in this case, the statute of limitations is a definitive amount of time that items can appear on your credit report and how long debts can be collected. Now, there are two primary statutes of limitations, and they are debt collection and credit reporting. So for the sake of simplicity, we're going to call them the credit time clock, and the debt time clock. OK, the credit time clock is the maximum amount of time that items can appear on your credit report. And the dead time clock is the maximum amount of time that someone can bring legal action on a debt that you owe. The credit time clock is essentially the statute of limitations for credit reporting. Now, there's a whole bunch of names for it. It's officially called running of reporting period. It's also called the statute of limitations for credit reporting. And some people call it this seven year rule, but I call it the credit time clock, and it's one of the most misunderstood parts of the Fair Credit Reporting Act. Now the Fair Credit Reporting Act, it describes how long items can remain on your credit report. And it also describes when they must be removed. Now some items have a seven year expiration date like charge offs and collections. Well, other items, like bankruptcies can stay on for up to 10 years. And in the case of tax liens, they might remain indefinitely. Now, the credit bureaus they keep personal credit history for a specific amount of time,

based on the date of first delinquency, the date of first delinquency. That's when you stop paying. Now the following information is taken directly from the FCRA and the Federal Trade Commission's official interpretation of running of reporting period. derogatory accounts can stay for seven years from the date of first delinquency. inquiries can stay for two years from the date they were placed, and some soft inquiries, they only stay for six months, unpaid tax liens can stay indefinitely, and chapter seven bankruptcy stays 10 years from the date it was filed. And chapter 13 bankruptcy, which is also called a repayment plan, it can stay for seven years from the date that the repayment plan ends. So this means if you have a four year repayment plan, it could take as long as 11 years for it to fall off your credit report. Now the majority of public records like judgments and child support, they take seven years, a closed or inactive account generally falls off after 10 years. Now one important thing I'd like to mention is that you would expect items to automatically fall off your credit report when the time clock is over. Right. But unfortunately, that's not always the case. Sometimes errors are made and often creditors or debt collectors will purposely report false status states in the hope of keeping these items on your credit report longer. OK, the reason they do this is because the longer something negative is on your report, the more likely it is that you may eventually pay it. Now the debt time clock, which is also called the debt collections statute of limitations. This is the length of time that a debt collection agency can take legal action to collect a debt. Now the length of time to bring action is determined by the type of contract whether it's written oral, promissory or open ended accounts and also determined by the state in which the debtor lived when The debt began. So let's discuss the types of debt. And then I'm going to give you some examples regarding the varying states. For an oral contract, you agree to pay money that's been loaned to you by someone, but this contract or agreement is verbal, OK? There is no written contract. It's a handshake agreement. Now remember, a verbal contract is legal, but it's much tougher to prove in court. And next we have written contracts, where you agree to pay on a loan under the terms written in a document, which you and your debtor have signed. Next, there's promissory notes, you agree to pay on a loan via a written contract. And this is just like the written contract. The big difference between a promissory note and a regular written contract is that the scheduled payments and the interest on the loans is spelled out in the promissory note, a mortgage is a great example of a promissory note. And then we have open ended accounts. These are revolving lines of credit with varying balances. And the best example is a credit card account. Now I'd like to talk a little more about the debt time clock in relation to when the debt actually expires, it's determined by two factors. First, the type of debt and the state where the debtor lives, and knowing if a debt is expired or not. That gives you an edge. For example, let's say you stopped paying a credit card debt in the state of Florida, and it was sold at ABC collections. And now ABC collections is coming after you they're calling you. They're sending letters, and they're threatening to sue you. They want their money, and they want it now, with a statute of limitations. It protects you. In this example, if it's a credit card, that would mean it's open ended. revolving accounts are accounts that you can use, paid back and then reuse, OK, meaning open ended. So with that being said, in Florida, the time that the creditor has to collect the debt is four years from the date of last activity. And the date of last activity is when you last made a payment. So if you never made any payments, it would be the day that you open the account. So in this example, if your last payment was over four years ago, then technically, you no longer owe this debt is no longer valid. Let's do another example. Let's say you live in Louisiana, and you had a personal loan and you stopped paying it, that would be considered a written contract. Now, once you've signed the written contract, you are bound by the terms of the contract. If you default on the terms of the contract, by failing to make the payments as agreed, then the other party can take certain actions to pursue you for what you owe. Now, if they decide to sue you, they would have ten years before that debt would expire, OK. Now, I would also like to point out that they would be able to sue you after the 10-year expiration date. But if you can prove that the debt is expired, it's very unlikely that they would win. 

Knowing when debts expire is very helpful for many reasons. First of all, creditors and debt collectors know that most consumers don't understand how long the debts are valid. And being able to stand up for your rights or to help your clients to do the same is very, very powerful. And knowing when debts expire gives you a huge advantage if you're ever sued. It also gives you leverage. So there you have it, knowledge really is power, right? And now you have even more of the power that you need to help you to start or grow your very own credit repair business.

So if you haven't already, now is the time to take the next step of this journey by participating in our Credit Hero Challenge. If you'd like me to hold you by the hand as you launch your very own credit repair business, be sure to check it out. It's a live experience that has helped tons of Credit Heroes to get their first clients, to get certified in disputing, and to gain confidence as they launched their credit repair business on a solid foundation. So they can change a whole lot of lives and make a great living in the process. Now we're starting the next challenge in just a couple of days. So you want to join before the doors close, or you're going to have a long wait until the next one. So, sign up right now at CreditHeroChallenge.com. And if you're finding value in the things that I'm sharing on this podcast, be sure to click the subscribe and leave me your questions and your comments, OK? Type them below because then I can come back and read each and every one of them. And I love to answer your questions. And if you're feeling excited about it, give me a review. Give me a thumbs up, tell all your friends because this is a new podcast and these things really helped me, OK? They helped me in my mission to help as many people as I can. So, let's make dreams come true together. And I will see you in the next episode. And until then, be a Credit Hero and keep changing lives!

 

Want more Credit Repair Business Secrets? Then get a copy of my book, The Ultimate Guide to Starting A Credit Repair Business, get it free at CreditRepairCloud.com/FreeBook. Inside this book, you'll find my top 35 secrets to removing items from credit reports and turning that into an amazing business that helps people change lives and makes you a great living in the process. Get it free at CreditRepairCloud.com/FreeBook.

 

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