Starting a credit repair business, you have a choice of what kind of company you’re going to build. A good and honest company slowly builds a fantastic business with happy clients and a steady stream of referrals. This business grows organically and pragmatically on a foundation that will last. Whereas a company that operates in the grey might make a quick buck for a moment, but it will disappear just as fast. The key to success is a solid foundation.
A few bad apples
The reason that credit repair companies have gotten a bad rap for being unethical or dishonest is largely due to the way that some credit repair companies have chosen to operate. Some of these unethical companies do credit repair by simply asserting that all negative items on their client's credit reports are due to identity theft and crossing their fingers that some will be removed. This is not credit repair it is fraud.
Many credit repair companies who operate in the grey will dispute items without their client knowing what is being disputed and why. Not only is this unethical, but it can have serious legal consequences.
Yes, the Fair Credit Reporting Act (FCRA) gives a consumer the right to dispute anything on a credit report. And yes, accurate items can be challenged and removed if they cannot be verified, but it all must be done in a correct, smart and legal way.
Professional Credit Repair
True credit repair requires skill, experience, and patience. Ethical credit repair professionals go through their clients’ credit reports together with their clients looking for information that is false, unverifiable, or incomplete, and then contact the bureaus to have it modified or removed. We call this strategy the Factual Dispute Methodology.
The Methodology Explained
The Factual Dispute Methodology is an important distinction for credit repair companies who seek to help people restore their standing by referencing the Fair Credit Reporting Act (FCRA) to dispute inaccurate information. Nearly 80 percent of all credit reports in the US have inaccuracies that need to be modified. That is a staggering number. The basis of the Factual Dispute Methodology is this process of examining a client’s credit report to find these inaccuracies and creating a plan of action to dispute them.
There are several types of negative items you will find on a consumer’s credit report, including inquiries, late payments, collections, bankruptcies, foreclosures, repossessions, judgments, and charge-offs. When examining a credit report, the first step is to determine whether each piece of information adheres to the following standards:
1. Is it Accurate?
Check that all account numbers, dates, account status, account types, and other information is correct based on the consumer’s personal records. Check that the credit reports you have accessed from all three bureaus contain the same exact information.
2. Is it Complete?
There should be no missing dates, account numbers, balances, or other information. This is one of the most common errors you will find on a credit report.
3. Is it Verifiable?
Creditors are required by law to have back up documentation for everything that is listed on a credit report. If the information does not exist, then the item should be removed completely. Are the records murky? Is there no signature from the client?
Once you have marked up the credit report with the items that are inaccurate, incomplete, or unverifiable, prioritize those that you will dispute first.
How to Prioritize
Many people choose to start with the easiest or most glaringly non-compliant items, then move on to the more difficult ones. This is often the best route because your clients will see results faster.
Others prioritize based on how much the item affects the consumer’s total credit score. For this strategy, it is helpful to know how scores are created. Credit scores are reported based on the following approximate formula:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% inquiries/recent credit decisions
- 10% types of credit used
Understanding this information, it would make sense to tackle the non-compliant items related to payment history and amounts owed first before moving on to other discrepancies.
The 623 Dispute Method
If the factual dispute method fails to yield results for your clients, another method credit repair specialists may take is the 623 dispute method. Under this practice, specialists are asking for an investigation into the accuracy of a debt record rather than asking for verification of the debt. If the original creditor cannot prove that a debt is delinquent, then the negative information must be removed from the credit report. This process should always follow the factual dispute, and may not work with creditors who take meticulous records, or if a debt is fairly recent. Still, it’s a viable part of credit restoration.
Are There Any Shortcuts?
Yes, it takes some time to go through the report this way; but the good news is that you only need to do this once for each client. If you’re using Credit Repair Cloud software you will tag all the items you wish to dispute at the same time that you import the credit report. This “tagging” maps out your course for the lifecycle of this client.
If you’ve done this correctly at the start, then each month that follows should take you less than 5 minutes of work, clicking to dispute a few more items on your list (these are the “Round 1” letters) — or replying to the response letters that were sent to your client (these are “Round 2” and higher).
Education is the Future
Throughout the client’s lifecycle, don’t forget that it’s equally important to educate your clients to better manage their credit. Explain what they can do to help to speed up the credit repair process, to pay down balances, to stop maxing out their cards and to stop applying for credit.
Help them change their bad credit habits so they can maintain their good credit long after your work is done. Those extra touches are what will build your referrals. We have many tools and resources in the client portal to help you with this, but it’s up to you to go the extra mile and be awesome for your clients. This will grow your business much faster than trickery.
Becoming a Good Apple
Understanding and adhering to the Factual Dispute Methodology, involving and educating your clients are key parts to operating an ethical, trustworthy credit repair business. It is up to all of us to adhere to high legal and ethical standards so we can change the conversation around credit repair to a more positive one.
Remember, you have an opportunity to truly help people. Approaching it that way will make a difference in your community — and it’s good karma.