Credit Repair

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you need to improve your credit health, you’re not alone. Millions of people have a bad credit score, often due to delinquencies, or late payments. According to a recent report from the New York Federal Reserve, credit card, and auto loan delinquencies are on the rise. Having poor credit can limit your financial options, but credit repair companies may be able to help.

Credit repair companies specialize in helping people fix their credit, but unfortunately, there are some companies that take advantage of people. It’s important to understand the laws of each state so you can protect yourself and choose the right credit repair company.

In this post, we teach you about credit repair laws for each state as well as the federal credit repair laws. Knowing your rights and the credit repair laws is the first step on your credit repair journey.

Credit repair laws for each state

In addition to federal laws, many states have laws that regulate the credit repair industry. The state consumer credit repair laws provide protection from companies that take advantage of people who are experiencing financial hardship. While many states have laws, there are some that don’t. Check the graphic below to see if your state is one of the few that doesn’t have specific laws for credit repair. 

It’s helpful to know that the state credit repair laws are based on the state in which the credit repair organization is operating from. Not only must they comply with their state credit repair laws, but they must abide by federal laws as well.

Depending on the state, they may require that the credit repair company has: 

  • A state registration requirement
  • A surety bond to cover potential damages to consumers
  • A required cancelation period after the consumer signs the contract
  • A refund period after the consumer signs the contract

Here is a list of each state and some specifics about their laws.

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State State credit repair laws Registration requirement? Surety bond amount Cancellation period (in days) Refund period (in days)
Alabama No state laws N/A N/A N/A N/A
Alaska No state laws N/A N/A N/A N/A
Arizona Credit Repair Organizations Act (A.R.S. 44-1701 et seq.) No $25,000 3 15
Arkansas Credit Services Organization Act (AR ST § 4-91-201 et seq.) No $10,000 5 10
California Credit Services Act (Civ. Code §§ 1789.10 et seq.) Yes $100,000 5 15
Colorado Credit Services Organization Act (CO Rev. Stat. 5-19-101 et seq.) No N/A 5 10
Connecticut CT. Gen. Stat. § 36a-700 et seq. No N/A N/A N/A
Delaware Del. Code. §2401 et seq. Yes $15,000 3 10
Florida Fla. Stat. §817.7001 et seq. No $10,000 5 10
Georgia Credit repair companies are illegal N/A N/A N/A N/A
Hawaii HI. Rev. Stat. § 481B-12 et seq. No N/A N/A N/A
Idaho Idaho Collection Agency Act (ID. Code. §26-2223 et seq.) Yes $15,000 N/A N/A
Illinois Credit Services Organizations Act (815 ILCS 605/1 et seq.) Yes $100,000 3 10
Indiana Credit Services Organizations (I.C. 24-5-15 et seq.) No $25,000 3 10
Iowa Credit Services Organizations (IA. Code. §538A et seq.) Yes $10,000 3 10
Kansas Credit Services Organization Act (K.S.A. 50-1116 et seq.) Yes $25,000 N/A 10
Kentucky No state laws N/A N/A N/A N/A
Louisiana Credit Repair Services Organizations Act (LA Rev Stat § 9:3573.1 et seq.) Yes $100,000 5 10
Maine Consumer Credit Code – Loan Brokers (ME Rev. Stat. 9-A § 10-101 et seq.) No $25,000 N/A N/A
Maryland Credit Services Businesses Act (MD. Code. § 19 et seq.) No $50,000 3 10
Massachusetts MA. Gen. Laws. 15-93 § 68 et seq. No $10,000 3 10
Michigan Credit Services Protection Act
(MI. Comp. L. § 445.1821 et seq.)		 No N/A N/A N/A
Minnesota MN. Stat. § 332.52 et seq. Yes $10,000 5 10
Mississippi Debt Management Services Act (MS ST § 81-22-1 (Reenacted) et seq.) Yes $50,000 N/A N/A
Missouri MO. Stat. 407.635 et seq. Yes $10,000 3 10
Montana No state laws N/A N/A N/A N/A
Nebraska Credit Services Organization Act (Neb. Rev. Stat. §45-801 et seq.) Yes $100,000 3 10
Nevada NRS 598.741 et seq. Yes $100,000 5 10
New Hampshire Credit Services Regulation Act (N.H. Rev. Stat. § 359 D:1 et seq.) No $25,000 5 5
New Jersey No state laws N/A N/A N/A N/A
New Mexico No state laws N/A N/A N/A N/A
New York Credit Services Business (N.Y. Gen. Bus. 28-BB § 458-a et seq.) No N/A 3 N/A
North Carolina Credit Repair Services Act (N.C. Gen. Stat. § 66-220 et seq.) No $10,000 3 10
North Dakota No state laws N/A N/A N/A N/A
Ohio Credit Services Organization Act (OH. Rev. Code. § 4712.01 et seq.) Yes $50,000 N/A
Oklahoma Credit Services Organization Act (§ 36 et seq.) Yes $10,000 5 10
Oregon Debt Management (OR. Rev. Stat. 697.602 et seq.) Yes $10,000 3 N/A
Pennsylvania Credit Services Act (73 P.S. § 2181 et seq.) No $5,000 – $25,000 5 15
Puerto Rico P.R. Laws tit. 7, § 630a et seq. Yes $10,000 7 15
Rhode Island No state laws N/A N/A N/A N/A
South Carolina Consumer Credit Counseling (S.C. Stat. § 37-7-101 et seq.) Yes $25,000 10 10
South Dakota No state laws N/A N/A N/A N/A
Tennessee Credit Services Businesses Act (TN ST § 47-18-1001 et seq.) No $100,000 5 10
Texas TX. Fin. Code. § 393.001 et seq. Yes $10,000 3 10
US Virgin Islands Virgin Islands Uniform Debt Services Management (12 V.I.C. § 401 et seq.) Yes $50,000 3 N/A
Utah Credit Services Organization Act (UT. Code. §13-21-1 et seq.) Yes $100,000 5 10
Vermont No state laws N/A N/A N/A N/A
Virginia Credit Services Businesses Act (VA. Code. § 59.1-335.1 et seq.) Yes $50,000 3 10
Washington Credit Services Organization Act (R.C.W. § 19.134 et seq.) No $10,000 5 10
West Virginia Consumer Credit and Protection Act (W.V. Code Ch. 46A et seq) Yes $15,000 3 10
Wisconsin Credit Services Organization (WI. Leg. § 422.501 et seq.) Yes $25,000 5 15
Wyoming No state laws N/A N/A N/A N/A

Federal credit repair laws

There are many consumer protections for people in the United States, and some involve your credit. The primary credit repair law to familiarize yourself with is the Credit Repair Organizations Act (CROA). In addition to the CROA, you should also know about the Fair Credit Reporting Act (FCRA), which is what many credit repair companies use when helping their customers.

Credit Repair Organizations Act (CROA)

CROA dates back to 1996. The Federal Trade Commission (FTC) states that this act “prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of ‘credit repair’ services.” The specifics of CROA state that the following are illegal: 

  • Exaggerating or misrepresenting the service
  • Submitting false information to credit bureaus and data furnishers
  • Providing a new identity to clear your credit history
  • Charging customers up front
  • Requiring customers to waive their rights

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is another federal law that helps ensure fair credit reporting practices for consumers. Credit repair companies work by utilizing the FCRA, so it’s helpful to understand what it says and how it works. 

Some of your rights and protections according to the FCRA include: 

  • You have the right to be told what’s in your file.
  • You must be told if any information in your file is being used against you.
  • You have the right to ask for your credit score.
  • Consumer reporting agencies must fix or remove inaccurate information.
  • Reporting agencies can’t report outdated negative information.

Is credit repair legal?

Credit repair services are completely legal, but you’ll need to find credit repair companies that are operating under state and federal laws. The best credit repair companies follow these laws and can assist you with challenging errors on your credit report. 

The following are some signs of a good credit repair company: 

  • They don’t charge you up front
  • They don’t guarantee results
  • They don’t ask you to lie about your information to reporting agencies

Credit repair companies charge for their services, so it may be helpful to shop around and look at online reviews. When doing this, keep in mind that although a company may be the least expensive option, it may not provide the best services.

Work with a credit repair company who knows credit law

If you’re looking for a credit repair company that understands state and federal laws when it comes to your credit, work with Lexington Law Firm. We have a team of legal professionals who follow credit repair laws, and we also challenge credit reporting errors on your behalf. 

In addition to providing you with regular updates about the credit repair process, we also provide various tools to help you better understand your credit health. To get started, sign up today.

Source: lexingtonlaw.com

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The stock market is often seen as a distant entity, a realm of high finance reserved for Wall Street professionals. Yet, for the average American, the rise and fall of stock prices can significantly impact their personal credit score. This article explores the complex interplay between the stock market, consumer behavior, and creditworthiness in the current economic climate.

The Indirect Link: Investor Psychology and Spending Habits

While directly investing in the stock market doesn’t typically influence your credit report, it can indirectly affect your credit score through your spending habits. A strong bull market, where stock prices are consistently rising, can lead to a phenomenon known as the “wealth effect.” Consumers feeling more confident about their overall financial well-being may be more likely to increase spending, potentially resorting to credit cards to finance larger purchases or a more lavish lifestyle. This increased reliance on credit can negatively impact your credit score in two ways:

Credit Utilization Ratio: This crucial factor in your credit score measures the amount of credit you use compared to your total credit limit. Your utilization ratio rises as your credit card balances increase, potentially dragging down your score.

Debt-to-Income Ratio: This metric compares your total debt obligations, including credit card debt, to your gross income. Higher spending fueled by a strong market can lead to a higher debt-to-income ratio, another negative factor for credit scores.

Conversely, a bear market, where stock prices consistently fall, can have the opposite effect. Feeling more cautious about their financial security, consumers may tighten their belts and reduce spending. This could lead to lower credit card balances and a more conservative approach to debt, potentially boosting credit scores.

The Margin Account Conundrum

Using margin accounts is one exception to the general rule of stock market investments that do not affect your credit score. These accounts allow investors to borrow money from their brokerage firm to purchase securities. While offering the potential for amplified gains, margin accounts also have amplified risks. The borrowed money is reflected as a debt on your credit report, impacting your credit utilization ratio.

Furthermore, suppose the value of the purchased securities falls below a certain threshold. In that case, you may receive a margin call, forcing you to sell some of your holdings or deposit additional cash to cover the debt. Failure to meet a margin call can result in your broker selling your assets at a potentially significant loss, further damaging your credit score.

The Middle-Class Squeeze: Inflation, Interest Rates, and Credit

The current economic climate in the United States adds another layer of complexity to the relationship between the stock market and personal credit. Rising inflation erodes purchasing power, making it more difficult for middle-class families to make ends meet. Coupled with rising interest rates on credit cards and loans, the temptation to overextend credit lines becomes even greater. This can lead to a vicious cycle of increasing debt and declining credit scores, making qualifying for future loans at favorable rates harder.

Navigating the Maze: Strategies for a Strong Credit Score

Despite the indirect influence of the stock market, there are steps you can take to maintain a healthy credit score:

Develop a Budget and Stick to It: Track your income and expenses to create a realistic spending plan. Allocate savings and debt repayment funds, leaving room for discretionary spending but avoiding overreliance on credit.

Maintain Low Credit Card Balances: Aim to maintain a credit utilization ratio below 30% – the lower, the better. Consider paying off your credit card balances monthly to avoid accruing interest charges.

Explore Credit-Building Tools: If you have a limited credit history, explore options like secured credit cards or responsible use of store credit cards to build a positive credit profile.

Monitor Your Credit Reports Regularly: Check your credit reports from all three major bureaus (Experian, Equifax, and TransUnion) for errors or discrepancies. Dispute any inaccuracies promptly to maintain accurate credit information.

Conclusion

The stock market may not directly control your credit score, but its influence on consumer confidence and spending habits can have a significant indirect impact. Understanding this connection and prioritizing responsible financial habits can help you navigate the complex economic landscape and maintain a healthy credit score – a crucial factor in securing loans, renting apartments, and achieving your financial goals.

Source: creditabsolute.com

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Understanding Your Credit Score

If you’re trying to perfect your credit score, it’s important first to understand what makes up your credit report and credit score. Your credit score is determined by an advanced algorithm developed by FICO and pulls the data from your credit report to determine your score. When calculating your credit score, the following information is going to affect your credit score in the corresponding percentages:

  • 35 percent: History of on-time or late payments of credit.
  • 30 percent: Available credit on your open credit cards
  • 15 percent: The age of your lines of credit (old = good)
  • 10 percent: How often do you apply for new credit?
  • 10 percent: Variable factors, such as the types of open credit lines you have

Many of this may be common sense or information that you’ve already learned over time, resulting in a good credit score but possibly not a perfect score. If you have a bad credit score, it could take a lot of time and work to increase your score and you may first want to consider repairing your credit. If your credit score is already above 700 but you’re trying to shoot for that perfect score of 850 to ensure the best deals and interest rates, here are 5 ways to perfect your credit score:

5 Ways to Get a Higher Credit Score

1. Maintaining Debt-To-Limit Ratio

To increase your credit score, it’s recommended that you keep your debt-to-credit ratio below 30% and, if possible, as low as 10%. The debt-to-limit ratio is the difference between how much you owe on a credit card versus how much your credit limit is. For example, if one of your credit cards has a credit limit of $5,000, then you should always keep the balance below $1,500 but preferably around $500. As you can see above, 30% of your credit score is determined by the available credit on your open credit cards, so keeping the debt-to-limit ratio will increase your available credit and also show that you’re responsible with your credit.

2. Keep Your Credit Cards Active

Make sure that you use your cards at least once a year to keep them shown as “active” credit and make sure that you never cancel your credit cards. 15% of your credit score is determined by the age of your lines of credit, so you should always keep your credit cards active to lengthen the age of your line of credit. Many people tend to cancel cards that they no longer use – many times because the rates aren’t very good or because they have another card with better benefits – but even if you don’t use the cards very often (just once a year is fine), you should keep them active. Typically, someone with a credit score over 800 has credit lines with at least 10 years of positive activity.

3. Always Pay Bills On Time

Probably the most well-known factor of a credit score and the factor that has the biggest impact on your credit score (35% of your score) is your history of paying your credit payments on-time. If you have a history of always making your credit card, mortgage, and car payments on time, you will greatly improve your credit score. This can also have an adverse effect as well, should you ever make a late payment. Unfortunately, it only takes one late payment to severely reduce your credit score so it’s crucial that you make sure to always make credit payments on time.

4. Dispute Errors On Your Credit Report

If you don’t already, make sure that you request a copy of your credit report once every year and review it for errors. It is actually quite common for credit reports to contain errors which can be disputed and potentially allow you to have negative items removed from your credit report. If, for instance, your credit report shows a late payment on a credit card but contained errors in the record, you can dispute the negative item and request to have it removed from your report. Having a negative item, like a late payment, removed from your report can improve your credit score significantly. While disputing errors on your credit report can be tedious and take a lot of time, it is usually worth it. Another option would be to contact a credit repair agency to help you dispute any negative items on your credit report.

5. Reduce The Number of Credit Inquiries

While this may only affect 10% of your credit score, keeping the number of credit inquiries down can still help to build that perfect credit score but is often ignored. You should never have more than one credit inquiry per year but many people do not realize how often this is done and often times have their credit checked more than once per year. If you’re applying for a car loan, checking your credit score online, or applying for a new credit card, these type of actions will almost always result in a credit inquiry and should be avoided if you’ve already had a credit inquiry earlier in the year. Make sure you do your research on what will result in a credit inquiry so that you don’t accidentally have more than one a year without realizing it.

Source: creditabsolute.com

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The short answer: In most cases there isn’t an instant fix for improving your credit score. Building, improving or even repairing credit takes time. 

Your credit score is like a snapshot that lenders use to determine your financial trustworthiness. Whether you’re applying for a loan, a credit card, or even renting an apartment, your credit score plays a crucial role in the decisions made about your financial future. But what if you’re in a pinch and need to improve your credit quickly? Can you fix your credit in just a week? 

Why Do Credit Scores Take So Long To Update?

How often do you check your credit score? Everyday? If you have, maybe you’ve noticed in the past how long it takes your credit score to update. The credit reporting process is another reason why it would take longer than a week to update your score – it takes a while for lenders, banks, and the bureaus to record your activity. 

Here’s what you should consider about the reporting process:

1. There are consistent reporting periods

Creditors typically report your account information to the credit bureaus at the end of each billing cycle. This means that any changes you make to your credit behavior, such as paying off a credit card balance or opening a new account, won’t immediately reflect on your credit report. Instead, you’ll have to wait until the next reporting period for these updates to be included.

2. The bureaus need time to verify your information

Even when creditors submit information to the credit bureaus, there is processing time involved. The credit bureaus need to receive, verify, and process the data before updating your credit report. This process isn’t instantaneous and can take several days to weeks, depending on various factors such as the volume of information being processed.

Additionally, the bureaus have specific schedules for updating credit reports, which may vary depending on factors like the bureau’s workload and the frequency of data submissions from creditors.

3. There’s a lag between when your credit reports update and when your score updates

Even after the credit bureaus update your credit report, there may still be a lag before your credit score reflects these changes. This is because your credit score is calculated based on the information in your credit report. While some credit scoring models may update more frequently, others may only update periodically, resulting in delays in your credit score reflecting recent changes.

4. Not everything is strong enough to impact your credit score

Additionally, your credit score may not change significantly if there hasn’t been much recent activity on your credit accounts. For example, if you haven’t made any new credit applications or incurred new debts, your credit report may remain relatively unchanged.

The Reality of Fixing Credit

While some changes to your credit report may occur relatively quickly, significant updates to your credit score typically take time to reflect accurately. It’s essential to be patient and continue practicing responsible credit habits while waiting for your credit score to update.

While you may not be able to fix your credit in a week, there are some strategies you can try to start improving it immediately:

Always Try to Pay Your Bills on Time

Making on-time payments is one of the most important factors in your credit score. Even a single late payment can have a negative impact, so prioritize paying your bills by their due dates.

Pay Down Credit Card Balances

If you have high credit card balances, paying them down can improve your credit utilization ratio, which in turn can positively affect your credit score.

Check Your Credit Report for Errors

Errors on your credit report can drag down your score. By reviewing your report and challenging any inaccuracies, you can potentially see an impact to your score. You can request a free copy of your credit report from each of the three main credit bureaus at AnnualCreditReport.com . 

Become an Authorized User

If you have a trusted family member or friend with good credit, asking to become an authorized user on one of their credit accounts can help boost your score. Just be sure that the primary account holder has a history of responsible credit usage.

Report Rent and Utilities

Rent, utilities, cell phone bills are examples of regular payments you may be making each month that don’t show up on your credit. If you feel confident that you can continue making those payments each month, you can always sign up for a rent and utility reporting service in order to get credit for paying your bills on-time.

The Importance of Patience

Unfortunately, the idea of fixing your credit overnight or even in a week is mostly a myth. 

While it’s understandable to want to improve your credit as quickly as possible, it’s essential to approach the process with patience and realistic expectations. By focusing on making responsible financial decisions over time, you can gradually raise your credit score and achieve your financial goals.

Source: credit.com

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Bad credit is detrimental to your financial standing in many ways. A low credit rating can mean getting credit cards and other credit lines at exorbitant interest rates and low limits.

If your rating is really low, your credit applications may not be approved at all. Further, landlords may decline your rental application or ask for higher security deposits. 

Simply put, the negative effects of bad credit are so far-reaching that many people are willing to do anything to get a better score. To this end, you’ll find services offering to delete negative items from your reports.

So, do such fixes work? If not, how do you go about fixing poor credit? 

Let’s find out:

Can Poor Credit History Be Erased?

Yes and No. If the right steps are taken to remove mistakes in your report, then bad history can be erased, allowing your rating to get a boost.

On the other hand, a service that promises to erase correct, but negative, information on your report is a scam. Companies running such frauds can even go further in promising you a completely new and blemish-free identity.

Are Credit Repair Companies Legal?

Credit repair is a legal service that is guided by the Credit Repair Organizations Act (CROA). Under the act, companies work within a framework that protects consumers from unscrupulous practices. 

This consumer protection act has been in effect since 1996 and bans:

  • Changing a client’s identity to hide them from lenders and credit reporting bureaus.
  • Assuring consumers that they can erase items from a credit report.
  • Getting paid for incomplete repair services.
  • Advising you to make deceitful claims to furnishers of credit information or agencies. 

Credit repair companies are also obligated to notify consumers that they can directly raise issues with credit reporting agencies. 

Furthermore, the bureaus are required to make certain that their reports are without error and investigate any issues about the reports they generate. 

It’s also worth noting that it’s within your right to sue any company that contravenes the CROA. 

How Do Credit Repair Firms Remove Bad History?

Companies in this field act on your behalf to access your financial reports and dispute errors. A successful service ensures that the damaging information is excised from your credit report. The service involves:

Checking Credit Reports

The company requests your reports from Experian, Equifax, and TransUnion. With the three reports, credit repairers can have a complete picture of your finances, since creditors are not required to subscribe to all credit agencies. 

Reviewing and Disputing Errors

Credit repair professionals go through the different entries in your reports, confirming details as contained in supporting documents from the primary sources. 

For example, to find out if a credit limit is accurate, the entry is checked against a statement from the specific credit line issuer. Such errors are marked and the right documents are prepared to initiate a dispute. 

Disputes are raised with both credit bureaus and the originators of the misleading information. Errors can be anything from a misspelled name to duplication of debt. 

If the disputes have merit, the bureaus are required to erase the affected entries. This is usually effected within a month or so after the process is initiated via mail or online.

What Can’t Be Erased from a Credit Report?

No matter how expensive a credit repair service is, some entries can’t be removed from a credit report. In a nutshell, all correct information stays on your report, irrespective of how damaging it is to your credit rating.

At the same time, bureaus are required to retain some vital entries in your reports, long after you have cleared the debt. Such entries include:

  • Payments for the last 24 months, whether they were timely or not.
  • Bankruptcies on your report can remain for up to 10 years, even after your status changes before the duration lapses
  • Applications for loans, credit cards, business loans, and other forms of credit. The entries are known as hard inquiries and stay on your credit report for 2 years.

The Takeaway

One approach to improving your credit standing is finding and disputing wrong information in your credit report. Common errors include incorrect accounts, inaccurate personal details, and data management errors.

With your authorization, credit repair services can help rectify mistakes and erase errors that are lowering your credit rating. However, such businesses are governed by laws that prescribe limits to what can or can’t be erased from a credit report. 

Ultimately though, you need to build your credit through timely payment of balances and not maxing out your credit limits. 

Source: creditabsolute.com

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A goodwill letter is a written correspondence that asks creditors to remove negative remarks from your credit reports.

Key points:

  • A goodwill letter is more likely to work on smaller negative items, such as late or missed payments.
  • The creditor has no obligation to honor or even respond to a goodwill letter.
  • Write a goodwill letter as you would for any business-related correspondence—keep it professional, clear and concise.
  • Take the necessary steps to avoid incurring negative items in the future.

Negative items, such as late or missed payments, can have a considerable effect on your credit score and make it harder for you to secure loans in the future. Luckily, if your late payments are a one-time thing and you have an overall positive relationship with your lender, you may be able to send a goodwill letter to have these negative items removed.

Read on to learn more about goodwill letters and how you can use them when taking control of your credit.

What is a goodwill letter?

A goodwill letter is a request to creditors to remove negative remarks from your credit reports. As the name “goodwill” suggests, this request puts it on the creditor to make a good-faith effort to cooperate and work with a client or customer, and to establish a good business reputation with its clients. A creditor might be willing to take such action if you have good history with the individual creditor and have demonstrated effort on your part to handle credit and finances more responsibly.

Creditors are never obligated to remove accurate negative items simply because you ask. And in some cases, creditors may not be able to remove the items due to internal policies or agreements with the credit bureaus. Nevertheless, making the request only takes a bit of your time, so it might be worth a try.

When should you use a goodwill letter?

It’s best to send a goodwill letter when you have a logical reason for missing a payment. Potential reasons for sending a goodwill letter include:

  • You experienced an unforeseen financial hardship that temporarily prevented you from paying your bills.
  • You or a loved one had a medical emergency. 
  • You recently changed banks and forgot a payment during the switch.
  • You moved locations, but they didn’t send the bill to your new address.
  • You were under the impression that you set up automatic payments, but there was a technical difficulty.

Whatever your reason for missing the payment, be sure to communicate to the creditor that you’re committed to getting your credit back on track.

What can goodwill letters remove?

Goodwill letters are more likely to work for smaller negative items, such as late or missed payments. That’s because many creditors have agreements with credit bureaus that they will not negotiate with individuals to have repossessions, collection accounts or charge-offs removed in exchange for payment.

While you’re free to send a goodwill letter any time, they are—generally—most effective when you want to get a mark related to a one-time negative issue removed.

How long will it take to get a response?

A goodwill letter is an unofficial letter sent to a creditor. As such, there’s no timeline requirement or even an obligation on the creditor to respond to the letter. How long the letter takes to generate a response—or whether any response is generated—varies.

A goodwill letter is not an official credit dispute letter. When someone finds an inaccurate item on their credit report, they can send a credit dispute or verification letter to the credit bureau. This prompts the credit bureau to launch an investigation, which comes with specific timelines that must be followed by the credit bureau and any creditor that is asked to provide documentation for the negative item.

Do goodwill letters work?

While there is never any guarantee that a goodwill letter will be successful, they have the best chance of working when the borrower and the lender have a good relationship. If you’re already in collections or have a long history of making late payments, you might not have good enough standing to successfully make the request.

How to write a goodwill letter

Write a goodwill letter as you would any business-related correspondence. Type and print it, and keep it professional, clear and concise.

While you can provide details about the reasons for a lapse in payment or another negative factor, a goodwill letter should not focus on the emotional aspects. The goal should be to show the creditor that the issue was not indicative of how you normally handle credit. You may also draft the letter in a way that shows that you have substantially improved how you handle credit.

This helps the creditor see you as a more valuable client, which can encourage them to do a goodwill favor for you. The goal of such a letter should not be to make the creditor feel sorry for you.

When writing your letter, include details that can help the creditor identify your account and the negative item in question. Then, provide a short description of why you think the creditor should remove the negative mark. You should include:

  • Your account number
  • The date and type of issue that occurred
  • Information that identifies the negative mark
  • Information about how long you have had a relationship with the creditor
  • Information that shows this is not habitual behavior for you
  • Sincere regret that this occurred
  • A specific call to action that explains what you are asking of the creditor

Example of a goodwill letter

If you’re unsure how to write a goodwill letter, check out this example to get started.

Re: Account No. [Account number]

Sally Joe

1199 La Playa Street

San Diego, CA 91932

To Whom It May Concern:

I’m writing this letter to express my gratitude as a longtime customer of California Bank and to discuss a concern regarding my account. Specifically, I would like to discuss an item posted to my credit report regarding this account and request that it be revised.

My account with California Bank began on 2/10/2013. Since that time, I have enjoyed excellent customer service and benefits and have been happy with California Bank. I have also been a customer in good standing, paying my account in a timely manner while qualifying for loyalty programs.

However, in January, I was in a major car accident and spent a week in the hospital. This led to a temporary decrease in my income and an influx of medical bills. While I was able to bounce back financially and now am continuing to pay all my debts as owed and in a timely manner, the first month after my injury was financially difficult, and this is when I missed that single payment.

I wish I could have continued with normal payments during that time, and I regret that I wasn’t able to do so. Following that personal emergency, I’m working hard to repair any damage done to my credit and personal financial life, and I’m reaching out to you for support in that effort.

I’m asking that California Bank give me a second chance at a fully positive credit history with your organization by removing the late payment mark from my credit report with all three credit bureaus. Please let me know if there is anything else I can provide to support you as you consider my request. Thank you.

Sincerely,

Sally Joe

Goodwill letter sample + template

How to avoid incurring negative items in the future

As mentioned above, goodwill letters are most likely to work for one-off occurrences. So, if your goodwill letter is successful and a creditor agrees to remove a negative remark from your credit report, it’s important that you take the following precautions to avoid incurring negative items in the future:

  • Stay organized. Organizing your finances can help you remember to pay them on time.
  • Pay your bills automatically. If you frequently forget to make payments, set up automatic transfers to stay on top of your bills.
  • Update your contact information. If any personal information changes, like your address, be sure to update it on your statement.
  • Have an emergency fund. Building an emergency fund will hopefully allow you to keep making payments, even in the event of an unplanned expense.

If you’re looking to improve your credit, Lexington Law Firm may be able to help you. Lexington Law Firm’s credit repair services can help you address questionable negative items on your credit reports and to ensure that what is reported on your credit reports are accurate and substantiated pursuant to applicable laws.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Candace Begody

Associate Attorney

Candace Begody was an Associate Attorney at Lexington Law.

Ms. Begody was born and raised in Arizona. She earned her juris doctor from Arizona State University’s Sandra Day O’Connor College of Law and her master’s in business from the W.P. Carey School of Business, also at ASU. Ms. Begody joined Lexington Law in 2022. Prior to that, she worked in transactional and business law in the Phoenix area. Ms. Begody is licensed to practice law in Arizona and was located in the Phoenix office.

Source: lexingtonlaw.com

Apache is functioning normally

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. Latest posts by Steve Rhode (see all) .u92ccdc757eaf561319558dbbfa56aac1padding:0;margin:0;padding-top:1em!important;padding-bottom:1em!important;width:100%;display:block;font-weight:700;background-color:#fff;border:0!important;border-left:4px solid #fff!important;box-shadow:0 1px 2px rgba(0,0,0,.17);-moz-box-shadow:0 1px 2px rgba(0,0,0,.17);-o-box-shadow:0 1px 2px rgba(0,0,0,.17);-webkit-box-shadow:0 1px 2px rgba(0,0,0,.17);text-decoration:none.u92ccdc757eaf561319558dbbfa56aac1:active,.u92ccdc757eaf561319558dbbfa56aac1:hoveropacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms;text-decoration:none.u92ccdc757eaf561319558dbbfa56aac1transition:background-color 250ms;webkit-transition:background-color 250ms;opacity:1;transition:opacity 250ms;webkit-transition:opacity … [Read more…]

Apache is functioning normally

Apache is functioning normally

Identity theft is a major problem. According to the Federal Trade Commission (FTC), there were more than 650,000 victims of identity theft in 2019, making ID theft the most-reported type of FTC complaint.  Chances are good that you will encounter identity theft in your lifetime. That was the case for at least 1 in 10 Americans ages 16 and older in 2016, according to the most recent data from the Bureau of Justice Statistics.

Protecting your identity and privacy should be a priority for you, and knowing what identity theft is can help you prepare. There are many different types of ID theft, which can make safeguarding your personal information even more important—and more difficult. Let’s look at some of the most common examples of identity theft and what you can do to manage the risks.

Defining Identity Theft

The term “identity theft” is used a lot, often interchangeably with “fraud.” Though many instances of identity theft are committed for fraudulent reasons, the two are slightly different. If you are a victim of identity theft, you want to catch it before it becomes fraud.

According to the National Center for Victims of Crime (NCVC), identity theft is “the knowing transfer or use, without lawful authority, of another person’s identity with the intent to commit, aid, or abet unlawful activity.” In simpler terms, ID theft is the act of stealing another person’s information, like through mail theft, phishing, card skimming, unsecure Wi-Fi or a data breach. Fraud is when a criminal illegally uses that information for their own gain.

The NCVC calls the latter “identity fraud,” which encompasses crimes like credit card fraud, medical fraud, and Social Security number theft. Identity fraud can be financially driven, but is also committed out of other motivations. Someone might try to steal your passport or driver’s license information to travel unnoticed by law enforcement, for example.

  • I just watched a documentary on the dark web, and I will never feel safe using my credit card again!

  • Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.

  • I need that peace of mind in my life. What else do you get with ExtraCredit?

  • It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.

  • It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.

  • …we live in Oklahoma.

Whether an ID thief uses your credit card or medical insurance, the cost to you can be big. Javelin Research found that the 2018 out-of-pocket costs for victims of identity theft were $1.7 billion.

Different Types of Identity Fraud

As a popular saying goes, “Know your enemy.” Let’s take a closer look at identity fraud types and preventative measures you can take to prepare yourself and protect your finances.

1. Credit Cards

Credit card fraud is by far the most prevalent type of identity theft, according to FTC numbers.

You probably store your credit card information with different vendors or subscription services. If you used your card once at a retail store, they’ll still have your information on file. If a data breach occurs at one of those businesses, someone may gain access to your credit card number and begin to make fraudulent purchases.

While it may be easier to catch a fraudulent charge on a card you have, it could be harder to spot a new account in your name. In the meantime, hard inquiries and high credit utilization due to fraud could wreck your credit score.

What you can do: Requesting a chargeback might help you avoid paying for specific fraudulent transactions, but checking your credit report will show you if the problem is deeper. Sign up for ExtraCredit to keep an eye on your credit report and scores at the same time to make sure that fraudulent accounts aren’t being opened or used. You can also request your free credit report from each of the three credit reporting agencies once a year to keep close control over your identity and credit profile. If you notice anything fishy, request a freeze immediately and file a report with the FTC.

Note: Due to the COVID-19 coronavirus pandemic, you can currently review your credit reports from each of the three credit bureaus for free each week, through April 2022.

2. Loans and Leases

Somebody with your personal information might try to apply for a loan online. Fraudsters may then be able to get financing to buy a car or real estate. The FTC has also reported fraud instances related to student loans and payday loans.

Loan application fraud is a challenge to track, but the impact is someone racking up debt in your name. When creditors come calling, it won’t be the thief who has to answer the phone.

What you can do: As with credit card fraud, regularly check your credit reports to watch for red flags. If you spot something, immediately contact the responsible financial institution. You may also want to file a police report or contact the office of the attorney general for your state. If you are the victim of loan/lease fraud, consider using credit repair services to help you recover.

3. Phones and Utilities

Mobile takeover fraud is a complicated scheme, but it’s a growing problem. Basically, it involves a fraudster using your information to access your smartphone and then lock you out. In the meantime, they can use your apps, read saved documents, or scam others by impersonating you. They might also harvest your personal and financial information that you have saved. The same might happen for an electricity or water account: A criminal finds a way in and consumes services that are ultimately billed to you.

The common theme with identity theft here is that if someone has your info, they can do just about anything with it. This includes opening up utility accounts in your name, getting free electricity, gas, water, internet or cable.

What you can do: Maintain strong passwords for all the accounts you have. If you need to, use a password manager to help you keep track of all the complex log-in credentials. Never, ever make your passwords using personally identifiable information, like a pet, birthdate, or home street. Should something happen, immediately contact your service provider.

4. Tax Fraud

Come tax time, a refund is a happy surprise for some Americans. Others may get a nasty shock when they’ve learned someone has claimed their return before they even file their taxes. Tax fraud typically occurs when someone has stolen your Social Security number, which they can then manipulate to falsely file a return and claim your refund.

What you can do: Under no circumstances should you give your SSN to anybody but trusted entities like the government, your bank, or your credit card company. Be wary of scammers posing as the IRS who will call or email you demanding your SSN information. This is a surefire sign of fraud. You can also opt to file your taxes early, thereby eliminating the opportunity for thieves to file for you and claim your return.

The IRS recommends watching out for various scams. If you believe you’ve been a victim, file a report on IdentityTheft.gov, call the IRS at 1-800-908-4490, and complete and submit the identity theft Affidavit.

Taking the Next Steps to Protect Your Identity

Identity theft is a constant threat, so you’ll always need to be on your toes.

Guard It from ExtraCredit provides you with proactive alerts, dark web monitoring, account monitoring, and $1 million in ID theft insurance.  Sign up today or read more articles about identity theft and fraud.

Source: credit.com

Apache is functioning normally

Today the Consumer Financial Protection Bureau and Lexington Law, the largest credit repair operation in the United States, entered into a Stipulated Final Judgement and Order the Court must approve. I would be surprised if they didn’t.

I’m going to bold what I think are the most important revelations.

The proposed order says, “Plaintiff Bureau of Consumer Financial Protection (“Bureau”) commenced this civil action on May 2, 2019, to obtain injunctive and monetary relief and civil penalties. The suit alleges, among other things, that the Defendants violated the credit repair advance fee provision of the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.4(a)(2), by billing clients for credit repair services before the timeframes required by the advance fee provision had expired. On March 10, 2023, this Court issued an order agreeing with the Bureau’s position.

Credit repair organizations that market or sell their services over the phone, irrespective of whether they promise a specific result to consumers, must follow the TSR, including the advance fee provision.

That is, credit repair organizations that market or sell services over the phone may not request or receive payment of any fee for credit repair services until (i) the time frame in which they have represented all of the goods or services will be provided to that person has expired; and (ii) they have provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved.

And no business may substantially assist a credit repair organization that it knows or consciously avoids knowing is engaged in an act or practice that violates the TSR, including by doing such things as providing back office support, technical know-how, lead generation, or data that supports their non-complaint credit repair practices or billing.

The Defendants and the Bureau have now agreed to settle the litigation. As part of the settlement, Lexington Law, CreditRepair.com, and Progrexion—the largest credit repair organizations in the United States—have agreed that, among other things, they will not violate the advance fee provision of the TSR, nor will they knowingly assist or support any company that is violating that provision.

Consumers considering using a credit repair company should be aware that it is illegal for a company to charge them for telemarketed credit repair unless it has been six months since the company achieved the promised results. Their consumer report has to show that the promised results were achieved six months earlier than they can be billed. Credit repair organizations accepting clients via inbound or outbound telemarketing must conform their billing practices to the full requirements of the TSR, including the advance fee provision of the TSR.

.u1df350f6a14e2ae19be1787c92e07417padding:0;margin:0;padding-top:1em!important;padding-bottom:1em!important;width:100%;display:block;font-weight:700;background-color:#fff;border:0!important;border-left:4px solid #fff!important;box-shadow:0 1px 2px rgba(0,0,0,.17);-moz-box-shadow:0 1px 2px rgba(0,0,0,.17);-o-box-shadow:0 1px 2px rgba(0,0,0,.17);-webkit-box-shadow:0 1px 2px rgba(0,0,0,.17);text-decoration:none.u1df350f6a14e2ae19be1787c92e07417:active,.u1df350f6a14e2ae19be1787c92e07417:hoveropacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms;text-decoration:none.u1df350f6a14e2ae19be1787c92e07417transition:background-color 250ms;webkit-transition:background-color 250ms;opacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms.u1df350f6a14e2ae19be1787c92e07417 .ctaTextfont-weight:700;color:#141414;text-decoration:none;font-size:16px.u1df350f6a14e2ae19be1787c92e07417 .postTitlecolor:#c0392b;text-decoration:underline!important;font-size:16px.u1df350f6a14e2ae19be1787c92e07417:hover .postTitletext-decoration:underline!importantSee also  Should I Keep Paying Lexington Law Firm to Repair My Credit?

You can read the court documents here and here.

Today, the Consumer Financial Protection Bureau (CFPB) entered into a proposed settlement with a ring of corporate entities operating some of the largest credit repair brands in the country, including Lexington Law and CreditRepair.com. The agreement follows a ruling from the court that the companies collected illegal advance fees for credit repair services through telemarketing in violation of federal law. If approved, the settlement would impose a $2.7 billion judgment against the companies. The order will also ban the companies from telemarketing credit repair services for 10 years.

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“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law. These credit repair giants used fake real estate and rent-to-own opportunities to illegally bait people and pad their pockets with billions in fees,” said CFPB Director Rohit Chopra. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”

Lexington Law and CreditRepair.com are the largest credit repair brands in the country. The credit repair services are marketed and offered through a web of related entities in the Salt Lake City area, including PGX Holdings, Progrexion Marketing, and the John C. Heath, Attorney-at-Law PC law firm. During the time period relevant to the lawsuit, the companies operated nationwide and had more than 4 million customers who were subjected to telemarketing. In 2022, the defendants had combined annual revenues of approximately $388 million.

The CFPB previously sued the companies to halt their illegal conduct and seek redress and other relief. In March 2023, the district court ruled that the defendants violated the advance fee provision of the Telemarketing Sales Rule. The Telemarketing Sale Rule provides a range of protections for consumers related to telemarketing and sets payment restrictions for certain goods and services. It requires credit repair companies to wait until six months after they provide the consumer with documentation reflecting that the promised results were achieved, before they request or receive payment from the consumer.

Following the district court’s ruling, the companies filed for Chapter 11 bankruptcy protection. The companies represented that they had shut down about 80 percent of their business, including their call centers, and laid off about 900 employees in response to the court’s ruling.

.ud27113728ba13b371a3cab030c9dc6d4padding:0;margin:0;padding-top:1em!important;padding-bottom:1em!important;width:100%;display:block;font-weight:700;background-color:#fff;border:0!important;border-left:4px solid #fff!important;box-shadow:0 1px 2px rgba(0,0,0,.17);-moz-box-shadow:0 1px 2px rgba(0,0,0,.17);-o-box-shadow:0 1px 2px rgba(0,0,0,.17);-webkit-box-shadow:0 1px 2px rgba(0,0,0,.17);text-decoration:none.ud27113728ba13b371a3cab030c9dc6d4:active,.ud27113728ba13b371a3cab030c9dc6d4:hoveropacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms;text-decoration:none.ud27113728ba13b371a3cab030c9dc6d4transition:background-color 250ms;webkit-transition:background-color 250ms;opacity:1;transition:opacity 250ms;webkit-transition:opacity 250ms.ud27113728ba13b371a3cab030c9dc6d4 .ctaTextfont-weight:700;color:#141414;text-decoration:none;font-size:16px.ud27113728ba13b371a3cab030c9dc6d4 .postTitlecolor:#c0392b;text-decoration:underline!important;font-size:16px.ud27113728ba13b371a3cab030c9dc6d4:hover .postTitletext-decoration:underline!importantSee also  I Want to Join in Lawsuit Against Lexington Law

Enforcement Action

Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices, and against institutions violating the Telemarketing Sales Rule.

If entered by the court, the settlement will, among other things:

  • Ban the perpetrators from telemarketing for 10 years: The companies will be banned from telemarketing credit repair services or selling credit repair services that others marketed through telemarketing for 10 years. The companies will also be banned from doing business with certain marketing affiliates. These bans will attach to the companies even after the bankruptcy proceedings are complete.
  • Require notices to consumers: The companies will be required to send a notice of the CFPB settlement to any remaining enrolled customers who were previously signed up through telemarketing. The notice will inform consumers of the CFPB’s lawsuit, the court’s summary judgment holding, the settlement, the consumer’s right to cancel their credit repair services, and the process for canceling the service.
  • Impose a $2.7 billion judgment for redress: The order would impose a $2.7 billion judgment against the companies for redress. Due to the companies’ financial insolvency, the CFPB will determine whether the CFPB’s victims relief fund can be used to make payments to those harmed by the perpetrators.
  • Impose more than $64 million in civil penalties: The order would impose a $45.8 million civil money penalty against Progrexion Marketing and a $18.4 million civil money penalty against the Heath law firm.
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
Latest posts by Steve Rhode (see all)

Source: getoutofdebt.org