Tuesday, December 9, 2008

Credit Repair - Dealing With Collection Accounts

The first step in credit repair is always to get a copy of your credit report. So I'm just going to assume that you have this. Let's deal with cleaning up your collection accounts.

First of all, one of the main things to keep in mind while dealing with the collectors who report on your credit report is that you need to have a paper trail. This is one of the reasons why you deal with them through the mail. STAY OFF THE PHONE! Besides not being verifiable, they are trained to negotiate you into paying them something, any little payment, anything they can get out of you. Their purpose for communicating with you is NOT the same as your purpose for communicating with them.

Your purpose is to get them to prove that you owe them. Your purpose is to get them to validate the debt. Your ultimate goal is to get it removed from your credit report. If they cannot legally prove it is your debt, you have no legal responsibilty to forward any money to them. They have to prove it is yours by supplying a contract, signed by you. They have to supply a complete history of your usage and payments for this account. They have to prove that your last date of activity is still within the statutes of limitations. They also have to prove that they have a legal right to collect on the debt and supply you with a breakdown of what they are charging you, including their fees.

So first, you need to send them a letter demanding validation of the account listed on your credit report. You do not need proof that they have your name, address, etc. Validation means proof of the account belonging to you. You will want to send this letter to them US certified mail with return receipt. (USCMRR). You get a receipt at the post office and when they receive it, they must sign for it. You then get that green card back, your proof of receipt. This then puts them on notice.

At this point, when you have received the green card back in the mail, you need to write a letter disputing with the bureaus. The reason you wait until after you have received the green card back is because once they have been put on notice that you are disputing the account, the law says that all collection activity has to cease until they provide legal validation.

The law considers the following things collection activity: Sending you a bill, calling you on the phone, calling people who may know you, reporting to a credit bureau, verifying with a credit bureau. The only thing they are allowed to do to your credit report is to note that the account is being disputed.

So, when you dispute with the bureaus, they will (or claim they do) contact the companies of the accounts you are disputing and attempt to verify that the information they have provided is accurate. Since verifying is legally considered to be a form of collection activity, they are not allowed to verify with the bureaus whether or not the information is correct. If they follow the law and do not verify, the tradeline is removed as requested by you.

Now, if they followed the law and the bureau followed the law, and people performed credit repair in this way, there would be a lot more good credit reports out there. Unfortunately, bureaus don't actually "investigate" and collectors don't usually give a crap about following the law. This is why credit repair does not happen overnight. But don't be discouraged. There is a good side to them breaking the law!

If you keep a paper trail - copies of all letters sent to both the bureaus and collectors, and receipts of when you mailed the collectors, you will build a nice file to use against them. Every violation of the law is accompanied by a nice little fine for the violator! Every time they report, verify, or continue regular collection activity (like sending you a bill instead of validation), they rack up fines you can charge them in court. Or you can use the huge amounts as a bartering chip. They can pay you a reduced amount and remove the tradeline from your report in exchange for you not suing them!

The courts will want to see a lengthy paper trail though. Not just 1 attempt to get something removed. They will want to see that you followed up 3, 4, 5, maybe 8 - 10 times with the collector trying to get them to validate. They will need to see your letters to the bureaus also disputing these tradelines. They will also need to see, from several copies of your credit reports over a number of months, the blatant disregard for the law that the collector shows by updating, verifying, and reporting the disputed tradeline, after being demanded to provide validation and not providing it.

Also keep everything they send you in your file. You will need to show the court what they have sent as supposed validation. Show the court the letters that request you send them information about the account you are disputing and requiring validation on. DO NOT SEND THEM ANYTHING! It is not your responsibility to provide them with information of the account. If they are accusing you of owing the money, then they should have everything they need! THE BURDEN OF PROOF IS ON THEM - NOT YOU!!

I love it when they request additional information on an account. This just proves to me that they do not have what they need for proper validation. This means that this account should be removed without too much trouble. Send a copy of the letter to the bureau with your next dispute. Show the bureau that they just said that they verified an account was accurate, yet the collector admits in writing, he doesn't have the information needed to know if it is accurate. How on earth can they truthfully verify that?

At this point, you can threaten to sue both of them if they do not remove the trade line. Usually it works. Not 100% of the time, because let's face it, they break laws on a regular basis. Generally you are dealing with minimum wage workers who have no clue of the law, and they assume that if they don't change it, you will not sue. In fact, they hope that they frustrate you into giving up.

Go back through all the letters and make a list for each collector and each  credit bureau. List every violation and the fine attached to each violation. When they see you're not giving up and you're not a mindless idiot, you're someone who has taken the time to know the laws and the fines that go with them, they will usually back down and remove the inaccurate tradelines, giving you the report, or a cleaner version of the report that all your hard work deserves!

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