Credit Repair Business in Orange County
PCS Online Solutions contributed to this article.
Advertisements seem to be everywhere selling books, and secret plans to help you improve your credit. Most of these programs have claims which read like the covers of supermarket tabloids:
“In three hours my credit score went from 580 to 677!”
“Eliminate bad credit and annihilate your debts with just 2 Magic Letters!”
The reality is that there is good reason for all the advertising. Credit reports and associated scores affect everyone, not just people who need a mortgage. The credit score just makes it simple for business people to make a judgment that seem fair. If your score is above a certain level, you can have credit. If it is below a certain level, you can go elsewhere. If it is in a bad range, you get to pay a higher rate or put down an extra deposit. The creditor just has to say we have the same rules for everyone. In addition to seeming fair, she does not have to hear about how your dog ate the credit card statement, or that the phone company totally ripped you off.
So why would the average lunch bucket Joe pay for credit repair?
1.) EMPLOYMENT SCREENING It’s estimated as many as 42% of employers now do credit checks on applicants before hiring them (according to a 1998 survey by the Society for Human Resource Management). While this is an older statistic, we can assume that most employers check especially for higher income jobs and jobs that require the employee to handle money. While many employers claim they only do it to verify information on your application (such as where you live and where you have worked etc.) we can both assume they are taking the liberty to have a peek at how you handle your financial affairs as well. In today’s competitive market, you can assume that if your credit paints a bad picture of you, employers will just toss your resume into the trash can and move on. They will not go out of their way to call you up and explain why you were not hired.
2) AUTO INSURANCE. As many as 92% of the 100 largest personal automobile insurers use credit information to underwrite new business, according to a 2001 study by Conning & Co., an insurance-research and asset-management firm.
3) HOMEOWNERS/RENTERS INSURANCE. It’s thought many insurance companies see a correlation between low credit scores and increased property insurance claims. Therefore, a low score will result in higher rates.
4) LIFE and HEALTH INSURANCE. Customers who are unable to pay their monthly insurance premium thereby pass along that increased cost to the insurance company that’s stuck with the bill. Since customers who pay without lapse are more profitable it is felt by many that a low credit score now even affects a monthly life and/or health insurance premium negatively.
5) EDUCATIONAL ROADBLOCKS While you as a credit repair expert cannot do anything for your customer that they cannot theoretically do on their own, your services are still needed. Many working age people in Orange County have learned English as a second language, and many of the people who were educated in California’s school system do not have the skills necessary to write a letter. They feel intimidated writing letters to the credit reporting agencies and people reporting delinquencies.
6) NUMEROUS ERRORS According to the Public Research Interest Group (PIRG) as many as 79% all credit reports contain errors, 25% of which are serious enough to cause the denial of credit (according to a 2004 report). I personally know this is true. A credit agency reported I was delinquent on loans I supposedly took out when I was five years old. After I complained, they changed the status of all my legitimate credit lines from paid-on-time to deceased. It was hard to buy a car or rent an apartment as a dead person.
So, what are these credit scores all about and how can you change them?
The fact is, time is only one of any number of factors which can fix any given credit report, but it’s far from being the only factor.
Experian, TransUnion (aka TRW) and Equifax are the three major credit rating agencies. They report the data, and have their own credit scoring system. But the Fair Isaac Company has developed a statistical model that predicts how likely a person is to pay their debts. This is translated into what is called your credit score or FICO. They keep the equations private but there is some public information about how they are constructed, and some firms have backward engineered their system and claim they can predict how much a change in your credit record will change your FICO. But Fair Isaac update their statistical model over time so claims made about the ability to manipulate the score may not be accurate. These are the factors that go into your score:
• The amount of time credit has been established
• The amount of credit used versus the amount of credit available
• Length of time at present residence
• Negative credit information such as bankruptcies, charge-offs, collections, etc.
You can help your clients improve their score in two ways. First, these are the factors you can educate them on to improve their score:
• Pay your bills on time. Late payments will have a serious impact on your score.
• Do not apply for credit frequently.
• Reduce your credit-card balances. If you are “maxed” out on your credit cards, this will affect your credit score negatively. You might be better off having loans up to 1/3 of your limit on three cards rather than having two cards paid off and one card at it’s maximum limit.
• If you have limited credit, obtain additional credit. The score is based on your total available credit. One way you increase this number is to have additional accounts.
The second way you can help your clients is by cleaning up their credit reports. Under a consumer protection law known as the Fair Credit Reporting Act (aka the FCRA), the only negative information which can be left on your credit report is not what is accurate, but only negative information that can be proved as accurate under the FCRA. What in the world does this mean to you?
It means any unflattering item on your credit report can only remain there if it is actually accurate and CAN BE PROVED AS SUCH under the guidelines of the FCRA. This undisputable fact presents consumers like you with both good news and bad news. The good news is that, through the FCRA, your credit score can most likely be improved dramatically in a very short period of time.
The bad news is that while the actual “work” will take very little time, it is essential that you work within the FCRA guidelines to clean up your client’s credit. This means writing letter after letter to the credit reporting agencies, and working with creditors to improve the status of past due obligations. You have to be able to make a case that information on your client’s report is wrong. Now you can do some of this on-line if your clients have given you access to their personal information.
All of this sounds impressive, yet is quite simple. When all is said and done, it is nothing more than a method of communication which exercises your client’s consumer protection rights. In the interest of being complete, there are some less ethical tactics that are sometimes used such as disputing all the bad stuff, and temporarily boosting the score when your client is shopping for a mortgage. We won’t go into this.
Before you decide to start in this business, it would be a good idea to read up on how you can improve your credit scores. You can use this information to improve your score and help out your family.
A great place to start is with this book:
Next, you can go into business your self or buy a credit repair franchise for $10,000-$20,000. But be careful, these have been HOT franchises over the past few years. And it is not 100% clear what if the traditional benefits of owning a franchise—name recognition, reputation, proprietary products—are relevant in this field. The franchises may allow you to get into debt counseling. You will negotiate a reduction on bad debts owed and creditors will give you a percentage of bad debts you can get your client to pay. This advantage to the creditor is that the creditor will get a better deal from you than if they sold the debt off to a collection agency.
See our section on buying a franchise. A couple of franchises you may want to check out are:
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