Why Credit Repair Doesn’t Work

Since the FCRA created a legal framework for the bureaus in the ’70s, there has always been a need for consumers to understand what the heck a score is and how to make sure it's working for their benefit rather than against them. Credit Repair did this one thing really well: Somehow the average consumer has been fed a line that says “Credit Repair is the best way to take control of your credit score”. While this is not true, it at least established one REALLY powerful notion for our consumers: For the first time, the average person started to accept the idea that there was SOMETHING that they could do to have an effect on this elusive score.  

How did this credit thing even come about?

Let’s go over some history. When the three credit bureaus were initially established, they compiled and held information on consumers and tied it to their social security numbers. This means that even if you wracked up some bad debt in New York, you couldn’t simply move to California to start fresh. The data would follow. Credit reporting isn’t all bad. Now for every instance that this did not help the consumer, there was also the consumer who benefited greatly. For example, if you had a great history of borrowing money and paying your debts, the reports tied to your social security numbers could ensure creditworthiness wherever you went. Back then if a bank wanted to lend you money and you didn’t have a family history of banking with them, then they could rely on your reports. They’d pull them up and with a team of experienced analysts try to determine if you could be trusted.  

What were they seeing on these reports?

When people think of a credit report nowadays you imagine a structured report delineating multiple pieces of data in an organized way. Each item reported has dates and terms including things like type of account, open date, standing with the original credit, etc. This was not always how credit worked. Back then, just about anything could make it onto your report. You might find that your neighbor had “reported” that you listen to music too loudly on the weekends, or that you gambled. Before the Credit Reporting Act dictated the rules of reporting and consumer rules, things were getting messy.

How does this have to do with my credit score?

As you may have guessed, it was becoming increasingly more difficult to make sound financial decisions off of these messy reports. Because consumers weren’t allowed to view their own reports, there was also no way to know if the things reflecting on them were even accurate. Banks and lending institutions needed a better way to predict whether someone could be trusted to pay back the money that was lent to them. Cue, Fair Isaac Company. Two fellas by the name of Bill Fair and Earl Isaac put their heads together to help bankers tackle this problem. They took reports from all three bureaus and created an algorithm to try to make some type of grading system that lenders could rely on. Their first scoring system was developed and sold in 1958 and it was the FICO (Fair Isaac Company) score we still know and use to this day. A number that roughly ranges from 350 to 850, that predicts the higher the score, the greater the chance you could repay your debts, the lower the score, the riskier the investment. They would take into account each and every piece of data on their reports along with other factors they call “exogenic factors”.

Are you telling me that my credit score can change based on where I live?

Oh, honey…. We aren’t ready to get into the myths of exogenic factors… That is for another day. It's been over 60 years and we are STILL using the FICO score? The bureaus have each created their own scores to try to compete with the FICO score, these are known as Vantage scores. In fact, the bureaus are trying to get the lending industry to use them, but FICO still predominantly rules the banks.  

Why is FICO so important?

Here’s the deal. People have been trying to reverse engineer the FICO score since its inception. The algorithm that creates the score is kept under lock and key, and FICO is only as valuable as other people's inability to reproduce it. So you’re saying, FICO is only a thing because it's so confusing? NOW we are getting back to credit repair! If FICO was established and successful based on how hard it is to figure out, then how on earth can the average consumer take control of their FICO score. Let’s talk about the FCRA Please don’t talk to me about laws that got passed in the ’70s… I’m sorry, but I really have to. The Fair Credit Reporting Act was passed in the ’70s. It created the legal framework for the bureaus as well as established consumers' rights in regards to their reports. Before the FCRA, consumers couldn’t see their own reports or scores. In addition to not seeing the scores or information that lenders were declining consumers over, there was no way to make sure there was correct information on it. The FTC has since reported that there are still errors in 1 in 5 people's reports.

What does this have to do with credit repair?

One of the biggest consumer rights defined by the FCRA is a consumer's ability to challenge the accuracy of items on their reports. If a consumer feels an item is inaccurate, unverifiable, or misleading, the consumer has a right to dispute it. A dispute will go to the bureaus, the bureaus will send it to the original creditor who reported it, and if the original creditor can’t respond to the dispute within 30 days proving its efficacy they have to remove it.

So that's how credit repair works?

Yup! You challenge negative items, and you roll the dice about what can stay on and what will be removed. For very specific consumers who have a lot of good credit items, removing negative items can actually increase someone's credit score. More often than not, removing negative items from someone's report still won’t create a powerful credit profile.  

How do you create a powerful credit profile?

In order to have a credit profile that can leverage your current income for your big financial goals, you have to do more than just remove negative items. While credit repair can be a great step in the process, it certainly isn’t the end goal. Let’s say you ask me to build you a house, so I dig you a basement. There you go! A hole in the ground…. In some ways, you are kind of left with even less of a house- That is credit repair, it may be a necessary step, but it definitely won’t get the job done.

So how do I achieve my big financial goals with the income I currently have?

In order to get what you want with what you currently have, you have to have a powerful credit profile. A powerful credit profile will allow you to leverage the income you have to get the things that you want. Archimedes said “give me a place to stand, and I will move the earth. Think of leverage as a lever. If you know how to work it, you can get a whole lot done with very little. This mathematician understood the power of leverage.

If credit repair won’t do the trick, how do I turn my credit into a powerful lever?

The only way to have a powerful lever is to have a powerful credit profile. Simply removing negative items is not enough as we have already discussed. You also have to build good credit on your profile. Building good credit can take a long time and it can be chock full of minefields. Just opening new credit lines and trying to use your credit is not enough. Too much credit can increase your score and still ruin your ability to leverage your accounts. So getting rid of negatives won’t work, adding positives might hurt…. WHAT DO I DO? Other than years and years of trial and error there is only one solution. You need someone who knows all the pitfalls of credit, and all the ways to create success to walk you through that. If you combine that with someone who also understands the issues that have gotten in the way and a really clear idea of your goal, then your ability to accomplish this can be fast-tracked. If your case might have taken 10 years, with the right help you might be able to move that to 6 months or a year.

Are you telling me I need to find a unicorn to help me buy my house?

Lol… I understand it seems that way, but no. You need Credit Innovation Group. At Credit innovation group you will be paired with a personal credit profile specialist. Instead of giving you a million different products to sign up for, they will help you create a map and then use their team to walk you through every step of the way. Most of our customers have a goal to buy a home so as your scores begin to increase, CIG starts looking at the non-credit items that your lender will be reviewing. After that, it's time to talk to a lender and see what other items they will need. Purposeful is a core value of Credit Innovation Group, which means we are satisfied with the end goal and nothing less.  

So, I should sign up for Credit Innovation Group and get my own Credit Specialist?

Yup. Because Credit Repair alone doesn’t work.