Proactive Versus Reactive Credit Repair

Editor’s Note: This is part three of the series Profile of the Credit Repair Customer.

If you don’t require consumers to obtain credit monitoring, how will you obtain a credit report legally? The answer is that you can’t. The consumer might bring you the tri-merge report from the mortgage lender or you may even have an unwilling mortgage lender send the report to you directly, but in this case, everyone is operating outside of federal law. Federal law prohibits access to credit reports except for the permissible purpose that the report was pulled. For example, a car dealer can use the report to approve car loans; a mortgage lender for a mortgage loan, and so forth.

Additionally, every mortgage lender’s Terms and Conditions of their membership with the bureaus prohibits the use of the report for purposes of credit repair. It is not a matter of if but of when the bureau will determine that a lender providing reports for credit repair purposes. It is important to not only follow the federal law but also to be careful not to place an ignorant loan originator in a position to ruin his employer’s business. Protect your affiliate from themselves; don’t use Tri-merge credit reports.

Instead, require the consumer to obtain an account with a credit-monitoring provider. While the Terms of Service between the consumer and the monitoring company prohibits the use of the report for credit repair, this agreement does not place anyone in harm’s way by violating permissible purpose laws. The consumer is obtaining a consumer report and can do with it as he or she pleases.

Moreover, using the same credit monitoring service during the life of the customer streamlines the comparison of updated subsequent reports to the previous report. The reason is that each credit monitoring company and the tri-merge provider has unique nomenclatures that they use in their reports, therefore making it difficult to correlate entries and this make mistakes during the review and update.

Credit monitoring also allows you to provide a proactive versus reactive service. Reactive credit repair relies upon the consumer to send in the results received from the bureaus. (Credit Reporting Agencies and creditors are required to respond in writing directly to the consumer in response to a request for an investigation of an item on the consumer report.)

However, all industry participants agree that less than 30% of consumers will consistently deliver these results to the CRO on a monthly or timely basis. Without the results or monitoring, the credit repair process is slowed and becomes re-active at best. Part of the success of any credit repair company is the number of times an investigation is requested by the consumer (the number of rounds of letters). By using credit monitoring, rounds of letters can be produced every 30 to 35 days. Simply stated, the increase in the number of rounds produced during the lifetime of the credit repair customer will improve results.


Credit repair company executives and owners face a myriad of challenges in the derogatory credit industry. It is obvious how important it is to the future economic health of our country to help educate consumers about debt and to assist them where possible in demanding that the Credit Reporting Agencies and Data Furnishes follow federal law. The job of the credit repair professional is to help the consumer have a completely accurate credit report and for the lender to use that credit report to determine the creditworthiness of the consumer. In short, Credit Repair Organizations are both ambassadors of credit education as well as being custodians of their consumer’s credit report.

We must get the Regulators and the Better Business Bureau to concentrate on the fact that consumers have a right to have every trade line on their credit report to report accurately. The PIRG reports that 70% of all credit reports contain errors and that 25% of those files contain errors that will or have caused a consumer to be turned down for a loan.

It is time for the regulators and the Better Business Bureau to concentrate on the enforcement of all consumer credit laws and not just the Credit Repair Organizations Act.

In some cases, if all of the consumers’ accounts are reporting accurately and in accordance with federal law, the consumer still cannot obtain a loan because one or more of negative items have been verified. In that case, the system has worked and the consumer will have to wait until the derogatory item has aged sufficiently so that it does not count against them according to the FICO algorithm of the lender’s guidelines.

That is why it is imperative that the CRO establish appropriate expectations before, during and after the sale and that only the candidates that meet or exceed your guidelines be accepted as a customer. A win must be that the credit report is accurate.

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