Credit Repair Fraud

Okay that last entry was a like poking a hornet’s nest. Allow me to clarify, there is absolutely nothing wrong with deleting erroneous information from your credit file/credit report. And that process is fairly simple; few people need to pay hundreds of dollars to achieve correcting a minor mistake. All that is required is to simultaneously send a cover letter to all three repositories and a copy of the proof that clearly shows the mistake. Information on how to do this will be included in my new blog on credit issues and it is free for the taking!

Here is the part from the last entry that created the stir:

All of the credit repair companies that have approached me over the past three years instruct their clients to dispute accurate information on their credit report. Knowingly disputing accurate information on the credit report is intentionally conveying false information with the intent to alter the content of the report in order to be approved for a mortgage.

Those are my words and no one else.

Hey everyone, this is not a rumor, I am sharing what the representatives from credit repair companies have said directly to my face. They instruct their clients to dispute everything including information that is accurate but negative in nature. Everyone should know by now that credit scores are an integral part of the mortgage underwriting process. They can also impact the interest rate the borrower receives. Anyone that knowingly lies to or deceives the credit bureaus to improve their credit rating in order to get a loan or a better interest rate is guilty even if the deception is only an omission of accurate information.

If there were a deduction on your pay stub for payment of a judgment, would it be wrong to white-out the information and provide the altered document in order to get a loan? Of course it would be wrong. This is the same as having the credit bureau remove negative information that you know is correct. Both are omissions of facts.

Here is my stance on this subject, there is absolutely nothing wrong with managing your credit file and therefore your credit report. However, there is nothing right about manipulating or causing false information to be delivered to a lender considering a loan application.

But do not take my word for it, you can find the following information on the FDIC’s web site:

§ 1344. Bank fraud.
Whoever knowingly executes, or attempts to execute, a scheme or artifice--
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
[Codified to 18 U.S.C. 1344]
[Source: Section 1344 added by section 1108(a) of title II of the Act of October 12, 1984 (Pub. L. No. 98--473, 98 Stat. 2147), effective October 12, 1984, as amended by section 961(k) of title IX of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 500), effective August 9, 1989; section 2504(j) of title XXV of the Act of November 29, 1990 (Pub. L. No. 101--647; 104 Stat. 4861), effective November 29, 1990]

Credit Issues and Credit Repair

This is NOT an announcement about a Credit Repair Service.

Beginning in January, I will offer a free service to anyone that has issues on their credit report or has a desire to improve their credit rating. The service will begin with a new web site linked to this one and a newsletter that contains valuable methods and suggestions for building a strong credit report.

This is not a traditional credit repair service (dispute everything) that is offered by many companies today. Those techniques are illegal and could cost you and your clients up to $1,000,000 in fines (each) and up to 30 years in prison or both, that’s strong!

All of the credit repair companies that have approached me over the past three years instruct their clients to dispute accurate information on their credit report. Knowingly disputing accurate information on the credit report is intentionally conveying false information with the intent to alter the content of the report in order to be approved for a mortgage. Folks, this is FRAUD. And anyone involved sticks their head in the noose if the lender is injured by the scheme, including but not limited to realtor, loan officer, processor or anyone else that refers the borrower to the credit repair company. Especially anyone that stands to gain from transaction!

I am aware the law places the burden of proof on the company that reported the negative information to a credit bureau. However, disputing an entry requires challenging it, in other words, stating that it is wrong. The soft spot on the underbelly of the system is profit. There is no immediate financial incentive for a company to research a dispute on information they supplied to the credit bureau sometime in the past. This is a weakness that is exploited by the credit repair companies. They know that if their clients dispute every negative entry that a certain percentage of disputes will go unanswered and therefore must be removed from the credit file. But think about it, this requires a written statement that there is something wrong with the entry, and in my example that is a lie.

Not only is it a lie, in almost every case it will be easy to prove it was a lie. Guess where checks and money orders clear. Guess who has a copy of the transaction, including deposits and withdrawals. The government that audits banks is the same government that prosecutes bank fraud and audits mortgage transactions, connect the dots here. There is a paper trail, and worse, in section 9 of the loan application the borrower acknowledges that any misrepresentation could result in civil and criminal penalties.

When the borrower applies for a loan and again at the closing they must acknowledge that they are aware of these penalties for supplying false or inaccurate information in order to get a loan. It takes a special kind of person to put this in writing and then allow the lender to rely on an inaccurate credit report due to omissions.

Keep in mind the government is pursuing loan fraud like a pack of rabid dogs!

There is no safe short cut to overcome accurate negative entries on a credit report. However, there are many actions most people can legally perform on their own behalf that will have a positive impact and doesn't cost an arm and a leg.

This new service is a huge undertaking and I will need help. If you are willing to contribute information on the subject please use the sign up form on the left or the one at the very bottom of the page.