Understanding Consumer Credit: Credit Repair

This is an ongoing blog series where Cumulus Funding CEO and Founder, Nathan Popkins, comments on an interesting story dealing with consumer credit–from the business side. The format for the story pulls relevant quotes from a reputable article that is trending on social channels, and adds Nathan’s insights. We look forward to your insights as well.


A recent Money News Now article discussed a recent study on the credit market. The study suggests that an “information imbalance impacts the consumer credit rating in an acute manner and can be a key reason for borrower delinquencies. With better understanding of the credit rating model, this can be fixed.” At the moment, many lenders look to a FICO scoring model for credit rating. According to the study and the story, there are several factors involved.

Money News: Customer testimonials about credit repair companies suggest that professional services can provide remedies for credit rating problems. This also frees up some time for the customer, which is important because once a consumer is embroiled in negative credit, they need time to evaluate options and study statues from the IRS. To make the situation paradoxical, the more time the credit rating remains low, the more problematic it becomes. Repair services can quicken the process, especially if there are errors found in the client?s credit history.

Nathan Popkins: Credit scores are a procrastinator’s worst enemy. If you find yourself behind on some payments, it is important to communicate with the lender or company you owe money to as soon as possible. The more time that goes by, the less they can do to help you, and the more adverse the impact is likely to be on your credit.

Similarly, it’s important to check the information appearing on your credit reports regularly to make sure it’s accurate. Since 2003, laws have been in effect allowing you to check your credit score once per year for free. However, this is not frequent enough for a consumer who really cares about staying on top of their credit score, which can change materially from month to month.

Thankfully, there are now a number of sites that offer real time, constantly updated scores from all three main credit bureaus. Though you won’t be charged, and don’t have to sign up for any longer term service that will start charging later, these sites do have a lot of ads. However, watching some ads is ultimately a small price to pay for staying on top of your credit.

Money News: Consumers should also educate themselves on legal provisions with regards to credit rating. Instead of bearing the brunt of information asymmetry and suffering as a result, consumers can use the Fair Credit Reporting Act (FCRA). The FCRA has numerous clauses, one of which allows them to seek damages from violators. Such incentives can only be provided if the consumer is aware of the scope of the act and how they can use it to improve their credit rating.

Nathan Popkins: It is important to know your rights, but also very important to keep good track of your discussions with creditors. Consumers often find themselves behind on a payment they didn’t know they owed. In an age where most communication is electronic, but most bills still come on paper, it’s tough not to be sympathetic to that situation.