Credit Repair: Self-Help
May Be Best
You see the advertisements in newspapers, on TV, and on the Internet. You hear
them on the radio. You get fliers in the mail. You may even get calls from telemarketers
offering credit repair services. They all make the same claims:
• "Credit problems? No problem!"
• "We can erase your bad credit-100% guaranteed."
• "Create a new credit identity-legally."
• "We can remove bankruptcies, judgments, liens, and bad loans from
your credit file forever!"
Do yourself a favor and save some money, too. Don't believe these statements.
Only time, a conscious effort, and a personal debt repayment plan will improve
your credit report.
This brochure explains how you can improve your credit worthiness and lists legitimate
resources for low or no-cost help.
The Scam
Everyday, companies nationwide appeal to consumers with poor credit histories.
They promise, for a fee, to clean up your credit report so you can get a car
loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver.
After you pay them hundreds or thousands of dollars in up-front fees, these companies
do nothing to improve your credit report; many simply vanish with your money.
The Warning Signs
If you decide to respond to a credit repair offer, beware of companies that:
• Want you to pay for credit repair services before any services are provided;
• Do not tell you your legal rights and what you can do-yourself-for free;
• Recommend that you not contact a credit bureau directly;
• Suggest that you try to invent a "new" credit report by applying
for an Employer Identification Number to use instead of your Social Security
Number; or
• Advise you to dispute all information in your credit report or take any
action that seems illegal, such as creating a new credit identity. If you follow
illegal advice and commit fraud, you may be subject to prosecution.
You could be charged and prosecuted for mail or wire fraud if you use the mail
or telephone to apply for credit and provide false information. It's a federal
crime to make false statements on a loan or credit application, to misrepresent
your Social Security Number, and to obtain an Employer Identification Number
from the Internal Revenue Service under false pretenses.
Under the Credit Repair Organizations Act, credit repair companies cannot require
you to pay until they have completed the promised services.
The Truth
No one can legally remove accurate and timely negative information from a credit
report. But the law does allow you to request a reinvestigation of information
in your file that you dispute as inaccurate or incomplete. There is no charge
for this. Everything a credit repair clinic can do for you legally, you can do
for yourself at little or no cost. According to the Fair Credit Reporting Act:
• You are entitled to a free copy of your credit report if you've been
denied credit, insurance or employment within the last 60 days. If your application
for credit, insurance, or employment is denied because of information supplied
by a credit bureau, the company you applied to must provide you with that credit
bureau's name, address, and telephone number.
• You can dispute mistakes or outdated items for free. Ask the credit reporting
agency for a dispute form or submit your dispute in writing, along with any supporting
documentation. Do not send them original documents.
Clearly identify each item in your report that you dispute, explain why you dispute
the information, and request a reinvestigation. If the new investigation reveals
an error, you may ask that a corrected version of the report be sent to anyone
who received your report within the past six months. Job applicants can have
corrected reports sent to anyone who received a report for employment purposes
during the past two years.
When the reinvestigation is complete, the credit bureau must give you the written
results and a free copy of your report if the dispute results in a change. If
an item is changed or removed, the credit bureau cannot put the disputed information
back in your file unless the information provider verifies its accuracy and completeness,
and the credit bureau gives you a written notice that includes the name, address,
and phone number of the provider.
You also should tell the creditor or other information provider in writing that
you dispute an item. Many providers specify an address for disputes. If the provider
then reports the item to any credit bureau, it must include a notice of your
dispute. In addition, if you are correct-that is, if the information is inaccurate-the
information provider may not use it again.
If the reinvestigation does not resolve your dispute, have the credit bureau
include your version of the dispute in your file and in future reports. Remember,
there is no charge for a reinvestigation.
Reporting Negative Information
Accurate negative information generally can be reported for seven years, but
there are exceptions:
• Bankruptcy information can be reported for 10 years;
• Information reported because of an application for a job with a salary
of more than $75,000 has no time limitation;
• Information reported because of an application for more than $150,000
worth of credit or life insurance has no time limitation;
• Information concerning a lawsuit or a judgment against you can be reported
for seven years or until the statute of limitations runs out, whichever is longer;
and
• Default information concerning U.S. Government insured or guaranteed
student loans can be reported for seven years after certain guarantor actions.
The Credit Repair Organizations Act
By law, credit repair organizations must give you a copy of the
"Consumer Credit File Rights Under State and Federal Law"
before you sign a contract. They also must give you a written
contract that spells out your rights and obligations. Read these
documents before signing the contract. The law contains specific
protections for you. For example, a credit repair company cannot:
• make false claims about their services;
• charge you until they have completed the promised services; or
• perform any services until they have your signature on a written contract
and have completed a three-day waiting period. During this time, you can cancel
the contract without paying any fees.
Your contract must specify:
• the payment terms for services, including their total cost;
• a detailed description of the services to be performed;
• how long it will take to achieve the results;
• any guarantees they offer; and
• the company's name and business address.
Have You Been Victimized?
Many states have laws strictly regulating credit repair companies. States may
be helpful if you've lost money to credit repair scams.
If you've had a problem with a credit repair company, don't be embarrassed to
report them. While you may fear that contacting the government will only make
your problems worse, that's not true. Laws are in place to protect you. Contact
your local consumer affairs office or your state attorney general (AG). Many
AGs have toll-free consumer hotlines. Check with your local directory assistance.
Need Help? Don't Despair
Just because you have a poor credit report doesn't mean you won't be able to
get credit. Creditors set their own credit-granting standards and not all of
them look at your credit history the same way. Some may look only at more recent
years to evaluate you for credit, and they may grant credit if your bill-paying
history has improved. It may be worthwhile to contact creditors informally to
discuss their credit standards.
If you can't resolve your credit problems yourself or you need additional help,
you may want to contact a credit counseling service. There are non-profit organizations
in every state that counsel consumers in debt. Counselors try to arrange repayment
plans that are acceptable to you and your creditors. They also can help you set
up a realistic budget. These counseling services are offered at little or no
cost to consumers. You can find the office nearest you by checking the white
pages of your telephone directory.
In addition, nonprofit counseling programs sometimes are operated by universities,
military bases, credit unions, and housing authorities. They're also likely to
charge little or nothing for their services. Or, you can check with your local
bank or consumer protection office to see if it has a list of reputable, low-cost
financial counseling services.
Do-It-Yourself Check-Up
Even if you don't have a poor credit history, it's a good idea to conduct your
own credit check-up, especially if you're planning a major purchase, such as
a home or car. Checking in advance on the accuracy of the information in your
credit report could speed the credit-granting process.
You're entitled to one free report a year if you can prove that (1) you're unemployed
and plan to look for a job with 60 days, (2) you're on welfare, or (3) your report
is inaccurate because of fraud. Otherwise, a credit bureau may charge you up
to $9.00 for a copy of your report.
Credit bureaus usually are listed in the yellow pages of your telephone book
under "credit reporting agencies." Three large national credit bureaus
supply most credit reports: Equifax, Experian and Trans Union. You may want to
contact each of them for a copy of your report.
Equifax
1-800-685-1111
www.equifax.com
Experian
1-888-EXPERIAN (397-3742)
www.experian.com
Trans Union
1-800-916-8800
www.transunion.com
For More Information
The FTC works for the consumer to prevent fraudulent, deceptive and unfair business
practices in the marketplace and to provide information to help consumers spot,
stop and avoid them. To file a complaint or to get free information on consumer
issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357);
TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and
other fraud-related complaints into Consumer Sentinel, a secure, online database
available to hundreds of civil and criminal law enforcement agencies in the U.S.
and abroad.
Source: Federal Trade Commission
To receive our business
newsletter and/or send your comments:
