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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
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:
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.
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.
