Guide to Credit Repair
Credit Repair: How to Help
Yourself
You see the advertisements in newspapers, on TV,
and on the Internet. You hear them on the radio. You get fliers
in the mail, and maybe even calls offering credit repair services.
They all make the same claims:
“Credit problems? No problem!”
“We can remove bankruptcies, judgments, liens,
and bad loans from your credit file forever!”
“We can erase your bad credit — 100%
guaranteed.”
“Create a new credit identity — legally.”
The Federal Trade Commission (FTC) says do yourself
a favor and save some money, too. Don’t believe these claims:
they’re very likely signs of a scam. Indeed, attorneys at
the nation’s consumer protection agency say they’ve
never seen a legitimate credit repair operation making those claims.
The fact is there’s no quick fix for creditworthiness. You
can improve your credit report legitimately, but it takes time,
a conscious effort, and sticking to a personal debt repayment
plan.
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Recognizing
a Credit Repair Scam
Everyday, companies target consumers who have poor credit histories
with promises to clean up their credit report so they can get
a car loan, a home mortgage, insurance, or even a job once they
pay them a fee for the service. The truth is, these companies
can’t deliver an improved credit report for you using the
tactics they promote. It’s illegal: No one can remove accurate
negative information from your credit report. So after you pay
them hundreds or thousands of dollars in fees, you’re left
with the same credit report and someone else has your money.
If you see a credit repair offer, here’s how
to tell if the company behind it is up to no good:
The company wants you to pay for credit repair services
before they provide any services. Under the Credit Repair Organizations
Act, credit repair companies cannot require you to pay until they
have completed the services they have promised.
The company doesn’t tell you your rights and what you can
do for yourself for free.
The company recommends that you do not contact any of the three
major national credit reporting companies directly.
The company tells you they can get rid of most or all the negative
credit information in your credit report, even if that information
is accurate and current.
The company suggests that you try to invent a “new”
credit identity — and then, a new credit report —
by applying for an Employer Identification Number to use instead
of your Social Security number.
The company advises you to dispute all the information in your
credit report, regardless of its accuracy or timeliness.
If you follow illegal advice and commit fraud, you may find yourself
in legal hot water, too: It’s a federal crime to lie 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. You could be charged
and prosecuted for mail or wire fraud if you use the mail, telephone,
or Internet to apply for credit and provide false information.
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Your
Rights Regarding Credit Repair
No one can legally remove accurate and timely negative
information from a credit report. The law allows you to ask for
an investigation of information in your file that you dispute
as inaccurate or incomplete. There is no charge for this. Some
people hire a company to investigate on their behalf, but anything
a credit repair clinic can do legally, you can do for yourself
at little or no cost. According to the Fair Credit Reporting Act
(FCRA):
You’re entitled to a free report if a company
takes “adverse action” against you, like denying your
application for credit, insurance, or employment. You have to
ask for your report within 60 days of receiving notice of the
action. The notice will give you the name, address, and phone
number of the consumer reporting company. You’re also entitled
to one free report a year if you’re unemployed and plan
to look for a job within 60 days; if you’re on welfare;
or if your report is inaccurate because of fraud, including identity
theft.
Each of the nationwide consumer reporting companies — Equifax,
Experian, and TransUnion — is required to provide you with
a free copy of your credit report once every 12 months, if you
ask for it. The three companies have a central website, a toll-free
telephone number, and a mailing address for consumers to order
the free annual credit reports the government entitles them to.
To order, click on annualcreditreport.com, call 1-877-322-8228,
or complete the Annual Credit Report Request Form and mail it
to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
You can use the form in this brochure, or you can
print it from ftc.gov/credit. You may order reports from each
of the three consumer reporting companies at the same time, or
you can stagger your requests, ordering one from each company
throughout the year from the central address. Don’t contact
the three nationwide consumer reporting companies individually
or at another address because you may end up paying for a report
that you’re entitled to get for free. In fact, each consumer
reporting company may charge you up to $10.50 to purchase an additional
copy of your report within a 12-month period.
It doesn’t cost anything to dispute mistakes
or outdated items on your credit report. Under the FCRA, both
the consumer reporting company and the information provider (that
is, the person, company, or organization that provides information
about you to a consumer reporting company) are responsible for
correcting inaccurate or incomplete information in your report.
To take advantage of all your rights under the FCRA, contact the
consumer reporting company and the information provider.
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Helping
Yourself
Step 1: Tell the consumer reporting company, in writing, what
information you think is inaccurate. Include copies (NOT originals)
of any documents that support your position. In addition to providing
your complete name and address, your letter should identify each
item in your report you dispute; state the facts and the reasons
you dispute the information, and ask that it be removed or corrected.
You may want to enclose a copy of your report, and circle the
items in question. Send your letter by certified mail, “return
receipt requested,” so you can document that the consumer
reporting company received it. Keep copies of your dispute letter
and enclosures.
Your letter may look something like the one below.
Consumer reporting companies must investigate the
items you question within 30 days — unless they consider
your dispute frivolous. They also must forward all the relevant
data you provide about the inaccuracy to the organization that
provided the information. After the information provider receives
notice of a dispute from the consumer reporting company, it is
required to investigate, review the relevant information, and
report the results back to the consumer reporting company. If
this investigation reveals that the disputed information is inaccurate,
the information provider has to notify the nationwide consumer
reporting companies so they can correct it in your file.
When the investigation is complete, the consumer
reporting company must give you the results in writing, too, and
a free copy of your report if the dispute results in a change.
If an item is changed or deleted, the consumer reporting company
is not permitted to put the disputed information back in your
file unless the information provider verifies that it is accurate
and complete. The consumer reporting company also must send you
written notice that includes the name, address, and phone number
of the information provider. If you ask, the consumer reporting
company must send notices of any correction to anyone who received
your report in the past six months. You also can ask that a corrected
copy of your report be sent to anyone who received a copy during
the past two years for employment purposes.
If an investigation doesn’t resolve your dispute
with the consumer reporting company, you can ask that a statement
of the dispute be included in your file and in future reports.
You also can ask the consumer reporting company to provide your
statement to anyone who received a copy of your report in the
recent past. You can expect to pay for this service.
Step 2: Tell the creditor or other information provider,
in writing, that you dispute an item. Be sure to include copies
(NOT originals) of documents that support your position. Many
providers specify an address for disputes. If the provider reports
the item to a consumer reporting company, it must include a notice
of your dispute. And if you are correct — that is, if the
information is found to be inaccurate — the information
provider may not report it again.
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Reporting
Accurate Negative Information
When negative information in your report is accurate, only the
passage of time can assure its removal. A consumer reporting company
can report most accurate negative information for seven years
and bankruptcy information for 10 years. Information about an
unpaid judgment against you can be reported for seven years or
until the statute of limitations runs out, whichever is longer.
To calculate the seven-year reporting period, start from the date
the event took place. There is no time limit on reporting information
about criminal convictions; information reported in response to
your application for a job that pays more than $75,000 a year;
and information reported because you’ve applied for more
than $150,000 worth of credit or life insurance.
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The Credit
Repair Organizations Act
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 you sign anything. And before signing,
know that a credit repair company cannot:
- make false claims about their services
- charge you until they have completed the promised services
- 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.
Before you sign a contract, be sure it specifies:
- the payment terms for services, including the
total cost
- a detailed description of the services the company will perform
- how long it will take to achieve the result
- any guarantees the company offer
- the company’s name and business address
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Have
You Been Victimized?
Many states have laws regulating credit repair companies.
State law enforcement officials may be helpful if you’ve
lost money to credit repair scams. Don’t be embarrassed
to report a problem with a credit repair company. While you may
fear that contacting the government could make your problems worse,
remember that laws are in place to protect you. Contact your local
consumer affairs office or your state Attorney General (AGs).
Many AGs have toll-free consumer hotlines; check the Blue Pages
of your telephone directory for the phone number or www.naag.org
for a list of state attorneys general.
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If You
Need Help
Just because you have a poor credit report doesn’t
mean you can’t get credit. Creditors set their own standards,
and not all look at your credit history the same way. Some may
look only at recent years to evaluate you for credit, and they
may give you credit if your bill-paying history has improved.
It may be worthwhile to contact creditors informally to discuss
their credit standards.
If you’re not disciplined enough to create
a workable budget and stick to it, to work out a repayment plan
with your creditors, or to keep track of your mounting bills,
you might consider contacting a credit counseling organization.
Many credit counseling organizations are nonprofit and work with
you to solve your financial problems. But remember that “nonprofit”
status doesn’t guarantee free, affordable, or even legitimate
services. In fact, some credit counseling organizations —
even some that claim non-profit status — may charge high
fees or hide their fees by pressuring consumers to make “voluntary”
contributions that only cause more debt.
Most credit counselors offer services through local
offices, the Internet, or on the telephone. If possible, find
an organization that offers in-person counseling. Many universities,
military bases, credit unions, housing authorities, and branches
of the U.S. Cooperative Extension Service operate nonprofit credit
counseling programs. Your financial institution, local consumer
protection agency, and friends and family also may be good sources
of information and referrals.
If you are considering filing for bankruptcy, be
aware that bankruptcy laws require that you get credit counseling
from a government-approved organization within six months before
you file for bankruptcy relief. You can find a state-by-state
list of government-approved organizations at www.usdoj.gov/ust,
the website of the U.S. Trustee Program. That’s the organization
within the U.S. Department of Justice that supervises bankruptcy
cases and trustees. Be wary of credit counseling organizations
that say they are government-approved, but do not appear on the
list of approved organizations.
Reputable credit counseling organizations can advise
you on managing your money and debts, help you develop a budget,
and offer free educational materials and workshops. Their counselors
are certified and trained in the areas of consumer credit, money
and debt management, and budgeting. Counselors discuss your entire
financial situation with you, and can help you develop a personalized
plan to solve your money problems. An initial counseling session
typically lasts an hour, with an offer of follow-up sessions.
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Do-It-Yourself
Check-Up
Regardless of your credit history, financial advisors
and consumer advocates recommend reviewing your credit report
periodically for three important reasons:
The information in your credit report affects whether
you can get a loan or insurance — and how much you will
have to pay for it.
It’s important to make sure the information is accurate,
complete, and up-to-date before you apply for a loan for a major
purchase like a house or car, buy insurance, or apply for a job.
It can help you deter, detect and defend against identity theft.
That’s when someone uses your personal information —
like your name, your Social Security number, or your credit card
number — to commit fraud. Identity thieves may use your
information to open a new credit card account in your name. Then,
when they don’t pay the bills, the delinquent account is
reported on your credit report. Inaccurate information like that
could affect your ability to get credit, insurance, or even a
job.
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For
More Information
To learn how to improve your credit worthiness
and find legitimate resources for low or no-cost help, please
see the following publications at ftc.gov/credit.
Your
Access to Free Credit Reports — Explains why it is important
to monitor your credit history, how to request a report, and how
to dispute errors.
How
to Dispute Credit Report Errors — Explains how to dispute
and correct inaccurate information in your credit report. Includes
a sample dispute letter.
Building
a Better Credit Report — Learn how to legally improve
your credit report, how to deal with debt, how to spot credit-related
scams, and more.
Knee
Deep in Debt — Discusses options to help you get back
in the black, including: realistic budgeting, credit counseling
from a reputable organization, debt consolidation, or bankruptcy.
Fiscal
Fitness: Choosing a Credit Counselor — Defines debt
repayment plans, explains the differences between secured and
unsecured debt, and offers questions to ask credit counseling
agencies if you consider using their services.
To file a complaint or to get free information
on consumer issues, visit ftc.gov
or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.
The FTC enters consumer complaints into the Consumer Sentinel
Network, a secure online database and investigative tool used
by hundreds of civil and criminal law enforcement agencies in
the U.S. and abroad.
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