You’ve made some bad financial decisions, lost your job, or had medical bills. He fell behind on his loan or mortgage payments and now his credit rating is bad. You want to repair your credit, but what’s the best way to do it? Can you do this on your own, or is a credit repair service a good option?
A quick Internet search for “credit repair service” produces 13 million results. It’s a big deal! But what exactly does a credit repair service do? Claims may sound too good to be true. A credit repair service typically claims that if you need good credit to buy a car or get a mortgage, the service has in-house techniques to erase bad credit. But the sales pitch is very carefully worded. They say they can help resolve questionable items, clear up inaccuracies, or remove costly errors on your credit report. All at a low and affordable price.
The Federal Trade Commission
Fortunately, at the top of your internet search is a website you can trust: the US Federal Trade Commission. The FTC is blunt – they say you should save your money because most repair services of credit are scams.
Here’s what the FTC says about anyone’s ability to remove accurate and timely information from your credit report: “It’s illegal: No one can remove accurate negative information from your credit report.”
The fact is that credit repair services have no more legal rights or abilities than you. If you want to pay a hefty fee for a service to try to accomplish what you could do yourself, that’s your choice. But remember that credit repair services cannot guarantee results.
What to consider
If you’re considering a credit repair service, here’s how to tell if the company behind it is a scam:
o You are asked to pay in advance. Under the Federal Law on Credit Repair Organizations, credit repair companies cannot demand payment until they have performed the promised service.
o You are told to dispute all items on your credit report, regardless of accuracy.
o You are not told that you can repair your credit report yourself for free.
o The company asks you to apply for credit with a different identity. This could be a felony!
o The company insists that you do not contact any of your creditors directly.
What can you do?
In the United States there are three major credit bureaus: Experian, TransUnion, and Equifax. These three companies report consumer credit to lenders. It is your reports and the underlying information that you can examine and, if necessary, repair.
Under federal law, once a year you have the right to request a free copy of your credit report from each of the three bureaus. Under the US Fair Credit Reporting Act (FCRA), you also have the right to receive a copy of your report if a lender takes “adverse” action against you. To receive your reports, log on to annualcreditreport.com or call 1-877-322-8228.
Examine the reports carefully. If you see erroneous entries or examples of good credit that have been left out, you should write a letter to the credit bureau. Explain exactly what you think the error or omission is. Send your letter by certified mail, return receipt requested. Send a copy of your letter, along with copies of any relevant receipts or statements (don’t send the originals!), to the company that originally reported the transaction: a credit card company, your mortgage lender, or a store retail.
Unless they deem your request frivolous, the credit bureau has 30 days to investigate and respond. If an error is detected, federal law requires consumer credit bureaus and their sources to follow a strict procedure for notifying you and making corrections.
The bottom line is that a legitimate credit repair service will do no more than you could do for yourself. It’s your choice.