What You don't Know about Credit Repair Can Cause
Trouble
If credit repair is so easy, why doesn't everyone have
great credit scores? The answer is that many credit repair
organizations use shady methods. Several of them operate
under the radar, and in fact consumers get duped every
day by firms claiming they can "completely erase all negative
credit problems." Either the firm takes the money and
never performs, or it uses fraudulent techniques, or sells
services that consumers can access themselves for free.
Let's take a look at the problem areas of credit repair
and then at what to look for in companies that are legitimate.
Two (usually fraudulent) tricks of the trade
There are two main ways that credit repair companies claim
to clean up your credit. First, they dispute negative
items on your credit report with the national credit bureaus.
By law, the credit bureaus must do an investigation on
the disputed items within 30 days. If there isn't enough
evidence to substantiate the negative item from the creditor,
the item must be removed.
However, you can dispute and have any credit
report inaccuracies corrected yourself for free, directly
with the credit bureaus. Beware of disputing all negative
items on a report hoping the bureau won't get to it investigating
them all. If it's discovered that you are committing fraud
through this means, your name could land in a fraud database,
making it even more difficult to get clean credit.
Second, a credit repair firm may advise you to apply for
an Employer Identification Number (EIN), establishing
a "new" credit report & using this number on applications
instead of your Social Security number.
Watch out! Following this advice can make you a perpetrator
of fraud. According to the FTC, 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.
Companies perpetrating credit repair fraud often get away
with their scams because scared consumers think they'll
be prosecuted if they report the credit repair organization.
It's not true; states have laws designed to protect consumers
and prosecute the perpetrators.
Protect yourself contractually
If you consider hiring a credit repair company to dispute
legitimate, inaccurate items in your credit report, take
measures to protect yourself. The Credit Repair Organization's
Act specifies the following by law:
Your contract must also describe in detail 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. DO NOT use any credit repair
company that does not follow the above legal requirements
to the letter. Note that In the case of identity
theft, a legitimate, experienced company can process
the reams of credit repair paperwork and make recovery
much easier-as long as you're willing to pay.
Safe, sure credit repair
Perhaps you think going through bankruptcy, having delinquent
credit accounts, foreclosures and/or repossessions means
you'll be ineligible for credit for years. What you should
know is that the Fico score models take every month of
on-time payment into account. Scores rebuild naturally
after 12, 24 & 36 months following the most severe credit
problems. Slow down, keep the faith and get yourself a
"bad credit credit
card" immediately after a severe credit problem-a
low-limit card secured with a savings account of cash
held as collateral. Use it sparingly, keep it paid current
at under 50% of its limit and you will see results. |
