Companies’ promises to “fix” your bad credit rating or to erase your bad credit usually are nothing more than ways to take your money.
Business is brisk among these so-called “credit-repair” companies that charge $50 to more than $1,000 to fix your credit report. In many cases, these outfits take your money, do little or nothing to improve your credit report and then vanish.
There are no quick or easy fixes for a poor credit history. If a company promises to clean up your credit report, remember:
- Your credit history is maintained by private companies called credit bureaus that collect information reported to them by banks, mortgage companies, department stores and other creditors.
- Only time will heal a poor credit history – even if your problems were due to illness or unemployment.
- Credit reporting agencies are permitted by law to report bankruptcies for 10 years and other negative information for seven years. Any negative information may be reported indefinitely if you apply for:
- $150,000 or more in credit.
- A life insurance policy with a face amount of $150,000 or more.
- A job paying $75,000 or more.
If there are genuine mistakes or outdated items in your report, you can fix them yourself – for free or for only a few dollars.
Your Credit File: Errors, Disputes and Accounts
Correcting errors in your credit file
You have the right, under the Fair Credit Reporting Act, to dispute the completeness and accuracy of information in your credit file.
When a credit-reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a reasonable period of time, unless it believes the dispute is “frivolous or irrelevant.”
If the agency cannot verify a disputed item, it must delete it. If your credit report contains erroneous information, the agency must correct it. If an item is incomplete, the agency must complete it. For example, if your file showed late payments, but failed to show you no longer are delinquent, the agency must show that your payments are now current. Or if your file listed an account that is not yours, the agency would have to delete it.
Also, at your request, the credit-reporting agency must send a notice of correction to anyone who has checked your file in the past six months.
If a reinvestigation does not resolve your dispute, the Fair Credit Reporting Act permits you to file a statement of up to 100 words to explain your side of the story. That explanation must be included in every report the agency sends.
Registering a dispute
To dispute information in your credit report, directly notify the credit-reporting agency. Submit your dispute in writing, along with copies (not originals) of documents supporting your position.
Besides providing your complete name and address, your letter should clearly identify each disputed item, explain why you dispute the item, and request deletion or correction. You may want to enclose a copy of your report with the questionable items circled.
Send your dispute by certified mail — return receipt requested. Keep copies of your dispute letter and enclosures to document what the agency received.
Adding accounts to your file
While most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to agencies. These may include travel, entertainment and gasoline card companies, local retailers, and credit unions.
If you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts not listed in your file, you can ask the credit-reporting agency to add this information to future reports. Although they are not required to do so, many agencies will add other verifiable accounts for a fee.
Spotting credit-repair scams
Be leery if you are tempted to contact a credit-repair company. The Federal Trade Commission and several attorneys general have sued credit-repair companies for falsely promising to remove bad information from credit reports. Here are tips to follow:
- E-mail us or contact the Attorney General’s Consumer Protection Hotline at 800-392-8222 to check for complaints made against a company.
- Avoid companies that tell you truthful information can be changed or erased to improve your credit or that only the credit-repair company can remove old or inaccurate information. These claims are false.
- Be wary if you are asked for a large sum of money before the credit-repair company completes the job. A money-back guarantee will not protect you from a disreputable company.
Avoid new credit identities
If you have filed for bankruptcy, you may be the target of a credit-repair scheme, often called “file segregation.” Here, you are promised a chance to hide unfavorable credit information by establishing a new credit identity.
However, there is a problem: File segregation is illegal. If you use it, you could face fines or imprisonment.
Other scams
Consumers looking for an easy fix often are targets of other credit-related scams:
- Credit by phone: Pay-per-call or 900-number services have become a popular vehicle for credit scams. Advertisements promise that “guaranteed” credit or cash loans are only a phone call away. Instead, the caller might only receive a list of banks offering low-interest credit cards or a booklet on how to establish credit — and a phone charge of $50 or more. Consumers rarely end up getting credit.
- Gold or platinum cards: Beware of promotions for gold or platinum cards that promise to get you credit and build your rating. Although they may sound like all-purpose credit cards, some cards only permit you to buy merchandise from special catalogs and will not help you obtain other credit. You also might be asked to call a 900 or 976 exchange number for more information. These phone charges add up quickly.
- Checking-account scam: This scam, which tricks you into disclosing your checking-account number, typically begins with a postcard advertising easy credit approval or low-interest credit card rates. When you call, you are asked for your checking-account number as “verification.” Your number then can be magnetically encoded on a draft, which is forwarded to your unsuspecting bank for payment from your account.
Taking control of credit
If you need help paying your bills, you have several options:
- Contact your creditor and try to work out an adjusted repayment plan.
- Check your telephone directory for nonprofit financial counseling programs. Some universities, county extension centers, military bases, credit unions, housing authorities and banks operate programs and charge little, if anything, for assistance.
- Contact Consumer Credit Counseling Service, a nonprofit agency that has more than 20 offices throughout Missouri. Debt counselors will try to arrange a repayment plan that is acceptable to you and your creditors and will set up a budget for you. Call 800-388-2227 for the nearest CCCS office.