Credit repair is available to anyone who understands his rights under the Fair Credit Reporting Act, which was passed to ensure that the information in your credit history is accurately maintained by consumer reporting agencies, namely the three big nationwide credit bureaus, Experian, Exquifax and TransUnion. As pointed out by MSN Money, for-profit credit repair companies often skew the details so consumers buy into promises that their bad credit histories can be erased, 100 percent guaranteed. One way to gain a better understanding of credit repair is to acknowledge that the negative records tarnishing your credit score must remain in your history legally unless they are obviously reported or entered in error.
Step 1
Know that negative records can be removed from your credit report in certain circumstances. Most negative information, such as charged-off and negotiated credit card debt, repossessions and records of foreclosure, remains on your reports for seven years until the record expires. Other records, such as bankruptcies, mar your credit report for 10 years and tax liens can be reflected for an indefinite period.
Expired records automatically drop off of your reports. But sometimes negative information is reported to credit bureaus in error. This might include debts racked up by someone other than yourself who uses your personal information to acquire credit (identity theft). Negative information may also be erroneously reported to a credit bureau if a creditor applies your payments to the wrong account number. Not all of the negative records you see in your credit report may be accurate or timely. If there is a clear error in your report or if old negative records still show up, credit repair is warranted.
Step 2
Remember the old adage, "It it sounds too good to be true, it probably is" and apply this to credit repair services. These companies can trick you into believing they have the power to persuade credit bureaus to remove negative records that are both accurate and timely when in fact they wield no special bargaining power. MSN Money notes that many bureaus are alert to the fact that credit repair services submit frivolous disputes and will refuse to investigate them. Attorney Gail Hillebrand of the Consumers Union says this of credit repair companies: "Anyone who promises to get accurate information less than seven-years-old off a file is lying."
Step 3
Recognize the bigger danger of using credit repair services, which is that in some cases, you can unwittingly create legal problems for yourself. If a credit repair service advises you to get a "clean credit history" by obtaining an employer identification number (EIN) from the Internal Revenue Service for purposes of getting new credit and you do follow this advice, you have committed a felony, MSN Money points out. To wit: there's no legal way to get a new credit file to wipe out the old one.
Step 4
Dispute erroneous or expired negative records in your credit history yourself. Do-it-yourself credit repair is the least expensive route to take rather than paying a credit repair service to do what you can do yourself by law. The Federal Trade Commission (FTC) advises that you dispute inaccurate or old information with the credit bureau in writing, include copies of your credit report and supporting documentation, and send your entire correspondence by certified mail, return receipt requested. This ensures that your dispute is received and processed.
Step 5
Live with the credit problems you can't repair. If you have just filed for bankruptcy or your credit report reflects debts that were recently sent to collections, these records won't drop off of your report any time soon. What you can do is manage your existing credit appropriately to ensure that you get the highest credit score possible. The Consumer Federation of America and Fair Isaac Corporation advise you to make payments in full and on time each month. Keep balances on open credit card accounts low, and pay off revolving debt rather than shuffling it over to a new credit card. Finally, apply for new credit only if you really need it.
Tips and Warnings
- The FTC states that most credit report disputes are resolved within 30 days, after which you'll receive written correspondence from the credit bureau informing you of its findings.
- If you do seek credit repair services, keep in mind that under the Credit Repair Organizations Act, the company cannot take your money until it completes the services it has promised you.
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