Credit Repair: Do It Yourself

When you have poor credit, it can be tempting to take a quick fix by paying someone else to erase your bad credit history and hand you a new, clean one. There are legitimate credit repair companies out there, and some people choose to go with them when they’re feeling overwhelmed with the process. However, the things that you pay them to do for you are actions you can take on your own — usually for free. What you really have to watch out for, though, are outright scams.

Advertisements claiming that you can get a new credit identity, or that you can have your report or score fixed in a short period of time, are usually scams. They are either planning to take your money and disappear without doing anything, or they are engaging in illegal activities that could land you in jail.

Credit Repair Scam Red Flags

As with any scam, if it seems too good to be true, it probably is. No one can, using legal means, have bankruptcies and other negative items erased from your credit history before the reporting time limit runs out. Promises that your credit score can be improved by 50 to 100 points should also be treated with skepticism. In many cases, unscrupulous methods are used to give you a temporary boost. After the methods are revealed, your credit could be in even worse shape.

Before you decide to send money to someone in exchange for having your bad credit file repaired, look for these red flags that you are dealing with a potential scammer:

  • Suggests that every negative item in your credit repair be disputed – even items that are accurate.
  • Asks for money before they complete any credit repair activities.
  • Insists that you wire the money, or that you make use of a private courier to send the money. Many scammers won’t let you use other means because they are traceable. Plus, if they carry out correspondence through the mail, they can be on the hook for mail fraud. Any company that is trying to minimize the paper trail should be viewed with suspicion.
  • You aren’t told that you can do your own credit repair for free.
  • Recommends that you avoid contacting the credit bureaus, and insists that you avoid second opinions and financial professionals.
  • Tells you that you can get a new identity with the help of an Employer Identification Number. You use that instead of your Social Security number, and supposedly you have a clean credit record. This is illegal – unless you have an actual business. Even then, you are still supposed to use your Social Security number for matters of personal credit.
  • Tells you that if you pay enough, negative items can be removed from your credit history early.

Some of the promises that a credit repair scam artist uses are designed to get you to send money to them quickly. They disappear, leaving you poor – and retaining a bad credit report. Others, though, encourage you to perform actions that are considered fraud. If you do something illegal on the advice of a scammer, you could end up paying a hefty fine, or even going to jail.

Your Rights: Credit Repair Organizations Act and Fair Credit Reporting Act

When it comes to repairing your credit, and learning about what is in your credit report, you have rights. Two laws, the Credit Repair Organizations Act (CROA) and the Fair Credit Reporting Act (FCRA), provide information that you can use to your advantage.

CROA: In order to make sure that you understand that you can do many credit repair actions yourself, this law states the following about credit report organizations:

  • They have to tell you which things you can do, on your own, for free.
  • They cannot charge you for credit repair services until the services have actually been performed.
  • Have to be up front, telling you about your rights to fix your own credit, and how you check your own credit situation.
  • Must provide a detailed contract, spelling out what will be done, and what the individual and total charges will be. The contract should also include how long it will take for the results to be achieved.
  • Have to wait three days from the time you sign the contract before performing any credit repair service. You can cancel the contract – without paying any fees – up until the waiting period ends.

You must also be provided with the company’s entire name and address. You should also find out about guarantees, and those should be spelled out in the contract.

FCRA: When combined with the CROA, this law can help you understand what you are entitled to in terms of knowing what’s in your credit report. You have the right to ask for an investigation if you believe an item is inaccurate or incomplete. The credit reporting agency also has to change the item in a timely manner if you are right. It is your right to dispute negative, inaccurate information free of charge – and there is no charge when your credit history is updated.

Additionally, if a company denies you credit, insurance or employment based on information in your credit history, you are entitled to a free copy of the report from the bureau that provided it. You must ask within 60 days, though. You will be provided with the information you need to contact the credit bureau for your free copy of your credit report.

On top of receiving a free copy of your report when an “adverse action” is taken against you, you can also receive one free report from each of the three major credit bureaus. Experian, TransUnion and Equifax are all required to provide you with one free credit report a year when you ask for it through www.annualcreditreport.com. You can also call 1-877-322-8228 or mail a form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. If you want a second report within a 12-month period, each bureau can charge you no more than $10.50.

When you ask for your free credit report (or even if you pay for a credit report), the bureau must provide you with everything that is in your credit history. This includes who else has been looking at your report, from marketers with “pre-screened offers” to employers. However, you aren’t entitled to a free credit score; you still have to pay to see your score.

Why you should check your credit report: You should check your credit report because the information it contains influences a lot of the financial decisions others make about you. The information in your credit report is used to make decisions about loans, insurance policies and hiring. Landlords use the information to decide whether to approve your application. Some cell phone and TV service providers check your credit before allowing you to open an account.

Before you apply for a big purchase, you should make sure that your credit report accurately reflects your financial habits and situation. A couple of months before you buy a car, apply for a mortgage or even before you apply for a job, look at your credit report and check for inaccuracies. Get them fixed before you apply, and you will have a better chance at being approved – and getting favorable terms. You don’t want to be surprised with poor credit when you are denied for your loan. Find out ahead of time so that you know what to expect, or so that you can fix the problem.

It is also worth noting that checking your credit report regularly can help you catch identity theft. If you see accounts that you haven’t opened, it can be a sign that someone is using your identity to get credit – and that can hamper your own ability to get the credit you need and deserve.

Do-It-Yourself Credit Repair

If you want to fix information in your credit report, you can do it on your own. Some people might decide to pay for the services of a legitimate credit repair company, but you should realize – before you engage these services – that a company can’t do something for you that you can’t do for yourself, free of charge. If you have the time to do a little legwork, you can do your own credit repair.

Here are the steps to disputing inaccurate items on your credit report:

  1. Notify the credit bureau: Write a letter to the credit agency that is reporting the inaccurate information. Identify each item you are disputing. You can enclose a copy of your credit report, with the offending items circled, for clarification. State the facts of your case, and share any documentation to support your assertion. Be sure to include your complete name and address.
  2. Let the creditor know about the dispute: The credit bureau should take care of every aspect of the investigation, but you can speed things along by contacting the company or organization that reported the information in the first place. Send the same information you sent to the credit bureau, and be sure to include the account number in question, so that it is easy to find your account.
  3. Follow up: Disputes are supposed to be taken care of within 30 days. Find out the outcome of the dispute. If you are right, the item should be removed from your report. The organization or creditor that reported the information to the credit bureau cannot report it again in the future. If the issue hasn’t been resolved within 60 days, it’s time to find out why. Realize, though, that you might be told, after investigation, that you are wrong, and the information might stay. You can appeal the decision if you have sufficient evidence to prove your case.

As you go through the steps of having negative items removed from your credit report, you should keep the following in mind:

  • Never send original documents. You should keep the originals and send only copies. Also, keep a copy of your dispute letter.
  • When you send dispute letters and supporting document copies, you should send it certified mail, and ask for a return receipt. This will provide proof that the credit bureau and the reporting organization received it.
  • Keep your document copies, and your mail return receipt, in a file. Also, if you speak with anyone over the phone, write down the date, time, who you spoke with, and what was discussed. Keep that in the file as well, along with correspondence from those who contact you.

It is important to understand if the information on your credit report is accurate, it will remain in place. Disputing negative items, if they are accurate, will not result in a change to the status of your credit history. Many less serious items, such as late payments, disappear after three to five years, even though they can remain for up to seven years. Other items, such as judgments against you and bankruptcies, can remain on your credit report up to 10 years. Only time can completely remove those items that are negative but accurate.

Some information, though, might never be removed from your credit report. Criminal convictions can remain for a long time, as can the information reported as a result of applying for a job paying more than $75,000 a year or for applying for more than $150,000 of life insurance or credit.

You are also allowed to include a statement in your credit file. This way, if someone looks at your credit report, they can see your side of the story. Your statement can include information about why you think that a negative item should have been corrected, or it can explain why you had a bankruptcy – and what you are doing to improve your financial situation.

Responsible credit habits: You can also improve the way you look in your credit history by showing good credit habits. If you begin making payments on time, and if you work to pay down your debt, these efforts will be evident in your credit history. If you forgo applying for new credit accounts as you work to improve your credit habits, your credit history will improve. Your credit score, which is based on the information in your credit report, will begin to rise as more positive items appear on your credit report. So, even if the two missed payments you had two years ago are on your credit history, the fact that you haven’t been late for a payment in the two years since will weigh heavily in your favor.

Remember that all creditors set their own standards. You might have to pay a higher interest rate on a loan, or a higher insurance premium, if you have bad credit, but you can still get the financial products and services that you need. If you can prove that you are making progress, many will consider giving you another chance. You can also find out what, specifically, you need to work on to qualify next time you apply for a loan or insurance.

Getting Help

In some cases, you might need help related to your credit report. If you have been victimized by a credit repair scam, you should report it to the authorities. All states have consumer affairs or consumer protection agencies. You can also contact the state attorney general’s office. You might be able to recover some of your money. You can visit www.naag.org to find information about how to contact the attorney general in your state.

Help managing your credit: In some cases, though, you might not know where to start in terms of better managing your credit. If you have a great deal of debt, you might need help putting together a repayment plan that can help you discharge your obligations and make a better start. You can get help through credit counseling organizations.

Just as you need to be careful about credit repair scams, you also need to be careful about credit counselors who claim they can help you get back on the right track. While “nonprofit” status can be encouraging, realize that some of these counselors employ tactics designed to help them get more money. Realize that some of these are scammers, and some are just unaffordable (although legitimate).

One of the best ways to avoid problems with credit counseling is to visit www.usdoj.gov/ust. There is a state-by-state list of all of the organizations that provide approved and reputable credit counseling services. These reputable organizations will offer you advice on managing your money, as well as give you sound information about credit repair. You can also get help drawing up a debt reduction plan, and creating a workable budget. You usually have to pay for these sessions, but many of the approved counselors are affordable.

There is no reason to continue with bad credit. It is possible for you to repair your credit report and be eligible for the best interest rates when you apply for loans. Be sure that you understand your rights so that you can avoid being scammed. With planning and knowledge, you can repair your own credit.