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Beware of Credit Repair Schemes
You see the advertisements in
newspapers, on TV, and on the Internet. You hear them on the radio. You get
fliers in the mail. You may even get calls from telemarketers offering credit
repair services. They all make the same claims:
- "Credit problems? No
problem!"
- "We can erase your bad
credit-100% guaranteed."
- "Create a new credit
identity-legally."
- "We can remove
bankruptcies, judgments, liens, and bad loans from your credit file
forever!"
Do yourself a favor and save
some money, too. Don't believe these statements. Only time, a conscious effort,
and a personal debt repayment plan will improve your credit report.
This brochure explains how you can improve your credit worthiness and lists
legitimate resources for low or no-cost help.
The Scam
Everyday, companies nationwide appeal to consumers with poor credit histories.
They promise, for a fee, to clean up your credit report so you can get a car
loan, a home mortgage, insurance, or even a job. The truth is, they can't
deliver. After you pay them hundreds or thousands of dollars in up-front fees,
these companies do nothing to improve your credit report; many simply vanish
with your money.
The Warning Signs
If you decide to respond to a credit repair offer, beware of companies that:
- Want you to pay for credit
repair services before any services are provided;
- Do not tell you your legal
rights and what you can do-yourself-for free;
- Recommend that you not
contact a credit bureau directly;
- Suggest that you try to
invent a "new" credit report by applying for an Employer
Identification Number to use instead of your Social Security Number; or
- Advise you to dispute all
information in your credit report or take any action that seems illegal,
such as creating a new credit identity. If you follow illegal advice and
commit fraud, you may be subject to prosecution.
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.
Under the Credit Repair Organizations Act, credit repair companies cannot
require you to pay until they have completed the promised services.
The Truth
No one can legally remove accurate and timely negative information from a
credit report. But the law does allow you to request a reinvestigation of
information in your file that you dispute as inaccurate or incomplete. There is
no charge for this. Everything a credit repair clinic can do for you legally,
you can do for yourself at little or no cost. According to the Fair Credit
Reporting Act:
- You are entitled to a free
copy of your credit report if you've been denied credit, insurance or
employment within the last 60 days. If your application for credit,
insurance, or employment is denied because of information supplied by a
credit bureau, the company you applied to must provide you with that credit
bureau's name, address, and telephone number.
- You can dispute mistakes or
outdated items for free. Ask the credit reporting agency for a dispute form
or submit your dispute in writing, along with any supporting documentation.
Do not send them original documents.
Clearly identify each item in
your report that you dispute, explain why you dispute the information, and
request a reinvestigation. If the new investigation reveals an error, you may
ask that a corrected version of the report be sent to anyone who received your
report within the past six months. Job applicants can have corrected reports
sent to anyone who received a report for employment purposes during the past two
years.
When the reinvestigation is complete, the credit bureau must give you the
written results and a free copy of your report if the dispute results in a
change. If an item is changed or removed, the credit bureau cannot put the
disputed information back in your file unless the information provider verifies
its accuracy and completeness, and the credit bureau gives you a written notice
that includes the name, address, and phone number of the provider.
You also should tell the creditor or other information provider in writing that
you dispute an item. Many providers specify an address for disputes. If the
provider then reports the item to any credit bureau, it must include a notice of
your dispute. In addition, if you are correct-that is, if the information is
inaccurate-the information provider may not use it again.
If the reinvestigation does not resolve your dispute, have the credit bureau
include your version of the dispute in your file and in future reports.
Remember, there is no charge for a reinvestigation.
Reporting Negative
Information
Accurate negative information generally can be reported for seven years, but
there are exceptions:
- Bankruptcy information can
be reported for 10 years;
- Information reported
because of an application for a job with a salary of more than $75,000 has
no time limitation;
- Information reported
because of an application for more than $150,000 worth of credit or life
insurance has no time limitation;
- Information concerning a
lawsuit or a judgment against you can be reported for seven years or until
the statute of limitations runs out, whichever is longer; and
- Default information
concerning U.S. Government insured or guaranteed student loans can be
reported for seven years after certain guarantor actions.
The Credit Repair
Organizations Act
By law, credit repair organizations must give you a copy of the "Consumer
Credit File Rights Under State and Federal Law" before you sign a contract.
They also must give you a written contract that spells out your rights and
obligations. Read these documents before signing the contract. The law contains
specific protections for you. For example, a credit repair company cannot:
- make false claims about
their services;
- charge you until they have
completed the promised services; or
- perform any services until
they have your signature on a written contract and have completed a
three-day waiting period. During this time, you can cancel the contract
without paying any fees.
Your contract must specify:
- the payment terms for
services, including their total cost;
- a detailed description of
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.
Have You Been Victimized?
Many states have laws strictly regulating credit repair companies. States may be
helpful if you've lost money to credit repair scams.
If you've had a problem with a credit repair company, don't be embarrassed to
report them. While you may fear that contacting the government will only make
your problems worse, that's not true. Laws are in place to protect you. Contact
your local consumer affairs office or your state attorney general (AG). Many AGs
have toll-free consumer hotlines. Check with your local directory assistance.
Need Help? Don't Despair
Just because you have a poor credit report doesn't mean you won't be able to
get credit. Creditors set their own credit-granting standards and not all of
them look at your credit history the same way. Some may look only at more recent
years to evaluate you for credit, and they may grant credit if your bill-paying
history has improved. It may be worthwhile to contact creditors informally to
discuss their credit standards.
If you can't resolve your credit problems yourself or you need additional help,
you may want to contact a credit counseling service. There are non-profit
organizations in every state that counsel consumers in debt. Counselors try to
arrange repayment plans that are acceptable to you and your creditors. They also
can help you set up a realistic budget. These counseling services are offered at
little or no cost to consumers. You can find the office nearest you by checking
the white pages of your telephone directory.
In addition, nonprofit counseling programs sometimes are operated by
universities, military bases, credit unions, and housing authorities. They're
also likely to charge little or nothing for their services. Or, you can check
with your local bank or consumer protection office to see if it has a list of
reputable, low-cost financial counseling services.
Do-It-Yourself Check-Up
Even if you don't have a poor credit history, it's a good idea to conduct your
own credit check-up, especially if you're planning a major purchase, such as a
home or car. Checking in advance on the accuracy of the information in your
credit report could speed the credit-granting process.
You're entitled to one free report a year if you can prove that (1) you're
unemployed and plan to look for a job with 60 days, (2) you're on welfare, or
(3) your report is inaccurate because of fraud. Otherwise, a credit bureau may
charge you up to $9.00 for a copy of your report.
Credit bureaus usually are listed in the yellow pages of your telephone book
under "credit reporting agencies." Three large national credit bureaus
supply most credit reports: Equifax, Experian and Trans Union. You may want to
contact each of them for a copy of your report.
Equifax
1-800-685-1111
www.equifax.com
Experian
1-888-EXPERIAN (397-3742)
www.experian.com
Trans Union
1-800-916-8800
www.transunion.com
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