Credit RepairLegit or Not?
These days, lots of companies are advertising “credit repair” on TV and on the internet. Some of these offers MAY be honest, but many are scams. Here’s how it works: BY LAW, the Credit Reporting Agencies (the “Credit Bureaus”) are required to respond to all consumers who report false statements on their credit reports. The Credit Reporting Agencies only have a certain amount of time to respond to your inquiry. If the time lapses the information must be automatically deleted. The Credit Repair companies simply keep writing to the Credit Reporting Agencies, hoping that the bureaus will slip up and miss the deadline.
Here are the problems:
- It is not legal for you to seek to remove TRUE information from your credit report, just false information.
- The credit bureaus do not really do much of a job of investigating consumer claims, so they rarely miss a deadline and they rarely correct even the information that is false. They use lots of workers in India and Jamaica (I am not making this up) who go through the mail and “answer” hundreds of letters, each day.
- By law, the Credit Reporting Agencies do NOT have to respond to a Credit Repair company.
Can you attempt credit repair? YES! If you have false information on your credit report, you SHOULD contact the Credit Reporting Agencies to change it. There are an estimated 10,000,000 victims of identity theft in the United States. Up to 40% of all credit reports contain errors, including “mixed cases” in which your information is mixed with someone else’s. There are cheap credit repair kits that you can obtain at Office Max that will provide step-by-step instructions on how to do this. In addition, I can help you.
Can you improve your credit report? YES! Here are probably the best ways:
- Pay all bills on time – for two years minimum.
- Pay in full, if possible, or at least more than minimum amounts at each payment.
- Close all but one or two revolving charge accounts after they are paid off.
- You DO have the legal right to include a written statement in your credit report explaining any problems, or extraordinary circumstances that caused financial hardship. The statement can be up to 100 words. Contact the bureaus to do this.
- Obtain a “secured” credit card. This is a credit card where you deposit a set amount of money with that credit card, each month, and in turn they extend a line of credit to you. What most people do not know is that a secured credit card usually pays YOU interest on money you place with the credit card. Often, it’s better than what you can get at a bank. Use that and pay it off to obtain a better credit history.
- Obtain and use a credit card with a LOW line of credit. Look: everyone needs a credit card, these days, if only to rent a car, or make a hotel reservation. After bankruptcy, most of my clients find that they are deluged by new credit card offers (after all, now they are debt free). Capitol One will usually give a credit card to anyone with a FICO score of 600, or better. Use this and pay it off, every month. It’s a great way to rebuild credit.
- Contact all creditors when you are having financial problems: it NEVER pays to hide from creditors. They actually may be able to help.
- Bad credit should only remain on your credit report for seven years. The fact that you filed bankruptcy remains on your credit report for up to 10 years.
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