How To Repair Your Credit

If you have less than perfect credit, you are probably attracted to the many commercials on TV which promise credit repair and debt consolidation. While there are many things companies can do to help you fix your credit, there are a number of things you can do yourself to get back on your feet. Many people make the mistake of avoidng their lenders. They choose to ignore phone calls or letters which are sent in the mail.

You want to make sure you contact your lenders promptly when you find yourself in a situation where you may not be able to make payments. Calling them to look for options is a responsible thing to do. They are likely to work with you, because they have a vested interest in getting back the money which is owed. If you are willing to setup a budget, most of your lenders will work with you. If you work with your lender, it is likely you won't have to worry about repairing your credit.

Even though your credit score may slightly be lowered if you have problems making payments, things will be a lot worse if you choose to ignore the lender. By showing that you are trying to pay off your debts, you will often find that your credit report remains relatively unchanged. When you decide to ignore them, this is when you will be reported to the credit agencies. Once this happens, it will become difficult to apply for a car, home, or even a job. If you are already in this situation, you should start looking at credit repair services which can help you rebuild your credit.

These organizations can help you setup a budget and payment schedule. It is also important to know your rights with the Fair Credit Reporting Act. If you have been denied employment or other things due to having bad credit, you are allowed to get a free report of your credit history. However, you have to ask for this at least two months after you've been denied. The reason why it is important to get a report of your credit history is because there may be errors.

If you find that information on your report is false, you can file a dispute with the credit agency to get the issue resolved. Though this will cost you nothing, you have to explain why the information on the report is false.

Credit Repair: Don't Get Scammed

You see the ads 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. They're just not true. Only time, a conscientious effort, and a plan for repaying your debt will improve your credit report.

The Warning Signs

If you should decide to respond to an offer to repair your credit, think twice. Don't do business with any company that:

  * wants you to pay for credit repair services before any services are provided

  * does not tell you your legal rights and what you can do yourself — for free

  * recommends that you not contact a consumer reporting company directly

  * suggests that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security number

  * advises 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.

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 consumer protections. For example, a credit repair company cannot:

  * make false claims about their services

  * charge you until they have completed the promised services

  * 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 total cost of the services

  * a detailed description of the services to be performed

  * how long it will take to achieve the results

  * any "guarantees" they offer

  * the company's name and business address.

Where to Complain

If you've had a problem with any of the scams described here, contact your local consumer protection agency, state Attorney General (AG), or Better Business Bureau. Many AG's have toll-free consumer hot-lines. Check with your local directory assistance.

Credit Repair Scam Tips

There are credit counseling services that are free of charge. Check into those.

Check with the Attorney General's office and the Better Business Bureau for complaints filed on company.

If you are asked to sign a contract, Make sure you read and understand before you sign; there could be hidden charges, etc.

Check with your creditors to make sure that the creditors will work with this agency.

Be leery of companies that promise to repair your credit. These companies can not do anything that you can't do yourself to repair your credit.

Check with the company to make sure that you will have access to payment records for payments made on your behalf.

There are several ways these credit repair scams claim they can help. For a fee they will offer to:

Clean up your credit record. Only you can do this, and it takes time, patience and a personal repayment plan. No one else can speed up the process or do it for you.

Offer you a Visa or Master Card even if you've been turned down by banks. Sometimes you must call a 900 number at a cost of $25 to $50, and you still may not receive a credit card.

Show you how to apply for credit with a new tax ID number, usually an EIN. (Employer Identification Number, used by businesses to report financial information to the government.) This is called file segregation (creating a new credit file separate from your old not-so-good credit report.) Not only is it illegal to apply for an EIN under false pretenses, if you obtain the new number through the U.S. mail or by telephone, you may be charged with mail or wire fraud and face fines and/or jail.

Ways to improve your own credit rating:

Obtain a "secured" credit card from a major bank and make the payments on time every time.

Make sure any mistakes on your credit report are corrected. The credit bureau can tell you how, at no cost to you. However, there is nothing anyone can do about negative information that is accurate. It cannot be "erased." Only timely payments for an extended period will help.

Contact a non-profit credit counseling service in your area.

If you realize you can't pay your monthly bills, contact your creditors immediately and arrange a payment plan.

Remember, there is nothing a credit repair service can do for you that you cannot do for yourself for free. It just takes time.

Credit Repair Scams: The Warning Signs

"Credit problems? No problem!"

"We can erase your bad credit Ч 100% guaranteed."

"Create a new credit identity Ч legally."

"We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!"

Do yourself a favor and save some money, too. DonТt believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

This article explains how you can improve your creditworthiness but you have to remember that it can take time. If you stick to a plan you can repair your credit and get your life back to normal. Take it one step at a time and make sure that you are not planning to do anything illegal.

The Scam

Everyday, there are companies nationwide that 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 canТt deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money.

The Warning Signs

If you decide to respond to a credit repair offer, look for these tell-tale signs of a scam:

companies that want you to pay for credit repair services before they provide any services.

companies that do not tell you your legal rights and what you can do for yourself for free.

companies that recommend that you not contact a credit reporting company directly.

companies that suggest that you try to invent a "new" credit identity Ч and then, a new credit report Ч by applying for an Employer Identification Number to use instead of your Social Security number.

companies that advise you to dispute all information in your credit report or take any action that seems illegal, like 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. ItТs a federal crime to lie 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 services they have promised.

Credit Repair Companies Provide No Cure for Your Credit Ails

"Do you have bad credit? We can help" is often a claim made in advertisements by credit repair companies who state they can erase negative information on your credit report. However, only time--not miracle cures or exorbitant fees--can heal bad credit.

Unscrupulous firms often rely on a portion of the federal Fair Credit Reporting Act (FCRA) which requires a credit bureau, or credit reporting agency, to omit some information on a credit report during the time when an investigation is being conducted after a challenge has been filed by a consumer.

As a result, credit repair firms will flood credit bureaus with multiple, frivolous disputes. Fees paid by consumers who are desperate for clean credit can range from a few dollars to thousands of dollars, but the legitimate negative information is never permanently erased from a credit file by the paperwork generated by a credit repair firm.

Rather, time is the best solution to an undesirable credit history.

Federal law mandates the time periods that accurate negative information remains on a credit report. Delinquent payments are eliminated from credit reports after seven years and personal bankruptcies after ten years.

Information concerning a lawsuit or judgment against you can be reported for seven years or until the statue of limitations runs out, whichever is longer.

Credit reporting company officials estimate that about 30 percent of their workload is wasted on credit repair companies which intentionally abuse laws and policies established to protect consumers.

Credit reporting organizations will provide consumers with a copy of their credit report upon request for a small fee. In addition, free credit reports are available to persons who have been denied credit within the past 60 days.

Consumers should be aware of the following facts:

Virtually every service a credit repair firm does legally can be done by consumers themselves for free or at minimum cost.

No one can legally remove accurate information from a credit report. Only time can wipe out bad credit.

Any consumer can dispute inaccurate information at no charge. Inaccurate information will be changed or deleted free of charge. Credit reports contain an easy-to-complete dispute form to help consumers who disagree with the information.

There are no miracle cures for bad credit.

Remember that lenders are in business to lend money and want to say "yes." However, their livelihood depends on extending credit only to consumers who repay their debts.

3 Things To Look For In A Credit Repair Company Online

If it's been a while since you've looked at your credit report, you may be surprised to find errors, mistakes, or even a black mark or two. Fortunately, a Credit Repair Company can help you fix those mistakes and erase those black marks. Watch out for scammers, though, and choose a reputable Credit Repair Company with these tips:

Don't pay anything up-front

Avoid a Credit Repair Company that wants you to hand over a fee or payment before they meet with you. Reputable companies will first talk to you, assess your credit report and discuss your current situation before asking for any type of payment for their services. An up-front fee is a red flag that the company will probably take your money and run. And no matter what type of charges you may incur, be sure they aren't exorbitant. If a Credit Repair Company claims your case will cost thousands of dollars, look for another one.

Watch out for "re-inventors"

Some companies will tell you that you can wipe your credit slate clean by "re-inventing" yourself with a new social security number. But that's not true! In most cases, what they plan to do is get you a new credit report by applying for an Employee Identification Number (EIN)--used by businesses--which resembles a social security number, and you're told to use it as such. But this practice, known as "file segregation," is a scam, and it's also illegal! Avoid any Credit Repair Company that suggests this practice.

Look for one that helps you help yourself

A good Credit Repair Company will tell you (for free!) what you can do yourself, such as writing letters to creditors and contacting the credit reporting bureaus about errors. Avoid any Credit Repair Company that encourages you to do anything illegal or unethical--such as disputing a legitimate charge or fee on your credit report.

Before signing up with any Credit Repair Company, make sure you check with the Better Business Bureau. They'll have records of any formal complaints against the company, so you can avoid scammers and rip-off artists.