Credit repair organizations say they can fix your bad credit report. But do those credit repair outfits actually deliver? Yes - and no. Nobody can simply remove negative information about you from any credit bureau report. There's no magic wand that dissolves a decade of bad choices and behavior. To truly repair your credit, the process takes years. However, a positive change in credit behavior may bring results in as little as 60 days. Whether you hire a credit repair clinic or use your own initiative to repair your credit for free, keep these tips in mind:
Dispute bad credit information. The only way to legally remove negative information is when the information itself is incorrect. So it pays to dispute wrong information. By law, credit report bureaus must open an investigation into any claims of inaccuracy. That's why you should order your credit report and check it thoroughly for mistakes. Some studies have put the error-rate on credit reports as high as 70%, so it's worth doing. Use documentary evidence such as account statements to back up your charges. It's completely free to dispute errors.
Alert others to the errors and start to repair your credit. If errors are found in your credit report, you have the right to demand that copies of the corrected report be mailed to anyone who has checked your credit in the last 6 months. If you were turned down for jobs because of bad credit, you are entitled to have reports sent to these prospective employers for up to 2 years.
Order a free copy of your credit report. Since 2005, Americans have been legally entitled to see their credit report from all 3 major bureaus (Experian, Equifax and Trans Union) once a year for free. The law is intended to make credit reporting more transparent and allow customers a way to defend themselves against inaccurate information. Prior to this law, credit repair organizations relied on customer inexperience and lack of knowledge. The first thing any credit repair organization will do is pull your credit report.
Beware of upfront payments. Credit repair companies are required by law to wait for payment until they have completed their contracted services for you. This eliminates one popular credit repair scam which allowed companies to receive large fees before beginning "repairs" which may or may not succeed.
After any credit report investigation, get a free copy in writing. After initiating an investigation into alleged errors, the credit bureau in question must complete their review in a timely manner - typically 30 days. If they cannot resolve the dispute because the creditor can't support their position, the issue is resolved in your favor. The credit bureau must issue a corrected report to you by mail. Credit repair companies make the error correction request for you, but you can just as easily do it yourself.
When disputes don't go your way, make a statement. You are entitled to tell your side of the story in any credit reporting dispute by writing a "consumer's statement" which is included on your report. Instances where consumer's statements are of value are credit problems stemming from prior marriages, identity thefts and other scenarios. There is also no charge for a re-investigation if more information becomes available.
Don't use tricks to fix credit. Credit repair clinics often say they'll swamp the credit report agency with hundreds of reports filed on the same day about different individuals. They hope that the bureau can't meet its obligations for timely acknowledgement or investigation. This may or may not work in your case.
Reporting Negative Information
There really is a 7-year itch. That's how long it takes before accurate negative information disappears from your credit report. But you're not always home free at the 7-year mark. Some items can remain on your credit report for far longer. These include:
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. No time limitation
Information reported because of an application for more than $150,000 worth of credit or life insurance. 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
Information about U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions
The Credit Repair Organizations Act
When considering whether to hire a credit repair company, follow these guidelines. 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 with them. They must also give you a written contract that spells out your rights and obligations. Read these documents carefully 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 after 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
If you do decide to go ahead with paid credit repair services, 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
The company's name and business address
Remember - credit repair companies have no magic potion or access to any tactics you don't already have. Sometimes it's far cheaper to do the leg work yourself rather than pay credit repair companies to do it for you. You'll reap the same benefits without expending a penny.
