You’ve probably seen plenty of advertisements about credit repair services. These organizations often make claims such as:
- Credit problems? No problem!
- We will remove bankruptcies, bad loans, and judgments from your credit report forever!
- We will create a new credit identity, legally.
- We will erase your bad debt guaranteed!
The problem? You should not believe any of these statements. The truth is, only time and hard work will improve your credit, and there is no quick fix. Many of these companies will use shady and sometimes illegal tactics and charge you a fortune for the service.
If you have inaccurate information in your credit report, it’s usually best to hire a credit repair lawyer to resolve the manner effectively and completely legally.
What a Credit Repair Scam Looks Like
Companies across the United States appeal to consumers with bad credit. You may see ads or even get telemarketing calls from companies who will claim, for a fee, they will clear up your credit report so you can get a mortgage, insurance, and new credit.
Unfortunately, this is something they cannot deliver. After you have paid hundreds or even thousands in fees, they will not do anything to improve your credit score and may even hurt it, leaving you out of the money and in no better situation.
While not all credit repair companies are necessarily a scam, stay away from any company that:
- Requires you pay a fee upfront for credit repair services,
- Does not tell you your legal rights and what you can do on your own at no cost,
- Tells you not to contact credit bureaus yourself,
- Tells you to apply for an Employer Identification Number to use instead of your Social Security number to create a “new” file,
- Suggests you dispute all negative information on your credit report, or
- Tells you to do anything that seems illegal. Remember, following illegal advice means that you will be committing fraud, and you will be subject to prosecution!
What You Need to Know
No one can legally get rid of accurate and timely negative information on your credit report. You are, however, allowed under law to request an investigation of information in your credit report that you dispute as inaccurate. This can be done for free.
There is nothing a credit repair company can do for you that you cannot do yourself for free or at very little cost. Credit repair companies are also prohibited by the Credit Repair Organizations Act from requiring any payment until they have completed the services they have promised.
According to the Fair Credit Reporting Act, you are entitled to one free copy of your credit report if you have been denied employment, credit, or insurance in the last 60 days, as well as one free copy every 12 months from TransUnion, Experian, and Equifax.
You have the legal right to dispute outdated or erroneous items at no charge. You may ask the credit bureau for their dispute form, submit your dispute in writing, or complete an online dispute. Doing so requests an investigation into the information.
The credit bureau is required by law to give you the written results of the investigation when it is complete, and a free copy of your report if your dispute causes a change. If an item is removed or changed, the credit bureau cannot put the disputed information back on your credit report unless the provider of the information verifies it is correct.
How Long Negative Information can be Reported
Accurate negative information can usually be reported on your credit file for seven years. There are exceptions to this rule:
- Bankruptcies may be reported for 7-10 years.
- Information reported due to an application for a job with a salary over $75,000 has no limit.
- Information reported due to an application for over $150,000 worth of credit or life insurance has no limit.
- Information about a lawsuit or judgment can be reported for 7 years or until the statute of limitations expires, whichever is longer.
- Default information for government-insured loans or guaranteed student loans can be reported for 7 years after specific guarantor action.
How the Credit Repair Organizations Act Protects You
This law requires certain actions from credit repair organizations and grants you many rights. Under the law, credit repair organizations must provide you with a copy of the Consumer Credit File Rights Under State and Federal Law before you sign any contract. You must also be given a written contract describing your obligations and rights.
A credit repair organization cannot:
- Make false claims about the services they provide,
- Charge you until promised services are complete, or
- Perform any services until you have signed a written contract and completed a 3-day wait period. During this period, you may cancel your contract without paying.
The contract you sign must include:
- The payment terms and total cost
- An in-depth description of the services that will be performed
- How long it will take to achieve the promised results
- Any guarantee on the services
- The company name and address
What to Do If You Are a Victim
Most states have laws governing credit repair companies, and these laws may help you if you have been taken advantage of by a credit repair scam.
If you have had problems with a credit repair company, contact us right away for help.