Credit repair services make confusing claims. They claim to be able to repair "bad" credit, leaving you with the impression that if your credit is legitimately bad, they can erase the bad data on your report. Many people with poor credit ratings buy into their claims, hoping to be able to increase their credit score in order to improve their chances of getting a loan, credit card or other form of credit. However, what they find out is that any credit repair service that promises to erase legitimate bad credit is either lying or engaging in illegal activity.
If you are considering using a credit repair service, there are several things you need to do and consider.
- Get a copy of your credit report from the three major credit reporting companies - Experian, TransUnion, and Equifax. These three agencies have set up a website that allows consumers to get a free copy of their credit report once every twelve months. To get your free report, go here.
- Carefully review your credit report to see where there is any inaccurate information. If you have a dispute with any of the charges on your report, you may want to consider calling a credit repair service.
- Before choosing a credit repair service, you should be familiar with The Credit Repair Organizations Act. This act was designed to protect consumers from credit repair services that take their money and give them little or nothing in return.
A credit repair service is legally required to give you a booklet called "Consumer Credit File Rights under State and Federal Law" that explains the act.
Some of the act's provisions state that a credit repair company cannot: charge for any services until they have been completed in full; provide any services until a contract has been signed, you have been given the booklet that explains your rights, and a three day waiting period passes; make any claims that are untrue.
- Even though a credit repair service can't legally remove bad credit information from a person's credit report, they can help a person with inaccurate information correct their credit report. Often when a consumer orders a copy of his credit report he finds inaccurate information on it for various reasons. Contacting the credit company that reported the inaccurate information and getting the information corrected is often a time consuming, frustrating job.
For a fee, a credit repair company can do the work of getting it corrected for a consumer. They can document the error, send a letter reporting the error, and continue to follow up with phone calls to the credit company until the error has been corrected on the credit report. Of course, all this could be done by the consumer himself, but many choose to let a credit repair company handle the headache.
- If there is a legitimate negative claim on your credit report - say you defaulted on a loan or got behind on credit card payments, a credit repair service cannot legally remove the claim. Some repair services will advise clients to do things such as creating a new credit identity by using false social security numbers, names or employee identifications numbers. If your credit repair service advises you to do this, do not do it. It is illegal and you could be charged with committing a fraud.
- A credit repair service that is on the up and up should stick with your case until all of the legitimately disputed claims have been corrected. Only then can they ask for payment. As for those negative claims that are on your credit report - only time can clear them up.