Fixing Your Bad Credit - The Truth About Free Credit Reports and Credit
Repair Agencies
There are many companies in the market today that promise a miracle cure for
people with bad credit. The Federal Trade Commission (FTC) pulls no punches
about these services, saying that they are, for the most part, "scams." It is
possible to improve your bad credit, but it requires patience and persistence,
and there's no guarantee that accurate negative information can be
removed by anything but time. While there are some honest individuals and
companies that can help people with bad credit improve their credit scores, for
the most part, anything that they can do you can do for yourself - it's just a
matter of putting a value on your time.
Obtaining a Free Credit Report
You are entitled to one free credit report a year from each of the three
major credit reporting agencies - Equifax, Experian, and TransUnion - however,
in order to get a "no-questions-asked" free report, you cannot ask the agencies
directly. Instead, you have to use their central website, annualcreditreport.com or call
877-322-8228. This is the only way to get a free, no-hassle report. Any other
website or TV ad with a catchy jingle promising a "free" report is
doing so with strings attached.
You can ask for additional free credit reports directly from the credit
bureaus (not from the central site) if any of the following apply:
1. You are denied credit
2. You are denied insurance
3. You apply for a job and aren't hired
4. You are unemployed and plan to seek a job in the next two months
5. You are on welfare
6. Your credit report(s) are inaccurate due to fraud or identity theft
If you are denied credit, insurance, or employment, you must request a free
credit report within 60. Keep a dated copy of your denial letter and send a
photocopy of it with your credit report request. The websites for the three
bureaus are: www.equifax.com, www.experian.com, and www.transunion.com.
In all other situations, you will most likely need to pay for your credit
report - even if the website or TV commercial says that it is "free." These
people have something to sell to you, so you might as well just pay one of the
three major bureaus directly instead. The amount that they charge varies by
state, but federal law makes charging more than $9.50 illegal.
Dispute Outdated, Inaccurate, or Just Plain Negative Information
Once you have your hands on your credit report(s), you can then decide what
information you would like to dispute. First, any negative information that is
more than seven years old should have been automatically removed, but if it
remains, simply write to the credit reporting agency and tell them to remove it
- they must, by law. The lone exception to this is Chapter 7 bankruptcy, which
stays on your credit report for 10 years.
Secondly, any inaccurate information should also be disputed. It helps if you
can prove that the information is false, but the onus is on the creditor to
prove that it is true; so even if you don't have a filing cabinet full of old
receipts and contracts, you should still dispute inaccurate information. Of
course, it only make sense to dispute false information that is negative - it is
possible for inaccurate good stuff to be on your report as well. In this case,
mum's the word; you're under no obligation to ask that it be corrected.
Third, you can make the decision to dispute negative information that you
only wish were inaccurate. The morality of this tactic is up to you, but if your creditors are unable to respond within the required 30 days, the negative information must be removed.
Do-it-Yourself vs. Credit Repair Services
Bad credit cannot be made to disappear with the waving of a magic wand, but
it can be cleaned up with a little hard work - and you can do it
yourself. However, while most credit repair services are (in the words of the
FTC) "scams," there are some legitimate, reputable firms out there. The question
you need to ask yourself is, "is it worth it to pay someone to do something I
could do myself?" You may decide that it is, especially since paying someone
means that you can go on with your life, however, you must be very wary when selecting a credit repair service. According to the FTC, here are some tell-tale
signs of a disreputable company:
1. The company wants you to pay them in advance for their credit
repair services: This is actually illegal. Any service that would
knowingly break the law is not legitimate. Any service that is ignorant or
the law is even less trustworthy.
2. The company tells you not to contact a credit bureau directly:
The only reason they would say this is to prevent you from realizing that
you can do this yourself. You should only hire a credit reporting
agency because you don't want to do it yourself.
3. The company wants you to create a new "credit identity":
Some companies suggest that you create an "Employer Identification Number" (EIN)
to replace your Social Security Number. The problem is that creditors are
not stupid - your "business" will have zero credit history, which in most
cases is worse than having bad credit. Furthermore, creating an EIN under
false pretenses is against the law, meaning you could be prosecuted for
fraud.
4. The company's promises are just too good to be true: If a
company says things like, "We can erase your bad credit - 100% guaranteed,"
or "We can remove bankruptcies, judgments, and liens from your credit
report; no problem!" then they are most likely scammers. While it may
technically be possible to get every bad item removed from your credit
report, there is very little chance that all of your creditors will fail to
respond within the required 30 days. And besides, it's not as if the credit
agencies can't see what you're doing - they will be able to tell that you
are disputing legitimate items - and thus, they will be less likely to find
in your favor.
If you feel you have been victimized by a credit repair agency, visit the website of the National Association of Attorneys General at www.naag.org, and find your state's Attorney General.
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