When you need to borrow money, a financial institution checks your credit history to see how you paid back previous debts. Good credit implies that you will make good on your promise to pay the creditor on time. If you have bad credit the lender will take a risk that you may not make a payment or worse off, stop paying all together.  

Credit Repair can restore the lost trust of the creditors. In order to repair credit properly the process requires following a system. In addition, credit repair implies putting more effort to restore the tarnished trustworthiness. Using a credit repair agency can ensure that the credit repair process is completed efficiently minus any problems.

Credit repair can cost a few hundred dollars to repair minor problems on upwards to over one thousand dollars to repair years of credit neglect. The process involves series of letters and takes a few months to over six months in severe cases. The agency should make a detailed offer in writing for you to review. A reputable credit repair agency will have a refund policy for items that could not be corrected.

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 you sign anything. The law contains specific protections for you. 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 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

The Problem

You see the advertisements 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!”
  

The Reality

Everyday, companies nationwide 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, some of them can’t deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report.

A credit repair organization will request the credit bureaus to provide proof of legitimate and illegitimate derogatories on your credit. If the credit bureaus cannot provide proof to back up their reporting then the item must be removed.

Most of us if not all of us have had one or more errors reported on our credit reports. Since credit reporting is not perfect, the same mistakes that allow inaccurate information on to your report can also allow accurate negative items to be removed.

Credit repair can be done by the individual for free (see further below). It's when there are too many items needing to be repaired that it becomes overwhelming for the individual to do alone. That's when hiring a reputable credit repair company may be the best plan.

What is credit and what is on it?

The Agencies

If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file contains information on where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy.

Companies that gather and sell this information are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau (Transunion, Equifax, Experian). The information CRAs sell about you to creditors, employers, insurers, and other businesses is called a consumer report.

The Fair Credit Reporting Act (FCRA)

The FCRA is designed to promote accuracy and ensure the privacy of information used in consumer reports. Recent amendments to the Act expand your rights and place additional requirements on CRAs. Businesses that supply information about you to CRAs and those that use consumer reports also have new responsibilities under the law.

Here are some questions consumers commonly ask about consumer reports and CRAs-and the answers.

• Q. How do I find the CRA that has my report?
  A. Contact the CRAs listed in the Yellow Pages under "credit" or "credit rating and reporting." Because more than one CRA may have a file on you, call each until you have located all the agencies maintaining your file. The three major credit bureaus are:

Equifax
1-800-685-1111
http://www.equifax.com/

Experian
1-888-EXPERIAN (397-3742)
http://www.experian.com/

Trans Union
1-800-916-8800
http://www.transunion.com/In addition, anyone who takes action against you in response to a report supplied by a CRA-such as denying your application for credit, insurance, or employment-must give you the name, address, and telephone number of the CRA that provided the report.

• Do I have a right to know what's in my report?
  Answer. Yes, if you ask for it. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year-two years for employment related requests.
• Is there a charge for my report?
  Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report, at your request, once every 12 months.
  The three companies are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228. You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. Otherwise, a consumer reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.
• What type of information do credit bureaus collect and sell?
  Answer. Credit bureaus collect and sell four basic types of information (see below).

1. Identification and employment information

Your name, birth date, Social Security number, employer, and spouse's name are routinely noted. The CRA also may provide information about your employment history, home ownership, income, and previous address, if a creditor requests this type of information.

2. Payment history

Your accounts with different creditors are listed, showing how much credit has been extended and whether you've paid on time. Related events, such as referral of an overdue account to a collection agency, may also be noted. 

3. Inquiries

CRAs must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.

4. Public record information

Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.

•  What are FICO scores made up of?

1. Payment history 35%
2. Amounts owed 30%      
3. Length of credit history 15%
4. New credit 10%         
5. Types of credit in use 10%

 

Do It Yourself Credit Repair

The process of repairing your credit involves the same thing anything else does, TIME and KNOWLEDGE. First you need to ask yourself if you have the time to get the knowledge and then if you have the time to do the work. Decide if taking the time to do it yourself is really worth it or if paying a reputable company to do it is more worthwhile. If doing it on your own is your decision then you should know by now that there is no mystery surrounding credit repair.

Step One

Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one on page 6. Send your letter by certified mail, “return receipt requested,” so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Date
Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Credit Reporting Agency
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

 CRAs must reinvestigate the item(s) in question-usually within 30 days-unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so that they can correct this information in your file.

Disputed information that cannot be verified must be deleted from your file.

• If your report contains inaccurate information, the CRA must correct it.
• If an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the CRA must show that your payments are now current.
• If your file shows an account that belongs only to another person, the CRA must delete it.

Step Two

When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice of its intent to reinsert the items that includes the name, address, and phone number of the provider.

If you request, the CRA must send notices of any correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.

In addition to writing to the CRA, you should tell the creditor or other information provider in writing that you dispute an item. Be sure to include copies (not originals) of documents that support your position. Many providers specify an address for disputes. If the provider continues to report the disputed item to any CRA after receiving your notice, it must include a notice that you dispute the item. If you are correct-that is, if the information is not accurate-the information provider may not report it again.

When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reportincompany also must send you written notice that includes the name, address, and phone number of the information provider. If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance.

Seven-year Reporting Period

There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

With regard to any delinquent account placed for collection-internally or by referral to a third-party debt collector, whichever is earlier-charged to profit and loss, or subjected to any similar action, the seven-year period is calculated from the date of the delinquency that occurred immediately before the collection activity, charge to profit and loss, or similar action. For example, assume that your payments on a loan were late in January, but that you caught up in February. You were late again in May, but caught up in July. You were again late in September, but did not catch up before the account was turned over to a collection agency in December. You made no more payments on the account, and it is charged to profit and loss in July of the following year.

Under the FCRA, the January and May late payments each can be reported for seven years. The collection activity and the charge to profit and loss can be reported for seven years from the date of the September payment, which was the delinquency that occurred immediately before those activities. 

Do-It-Yourself Check-Up

Even if you don’t have a poor credit history, some financial advisors and consumer advocates suggest you review your credit report periodically

• because the information it contains affects whether you can get a loan or insurance — and how much you will have to pay for it.
  
• to make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
  
• to help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

Tip-offs to avoid Rip-offs

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

• companies that do not offer a refund for items that could not be repaired.
  
• 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 — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.
  
• companies that advise you to 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.

Check the company out

If you decide to work with a credit repair company, be sure to check it out with your state Attorney General and the Better Business Bureau. They can tell you if any consumer complaints are on file about the firm you’re considering doing business with.

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