This article is reprinted from ftc.gov.
This is an excellent article for anyone interested in credit repair services.
Credit Repair: Self Help May Be Best
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!”
Do yourself a favor and save some money, too. Don’t believe these
statements. Only time, a conscious effort, and a personal debt repayment
plan will improve your credit report.
This brochure explains how you can improve your creditworthiness and gives
legitimate resources for low or no-cost help.
The Scam
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, they
can’t deliver. After you pay them hundreds or thousands of dollars
in fees, these companies do nothing to improve your credit report; most
simply vanish with your money.
The Warning Signs
If you decide to respond to a credit repair offer, look for these tell-tale
signs of a scam:
companies that want you to pay for credit repair services before they
provide any services.
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 dispute all information in your credit report
or 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.
You could be charged and prosecuted for mail or wire fraud if you use
the mail or telephone to apply for credit and provide false information.
It’s a federal crime to lie on a loan or credit application, to
misrepresent your Social Security number, and to obtain an Employer Identification
Number from the Internal Revenue Service under false pretenses.
Under the Credit Repair Organizations Act, credit repair companies cannot
require you to pay until they have completed the services they have promised.
The Truth
No one can legally remove accurate and timely negative information from
a credit report. The law allows you to ask for an investigation of information
in your file that you dispute as inaccurate or incomplete. There is no
charge for this. Everything a credit repair clinic can do for you legally,
you can do for yourself at little or no cost. According to the Fair Credit
Reporting Act (FCRA):
You’re entitled to a free report if a company takes adverse action
against you, like denying your application for credit, insurance, or employment,
and you ask for your report within 60 days of receiving notice of the
action. The notice will give you the name, address, and phone number of
the consumer reporting company. You’re also entitled to one free
report a year if you’re unemployed and plan to look for a job within
60 days; if you’re on welfare; or if your report is inaccurate because
of fraud, including identity theft.
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 have set up a central website, a toll-free telephone
number, and a mailing address through which you can order your free annual
report. To order, click on annualcreditreport.com, call 1-877-322-8228,
or complete the Annual Credit Report Request Form and mail it to: Annual
Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
You can print the form from ftc.gov/bcp/conline/edcams/credit/ . Do not
contact the three nationwide consumer reporting companies individually.
They are providing free annual credit reports only through annualcreditreport.com,
1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281,
Atlanta, GA 30348-5281. 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. For more information,
see Your Access to Free Credit Reports at ftc.gov/bcp/conline/edcams/credit/
.
Otherwise, a consumer reporting company may charge you up to $9.50 for
another copy of your report within a 12-month period.
You can dispute mistakes or outdated items for free. Under the FCRA, both
the consumer reporting company and the information provider (that is,
the person, company, or organization that provides information about you
to a consumer reporting company) are responsible for correcting inaccurate
or incomplete information in your report. To take advantage of all your
rights under this law, contact the consumer reporting company and the
information provider.
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.
Consumer reporting companies must investigate the items in question —
usually within 30 days — unless they consider your dispute frivolous.
They also must forward all the relevant data you provide about the inaccuracy
to the organization that provided the information. After the information
provider receives notice of a dispute from the consumer reporting company,
it must investigate, review the relevant information, and report the results
back to the consumer reporting company. If the information provider finds
the disputed information is inaccurate, it must notify all three nationwide
consumer reporting companies so they can correct the information in your
file.
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.
STEP TWO
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 reports the item to a consumer reporting company, it must
include a notice of your dispute. And if you are correct – that
is, if the information is found to be inaccurate – the information
provider may not report it again.
For more information, see How to Dispute Credit Report Errors at ftc.gov/bcp/conline/edcams/credit/
.
Reporting Accurate Negative Information
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. There is a standard method for calculating the seven-year
reporting period. Generally, the period runs from the date that the event
took place.
For more information, see Building a Better Credit Report at ftc.gov/bcp/conline/edcams/credit/
.
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
Have You Been Victimized?
Many states have laws regulating credit repair companies. State law enforcement
officials may be helpful if you’ve lost money to credit repair scams.
If you’ve had a problem with a credit repair company, don’t
be embarrassed to report it. While you may fear that contacting the government
will only make your problems worse, remember that laws are in place to
protect you. Contact your local consumer affairs office or your state
Attorney General (AGs). Many AGs have toll-free consumer hotlines. Check
the Blue Pages of your telephone directory for the phone number or check
www.naag.org for a list of state Attorneys General.
Need Help? Don’t Despair
Just because you have a poor credit report doesn’t mean you won’t
be able to get credit. Creditors set their own credit-granting standards
and not all of them look at your credit history the same way. Some may
look only at more recent years to evaluate you for credit, and they may
grant credit if your bill-paying history has improved. It may be worthwhile
to contact creditors informally to discuss their credit standards.
If you’re not disciplined enough to create a workable budget and
stick to it, work out a repayment plan with your creditors, or keep track
of mounting bills, consider contacting a credit counseling organization.
Many credit counseling organizations are nonprofit and work with you to
solve your financial problems. But not all are reputable. For example,
just because an organization says it’s “nonprofit,”
there’s no guarantee that its services are free, affordable, or
even legitimate. In fact, some credit counseling organizations charge
high fees, or hide their fees by pressuring consumers to make “voluntary”
contributions that only cause more debt.
Most credit counselors offer services through local offices, the Internet,
or on the telephone. If possible, find an organization that offers in-person
counseling. Many universities, military bases, credit unions, housing
authorities, and branches of the U.S. Cooperative Extension Service operate
nonprofit credit counseling programs. Your financial institution, local
consumer protection agency, and friends and family also may be good sources
of information and referrals.
If you are considering filing for bankruptcy, you should know about one
major change to the bankruptcy laws: As of October 17, 2005, you must
get credit counseling from a government-approved organization within six
months before you file for bankruptcy relief. You can find a state-by-state
list of government-approved organizations at www.usdoj.gov/ust. That is
the website of the U.S. Trustee Program, the organization within the U.S.
Department of Justice that supervises bankruptcy cases and trustees.
Reputable credit counseling organizations can advise you on managing
your money and debts, help you develop a budget, and offer free educational
materials and workshops. Their counselors are certified and trained in
the areas of consumer credit, money and debt management, and budgeting.
Counselors discuss your entire financial situation with you, and help
you develop a personalized plan to solve your money problems. An initial
counseling session typically lasts an hour, with an offer of follow-up
sessions.
For more information, see Knee Deep in Debt and Fiscal Fitness: Choosing
a Credit Counselor at ftc.gov/bcp/conline/edcams/credit/ .
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.
Sample Dispute Letter
Date
Your Name
Your Address
Your City, State, Zip Code
Complaint Department
Name of Company
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 investigate 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)
The FTC works for the consumer to prevent fraudulent, deceptive and unfair
business practices in the marketplace and to provide information to help
consumers spot, stop, and avoid them. To file a complaint or to get free
information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP
(1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing,
identity theft, and other fraud-related complaints into Consumer Sentinel,
a secure online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
|
|
