Many credit repair companies advertise to "clean up", "fix", or "erase" bad credit ratings or negative information from your credit report, hence it is crucial to understand the nature and tactics of potentially fraudulent credit repair services in order to not fall a victim to one.
Most importantly, any negative information in your credit report which is accurate cannot be erased. If valid, such information stays in your file for seven years or ten years in the case of bankruptcy. According to the federal Fair Credit Reporting Act, you have the right to obtain one free copy of your credit report per year and to challenge its accuracy. If mistakes are found, the law states that the three credit reporting agencies, Experian, Trans Union, and Equifax, are responsible for conducting reasonable investigations into consumer disputes in regards to possibly incorrect information on the credit report. To get a copy of your credit report, go to www.annualcreditreport.com
It needs to be kept in mind that the process of obtaining your credit report, finding mistakes and documenting them, gathering any necessary paperwork, sending everything to the credit reporting agencies and then having an investigation opened, is not quick and easy. It is time-consuming and quite likely tedious, and here is where legitimate credit repair companies offer their services. They can pull your credit reports, review them for errors, send out dispute letters along with documentation, and save you time. But that is the extent of what these services can do, and the reality is that anything that a credit repair service can do for you for a fee, you can do yourself for free.
As directed by the Credit Repair Organizations Act, a reputable credit repair company should provide you with an explanation of your rights as a consumer. Before you sign any contract make sure it lists: the payment terms for any services including the total cost, a detailed description of the services to be performed, how long it will take to achieve the results, any guarantees the company offers, and what the company's name and business address is. The last two may seem obvious, but a lot of fraudelent credit repair companies use websites to get you to sign up for their services, often time not listing a valid phone number or using another company's address.
According to the Director of the Federal Trade Commission in Chicago, many consumers are led to believe that there are loop holes in federal law that allow poor credit to be somehow erased. The truth is that no such loop holes exist. One frequent scam involves a fraudulent credit repair company asking the consumer to pay for services upfront, and once payments are made the company cannot be reached or disappears altogether. In another case, a consumer may pay hundreds of dollars in fees and subsequently get a large mailing or packet of information, which later turns out to be useless.
Red flagsConsumers are advised to NOT conduct business with any company or organization that does any of the following:
* Requests that you pay for credit repair before any services are provided. This is illegal per the Credit Repairt Organizations Act, which states that credit repair companies cannot charge you fees until after they completed the promised services.* Advises you to dispute all negative information in your credit report.* Guarantees or promises you to remove accurate records of bankruptcies, judgments, liens, or bad loans - in essence, negative information that you do not want on your credit report.* Offers to help you get a new credit identity. The company may tell you to apply for an Employer Identification Number or to apply for credit using this and a different address. This practice is known as file segregation, and is a federal and state felony.