The entire credit reporting system is voluntary and is for the benefit of all lenders as well as consumers. It is based upon trust and the integrity of the information. The improper removal of accurate data would undermine the entire system, which is why creditors are prohibited from removing negative but correct information from your credit file. Creditors are bound by federal law to report accurate information and also by contracts with the credit reporting agencies to do so.
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The entire system is based upon the sharing of information so lenders can make sound decisions. The system helps people obtain credit at the lowest possible costs, so it is valuable as a tool to mitigate risk. The credit reporting system is an integral part of business, and depends upon everyone cooperating. These fundamental principles are why most credit repair organizations are ultimately a scam, because they cannot make bad credit good if the underlying data is accurate.
According to Rod Griffin, the Director of Public Education at Experian, here is what many illegitimate credit repair companies really do in the guise of helping their clients:. I interviewed a senior credit counsellor at Experian to review the intricacies of a credit report, and what a consumer should and should not do to affect their scores. Here is what she told me:. Ask your creditor about their relationship with the credit reporting agency. Remember that credit reporting agencies only store data and cannot provide a credit score, unless it is based upon the Vantage 3.
I f you are in trouble and thinking about using a credit repair company, remember there is nothing they can legally do to remove accurate yet derogatory information from your file. Whatever they can do, you can do for free. You have the right to dispute any information that is wrong and have it removed from your credit report.
If you commit fraud in attempting to change the information on file, you can be prosecuted. And if you succeed in totally wiping out your credit history by altering or creating a new identity, you will not be able to obtain any credit either, because a lender will have no data upon which to base a credit decision. If you need help in repairing your credit, there are many legitimate companies that can assist you, but you need to research carefully to be certain the company is not a scam.
In fact, a credit repair company breaks federal law by charging you upfront. This includes making you pay the total fees as a lump sum or by installments. To earn payment, the repair company must fully perform its promises to you. Normally, this means fashioning a settlement agreement between you and your creditors. Debt settlement is an agreement with your creditor that allows you to pay a lump sum to settle the amount you owe, which is usually less than the amount you actually owe.
However, it comes with its own risks that could potentially cost more or damage your credit.
How to Avoid Credit Repair Scams (with Pictures) - wikiHow
Avoid companies that cannot furnish you a written explanation of or contract for their services. The federal Credit Repair Organizations Act mandates that agreements between the company and you be in writing and signed by you. The contract must state the name and specific address of the business, price, the scope and specifics of the services to be rendered and when the company will complete its work.
You also have the right to cancel the contract within three days not counting Saturdays, Sundays or holidays.
Advice by the credit repair company to not contract a credit bureau should also raise red flags. Federal law entitles you to one free credit report every 12 months from the major credit reporting agencies — Equifax, Transunion and Experian. You may obtain a report from each through www. When requesting a copy of your report, you need to have your Social Security Number, your current and previous addresses and a list of your known or existing loans, credit cards and utility bills.
Some of the information forms the basis of security questions designed to verify your identity.
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These are often items of which only you would have knowledge. You are also entitled to a free report upon request if :. You may also request correction of errors on the report on your own for free. This requires that you submit a dispute that identifies what you contend is wrong. It may help to submit supporting documents, such as payment records, your Social Security Number or current address. Upon your request and without charge, the credit reporting agency must investigate your dispute. This includes sending notice of it to the entity that furnished the information and requesting information to verify the accuracy of the information.
The bureau must correct your report if it determines the presence of an error.
Avoiding Credit Repair Scams
Learn how to fix errors on your credit report by yourself at no cost here. Ask the credit repair company how it specifically repairs credit or proposes to repair yours. Questions may include:. Vague, inconsistent or incomplete answers should tell you that the organization does not have a plan. Similarly, be wary of guarantees by the repair company of specific results or that it can replicate precisely what it has done for others.
Your financial situation differs from that of others. You should not expect the same treatment from your creditors as other debtors — even if you have the same creditors. Ask the following questions, for starters:.
You likely will find that reputable credit repair companies do not work solely on settlements or correcting faulty credit information. Many will address with you the root causes of low credit scores or other credit problems.
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Although the credit bureau must remove erroneous information, neither you nor a credit repair company can force removal of accurate information. A company that tells you the contrary misleads you. Under the federal Fair Credit Reporting Act, negative information may stay on your report for several years. Legitimate credit repair organizations will help you dispute incorrect information on a report.
Here, the legitimacy of your dispute does not matter. Organizations may submit repetitive, voluminous and even misleading documents to bolster your dispute. With jamming, illegitimate repair businesses hope that the credit bureaus lack sufficient time and resources to investigate the disputes. This supposedly causes the credit bureau to just adjust your credit report in your favor.
Be leery if you are tempted to contact a credit-repair company. The Federal Trade Commission and several attorneys general have sued credit-repair companies for falsely promising to remove bad information from credit reports. Here are tips to follow:. However, there is a problem: File segregation is illegal. If you use it, you could face fines or imprisonment. Antitrust Laws. Business Registrations. Check a Charity. Consumer Complaints. Landlord-Tenant Law. Protecting Seniors.