You've seen the ads – stuff like "We can erase your bad credit, guaranteed!" and "Create a new credit identity!" Are these people for real, and are they worth it?
You’ve got strong incentive to make your credit report look as good as possible. A great credit history means a higher credit score, which in turn means more borrowing options at better rates, potentially lower insurance rates, and other benefits.
In short, it literally pays to have good credit.
But if your credit history isn’t looking its best, there’s more you can do than wait years for bad marks to expire. You can, and should, do what you can to repair your history. And as with many things subject to repair, that leaves you with two options: doing it yourself or paying a pro.
In the video below, Money Talks News founder Stacy Johnson has the answers – check it out, and then read on for steps you can take to polish your report without spending a buck.
Up to $800 for “basic” credit repair? There’s no good reason to pay that when you can accomplish anything they can for, at most, the cost of mailing a few letters. Here’s exactly what a pro would do, and what you can do yourself.
1. Snag your reports.
There are three major consumer reporting agencies that maintain your credit history: Experian, Equifax, and TransUnion. All of them have to share it with you free – but only once a year. Head over to AnnualCreditReport.com, fill out a 30-second form, and pick the agency you want a report from. You can grab all three at once, or stagger them so you can keep an eye on things multiple times a year since they typically have similar info. It’s a good idea to print out or save the reports to your computer, since you won’t be able to pull them up again for a while.
There are other ways to get a report without paying. According to the Federal Trade Commission, if you’ve been denied credit, insurance, or a job based on your report, you have two months to request a copy of the offending report from the agency. You can also get one if you’re unemployed and seeking work, receiving welfare, or a victim of fraud.
Of course, you can also pay to get a copy. The cost is about $11.
2. Check for accuracy.
Make sure your name, present and past addresses, credit inquiries, Social Security number, and account information (balance, payment dates, status) are all correct. Errors are common. If something isn’t right, it should be disputed online, or by sending the agency a letter. Which is best depends on the complexity. For example, you can only make a brief statement explaining the error for an online dispute, but when disputing through the mail you can provide copies of evidence. If you opt for snail mail, the FTC says, “Send your letter by certified mail, ‘return receipt requested,’ so you can document what the credit reporting company received. Keep copies of your dispute letter and enclosures.” They have a sample dispute letter you can use, but if that doesn’t work, don’t give up.
If you’re trying to get a problem fixed and a month goes by with no response from the credit reporting agency, send it off a second time, but add a paragraph like this:
You haven’t responded to my previous request in a timely fashion, which, as you should know, is illegal. The Fair Credit Reporting Act (15 U.S.C. § 1681i) says, “If the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly of such dispute, the agency shall re-investigate free of charge and record the current status of the disputed information, or delete the item from the file before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer.”
I don’t know how that statement could be any clearer. Since more than 30 days have passed since my initial inquiry, I’ll be expecting written confirmation that the items listed in my original dispute have been permanently removed from my credit history.
They typically have a month to respond to disputes, and will notify you of the results either way. If there’s a screw-up, the agency will fix it and automatically report it to the other two. They will also send notice of the error to anyone who has requested your report in the past six months at your request.
3. Face the bad stuff.
There are basically three ways to get a negative mark off your credit report:
- Let it roll off naturally
- Convince the creditor to remove it
- Dispute an account the creditor has no proof of
The first option is the easiest, but takes the longest. Most credit sins are eventually forgiven and forgotten, but it takes seven years (from the “first delinquency” date) for most to disappear from your report. Bankruptcies stay for 10.
Next, you can try persuading the creditor to drop an item. With the exception of child support, there’s nothing in the law saying anyone has to report negative information. There’s also no law against the agency that reported it having it removed. So it’s possible to simply contact the creditor and ask them to remove negatives from your history. The odds aren’t great, but it happens.
Two things will help convince a creditor to remove accurate negative information from your credit history: still being a customer, or negotiating with an unpaid balance. Write a letter explaining what you want and what you have to offer in exchange – either your continued business or a cash settlement on an unpaid balance. If you opt to use an unpaid bill as leverage don’t pay anything before getting it in writing.
The last method of removing accurate negative information comes down to ethics and dumb luck. By law, reporting agencies have to verify information you dispute. Verification means contacting the creditor that originally reported the negative information and asking them if it’s accurate. If a creditor lost the paperwork, went out of business, or simply can’t be located, the information can’t be verified and has to be removed.
It’s similar to pleading innocent on a speeding ticket and hoping the cop doesn’t show up in court.
If none of these options work, you can still add a brief explanation (a couple of sentences) to any item on your report that you disagree with. For example, if there’s a good reason you missed a couple of payments – job loss, medical issues, natural disaster – you can say so. In the age of computers and credit scores, this probably won’t help, but may be better than nothing.
Pro or no?
The steps above are virtually the only way to influence a credit history, so there’s nothing a pro can do better than you. So while you can pursue professional credit repair, be aware that you’re paying big bucks for something that doesn’t require special expertise. And also be aware there are tons of scams in the credit repair business. Check out the FTC’s page on credit repair for examples and warning signs. Better idea: If you need help or the personal touch, check out a credit counseling agency for free help. Learn where to look in Finding Help With Debt.