If your credit is in bad shape, repairing it can be one of the smartest things you do in 2017.
Removing negative items from your credit report can help improve your FICO score, making it easier to:
- Buy or rent a home
- Get insurance
- Buy a car
- Get a job
A higher credit score can especially pay off in lower interest rates when you go to acquire a mortgage or car loan.
That’s why so many people try to repair their credit. Many of these consumers turn to professionals for help, but experts warn you to be careful, as scammers are everywhere.
In truth, there is nothing a credit repair company can do for you that you can’t do for yourself. Still, some consumers are more comfortable seeking the help of a professional.
In case you are among them, we’ve partnered with Debt.com, accessible through our Solutions Center, to match you with reputable, trustworthy experts. They can guide you through the process of repairing your credit.
Whether you go the DIY route or seek out professional help, there are some things you should do, and things you should avoid. Let’s start with the things you should do:
Get free copies of your credit reports
Visit AnnualCreditReport.com to get a free copy of your credit report from each of the three credit reporting agencies. Then, thoroughly scrutinize the information in the reports for errors, omissions and fraudulent accounts.
Be on the lookout for negative marks that should have dropped off your report because they’re more than seven to 10 years old. Most bad items drop off by seven years.
Notify the credit reporting agency online or by letter — see a sample of a letter at the Federal Trade Commission website. When you notify one agency, it will contact the other credit reporting agencies. The letter should include:
- Your name and address
- The items in dispute
- Your argument and any supporting facts to support your claim
- A formal request to resolve the issue
Send copies (not originals) of documentation that supports your claim that the information is wrong. The credit reporting agency will have 30 days to investigate and communicate its decision.
Request a goodwill adjustment
If your credit reports contain contents that are accurate but negative, write to your creditors and ask them to remove the bad information right away. Be polite, as they aren’t required to comply with your request. However, as Money Talks News founder Stacy Johnson notes, they might be more willing to grant your request if you still have a business relationship with them.
Know your rights
The Credit Repair Organizations Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, or to charge you before they’ve performed their services. This law, enforced by the FTC, requires credit repair companies to explain:
- Your legal rights in a written contract that also details the services they’ll perform
- Your three-day right to cancel without any charge
- How long it will take to get results
- The total cost you will pay
- Any guarantees
If a credit repair company you hired doesn’t live up to its promises, the FTC says you have these options:
- Sue them in federal court for your actual losses or for what you paid them, whichever is more.
- Seek punitive damages — money to punish the company for violating the law.
- Join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney’s fees.
Avoid these 3 ‘tricks’
When you repair your credit, there are also some things you should avoid — specifically, the following four “tricks.” Experts say these gimmicks indicate you might be dealing with a scammer:
The new number trick. Some credit repair agencies advise you to start a new credit file by getting a new tax ID number — either a credit profile number (CPN) or an IRS-issued Employer Identification Number (EIN) — to use in lieu of your Social Security number. The new number might resemble a Social Security number. This trick is illegal. The FTC warns that scammers may be selling stolen Social Security numbers, often taken from children. By using a stolen number as your own, the con artists involve you in identity theft.
The lying trick. Scammers might tell you to give false information on your applications. The FTC reminds consumers it’s a federal crime to lie on a credit or loan application, misrepresent your Social Security number, or obtain an EIN from the IRS under false pretenses. You could go to prison.
The upfront charges trick. The law requires credit repair companies not to collect a dime from you before they perform any services.
For more on the do-it-yourself route, check out “3 Steps to Repairing Your Own Credit.”
Have you tried to repair your own credit or used a professional? How did it go? Share with us in comments below or on our Facebook page.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.