| Credit
Repair - Questions & Answers
Introduction
Credit report a little under
the weather? Tempted to spend some bucks to get
it fixed? Think twice and read this.
Do credit repair schemes
work?
Generally, no. Most credit repair
outfits are expensive and employ questionable
and even illegal tactics. These tactics include
advising you to dispute all your debts, advising
you to obtain a Federal tax ID number under false
pretenses, or devising a new credit identity.
These actions are at best temporary fixes, and
at worst, can get you in a lot of trouble. Furthermore,
there is nothing one of the few legitimate credit
repair agencies can do for you that you can’t
do yourself. If you do decide to visit a credit
repair agency, here are some things you should
know.
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 signing
the contract. 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; or
- 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; and
- the company’s name and business address.
Can I repair my credit
myself?
To a certain extent, yes. There
are things you can do to elliminate inaccurate
information on your credit report and to begin
to rebuild your credit.
From this day forward, make all
your payments on time! Get a copy of your credit
report and examine it closely.*
If any of the information on
the report is incorrect, federal law allows you
to dispute the debt. Creditors have a limited
amount of time in which to verify the debt. If
it cannot be verified, it will be removed from
your report.*
Have the credit bureaus insert
a statement into your credit report explaining
the negative formation (unemployment, dispute
with creditor, medical issues).*
Negotiate payout plans with
your creditors. Creditors are often willing to
reduce interest, allow interest only or principal
only payments, or extended payments. You can also
negotiate whether they will report bad credit
to the credit bureaus.
Slowly begin to rebuild your
credit by judiciously applying for new credit.
Consider secured credit cards and higher-interest
rate cards with LOW limits that may be easier
to qualify for.
Avoid finance companies and rent-to-own
firms. Other credit grantors consider loans with
a finance company a strike against you even if
you¡¦re paying on time.
As a last resort, consider a
bill consolidation loan. This loan can pay off
your current creditors, extend the payments and
allow you to start fresh. But, you will probably
pay a high interest rate, and debtors are often
tempted to charge up credit cards again.
*See
our FAQs on Fair Credit Reporting.
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