credit repair

Credit scams
    Bankruptcy
    Debit Card Fraud
    10 Credit Myths
    File Segregation

March 1998:


Television advertising credit repair scams.
"Credit Problems? NO problem..."
"We can erase your bad credit–100% guaranteed."
"We can remove bankruptcies, judgments, liens, and bad loans from your credit file, FOREVER!"
"Create a new credit identity–legally."

Do yourself a favor and save some money, too. Don't believe these statements. Newspapers, radio, TV, and the Internet are filled with ads that offer – for a fee – to erase accurate negative information in your credit file so you can get a credit card, auto loan, home mortgage, or even a job. The scam artists who run these ads can't deliver. Only time, a deliberate effort, and a personal debt repayment plan will improve your credit.

The companies that advertise credit repair services appeal to consumers with poor credit histories. Not only can't they provide you with a clean credit record, they may encouraging you to violate federal law. If they ask you to make false statements on a loan or credit application, misrepresent your Social Security number, or advise you to get an Employer Identification Number from the Internal Revenue Service under false pretenses, you will be committing fraud.

The truth is you can help yourself rebuild a better credit record. Start by contacting your creditors when you realize that you are unable to make payments. If you need help working out a payment plan and a budget, contact your local credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union, or housing authority for no-cost credit counseling programs.

In addition, you have specific rights under the Fair Credit Reporting Act:
  • You are entitled to a free copy of your credit report if you've been denied credit, insurance or employment and request the report within 60 days of notice, or if you can prove that;
    - you're unemployed and plan to look for a job within 60 days,
    - you're on welfare, or
    - your report is inaccurate because of fraud.
  • If your application for credit, insurance, or employment is denied because of inaccurate or incomplete credit information, the company to which you applied must give you the name and address of the reporting credit bureau.
  • There is no charge to dispute mistakes or outdated information on your credit record. Ask the credit bureau for a dispute form and submit it with any supporting documentation.

Other facts you should know:

  • Bankruptcy information can be reported for ten years.
  • Information about a lawsuit or judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
  • Information reported because of an application for a job with a salary of more than $75,000 has no time limit.
  • Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.

You see the advertisements in newspaper, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. Do yourself a favor and save some money, too. Don't believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

The following information explains how you can improve your credit worthiness and lists legitimate resources for low or no-cost help.

The Scam

Everyday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply vanish with your money.

The Warning Signs

If you decide to respond to a credit repair offer, beware of companies that:
  • Want you to pay for credit repair services before any services are provided,
  • Do not tell you your legal rights and what you can do – yourself – for free;
  • Recommend that you not contact a credit bureau directly;
  • Suggest that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security Number; or
  • Advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It's a Federal crime to make false statements on a loan or credit application, or misrepresent your Social Security Number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services.

The Truth

No one can legally remove accurate and timely negative information from a credit report. But the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at a little or no cost.

According to the fair Credit Reporting Act:

  • You are entitled to a free copy of your credit report if you've been denied credit, insurance or employment within the last 60 days. If your application for credit, insurance, or employment is denied because of information supplied by a credit bureau, the company you applied to must provide you with the credit bureau's name, address, and telephone number.
  • You can dispute mistakes or outdated items for free. Ask the credit reporting agency for a dispute form or submit your dispute in writing, along with any supporting documentation. Do not send them original documents.

Clearly identify each item in your report that you dispute, explain why you dispute the information, and request a reinvestigation. If the new investigation reveals an error, you may ask that a corrected version of the report be sent to anyone who received your report within the past six months. Job applicants can have corrected reports sent to anyone who received a report for employment purposes during the past two years.

When the reinvestigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider.Dispute credit report errors in writing.

You also should tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. In addition, if you are correct – that is, if the information is inaccurate – the information provider may not use it again.

If the reinvestigation does not resolve your dispute, have the credit bureau include your version of the dispute in your file and in future reports. Remember, there is no charge for a reinvestigation.

Reporting Negative Information
Accurate negative information generally can be reported for seven years,

but there are exceptions:
  • Bankruptcy information can be reported for ten years;
  • Information reported because of an application for a job with a salary of more than $75,000 has no time limitation;
  • Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limitation;
  • Information concerning a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer; and
  • Default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.

The Credit Repair Organizations Act

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 a three-day waiting period. During this time, you can cancel the contract without paying any fees.
Your contract must specify:
  • The payment terms of 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.

Have You Been Victimized?

Many states have laws strictly regulating credit repair companies. States may be helpful if you've lost money to credit repair scams. If you've had a problem with a credit repair company, don't be embarrassed to report them. While you may fear that contacting the government will only make your problems worse, that's not true. Laws are in place to protect you. Contact your local consumer affairs office or your state Attorney General (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance.

Need Help? Don't Despair

Just because you have a poor credit report doesn't mean you won't be able to get credit. Creditors set their own credit-granting standards and not all of them look at your credit history the same way. Some may look only at more recent years to evaluate you for credit, and they may grant credit if your bill-paying history has has improved. It may be worthwhile to contact creditors informally to discuss their credit standards.

Credit counseling agencies can help resolve your credit problems.If you can't resolve your credit problems yourself or you need additional help, you may want to contact a credit counseling service. There are nonprofit organizations in every state that counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These counseling services are offered at little or no cost to consumers. You can find the office nearest you by checking the white pages of your telephone directory.

In addition, nonprofit counseling programs sometimes are operated by universities, military bases, credit unions, and housing authorities. They are also likely to charge little or nothing for their services. Or, you can check with your local bank or consumer protection office to see if it has a list or reputable, low-cost financial counseling services.

Do It Yourself Check-Up

Even if you don't have a poor credit history, it's a good idea to conduct your own credit check-up, especially if you're planning a major purchase, such as a home or car. Checking in advance on the accuracy of the information in your credit report could speed the credit-granting process.

You're entitled to one free report a year if you can prove that:

  1. You're unemployed and plan to look for a job within 60 days;
  2. You're on welfare; or
  3. Your report is inaccurate because of fraud.
Otherwise, a credit bureau may charge you up to $8.50 for a copy of your report. Credit bureaus usually are listed in the yellow pages of your telephone book under "credit reporting agencies."

Three large national credit bureaus supply most credit reports:

Experian, Equifax, and TransUnion. You may want to contact each of them for a copy of your report.
  • Experian charges $8.50; except for residents of some states; call 1-888-397-3742
  • Equifax charges $8.50; except for residents of some states; call 1-800-685-1111
  • TransUnion charges $8.50; except for residents of some states; call 1-800-888-4213

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. Based on your credit payment history, businesses can choose to grant or deny you credit provided you receive fair and equal treatment. Sometimes, things happen that can cause credit problems: a temporary loss of income, an illness, or even a computer error. Solving credit problems may take time and patience, but it doesn't have to be an ordeal.

The Federal Trade Commission (FTC) enforces credit laws that protect your right to obtain, use, and maintain credit. These laws do not guarantee that everyone will receive credit. Instead, the credit laws protect your rights by requiring businesses to give all consumers a fair and equal opportunity to receive credit and to resolve disputes over credit errors. This section explains your rights under these laws and offers practical tips to help you solve credit problems.

Your Credit Report

Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by "Consumer Reporting Agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have very applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

  • You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request
  • You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
  • Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.
  • You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
  • If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.
You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Your Credit Application

When creditors evaluate a credit application, they cannot lawfully engage in discriminatory practices. The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant your credit.

The ECOA protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit also are protected by this law.

Your rights under the Equal Credit Opportunity Act:

  • You cannot be denied credit based on your race, sex, marital status, religion, national origin, age, or recipient of public assistance.
  • You have the right to have reliable public assistance considered in the same manner as other income.
  • If you are denied credit, you have a legal right to know why.

Your Credit Billing and Electronic Fund Transfer Statements.

It is important to check credit billing and electronic fund transfer account statements regularly. These documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and contest the error immediately

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish

procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:
  • charges or electronic fund transfers that you – or anyone you have authorized to use your account have not made;
  • charges or electronic fund transfers that are incorrectly identified or show the wrong amount or date;
  • computation or similar errors;
  • failure to reflect payments, credits, or electronic fund transfers properly;
  • not mailing or delivering credit billing statements to your current address, as long as that address was received by the creditor in writing at least 20 days before the billing period ended;
  • charges or electronic fund transfers for which you request an explanation or documentation, due to a possible error.
The FCBA generally applies only to "open end" credit accounts – credit cards, revolving charge accounts (such as department store accounts), and overdraft checking accounts. It does not apply to loans or credit sales that are paid according to a flexible schedule until the entire amount is paid back, such as an automobile loan. The EFTA applies to electronic fund transfers, such as those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Your Debts and Debt Collectors

You are responsible for your debts. If you fall behind in paying your creditors or an error is made on your account, you may be contacted by a "debt collector." A debt collector is any person, other than the creditor, who regularly collects debts owed to others. This includes lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money owed for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts.

Your rights under the Fair Debt Collection Practices Act:

  • Debt collectors may contact you only between 8 a.m . and 9 p.m.
    • \
  • Debt collectors may not contact you at work if they know your employer disapproves.
  • Debt collectors may not harass, oppress, or abuse you.
  • Debt collectors may not lie when collecting debts, such as, falsely implying that you have committed a crime.
  • Debt collectors must identify themselves to you on the phone.
  • Debt collectors must stop contacting you if you ask them to in writing.

Solving Your Credit Problems

Your credit report influences your purchasing power, as well as your chances to get a job, rent or buy an apartment or a house, and buy insurance. A history of timely credit payments helps you get additional credit.

Accurate negative information can stay on your report for seven years.
A bankruptcy can stay on your report for ten years.

If you are having problems paying your bills, contact your creditors at once. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don't wait until your account has been turned over to a debt collector.

Here are some additional tips for solving credit problems:

  • If you want to contest a credit report, bill or credit denial, contact the appropriate company in writing and send it "return receipt requested."
  • When you contest a billing error, include your name, account number, the dollar amount in question, and the reason you believe the bill is wrong.
  • If in doubt, request written verification of a debt.
  • Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct problems.
  • Be skeptical of businesses that offer instant solutions to credit problems.
  • Be persistent. Resolving credit problems can take time and effort.
  • There is nothing that a credit repair company can do for your – for a fee – that you cannot do for yourself for a little or no cost.

If you can't resolve your credit problems yourself or if you need help, you may want to contact a credit counseling service. Nonprofit organizations in every state counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These services are usually offered at little or no cost. Universities, military bases, credit unions, and housing authorities also may offer low - or no-cost credit counseling programs. Check the white pages of your telephone directory for a service near you.