So-called “credit repair” companies claim that they can remove negative information from credit reports. Advertising as “Credit Advisor”, “Credit Rating Correction Service” or “Credit Consultant”, they voice variations on this message: “Rejected due to bad credit? We can help!” Many of these companies charge hundreds or even thousands of dollars for the promise of “cleaning up” bad credit reports. But the truth is, these companies can only do what you can do yourself — at no cost.
Nothing can remove accurate negative information from your credit report. No company has the “secret” ability to remove all negative information.
But this does not stop their claim. This deceptive quote comes from a credit repair company brochure: “Billed accounts, collection accounts, judgments, tax liens, repossessions, and even bankruptcy can be removed from your credit record in less than a year (five to seven months on average). ).”
One tactic is to bombard credit reporting agencies with requests to verify information. If the credit reporting agency cannot verify the entry within 60 days, it will remove the information from the report. But if the information is later verified to be correct, it will return in the report.
Before you even consider signing a contract with a company that promises to fix your credit, keep these facts in mind:
- You can get a copy of your own credit report.
- You have the right to dispute entries on your credit report.
Beware of guaranteed credit offers!
Credit repair and other companies often claim that they “guarantee” to give you a credit card, regardless of your credit history. In fact, these companies don’t always honor their warranties. Sometimes, they’ll just take your money and run–you won’t get any credit, regardless of what they promise.
If they give you a card at all, it will often be a “secure” bank credit card, with a high up-front “application” fee, which requires you to deposit and keep a few hundred dollars in a savings account, or a card that only allows you to buy catalog items from businesses you’ve probably never heard of. (You can apply for a secure credit card yourself. For a list of free banks that do not charge a secure credit card application, see the information from Consumer Actions in the “For More Information” section below.)
Credit repair companies often advertise on television, in newspapers and even in matchbooks. Sometimes they ask consumers to dial “900” for more information. Calls to 900 numbers can cost you $2 or $3 per minute, so hearing a few minutes of card information can be expensive.
Some companies try to get people credit cards by asking them to apply using the financial information of other people with good credit histories. It is a crime to apply for credit in someone else’s name–don’t do business with any of these companies.
Law enforcement agencies have shut down many credit repair outfits, but it’s hard to stop fake credit repair outfits unless people complain about it. Therefore, be careful responding to credit repair advertisements and be sure to complain to the agencies listed below if you think a credit repair company is taking advantage of you.
For more information
- The Federal Trade Commission (FTC) publishes information to consumers on credit issues and enforces federal credit laws. For a list of free publications, write to the FTC Department of Public Reference at the address given below. While the FTC does not handle individual cases, it can act when it sees a pattern of possible lawlessness developing. Complaints about credit reporting agencies and credit repair fraud must be made in writing. Send to: FTC Credit Practices Division, 6th St., NW, Washington, DC 20580.
- Contact your local consumer protection agency or your state attorney general’s office. Many Attorney Generals have toll-free consumer hotlines. These numbers may be listed in the “self-help” or government section of the front of your phone book. These agents can offer advice and may also be able to help resolve your complaint.
- Consumer Action’s free complaint/information keypad offering non-legal consumer advice and referrals can be reached from 10am to 2pm on weekdays. Chinese, English and Spanish are spoken. Call (415) 777-9635 (San Francisco office) or (213) 624-8327 (Los Angeles office). Consumer Action has a free list of secure credit card banks that charge no application fees. To receive a free copy, send a self-addressed postage envelope to: Consumer Action Safe Credit Card Survey, 717 Market St., Suite 310, San Francisco, CA 94103. (Available in English only.)
- Consumer Credit Counseling Services (CCCS) help consumers who have problems paying their bills – before their good credit rating suffers. Your local CCCS office can help you develop a flexible payment plan to make debt repayments more feasible. Call (800) 388-CCCS for an interactive recording which will give you the telephone number of your nearest office. Spanish speakers can call (800) 68-AYUDA (800-682-9832) between 8 a.m. and 7 p.m. Central time.
- Before you sign a contract with any company, check with your local Better Business Bureau (BBB), a non-governmental service that advises consumers on fraud prevention. Contact your local BBB. If you cannot find a local number listed in the telephone directory, call the Council of Better Business Bureaus at (703) 276-0100 for a referral to your nearest office.