The Truth About Credit Repair Services
October 7, 2014
There are three elements to a successful plan for legitimately fixing your credit report: a conscious effort, sticking to a debt repayment plan, and time. Sadly, there is no quick fix for poor creditworthiness. If your credit report contains only accurate and timely-reported information, such information cannot legally be removed from your credit report. There are scads of credit repair services out there that claim to be able to fix your bad credit, but many are scams! So, beware.
Usually, “credit repair services” will investigate debts reported on your credit report and work to correct any reported items that are not accurate and timely. Legally speaking, anything a credit repair company can do, you can do. The only cost to you will be an opportunity cost (i.e., the time and energy you could have spent doing something else).
As the Federal Trade Commission (FTC) website says:
- “You’re entitled to a free credit report if a company takes ‘adverse action’ against you, like denying your application for credit, insurance, or employment. You have to ask for your report within 60 days of receiving notice of the action. The notice includes the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
- Each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it. To order, visit annualcreditreport.com (make sure you click that link or carefully type the URL into your browser; this is not freecreditreport [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][dot] com), or call 1-877-322-8228. You may order reports from each of the three credit reporting companies at the same time, or you can stagger your requests throughout the year.
- It doesn’t cost anything to dispute mistakes or outdated items on your credit report. Both the credit reporting company and the information provider (the person, company, or organization that provides information about you to a credit reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights, contact both the credit reporting company and the information provider.”
The FTC has a page on their website entitled, “Credit Repair: How to Help Yourself.” Check it out.
Often, people want to repair their credit by having negative items removed from their credit report in order to qualify for some kind of credit. That makes a lot of sense, except that if you could just have something removed because you didn’t like that the item appeared on your credit report, it would undermine the ostensible purpose of credit reporting. In effect, the whole credit reporting system would be a sham, a pay-for-play game in which only the poor suffered under the burden of bad credit. But there is hope if you have bad credit, but want to improve your credit score in order to get a business loan or successfully apply for some other kind of credit.
I want to just type out and share with you all the text on pages 16 through 48 of I Will Teach You To Be Rich by Ramit Sethi. The dubious and grandiose title notwithstanding, that part of Mr. Sethi’s book is excellent. Unfortunately, that’s called plagiarism and copyright infringement, and it is generally frowned upon. The good news is, I have seen that book (in paperback, used, on Amazon) available for as little as $3.87. Those 32 pages or so are worth the cost of the book–even if you don’t have Amazon Prime (because…?), and you still pay for shipping.
Mr. Sethi spends a bit of time in the book talking about the credit utilization rate. I just felt your eyes glaze over. Stay with me. For people who are financially responsible and who “have no credit card debt and pay their bills in full each month,” and “not for anyone else,” Mr. Sethi discusses getting more credit to improve your “credit utilization rate, which is simply how much you owe divided by your available credit.” As Mr. Sethi points out, your credit utilization rate “makes up 30 percent of your credit score.” (Sethi, R. (2009). Optimize Your Credit Cards. In I Will Teach You To Be Rich (p. 266). New York: Workman Pub.) The general idea is to have a lot of available credit on active accounts, but to pay off all your credit accounts at the end of each month. If you want more details, read the book.
The most important thing, with regard to improving your credit score, is reducing the amount of debt you have. Notice this does not mean “cutting up the credit cards” and all that jazz. It just means what I said, and nothing more–reducing the amount of debt you have, not reducing the amount of debt you have available to you. Again, this takes a conscious effort, commitment and fidelity to a debt repayment plan, and time–not to mention more than a little self-control for most people. At least now you know better than to waste your precious resources on a “quick fix” that’s just going to end up costing you money you don’t have.
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