If you have a bad credit record, you know how hard it can be to secure new credit or seek new employment. While you may be willing to do whatever it takes to repair your credit rating, some companies not only offer illegal advice or methods, but also misrepresent what they will be able to accomplish.
There are many other individuals and organizations the law does allow to provide you with credit repair assistance. Lenders, banks insured by the FDIC, and nonprofit organizations can give you credit repair advice. In some situations, a real estate broker, attorney or registered financial advisor may also advise you.
Questionable Credit Repair Offers
You have seen plenty of ads full of promises like these:
- “Credit problems? No problem!”
- “We can erase your bad credit--100% guaranteed.”
- “Create a new credit identity legally.”
- “We can remove bankruptcies, liens, judgments and bad loans from your credit file forever!”
Unfortunately, these companies cannot live up to their promises. Even after you pay hundreds or thousands of dollars in up-front fees, your credit will be no better. No one can remove correct information from your credit report, even if it negatively reflects on you. It is illegal and a misdemeanor to operate a credit-repair services company of this type under Georgia law.
If you decide to respond to a credit repair offer, beware of companies that:
- Want you to pay for services up front;
- Do not tell you your legal rights or what you can do for yourself at no cost;
- Recommend that you not contact the credit bureaus directly;
- Suggest you get new credit by using someone else’s Social Security number or by applying for an Employer Identification Number; or
- Advise you to dispute all information on your credit report.
The Social Security Act prohibits misrepresentation of your Social Security number, and the Identity Theft and Assumption Deterrence Act makes it a federal crime to knowingly use another person’s identification with dishonest intent. Further, it is a federal crime to make false statements on a credit application or to obtain an Employer Identification Number from the Internal Revenue Services under false pretenses. You will be prosecuted by the federal government for these crimes.
Federal law also imposes certain limitations on credit repair companies. They may not:
- Make false claims about their services.
- Charge you until they have completed the promised services.
- Perform any services until you have signed a written contract and a three-day waiting period has passed, during which you can cancel your contract with no fees.
Other practices that may violate the Georgia Fair Business Practices Act include:
- Promising to remove negative but accurate information from your credit report.
- Offering to establish a new credit identity for you, an illegal practice known as “file segregation.”
- Encouraging you to stop making payments to your creditors.
- Telling you to ignore the IRS, collection letters or other legal documents.
If a credit repair company is able to obtain a credit card for you, often this is a “secured” bank card that requires you to pay a high application fee and deposit several hundred dollars in a bank account, or a card for a small and unfamiliar company or catalog. If you want a secure credit card, you can get it on your own. Bankrate, a private institution not endorsed by the state, has a listing of secured credit cards and their terms.
When you sign a contract for credit repair services, you should know what to look for. The contract must specify:
- The payment terms, including 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.
Filing a Complaint
It is very important to report any credit repair companies that take advantage of you, so they can be stopped. Since most credit-protection laws are enforced at the federal level, you should contact the Federal Trade Commission (FTC) when you have a complaint about a company offering credit repair services. While the FTC does not handle individual cases, it can act when it sees a developing pattern of possible legal violations. You may send your complaint to:
FTC Division of Credit Practices
6th Street, NW
Washington, DC 20580
If you believe you have been the victim of an unscrupulous credit repair firm, you may also report it to the Georgia Department of Law's Consumer Protection Unit so that we will be aware of their activities. Our office must, however, pass such complaints along to the FTC.
How to Improve Your Credit
The only one who can fix your credit is you, and this process can only happen over time as you take steps to improve your credit on your own.
First, contact your creditors when you realize you are unable to make your payments. If you need help preparing a budget and working out a payment plan, contact your local credit counseling service. To locate a credit counseling service near you, go to the National Foundation for Credit Counseling web site or call 800-388-2227.
Next, check your credit report. About one out of every four credit reports contains errors. You may dispute, at no charge, any items you believe are inaccurate. Each credit bureau usually has its own method for filing a dispute, so contact them for more information. You should collect copies of any supporting documentation and send these with the form you submit. The credit bureau will investigate your dispute and delete or correct any information found to be inaccurate. You may request that a copy of your corrected credit report be sent to everyone who has requested your credit within the past six months.
If the dispute remains, you can file a written explanation that will be sent with your credit report whenever it is requested. You can also file a written explanation if there was a good reason that you could not pay your bills on time, such as unemployment or sudden illness.
Most negative information will only appear on your credit report for seven years. However, there are a few exceptions:
- 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.
Continue to pay your bills promptly, and apply for credit only when absolutely necessary. With your hard work, your credit will improve over time.