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We've all seen the ads. "Bad credit-no problem." "Create a new credit identity," "We'll fix your credit" "These ace scams that promise, foi a fee, to lead the consumer to credit heaven. Don't believe them! Save your money and possibly avoid a rip-off scheme, which may .later cause major financial and legal problems," says Solomon Harge, Executive Director of the non-profit Consumer Protection Association in Cleveland. There are two ways to repair damaged credit; either do-it-yourself or work with a legitimate non-profit credit-counseling service.
An individual can have damaged credit for two reasons. The most obvious reason is a poor payment and credit history. However, according to a 2004 study by the Public Interest Research Group, 25 percent of the credit reports surveyed had serious errors that could result in credit denial, 79 percent contained other serious mistakes and errors and 30 percent contained credit accounts that had been closed by the consumer, but remained listed as open.
Steps to cedit repair
The Fair Credit Reporting Act sets the standards that credit reporting bureaus and creditors must follow in reporting credit files. The act also gives individuals the right to challenge the accuracy of their credit report, request a reinvestigation within a reasonable amount of time and have errors corrected or deleted.
Get a copy of your credit reports. You can get a free copy from all three reporting agencies by going to www.annualcreditreport.com. You can also get your credit score for a small fee. Review your credit reports and look for errors, inaccuracies and negative credit items.
Write dispute letters to the credit, bureaus on the items you believe tire errors or inaccuracies. Send your letters by certified mail with a return receipt requested. Keep copies of your letters and mau receipts. The Federal Trade Commission has sample dispute letters and more detailed information on the website www.ftc.gov.
The credit bureaus must reinvestigate the disputed items by contacting uie information provider and requesting an investigation of their file and a follow-up report.
The credit bureau is required to repot the results of the reinvestigation to (he individual. If there is an error or inaccuracy it must be corrected. However, if the information provider confirms the original information, the individual has the right to appeal. If there is no response from the information provider in a reasonable amount of time, the disputed item must be corrected or deleted.
After the reinvestigation is completed, the credit bureau is required to provide the individual with written results and a free updated copy of their credit report.
Dealing with Real Debt
If an individual has damaged credit because of a poor payment or credit history, there are two primary options. The self-help option works for most people. The first step of this option is to create a realistic budget. Then, develop a twelve-month plan to either eliminate or substantially reduce high interest rate debt. The overall objectives should be to reduce the total debt level, lower interest rates and reduce the number of creditors.
If self-help is not enough, contact a legitimate non-profit credit or debt counseling service. The counseling service can set up a payment plan, in which the individual makes one monthly payment to the counseling agency, which then pays each of their creditors. The service can save money by negotiating lower payments and possibly lower interest rates.
No Quick Fix!
There is no quick fix for repairing damaged credit. Avoid the scams and either do-it-yourself or seek help from a legitimate credit counseling service.
[Author Affiliation]
Michael G. Shinn, CFP
[Author Affiliation]
Michael G. Shinn can be reached at shinnm@financialnetwork.com.
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