FREE CREDIT REPAIR

Free Credit Repair

Every consumer who uses credit has a credit record -- and is it ever powerful.

Every time you apply for credit or a loan, creditors obtain your credit record to verify your worthiness. But, the use of these reports has broadened. Insurance companies have begun to use them to determine premiums or deny coverage. Potential employers may even want to check out your credit worthiness.

If you are hampered by a low credit score, you may do well to make use of credit repair service to improve your credit score.

Rising interest in credit scores

Today, a credit record is more than just a dry report on how many credit cards you have and whether you made every auto payment on time. Credit recording agencies often distill consumers' reports into a three-digit number called a credit score -- and that number alone can determine whether you get easy monthly payments or loan-shark rates. It's not surprising that as credit scores become more important, consumers are taking more interest in these three-digit numbers. A high score saves you money, a low score costs you. This fascination with credit scores has led to more interest in repairing credit to increase scores.

Unfortunately, as the demand for credit repair rises, the opportunity for scams becomes more prevalent, says Marta Moakley, an assistant attorney general in Florida.

"As our economy becomes sluggish and debt levels rise, more people turn to companies that specialize in credit repair for help. Consumers need to be aware that there is potential for fraud."

The need for such a service is obvious. Practically every consumer has inaccurate or outdated information on a credit report from one of the three major credit bureaus, says Steve Rhode, president and co-founder of Myvesta.org, a nonprofit agency that counsels people in financial crisis.

These errors can be costly, and it's up to the consumer to get them corrected. The credit bureaus are not obligated to root out errors and provide accurate information. Their job is to record the information presented to them by creditors.

Call for help?

So, if your score is low or your credit report is inaccurate, what are your options? It's like hanging wallpaper -- do you call a professional paperhanger, or tackle it yourself?

The Fair Credit Reporting Act says consumers can dispute mistakes in their credit files for free. But it will take time. Correcting one error may average four hours, says Rhode. That includes applying for your credit reports, reviewing and highlighting errors, documenting the mistake, typing up your letter and mailing it.

Credit repair services offer, for a fee, to do this daunting legwork. They pull credit reports, review for errors and send out dispute letters along with documentation. They add professionalism. They save you time. Some promise to erase bad credit -- 100 percent guaranteed. Others advertise they can remove bankruptcies from your credit file forever.

These repair services, however, don't have any secret remedies for erasing bad credit. Neither you nor the credit repair service has the right to remove accurate and current information from your credit report. The bottom line is: Credit repair services can't do anything for you that you can't do for yourself, free.

The mysterious repair shops

Are credit repair clinics fulfilling their promises to improve credit scores? It's hard to say. We contacted five credit repair clinics to learn about their guarantees and success stories, but not one was willing to talk.

The consumer service agencies were more than willing to talk.

Steve Baker, Director of the Federal Trade Commission in Chicago, says a prevailing myth about credit repair is that there are loopholes in the federal law that allows poor credit to be erased. It doesn't exist.

He says that in the past four years the FTC has not seen a legitimate credit repair clinic. "It's possible that these clinics are providing legitimate services to customers, but I've not seen it yet. When the law says that bankruptcy remains on your credit report for 10 years, just how can it be legally removed?" questions Baker. "And, later when you're asked in a credit application if you've ever filed for bankruptcy, will you lie?"

He cites an example of one consumer who was told to steal his bankruptcy record from the county courthouse, so that the credit bureau could not verify its accuracy.

Dramatic? Yes. But it poses a good question -- how are credit repair services removing bad credit?

"If the credit repair service offers guarantees within the Fair Credit Reporting Act," says Steve Rhode of Myvesta.org, "then it's doing the job. Credit repair services get sleazy when they promise to do a job that's just not possible. They promise to remove accurate, but negative information."

"Scams occur," says Marta Moakley, "when consumers pay fees for services that are never performed, or the consumer is misled on the services provided. Too often the consumer can't afford to lose this money."

Worse yet, consumers have paid money upfront -- and the company disappears.

"Credit protection and credit repair" scams are one of the top consumer complaints reported to the FTC. The actual dollar amount lost by consumers to these scams is difficult to calculate, says Baker, because many people are too embarrassed to complain. But, the FTC estimates the loss to consumers is easily in the millions.

"This is an equal opportunity scam. Everyone has a credit report; anyone can suffer from a poor credit history," says Baker.

Steve Rhode knows of consumers who paid $400 to $2,000 for credit repair services. Do-it-yourselfers can expect to pay $30 for a consolidated credit report -- a report that provides your credit history from the three major credit bureaus -- plus the value of their time.

Finding a reputable company

You may still decide to go the credit repair service route. Here's how to let your fingers cautiously do the walking through the yellow pages.

Do your homework. Research the company before your first visit. Contact the Better Business Bureau to see if the firm has had any consumer complaints. Check with your state attorney general's office or other state consumer agencies to find out if there are any pending legal investigations. The FTC warns against relying on chambers of commerce or other trade associations where membership is based solely on a fee.

Know your rights. Credit repair services must follow specific guidelines from the Credit Repair Organizations Act, which are intended to protect consumers. You should receive an explanation of these rights before signing a written contract. Read them.

You should receive a contract with all of the following information:

The payment terms for 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
The company's name and business address
Remember the grace period. The credit repair company cannot perform any services for you until you've signed a written contract and completed a three-day waiting period. You may cancel the contract without paying any fees during this period.

"There are no quick fixes in credit repair," insists Moakley. "Common sense tells you that a third party doesn't know your credit history better than you. Through contacting credit bureaus, making your own corrections, consolidating your debts and budgeting, you can improve your own score. You don't need to pay someone to fix it for you. Apply that money toward your debt."