Credit Repair - What You Don't Know CAN Hurt You

The magician waves his wand and an astonished crowd sees a rabbit come out of a hat. A woman is sawed in half on stage and then magically reappears unscathed. Whether it is deception or entertainment is beyond the scope of this article, but either way I'm sure you'll agree, that the magicians of old would rather not share their secrets lest their livelihood vanish. A parallel exists in the credit repair industry. They promise to cure your bad credit (for a fee, of course) and unlike the sawed-off woman or the appearing rabbit, nothing really happens. Your credit score remains unchanged and in many cases further disarray occurs. You might also risk a potential misreading or deliberate misrepresentation of the law by inexperienced or perhaps unscrupulous personnel who are involved in this business, thus adding to your credit woes. The purpose of this article then is to inform you how to repair your credit without any cost, and further to make apparent what is considered illegal or at least unethical conduct on the part of credit repair companies.

First on The Federal Trade Commission's (FTC's) list of "tell-tale signs of a scam" is a warning to beware of "companies that want you to pay for credit repair services before they provide any services". Receiving "payment in advance" is a violation of the Credit Repair Organizations Act. Unfortunately, it seems to be a common practice among many credit repair companies who regularly collect these advance payments.

Another unsavory activity among some credit repair companies is for them to instruct you to dispute all derogatory information in your credit report regardless of its timeliness or accuracy. Their strategy is to bombard the credit bureau with these dispute letters in the hopes that these items will be removed because they are not verified in the thirty-day time frame. Not only is this strategy unethical, it's also ineffective. The Credit Reporting Agencies (CRA's) have created an Automated Consumer Dispute Verification (ACDV) system that is designed to speedily handle a tremendous volume of disputes. Once verified, all future disputes can be labeled "frivolous" under a provision of the Fair Credit Reporting Act (FCRA). This labeling effectively ends the investigation process by the CRA's on your behalf.

The final topic to discuss is what the FTC refers to as "File Segregation". This involves applying for an Employer Identification Number (EIN) from the Internal Revenue Service and then using it in place of your Social Security number to apply for credit. Misrepresenting your Social Security number is a federal crime. If a credit repair company instructs you to do this, then you could face fines or even a prison sentence.

At the risk of sounding simplistic, I must assert that the best credit repair is free, meaning you can do this yourself. No one knows your personal credit file better than you and Congress enacted the FCRA to protect your rights, not the rights of the credit repair company. All that is necessary to fix your credit is some free information and a little patience. There are some good websites that can be found on the net (the Broken Credit Blog included) that have compiled free information on the subject of credit repair. Be sure that the site you choose has been updated to reflect the 2003 FACTA amendment to the FCRA.

We all want good credit. Without it, life becomes very difficult. Unfortunately, occasions arise, quite often through no fault of our own, that causes our credit standing to take a downward spin (sickness, loss of job, etc.) Many of us have been through such an ordeal and during this period, discouragement sets in. But all of us have the opportunity to repair this negative credit and we should take advantage of such an opportunity.

We hope this article will offer some practical advice in the restoration of your good credit as well as point out some of the pitfalls to be aware of in this attainable pursuit of a healthy credit life.

Paul Jerome is a mortgage expert and frequent contributor to the Broken Credit Blog The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

http://www.brokencredit.com