Don't Use a Credit Repair Clinic

Steer clear of credit repair clinics; you can repair your credit yourself.

If you want to clean up your credit report, steer clear of credit repair clinics. These companies claim they can fix your credit, qualify you for a loan, or get you a credit card. But you shouldn't have to pay for credit repair services: These companies can legally do only what you can easily do yourself. And some of them use questionable tactics that can land you in hot water.

Some Credit Repair Clinics Use Illegal Tactics

Some credit repair clinics use practices that are fraudulent, deceptive, and even illegal. For example, credit repair clinics have been caught:

  • stealing the credit files or Social Security numbers of people who are under 18 or have died, and substituting these for the files of people with poor credit histories, and
  • advising clients to create a new identity by applying for an IRS Employer Identification number (EIN), a nine-digit number that resembles a Social Security number, and using it instead of their Social Security number to apply for credit—which is illegal.

You Can Repair Your Credit For Free

Even if a credit repair company is legitimate, it can't do anything for you that you can't do yourself. What the company will do, however, is charge you between $250 and $5,000 for their unnecessary services.

What Credit Repair Companies Claim to Do

Here's what credit repair companies claim they can do—and how to do it yourself:

Remove incorrect information from your credit file. You can do that yourself under the Fair Credit Reporting Act. (For more information, see How to Clean Up Your Credit Report.)

Remove correct, but negative, information from your credit file. Negative items in your credit file can legally stay there for seven years or more (depending on the type of information), as long as they're correct. No one can wave a wand and make them go away. (To learn what is, and isn't, on your credit report, see Credit Report Basics.)

One credit repair clinic tactic is to challenge every item in a credit file—negative, positive, or neutral—with the hope of overwhelming the credit bureau into removing information without verifying it. But credit bureaus often dismiss these challenges on the grounds that they're frivolous, a right that credit bureaus have under the Fair Credit Reporting Act. You're better off getting your file and selectively challenging the items that are incomplete or inaccurate.

Even if the credit bureau removes information that a credit bureau had the right to include in your file, it's no doubt only a temporary removal. Most correct information reappears after 30-60 days, because the creditor that first reported the information to the credit bureaus will report it again.

Get outstanding debt balances and court judgments removed from your credit file. Credit repair clinics often advise debtors to pay outstanding debts if the creditor agrees to remove the negative information from your credit file. This is certainly a negotiation tactic you might want to consider, but you don't need to pay a credit repair clinic for this advice.

Advise you to get a major credit card. Credit repair clinics can give you a list of banks that offer secured credit cards—credit cards used against a balance you deposit in a bank account. (This is the first step to getting a major credit card if you have bad credit.) While this information is helpful in rebuilding credit, it's not worth paying for—you can find this information yourself for little or nothing.

For-Profit vs. Nonprofit Credit Repair Companies

The federal Credit Repair Organizations Act prohibits for-profit credit repair clinics from engaging in certain practices and making certain claims about their services. Many states regulate credit repair clinics as well. Some dubious credit repair clinics have tried to get around these regulations by setting themselves up as nonprofits.

Before using any organization that claims to be a nonprofit, carefully check the company's fees, claims about its services, and reputation. Contact the Better Business Bureau and ask if any complaints have been filed against the company. Do the same with your local consumer protection agency. You can verify nonprofit status by contacting the Internal Revenue Service, but just because the company is a non-profit doesn't mean it's legitimate.

Getting Help

If you need help disputing an error in your credit report, consider talking to an attorney or a legitimate credit counseling agency. For comprehensive information on how to repair your credit, get Credit Repair, by Amy Loftsgordon and Cara O'Neill (Nolo).

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