Don’t Be Fooled by Misleading ‘Credit Repair’ Claims!
An illustrated fact sheet that describes what a credit report is and how to find out what is in your credit report. Explains how to correct inaccurate information in your report and advises caution with credit repair companies and guaranteed credit claims.
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Note: Last revision 1996. Use this information as a general guide only; consult with a local consumer group for laws specific to your state.
Introduction
Some companies cheat consumers by making misleading claims about "cleaning up" bad credit reports. This document explains the limited services that credit repaircompanies can legally perform, and reveals some companies' misleading claims and illegal practices.
Credit reports
Your credit report is a listing of your payment history on credit cards and loans, including your mortgage. It includes information about outstanding loans, debt repayment and credit limits. It may also include non-credit information, such as jobs you have held, public record information, your date of birth and your address.
Your credit report is reviewed by lenders when you apply to them for credit. They use the report's information in deciding whether to give you a loan. Credit reports are maintained by credit reporting agencies. These private companies work with banks and other lenders. The three biggest national credit reporting agencies are: TRW, Trans Union and Equifax.
If you have ever fallen behind in making payments on previous loans or on your credit cards, it may be difficult for you to get a new loan, an apartment or even a job. Most negative information—including information about federally-guaranteed student loans#8212;stays on the report for seven years after it was reported; bankruptcies stay on for 10 years.
It is possible that incorrect information also may be in your credit report. For instance, your credit report might contain a statement that you failed to pay a debt that you did pay, information about another person with the same name, or a court action you were not involved in.
How do I find out what is in my credit report?
You can obtain a copy of your credit report from any or all of the three major credit reporting bureaus. Write to them at the following addresses, or call them if you prefer (note that all three companies offer toll-free 800 phone numbers):
- Equifax, P.O. Box 105873, Atlanta, GA 30348, 1-800-685-1111
- Experian, P.O. Box 2104, Allen, TX 75013, 1-888-397-3742 (1-888-EXPERIAN)
- Trans Union, P.O. Box 390, Springfield, PA 19064, 1-800-916-8800
These companies charge up to $8 to get a copy. However, a credit bureau must give you a free copy if you have been turned down for credit, a job, insurance or a rental unit within the last 60 days because of information in its report. The company turning you down must tell you which of the bureaus furnished the report it used.
What can I do about inaccurate information in my credit report?
You have the right to ask a credit reporting bureau to verify information in your credit report that you believe is inaccurate. Also, contact the company that gave the information to the credit reporting bureau and ask it to provide corrected information to all credit reporting bureaus it works with.
Inaccurate information about you may be on more than one credit report. While the three large credit bureaus mentioned above usually share information about an error, you should write to each credit reporting bureau to make sure the error is corrected on all your credit reports. About two months after you think the error should have been corrected, order copies of your credit reports again to check that thenaccurate information was deleted.
If the verification process does not resolve your dispute, you can write a statement of 100 words or less to present your version of the situation and ask the credit reporting bureau to include it in your credit report.
Beware of credit repair companies!
So-called "credit repair" companies claim they can remove negative information from credit reports. Advertising as "Credit Advisors," "Credit Rating Correction Services" or "Credit Consultants," they trumpet variations on this message: "Turned down because of bad credit? We can help!" Many of these companies charge hundreds if not thousands of dollars for the promise to "clean up" bad credit reports. But the truth is, these companies can only do what you could do yourself—at no charge.
Nobody can remove negative information that is accurate from your credit report. No company has a "secret" ability to remove all negative information.
But this doesn't stop their claims. This deceptive quote is from a credit repair company brochure: "Charged-off accounts, collection accounts, judgments, tax liens, repossessions, and even bankruptcies can be removed from your credit records in less than one year (five to seven month average)."
One tactic is to bombard credit reporting agencies with requests to verify information. If a credit reporting agency cannot verify an entry within 60 days, it will remove the information from the report. But if the information is later verified to be accurate, it will go back in the report.
Before you even consider signing a contract with a company that promises to repair your credit, remember these facts:
- You may obtain a copy of your credit report on your own.
- You have the right to dispute entries in your credit report.
Beware guaranteed credit offers!
Credit repair and other companies often claim they "guarantee" to get you a credit card, regardless of your credit history. In fact, these companies do not always honor their guarantee. Sometimes, they'll just take your money and run—you will not get any credit, regardless of what they promised.
If they get you a card at all it often will be a "secured" bank credit card, with high up-front "application" fees, that requires you to deposit and keep several hundred dollars in a savings account, or a card that only allows you to buy items in a catalogue from a business that you probably never heard of. (You can apply for a secured credit card by yourself. For a free list of banks that do not charge application fees for secured cards, see the information from Consumer Action in the "For More Information" section below.)
Credit repair companies often advertise on television, in newspapers and even on matchbooks. Sometimes they require consumers to dial a "900" telephone number to get more information. Calls to 900 numbers can cost $2 or $3 a minute, so listening to a few minutes of information about the cards can be expensive.
Some companies try to get people a credit card by having them apply using financial information of other people with good credit histories. It is a criminal act to apply for credit under someone else's name--do not do business with one of these companies.
Law enforcement agencies have shut down many credit repair outfits, but it is hard to stop a fraudulent credit repair outfit unless people complain about it. Therefore, be careful about responding to credit repair ads and be sure to complain to the agencies listed below if you think a credit repair company took advantage of you.
For more information
- The Federal Trade Commission (FTC) publishes information for consumers on the subject of credit and enforces federal laws on credit. For a list of free publications, write to the FTC's Public Reference Department at the address given below. While the FTC does not handle individual cases, it can act when it sees a pattern of possible law violations develop. Complaints about credit reporting agencies and credit repair scams must be in writing. Send them to: FTC Credit Practices Division, 6th St., N.W., Washington, DC 20580.
- Contact your local consumer protection agency or your state Attorney General's office. Many Attorneys General have toll-free consumer hotlines. These numbers may be listed in the "self-help" or government sections in the front of your phone book. These agencies can offer you advice and may also be able to help resolve your complaint.
- Consumer Action's free complaint/information switchboards offering non-legal consumer advice and referrals can be reached from 10 a.m. to 2 p.m. on weekdays. Chinese, English and Spanish are spoken. Call either (415) 777-9635 (San Francisco office) or (213) 624-8327 (Los Angeles office). Consumer Action has a free list of secured credit card banks that do not charge application fees. To receive a free copy, send a self-addressed stamped envelope to: Consumer Action Secured Credit Card Survey, 717 Market St., Suite 310, San Francisco, CA 94103. (Available in English only.)
- The Consumer Credit Counseling Service (CCCS) assists consumers who have problems in paying their bills--before their good credit ratings suffer. Your local CCCS office can help you work out flexible payment plans to make debt repayment more feasible. Call (800) 388-CCCS for an interactive recording that will provide you with the phone number of the office nearest to you. Spanish-speakers can call (800) 68-AYUDA (800-682-9832) between 8 a.m. and 7 p.m. central time.
- Before you sign a contract with any company, check it out with the local Better Business Bureau (BBB), a non-government service which advises consumers on fraud prevention. Call your local BBB. If you cannot find a local number listed in the phone directory, call the Council of Better Business Bureaus at (703) 276-0100 for a referral to the office nearest you.
Produced by Consumer Action
Electronic publication funded by Sprint
Published / Reviewed Date
Published: December 27, 1996
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Filed Under
Credit ♦ Credit Reports/Scores ♦ Fraud/Scams ♦
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© 1996 –2024 Consumer Action. Rights Reserved.
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