Can a Credit Rating Repair Company Legitimately Clear Up My Bad Credit?
Credit rating repair companies dangle promises of clean credit reports and high credit scores to lure you in, but the Federal Trade Commission warns that many do not deliver what they claim. Some companies use legitimate credit repair techniques to improve your TransUnion, Experian and Equifax files, but some do nothing at all or use illegal tactics.
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Legitimate Method
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Legitimate credit rating repair companies use credit disputes to remove as many bad entries as possible from your credit reports, which makes you look better to lenders and increases your credit score. The Fair Credit Reporting Act allows disputes for even minor mistakes but bans totally frivolous complaints. An on-the-level credit repairer finds as many errors as possible in your negative credit report data. The disputes result in erasure if the credit bureaus are unable to verify that information within 30 days. The Divorcenet website explains that the entries might be deleted immediately if the bureaus are too backlogged to abide by the FCRA's 30-day investigation requirement.
Illegal Methods
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The FTC warns that scam credit rating repair companies typically use two illegal methods to clear up bad credit. Some send blanket disputes on every negative credit report item, whether or not there is a mistake. TransUnion, Experian and Equifax recognize this tactic and dismiss the disputes immediately because the FCRA protects them from wasting time on obviously false complaints. The other illegal method involves using an Employer Identification Number in place of your Social Security Number to build a brand-new credit history. The FTC advises that you can be prosecuted for mail or wire fraud for using an EIN in this manner.
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Business Practices
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Legitimate credit rating repair companies have certain business practices that distinguish them from fraudulent firms. The FTC explains that they do not expect payment until they perform their services, and they let you know you can clean up your credit yourself for free. The Credit Repair Organizations Act forbids advance payment, so immediately dismiss any company that asks for money up front. A good firm gives you a written contract that states what it will do, the expected time frame and how much you will owe when it is done. Bankrate.com warns against firms that claim to have special relationships with the credit bureaus or secret credit repair methods because there is no such thing.
Considerations
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The FCRA lets you repair your own credit in the same way that a legitimate firm cleans it up, according to the FTC. Free credit reports are available every year from AnnualCreditReport.com, and TransUnion, Experian and Equifax all have online dispute forms with clear instructions for filing your own complaints. They are bound by the same 30-day investigation time frame, whether you make a dispute or a company does it for you.
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