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[01:19:54 AM Thursday, August 16, 2007]
Credit Repair Companies Can Be Shady One of the greatest things about the USA is the can-do attitude. People start businesses every day in the hopes of earning a living, getting rich and providing people with something they need. The down side to this is that some of these entrepreneurs are dishonest and shady, and it's up to the consumer to figure out which is which. In the 1800s, there were "snake oil" salesmen, people who went from town to town selling medicinal cures that, in fact, were utterly useless. The medical industry is more regulated now, but there are still snake-oil salesmen: the credit-repair industry, where businesses claim they can fix your credit report magically and overnight. There are some honest firms in this area, but it's difficult to tell who's on the up-and-up and who's full of lies. Some of the claims they make are outrageous. They'll take every negative item out of your credit report! They'll boost your credit score within a week's time! Just as when the snake-oil salesmen came to town, the consumer has to look carefully and the claims and see what's actually possible. The consumer also needs to consider this: Do I even need this potion, and can I get the same results by myself, without paying someone else to do it for me? People with bad credit are approached all the time by organizations pledging to wipe their credit report clean of all negative items, which would then allow the customer to take advantage of new credit card offers, get low rates, no annual fees, and other perks of good credit. But in nearly every case, after you've paid these people hundreds of dollars for their services, your credit report and credit score are going to look about the same. Why? Because the Fair Credit Reporting Act legislates what can and cannot be included on your credit report. If there's something negative on our report, and it's accurate and up-to-date, then you're stuck with it. It's on there until enough time passes that it can be removed. But the credit-repair people count on you not knowing that. They boast that they can get any negative info stricken from your credit report, as if by magic! Basically, what they do is take the shotgun approach. On your behalf, they lodge a dispute against every single negative piece of information on your credit report, including the ones that are perfectly accurate and indisputable. Now, in some cases, it will turn out that a few of those negative items should be removed, and sure enough, they get removed. But in general, most people's credit reports are fairly accurate. Most of what's on there belongs there. The shotgun approach does work temporarily, though: If an item is disputed, the credit reporting agency is obligated to remove it while it conducts an investigation. So while that's happening, as promised, your credit report will look squeaky clean. But what happens once the investigation is complete and your creditors and banks verify to the credit reporting agency that the negative information is accurate? All that stuff returns to your credit report, and you're back where you started. Meanwhile, the people you paid to clean up your credit are long gone. Good luck getting them to return your phone calls now! So is there nothing you can do about negative comments on your credit report? If it's accurate, no, there's nothing you can do. Eventually, negative information disappears, once enough time has passed. It's usually seven years for most negative information, and 10 years for a bankruptcy. But if something is inaccurate or misleading, you have every right to dispute it and correct it. After you file a dispute on an item, the credit reporting agency is obligated to look into it within 30 days. They go to the creditor who provided the negative information — "This person missed a payment with us"; "This person stopped paying his bills"; etc. — and ask them to verify that the information they gave is correct. If the creditor discovers that the information is in error, they are obligated to inform all three credit reporting agencies, not just the one that contacted them, so that the consumer's credit report can be updated. It may sound like a huge hassle, but it's actually not very hard for a consumer like to initiate dispute claims. There's no fee, either. So why pay a credit repair company to do it for you, when: a) you can do it yourself, and b) most of what they do won't work anyway? Another lie that these companies tell is that a consumer can leave behind a bad credit report and just start a new one, with no negative information at all! They call it "new credit identity" or "file segregation," and they tell you to apply for an "Employer Identification Number" from the IRS. The Employer Identification Number has the same number of digits as a Social Security number, and what these fraudulent companies do is tell you to start using that instead of your SS number. That way, when creditors check your credit report, they'll only see things linked to your new number, and the old, bad information won't show up at all. For one thing, you could be charged with lying on a loan or credit application. Plus, it's against the law — a federal crime, actually — to lie about your SS number or to get an EIN under false pretenses. Besides, think about what would happen if you did it: Creditors would check your credit report under your new number and find ... no credit history. That would make them turn you down.
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