Free Credit Report Repair Guide

SALEM, Ore. (CNN/Money) – Your credit score, or FICO score, is arguably one of the most important pieces of information in your financial life.
Lenders, landlords, insurers, utility companies and even employers scrutinize this rating — which sums up all of the information in your credit reports with three digits ranging from 300 to 850.

Yet, according to a survey released Tuesday, nearly half of all Americans don’t understand what these scores measure or what factors go into them.

The survey, conducted by Opinion Research Corporation for the Consumer Federation of America (CFA) and Fair Isaac Corporation, found that 49 percent of respondents do not understand that credit scores measure a person’s credit risk, while 45 percent think – incorrectly – that a higher income will result in a higher credit score.

“Despite all of the news coverage about credit scores over the past year, many consumers still do not understand important facts about these increasingly influential numbers,” said Stephen Brobeck, CFA executive director.

Just how influential is your credit score?

If your credit score is 580, for example, you are likely to pay nearly three percentage points more in mortgage interest than someone with a score of 720. To put it another way, the payments on a $150,000 30-year fixed-rate mortgage would be about $890 if you qualify for the best rate, according to Fair Isaac, the company that created the FICO score. That same loan could cost more than $1,200 a month if your credit is poor.

To that end, you’ll want to check your credit scores periodically, correct any errors on your reports and take steps to improve your score over time. The secret to a better credit score: Pay your bills on time and keep your balances low.

To help consumers understand their scores, CFA and Fair Isaac have prepared a free brochure now available online.

In the meantime, make sure you’re not falling for any of these common credit score myths.

Myth: You only have one credit score. In truth, you have three credit scores, one from each of the three major credit bureaus. “These scores can vary by as much as 50 points or more,” said Ryan Sjoblad, a spokesman for Fair Isaac. This is why it’s a good idea to check all three.

Myth: Checking your own credit will lower your score. You can check your own score as many times as you want without impacting your score, said Sjoblad, but make sure you do so via the bureaus or a legitimate score seller like MyFICO.com rather than, say, at a car dealership.

Myth: Your age, income and sex are factored into your score. According to Sjoblad, none of this information has any bearing on your score. Your employment is something that is listed on the credit bureau report, he added, but doesn’t affect the score itself.

Myth: A higher salary will boost your score. Paying off your debts will improve your score. Earning more money, winning the lottery or inheriting a fortune, however, will not because, again, your net worth and income are not factored into your score.

Myth: To remove unfavorable info just dispute it. If there is information in your report that is legitimately inaccurate, you should by all means dispute it. Credit agencies are obligated to investigate credit inaccuracies within 30 days or remove disputed information. But don’t fall for so-called credit repair companies promising to remove unfavorable (though accurate) information from your credit reports to “instantly” improve your score. These days credit agencies not only investigate disputes quickly, they know a sham when they see it.

Myth: Shopping around for a loan hurts your score. When you apply for a loan or get pre-approved the creditor checks your credit report, which shows up as an inquiry to your credit. While it’s true that too many inquiries to your credit will lower your score, you absolutely can shop around for a mortgage, home equity loan or car loan without worrying about damaging your credit, said Sjoblad. “As long as the same kind of inquiries are made within 14 days of each other, they count as one inquiry on your credit score,” he said. Take note: This grace period doesn’t apply to credit cards.

Myth: Credit card offers are hurting your score. Credit card solicitations, while annoying, don’t affect your score. That’s assuming you don’t respond to the solicitations and use all of the credit that’s available to you. There is no magic number for how many credit cards are too many, said Fair Isaac’s Cheri St. John. But, if ratio of credit used to credit available is high, that indicates higher risk. “Clearly consumers want to keep balances below the available credit line,” she added.

Myth: When you get married your credit scores are merged. “People think once you’re married your credit information gets mixed,” said Sjoblad. But, your good or bad credit is yours and yours only ’til death do you part. When you open accounts jointly, though, that information will be reflected on each of your credit reports, for better or for worse.

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:
“Credit problems? No problem!”
“We can erase your bad credit-100% guaranteed.”
“Create a new credit identity-legally.”
“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”
Do yourself a favor and save some money, too. Don’t believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

This brochure explains how you can improve your credit worthiness and lists legitimate resources for low or no-cost help.

The Scam
Everyday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can’t deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply vanish with your money.

The Warning Signs
If you decide to respond to a credit repair offer, beware of companies that:

Want you to pay for credit repair services before any services are provided;
Do not tell you your legal rights and what you can do-yourself-for free;
Recommend that you not contact a credit bureau directly;
Suggest that you try to invent a “new” credit report by applying for an Employer Identification Number to use instead of your Social Security Number; or
Advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.
You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It’s a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security Number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services.

The Truth
No one can legally remove accurate and timely negative information from a credit report. But the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act:

You are entitled to a free copy of your credit report if you’ve been denied credit, insurance or employment within the last 60 days. If your application for credit, insurance, or employment is denied because of information supplied by a credit bureau, the company you applied to must provide you with that credit bureau’s name, address, and telephone number.
You can dispute mistakes or outdated items for free. Ask the credit reporting agency for a dispute form or submit your dispute in writing, along with any supporting documentation. Do not send them original documents.
Clearly identify each item in your report that you dispute, explain why you dispute the information, and request a reinvestigation. If the new investigation reveals an error, you may ask that a corrected version of the report be sent to anyone who received your report within the past six months. Job applicants can have corrected reports sent to anyone who received a report for employment purposes during the past two years.

When the reinvestigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider.

You also should tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. In addition, if you are correct-that is, if the information is inaccurate-the information provider may not use it again.

If the reinvestigation does not resolve your dispute, have the credit bureau include your version of the dispute in your file and in future reports. Remember, there is no charge for a reinvestigation.

Reporting Negative Information
Accurate negative information generally can be reported for seven years, but there are exceptions:

Bankruptcy information can be reported for 10 years;
Information reported because of an application for a job with a salary of more than $75,000 has no time limitation;
Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limitation;
Information concerning a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer; and
Default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.
The Credit Repair Organizations Act
By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract. The law contains specific protections for you. For example, a credit repair company cannot:

make false claims about their services;
charge you until they have completed the promised services; or
perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.
Your contract must specify:

the payment terms for services, including their total cost;
a detailed description of the services to be performed;
how long it will take to achieve the results;
any guarantees they offer; and
the company’s name and business address.
Have You Been Victimized?
Many states have laws strictly regulating credit repair companies. States may be helpful if you’ve lost money to credit repair scams.

If you’ve had a problem with a credit repair company, don’t be embarrassed to report them. While you may fear that contacting the government will only make your problems worse, that’s not true. Laws are in place to protect you. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance.

Need Help? Don’t Despair
Just because you have a poor credit report doesn’t mean you won’t be able to get credit. Creditors set their own credit-granting standards and not all of them look at your credit history the same way. Some may look only at more recent years to evaluate you for credit, and they may grant credit if your bill-paying history has improved. It may be worthwhile to contact creditors informally to discuss their credit standards.

If you can’t resolve your credit problems yourself or you need additional help, you may want to contact a credit counseling service. There are non-profit organizations in every state that counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These counseling services are offered at little or no cost to consumers. You can find the office nearest you by checking the white pages of your telephone directory.

In addition, nonprofit counseling programs sometimes are operated by universities, military bases, credit unions, and housing authorities. They’re also likely to charge little or nothing for their services. Or, you can check with your local bank or consumer protection office to see if it has a list of reputable, low-cost financial counseling services.

Do-It-Yourself Check-Up
Even if you don’t have a poor credit history, it’s a good idea to conduct your own credit check-up, especially if you’re planning a major purchase, such as a home or car. Checking in advance on the accuracy of the information in your credit report could speed the credit-granting process.

You’re entitled to one free report a year if you can prove that (1) you’re unemployed and plan to look for a job with 60 days, (2) you’re on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a credit bureau may charge you up to $9.00 for a copy of your report.

Credit bureaus usually are listed in the yellow pages of your telephone book under “credit reporting agencies.” Three large national credit bureaus supply most credit reports: Equifax, Experian and Trans Union. You may want to contact each of them for a copy of your report.

Equifax
1-800-685-1111
www.equifax.com

Experian
1-888-EXPERIAN (397-3742)
www.experian.com

Trans Union
1-800-916-8800
www.transunion.com

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