Can you legally fix your credit?
For millions of Americans with poor credit, the idea of being able to fix their credit sounds almost too good to be true. You may wonder, “Is credit repair legal. Credit repair is perfectly legal and more than that, it is your right and responsibility as a U.S. consumer. Everyone, no matter their income, amount of credit card debt, or other financial issues, is legally entitled to a fair, accurate representation of the information that appears on their credit report.
This article will express exactly what makes credit repair legal, how to sidestep any murky territory, and how you can get started fixing your credit today.
The FCRA is a piece of federal legislation enacted in 1970 that outlines a number of rules regarding the way your credit file is communicated.
First, it allows you access to your credit report at any time for a reasonable price, including at least one free copy from each credit bureau every 12 months. Below you’ll find more situations in which you might qualify for a free credit report from Equifax, Experian, and TransUnion.
The FCRA also limits who may access your credit history. They must have “permissible purpose” so that your report isn’t cluttered with multiple inquiries pulling down your credit score.
If you find any credit inquiry listed on your report that you did not explicitly authorize, it is your right to have it removed. Otherwise, each one could shave off a few points from your credit score while also raising a potential red flag to future creditors.
The length of time any piece of negative financial information stays on your credit history is also limited by the FCRA. Most items automatically drop off after seven years, although some more serious infractions stay on as long as ten years.
If you see something listed that should have already been removed due to the time frame, then it’s definitely worthy of being disputed.
Finally, the FCRA gives you the right to dispute any items on your credit reports you feel may be inaccurate, untimely, misleading, biased, incomplete, or unverifiable
In essence, you have the right to dispute the questionable negative items on your credit reports that you feel are giving lenders an unfair impression of your creditworthiness.
What’s more, is that the credit bureau is required to open and complete an investigation within 30 days of the dispute being filed. They must also update you on any action that did or did not take place on your credit report as a result of that investigation.
As long as you follow the correct steps during the dispute process, there’s no reason why you can’t improve your score to become an accurate reflection of your financial history.
The first step to analyzing your credit is to see what is actually in your report. Fortunately, it’s easily accessible.
- You have the right to get a free credit report from each of the credit bureaus at least once every 12 months.
- You may be entitled to more than one free report every 12 months depending upon the state you live in.
You can also receive a copy of your report for free if ANY of the following apply:
- You have been denied an application for credit. This means any type of credit, whether it is a credit card, loan, or some other type of financial instrument.
- You have been denied insurance – including homeowner’s insurance, renter’s insurance, car insurance, or health insurance.
- You have been denied employment – if a potential employer pulls your credit report and decides not to hire you on the basis of what is found, you are entitled to a copy of your report.
- You are currently unemployed and plan to look for a job – if you are planning to look for work within the next 60 days.
- You are on welfare – no other requirements here, if you are on welfare, you qualify for an additional free report.
- You are a victim of identity theft – as long as you file a report with the police to alert them of the fraud.
One thing to keep in mind is that while you can easily get copies of your credit report for free, getting copies of your credit scores sometimes require that you pay a fee. Credit repair happens by removing negative marks from your credit report. By law, every piece of financial information that is listed must be accurate, otherwise, you can file a dispute to have it removed. The premise of legal credit repair is to find inaccuracies on accounts that are reporting as negative on your credit report.
Even if just one element of the listing is incorrect, such as the date payment was reported late or the outstanding balance of a loan, you can file a dispute. The more documentation you have available to support your claims, the greater the chance of success you have for getting those items removed.
What types of items might be damaging your credit score? The most likely culprits include late payments, charge-offs, collections, bankruptcy, foreclosure, judgments, repossessions, and tax liens.
Depending on how serious the items are and how many you have, you may prefer to tackle credit repair on your own or hire a professional to help you improve your credit.
Once you have your credit report, it’s time to figure out the best way to start repairing any negative information that’s on there. With a bit of research, you may be able to identify the kinds of information that can be removed.
This is especially true if you only have one or two straightforward negative items. Otherwise, you can reach out to a professional credit repair company.
Most reputable firms offer a free consultation where they’ll review your financial history and develop a strategy moving forward. They can help you understand the next steps and what you can do to effectively dispute the errors.
If you decide to move forward and hire the credit repair company, you’ll get advice on your legal rights and also in handling any creditors and collection agencies. They’ll also give you personalized advice on how to handle any financial items that may be affected by a statute of limitations.
When you repair credit by yourself, you could run the risk of reopening a collection by making a wrong move. A professional can help you navigate these tricky areas because the best firms have experienced attorneys and paralegals on staff to assist you throughout the entire process.
Credit repair is legal and free when you do it yourself (except for the time it takes you to do all the research and. However, many people get confused or intimidated when it comes to exercising their rights.
One of the main reasons credit repair can be difficult, even though it is perfectly legal, is that the credit bureaus and creditors may not uphold the spirit of the law. Credit bureaus and creditors are required to investigate your disputes unless they decide it is a frivolous dispute.
Contrary to popular belief, consumer credit bureaus are not federal agencies, they are private, for-profit companies. That means it’s especially important to monitor how they handle your credit reports and relevant disputes.
Their core business isn’t consumer protection, it’s selling your financial information to interested parties like lenders and credit card companies.
The Credit Repair Organizations Act is a federal law passed in 1996 that requires credit repair services to advertise and communicate honestly with consumers.
While ethical credit repair is perfectly legal, there are some credit repair scams that you should be aware of. One of them is attempting to “segregate” your credit files. And it’s something that only disreputable credit repair organizations will ever try to do for you.
You cannot legally start over with a “new” credit file. When credit repair companies claim that they can create a new credit file, they will tell you to apply for an EIN – Employer Identification Number – and use that number when you apply for credit.
An EIN can only legally be used by a business entity, and trying to use one for your own personal credit is illegal and constitutes fraud. Even if you were only following the advice of a credit repair company, you will be the one held liable.
Never do business with a company providing this service. It’s better to avoid the possibility of fraud and only hire a company with a positive reputation so you can legitimately — and legally — repair your credit.
Another method used by unscrupulous credit repair agencies is what’s known as “jamming.”
They’ll spend countless letters disputing everything on your credit report in the hopes that not every piece of information will be verified during the mandatory 30-day investigation period. Not only is this practice unethical, but it’s also ineffective in the long run.
While you might see a temporary increase in your score when an unverified item drops off, chances are that the creditor will report the same information during the next period.
At that time, the negative item will reappear on your credit report and your score will drop back down to where it was originally. The lesson here? Ask your credit repair company what specific tactics they’ll employ to fix your credit.
A final red flag to look out for during the credit repair process? Working with a company that requires payment upfront before they actually do anything for you. This likely means that they don’t plan on performing any credit repair services at all and could just take your money and run.
It’s important to note, however, that these shady businesses are not the norm, nor are they wholly representative of the entire credit repair industry. As long as you do some basic research before choosing a credit repair company, you should be in good hands with a company that knows how to use the law in your favor.
#1. Dispute every error… even the little ones
To increase your credit score, you first need to know what your score is, and a detailed history of how you got to that point. Contact the three major companies in the market, Experian, TransUnion, and Equifax and order a credit report. Once you receive the report, print them out and start reviewing them. The first thing you are looking for on your road to “credit repair” are significant errors, such as accounts that aren’t yours, balances that have been paid, and limits that are incorrectly reported. Highlight any discrepancy you find and contact the bureau. You can also file disputes online. The next thing you need to look for is the small errors. Dispute everything that you see as being incorrect or inaccurate. Anytime your credit card company misreported your balance, or a creditor pulled credit without asking permission, all these small things add up. The credit bureaus are legally obliged to investigate any valid claims. If you show, they displayed inaccurate information they have to rectify this. If not, you can contact the Consumer Financial Protection Bureau.
#2 Make sure all new accounts are included
Once you have completed step one, you now need to continue repairing your credit score. The next step is to look for credit lines that should have been included but were not. For example, if you have had a Cell Phone for ten years and have never failed to pay your bill, this could count toward your credit history. You can contact these companies and request that they report your payments to the credit bureaus, here are some of the companies that you should contact;
- Telephone company
- Cable and Internet provider
- Wireless provider
- Utility company
You should remember that they are under no obligation to do anything, on time or not. Unfortunately, too many of these companies don’t do anything. You are asking them to do you a favor, remember this when you are talking to them or contacting them by email.
#3. Start clearing your highest balance
Most people approach this is the wrong way, and the largest debts are the ones costing you your credit score and more money in interest and penalties. While paying off the small balances may seem like the logical thing to do, but if you are attempting to boost your credit rating quickly, you need to pay the credit card with the lowest available limit. For example, if you have two cards with a 5,000 dollar limit on each one has a balance of $4000 and the other a balance of $2000 the first card is doing far more damage to your credit rating, due to its higher utilization ratio, clear, this and your score will improve faster.
#4. Pay by the report date
One thing that people don’t understand about building credit is that they should pay their debts when they receive them or as quickly as possible. Don’t wait until the due date, at that rate your bill may have been reported as overdue, and this will affect your score. In this example, we will tackle your credit card company and the day they say overdue balances. If the company reports overdue balances on the 10th of every month and your due date is the 20th. If you purchase on the 5th and the balance is still on the card on the 15th, as far as you know you are not overdue. Still, to the credit card company, you have a balance on the card, and it will be reported accordingly Make a call to your provider and ask what day they report payment histories.
In many cases, their date will not line up with your due date. If they are different, it is a good idea to clear your card balance before the reporting date. To make sure your card shows a zero balance as often as possible
#5. Use more than one credit type
This is a strange one, and it is possible to get refused credit because you do not have enough proof of using different types of credit. Lenders want to see your ability to service debt, and more than one example at once. Having one correctly maintained credit card history is not always enough. Try and open many different bank accounts and have several different credit cards, even a small loan portfolio. When you add instalment credit to an already existing line of credit can boost your credit score.
#6. Don’t stop using your credit cards
When you are trying to rebuild your credit, one of the best strategies is to keep using your cards and clearing the balance before the date your credit card provider reports their card balances. Do not cut up your credit cards, and these are a gift horse for people trying to rebuild their credit scores. Every month you should put a small amount on every card you have and pay that balance on time. As you do this, continue to take the other steps, and you will see your credit score slowly rising on a month by month basis. Unless your underlying issue means managing credit cards is just a bad idea, continue this process every month.
- Increase your credit
Your credit score is directly linked to your credit utilization ratio, which we explained earlier. If you have a card with a $15,000 balance and you owe 900 dollars, you are using very little of your available credit. If you owe $900 on a card with a 1000 dollar limit, you are using 90% of your available credit. Even though you owe the same amount of cash on both cards, the second is indicates you are a higher credit risk to the credit bureau. Paying the balance is the best option; if this is not possible, try to get your limit extended. This can be achieved by directly calling the card company if you are approved this can boost your credit score instantly.
These are just seven possible ways to “credit repair”, use these consistently, and you will get your score back in the prime range. Once you manage to do this, you need to protect it. When you have a low rating, a mistake or two won’t do too much more damage. But if you have worked hard to get a near-perfect score, even the smallest mistake can dent your score. Don’t allow yourself to slip into old habits.
By Ezekiel Andersen