Has your first New Year’s resolution already fallen by the wayside? It may not be your year to head back to the gym – or master the samba, or learn Cantonese, or rescue a dozen St. Bernards – but your credit may still be in need of some attention. The start of a new year is a time when many people ask themselves what they can do to get their finances into better shape, and credit is usually a part of that thought. There are many ways to be more connected to your credit, but where to start? And who can help? The answer may not be the first you think of, depending on how much you know about credit.
Credit repair companies may offer to help consumers “fix” their bad credit. However, these companies are quite limited by law in what they can do. In fact, there’s nothing credit repair companies can do that consumers can’t do for themselves. Firms that say they can give you a “new credit identity” or “erase” negative information from your credit report are probably promising more than they can deliver – and may be breaking the law.
‘Fixing’ Your Own Credit
How is it that you can shape your credit destiny? One of the most important factors that your credit score can capture is your payment history – make it work for you by ensuring that your bills are paid on-time each month. In a larger sense, being responsible with your credit can take many forms, from paying your bills on time, to paying down your balances on credit cards and other revolving credit and keeping those balances low, to applying for new credit only when necessary. All of these are things you can do to demonstrate your creditworthiness. Negative information that might currently appear on your credit report will get older and eventually drop off your report. If you can avoid adding new negative information, then your credit report will have more and more positive information and less and less of the negative. That typically means that your credit overall will be healthier, and show that you’ve been taking better care of it.
The Dispute Process
Your credit report is made up of information reported by companies that have extended you credit, as well as certain public records that reflect on how well you manage debt, such as bankruptcies or foreclosures. As an inclusive record for others to see how responsibly you use credit, it’s important to get your credit report regularly and review the information in it. Federal law allows consumers to dispute information with Experian and other major credit bureaus at no charge to have it corrected or removed. You can hire a credit repair company to handle this, or you can do it yourself for free. Credit repair firms may even charge a hefty fee for their services.
Accurate Data Can’t Be Removed
That shouldn’t be taken to mean that all negative information can be removed from your credit report – it can’t. No company can legally get negative information removed from your credit report if that information is accurate and “timely,” meaning it is not so old that federal law requires that it be removed. Credit repair advertisements might promise to erase this information, but that simply can’t be done. Similarly, no company can legally get you a “new credit identity,” or promise to “remove bankruptcies, judgments, liens, and bad loans from your credit file forever.” The federal Credit Repair Organizations Act specifically prohibits credit repair companies from promising any service that they cannot legally perform. They echo the reminder that there’s just no quick fix for creditworthiness, since you must demonstrate the trend in the long run: put in the effort consistently to improve your credit behavior, and stick to your debt repayment plan.
Limits on Credit Repair Companies
The Credit Repair Organizations Act protects consumers by putting sharp restrictions on credit repair companies. It bars credit repair companies from telling you to lie to or mislead a creditor or credit bureau, so a firm that urges you to do so may be breaking the law. Credit repair firms also cannot collect any payment from you in advance; they can collect only after they have “fully performed” the services they’ve promised. These companies also must provide you with a written statement outlining your rights – including your right to contact credit bureaus directly without going through a credit repair firm. And after you sign a contract with a credit repair company, you have three days to back out of the contract without penalty.
Showing that you’re using credit responsibly is a great reason to check your credit report, but there are many others. Taking the opportunity to engage with your credit and knowing how it appears to others can help you be confident about the state of your financial future, and of your plans to achieve those big dreams ahead. It’s never too late to start becoming someone who cares more about their credit.
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About the Author
Cam Merritt has been a professional writer and editor since 1992, specializing in articles about personal finance and law. He has contributed to USA Today and the Better Homes and Gardens family of magazines and websites. Merritt has a Bachelor of Arts in journalism from Drake University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.