You've seen the ads, received the emails, and opened the letters--all of them telling you how you can "legally" repair your credit history by using credit repair services or software. The problem is that many of the tactics these credit repair consultants are suggesting are either illegal or can be done without their help for a fraction of the cost.
According to the Federal Trade Commission, we should be wary if credit repair specialists:
1. Want you to pay a fee before providing any credit repair services.
2. Don't tell you your rights and what you can do for free.
3. Recommend that you don't contact a credit reporting agency on your own.
4. Suggest that you invent a new identity by applying for a new Social Security Number or Employer Identification Number.
5. Suggest that you dispute everything in your credit report.
Many of these tactics are fraudulent, and you could even face some heavy jail time.
Get copies of your credit reportsAll three major credit reporting agencies have to provide you with copies of your credit reports on a yearly basis if you request it or when civil action has been filed against you for collection.
Read the reports for errors and omissionsYou can dispute anything in your credit reports that is suspicious, erroneously reported or for claims that are more than seven years old. Bankruptcies can stay on your report for 10 years.
Federal Trade Commission's credit repair website.
Contact the creditorFollow up by sending a letter disputing the error to the company or business that filed the claim.
- Once your credit is reestablished, consider obtaining a gasoline card or a secured credit card to generate a positive credit history.
- Keep your credit card balances within 30 percent of your available credit.
- Keep requests for additional credit at a minimum. Too many inquiries can hurt your credit rating.
- A so-called "ideal" credit report should contain three-to-five credit cards, a mortgage loan and an installment loan, all showing a positive credit history for about two years.