By Broderick Perkins
You know the pitch: "Bad Credit? No Credit? No Problem. We Can Fix It and Get You That Mortgage!"
Forget about it.
Don't believe exuberant hucksters who entice you to cast your credit troubles their way and, for a fee, derogatory remarks on your credit report will magically disappear.
What's more likely to disappear is the exorbitant fee to "fix" your credit report.
While you can request an investigation of credit report information you believe is inaccurate, no one can legally remove accurate and timely negative information from a credit report, says Silver Spring, MD-based Peter Miller, author of "Commons-Sense Mortgage" (Contemporary Books).
"One of the more common and serious scams is to steal the identities and Social Security numbers of people who have died in far away places like Puerto Rico and Guam," said consumer educator and advocate Gerri Detweiler, president of MoneyForMail.com and author of the Debt Counselors of America's "DCA's Guide to Credit Repair: How To Do It Yourself and Avoid Rip-Offs."
The better approach is knowing the law, what to avoid and how to check and correct errors on your credit report.
Know your rights
The federal credit repair act
-- Requires credit repair organizations disclose, in writing, your legal rights about correcting your credit history, before you sign a contract.
-- Mandates that credit repair organizations give you a written contract with all the terms and conditions of payment, a detailed description of the services to be provided, including any guarantees, and an estimate of how long it will take to perform the contract.
-- Gives you a three-day cooling off period, or right to cancel, on any credit repair agreement you sign.
-- Voids any contract between you and a credit repair organization that doesn’t comply with the law.
-- Prohibits credit repair organizations from taking your money before delivering what's promised.
Know what to avoid
The law is tough, but you must also protect yourself. The Federal Trade Commission and the Better Business Bureau says if you insist on hiring a credit repair company, beware of companies exhibiting tell tale signs they are up to no good.
Avoid companies that
-- Don't disclose to you, in writing, your legal rights.
-- Recommend that you do not contact a credit bureau directly.
-- Want you to pay for credit repair services before they are provided.
-- Advise you to dispute information you know is correct.
-- Suggest you engage in illegal activity, including creating a new identity.
"People will suggest that you use a federal employee number. Any lender is going to know it's not a Social Security number," said Miller, also host of Ourbroker.com, a real estate information portal on the Internet.
Know what to do and what not to do
Anything a credit repair clinic can do for you legally, you can do yourself for the nominal cost of your credit report and postage.
The Fair Credit Reporting Act entitles you to a free copy of your credit report if you've been denied credit within the last 30 days because of something on your credit report. Otherwise, the cost of your credit report is about $10. You can then dispute (by certified, return-receipt mail) mistakes or outdated items. Ask the credit reporting bureau for a dispute form or submit your dispute in writing.
Miller also says another tactic fraudulent credit repair firms use is to inundate a credit reporting agency with challenges, hoping to overwhelm the bureau's capacity to process them. The fair credit law says the credit bureau must remove any derogatory remark it can't verify within 30 days. When the creditor later verifies the information, however, the black mark returns. By then, of course, you've already paid for the "repair".
Finally, while it may or may not sway a lender to approve credit, you may add your own explanation for a negative entry the bureau substantiates.
Miller questions the wisdom of invoking that right.
"The law's not clear about when it comes off. The debt could be paid off but the statement could remain. A better approach is, when you apply for a mortgage, explain it to the lender. Something people miss is that lenders are not looking for perfect credit. They are looking for honesty and someone who is responsible enough to tell the truth," Miller said.
For more information about credit repair, your rights, scams to avoid and filing a complaint, contact the Federal Trade Commission.
Broderick Perkins, has been a consumer journalist for 20 years. Experienced in print, electronic, and consulting journalism, he is chief executive editor of San Jose, CA-based, DeadlineNews.Com, an editorial content and consulting firm.