Credit Repair: How to Tell Fact from Fiction
While the real estate market and the overall economy continue to demonstrate signs of improvement, the current lending environment is still a dicey road for many prospective homebuyers. Stringent credit requirements are still widespread among lenders, making improving your credit profile integral to securing a mortgage.
The good news: There are many proactive steps you can take to repair less-than-perfect credit. The bad news: There are many bogus organizations that claim they can fix your credit problems quickly. Make sure you understand fact from fiction before proceeding with any such firm. The Federal Trade Commission (FTC ) offers the following red flags to watch for to help identify a credit repair scam:
Claim: The company wants you to pay for credit repair services before they provide any services.
Fact: Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the credit repair services they promised.
Claim: The company doesn’t tell you your rights and what you can do for yourself for free.
Fact: The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. This investigation doesn’t cost any money.
Claim: The company recommends that you don’t contact any of the three major national consumer reporting companies (Equifax, Experian, and TransUnion) directly.
Fact: Under the Fair Credit Reporting Act (FCRA), the consumer reporting company and the information provider (the person, company, or organization that provides information about you to the consumer reporting company) must correct inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the consumer reporting company and the information provider in writing.
Claim: The company tells you they can get rid of most or all of the negative credit information in your credit report, even if the information is accurate and current.
Fact: Watch out for any credit repair company that claims to be able to legally remove accurate and timely information from your credit report. Improving your credit takes time and a conscious effort to pay your debts.
Claim: The company suggests that you apply for an Employer Identification Number to use instead of your Social Security number so you can invent a “new” credit identity – and then, a new credit report.
Fact: If you follow illegal advice like this, you may find yourself in hot water. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, or to get an Employer Identification Number from the Internal Revenue Service under false pretenses. You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or Internet to apply for credit and provide false information.
Your real estate professional or financial advisor can point you in the right direction for learning the specific steps you can take to repair your credit. They can also suggest lending options that might be available to you.