Credit repair is a process that consumers undertake when they want to improve their credit record. Many transactions require a minimum credit score for approval; without a certain score level, people can find it difficult or even impossible to buy a house, purchase a car, or obtain a new credit card. Credit scores can even impact a hiring decision, as many employers look at the credit score of a potential employee to assess their financial stability and their ability to handle debt responsibly.
If your credit record is not as exemplary as you would like it to be, you can create a credit repair plan yourself, or you can obtain help from a legitimate credit repair organization. A multitude of businesses have entered the credit repair market; most promise to help solve credit problems and to remove negative items from a consumer's credit file. While a few of these businesses may be trustworthy, the majority of them are preying on consumers for the fees these businesses charge.
There are several warning signs that a credit repair company is not a reputable business. According to the Credit Repair Organizations Act, a credit repair business can never require you to pay until they complete the services they promised you. This means that any company that asks you for an upfront fee before they perform any services is not legitimate. Another warning sign is when a credit repair business tells you that they can remove most or all of the negative information in your credit file, including accurate information. It is unlawful to remove any information in a credit history if the information is accurate, even if it is negative.
One other tactic that some disreputable credit repair companies might suggest is that you establish a new credit identity by applying for an Employer Identification Number (EIN). It is a federal crime to obtain an EIN under the pretense of misrepresenting your Social Security number.
You can also choose to create a credit repair plan for yourself; it's not a difficult undertaking. Start by obtaining copies of your credit report from the three credit reporting bureaus - Equifax, Experian, and TransUnion - and then comb through the reports, highlighting negative information. You have the right to dispute any negative entries that you feel are in error, and you can also attach a statement to negative items that explains your situation.
As you move forward, establish a system to pay all of your credit card bills in a timely manner. Your on-time payments will be noted in your credit files and over time, will raise your credit score.