The Legal Right to an Accurate Credit History
Your financial reputation is largely defined by your credit report, which is compiled by credit bureaus like Equifax, Experian, and TransUnion. These reports contain information about your debt management habits, which determines your credit score.
However, errors are common. A study by the Federal Trade Commission (FTC) found that one in five consumers had a verified error on their credit report. These mistakes—from incorrect payment statuses to accounts belonging to someone else—can unfairly lower your score.
The Fair Credit Reporting Act (FCRA) is a federal law that gives you the right to dispute any information you believe is inaccurate. This legal protection makes credit repair a legitimate and essential tool for consumers.
The Credit Repair Process: A Step-by-Step Guide
Credit repair is not about erasing legitimate debts; it’s a systematic process focused on ensuring the accuracy of your credit report.
- Request Your Credit Reports: You are entitled to a free credit report from each of the three major bureaus every 12 months. You can get them at AnnualCreditReport.com, the only source authorized by federal law.
- Review and Identify Errors: Carefully examine each report for mistakes such as accounts you don’t recognize (a sign of identity theft), incorrect balances, duplicate accounts, or outdated negative information. Most negative items must be removed after seven years, while some bankruptcies can remain for up to 10 years.
- Dispute Inaccuracies: You can dispute errors online or by mail with the credit bureaus. Your dispute should clearly explain the error and include any supporting documentation, like payment records. It’s also wise to notify the creditor that reported the information.
- Follow the Investigation: Under the FCRA, credit bureaus generally have 30 to 45 days to investigate your claim. They must contact the creditor that provided the information to verify its accuracy.
- Check the Resolution: If the information is found to be inaccurate or cannot be verified, the bureau must remove it. If the creditor verifies the information as correct, it will remain on your report.
DIY vs. Hiring a Professional
You can manage the credit repair process yourself or hire a company. While going the DIY route is free, it requires time and diligence. Reputable credit repair companies have expertise but charge for their services.
Warning: Be wary of credit repair scams. The Credit Repair Organizations Act (CROA) makes it illegal for companies to request payment before services are rendered or to promise to remove legitimate debt collection accounts. No one can guarantee a specific credit score increase.
Best Practices for Improving Your Credit
While disputing errors, focus on building positive credit habits:
- Pay Bills on Time: Your payment history is the most significant factor in your credit score.
- Manage Your Credit Utilization: Keep your credit card balances low, ideally below 30% of your available credit.
- Keep Old Accounts Open: Closing old accounts can shorten your credit history and potentially lower your score.
- Monitor Your Credit: Regularly check your credit reports to catch new errors quickly.
Frequently Asked Questions About Credit Repair
Q: How long does credit repair take?
A: Each dispute takes 30-45 days to investigate. Complex cases with multiple errors can take several months to fully resolve.
Q: Can credit repair remove legitimate debts like bankruptcies?
A: No. Credit repair can only address inaccurate or unverified information. If a bankruptcy or foreclosure is reported accurately, it will remain on your report for the legally allowed period (7-10 years).
Q: Is it better to do credit repair myself or hire a company?
A: Doing it yourself is free and empowers you with financial knowledge. A reputable company can save you time but comes at a cost. The FTC provides resources for consumers who choose the DIY path.
External Resource: For more information on your rights and how to handle disputes, visit the Federal Trade Commission’s page on Credit Repair: How to Help Yourself.
