Use a Reputable Credit Counselor

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. What are the ads for? Credit repair services. There are lots of companies that claim that they can erase your bad credit and remove bankruptcies, judgements, liens and bad loans from your credit history forever.

But the truth is no one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge.

According to the Fair Credit Reporting Act (FCRA):

You’re entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

You can dispute mistakes or outdated items for free. Under the FCRA, both the consumer reporting company and the information provider are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions;

There is some good news—just because you have a poor credit report doesn’t mean you won’t be able to get credit. Creditors set their own credit-granting standards and not all of them look at your history the same way. Some may look only at more recent years to evaluate you for credit, and they may grant credit if your bill-paying history has improved. It may be worthwhile to contact creditors informally to discuss their credit standards.

If you’re not disciplined enough to create a budget and stick to it, work out a repayment plan with your creditors, or keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But not all are reputable. For example, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable or even legitimate. In fact, some credit counseling organizations charge high fees, or hide their fees by pressuring consumers to make “voluntary” contributions that only cause more debt.

Most credit counselors offer services through local offices, the Internet or on the telephone. If possible, find an organization that offers in-person counseling. It’s wise to do some research when choosing a credit counseling organization and ask these important questions:
• What services do you offer?
• Will you help me develop a plan for avoiding problems in the future?
• What are your fees?
• What if I can’t afford to pay
your fees?
• What qualifications do your counselors have? Are they accredited or certified by an outside organization?
• What do you do to keep information about me confidential and secure?

Consider the answers carefully and make sure that they are offering the services you are looking for and that all of the answers meet your criteria.

If you are considering filing for bankruptcy, you should know about one major change to the bankruptcy laws: As of October 17, 2005, you must get credit counseling from a government-approved organization within six months before you file for bankruptcy relief. You can find a list of government-approved organizations at usdoj.gov/ust. That is the website of the US Trustee Program, the organization within the US Department of Justice that supervises bankruptcy cases and trustees.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a plan to solve your financial problems.