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If it's truly broken, credit repair can't fix itPublished July 23, 2001
Q: I need your advice on contracting the services of people who claim to know loopholes that can fix your credit report. I've seen ads on television asking for $399 to receive their help. Just how legitimate are these people and their services? Have you heard of them? And do they really do something that we cannot do ourselves?
A: Your suspicions are right. So-called "credit doctors" and "credit repair" companies don't do anything you could not do on your own -- except charge outrageous fees. By the same token, nobody can "fix" your credit report, if by that you mean removing information that is damaging but accurate and required to stay on your credit file.
"There is no such thing as `credit repair' because credit files can only be corrected and not `fixed,'" said Paul S. Richard, executive director of the nonprofit Institute of Consumer Financial Education in San Diego. "Everything a `credit repair' clinic can do for you legally, you can and should do for yourself at little or no cost," he said.
Thanks to amendments to the Fair Credit Reporting Reform Act, which went into effect in October 1997, the burden of proof in disputes has shifted from consumers to the credit bureaus. Information disputed by consumers must be verified within 30 days or removed, and consumers can sue a creditor that fails to correct an obvious error.
"The law set it up so consumers could do this `credit correcting' on their own," said Richard, author of the popular Do-It-Yourself Credit File Correction Guide published by the Institute.
"Consumers pay hundreds or thousands of dollars in up-front fees and these companies do nothing to improve credit reports, and many outfits simply vanish with consumers' money," Richard said.
A much better solution is to order a copy of the Institute's guide, which includes more than a dozen sample letters to use when communicating with credit reporting agencies about mistakes and problems. The clearly written guide explains how to obtain credit reports, how to read them and how to make changes and corrections. It also includes a section on establishing or re-establishing credit.
For a copy of the 44-page guide, in its Twelfth Printing, you can send a check or money order for $10 to the Institute of Consumer Financial Education at P.O. Box 34070, San Diego, CA 92163-4070. You can buy the guide online at the Institute's Web site, www.financial-education-icfe.org.
Q: One subject you might want to discuss is identity theft and how one should periodically contact credit reporting companies to check on unusual activity. You would do a great service by providing the names and phone numbers.
A: The problem of identity theft -- somebody pretending to be you and running up large bills -- has gotten worse in our electronic age. The Internet and other forms of electronic commerce make it easier for sophisticated crooks to access Social Security numbers and other personal information.
Here are some common-sense tips published in the Federal Deposit Insurance Corp.'s FDIC Consumer News, the agency's quarterly newsletter for consumers:
Protect your Social Security number, credit card numbers, account passwords and other personal information. Never give these numbers out unless you initiate the contact with a person you know and trust.
In particular, be very careful with your Social Security number. It can be the key for identity thieves to get credit cards, apply for federal benefit payments or open other doors to your money. Your employer will need your Social Security number to report your income to the Internal Revenue Service, and your bank or brokerage firm will need it to report interest or dividend income. But beyond that, the decision to give out your number is "a decision you should not take lightly," the FDIC says.
Minimize the damage in case your wallet gets lost or stolen. Don't carry around more checks, credit cards or other bank items than you expect to need. Don't carry your Social Security number in your wallet.
Protect your mail. Promptly remove mail from your mailbox after it has been delivered. Deposit outgoing mail containing checks or personal financial information in a Postal Service collection box, hand it to your mail carrier or take it to the post office.
Keep thieves from turning your trash into their cash. Tear up or shred important documents before you put them in the trash.
Practice home security. Find a safe place for extra checks, credit cards and documents that list valuable information.
Check your bank account statements and credit card bills the day they arrive, and contact your financial institution immediately if you notice anything suspicious.
Review your credit report once a year. Here are the toll-free numbers for three major reporting agencies: Equifax (800-685-1111), Experian (888-397-3742) and Trans Union (800-888-4213).
For more information on preventing and reporting identity theft, contact the Federal Trade Commission's ID theft toll-free hot line at 877-438-4338 or check the Web site www.consumer.gov/idtheft.
Under certain circumstances, the Social Security Administration will assign a new Social Security number to victims of identity theft. For more information, call the agency's toll-free fraud hotline at 800-269-0271 or visit the Web site www.ssa.gov.
Humberto Cruz can be reached at AskHumberto@aol.com or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chicago, Ill. 60611. Questions will be addressed through his columns, but personal replies are not possible.
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