Lenders rely on credit scores to determine your worthiness as a consumer. Your score is important when you finance a car or home, obtain insurance or apply for a job. Past credit missteps -- even those seven to 10 years ago -- and errors on your report will affect you financially if you don't repair your credit score. "There's no quick fix for creditworthiness," says the Federal Trade Commission; however, you can improve it legitimately with time and a conscious effort to manage and repay your personal debt.
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Federal law empowers consumers to repair their own credit scores free of charge, according to the FTC. Under the Fair Credit Reporting Act (FCRA), you are entitled to a free annual credit report from the three major credit bureaus -- Experian, Transunion and Equifax. You are also entitled to a free report when a company takes "adverse action" against you, such as denying your credit application, says the FTC. Under the FCRA, both you and your collector are responsible for correcting outdated items or mistakes that affect your credit score. Credit reporting errors often occur because the report is incomplete, because the report is about someone else with a similar name or because of clerical errors, according to myFICO.com.
Inform the collector or company reporting the false information of the mistake or outdated item in writing and provide any supporting documentation. Ask the company to remove or delete the item from your file and send notices of the correction to anyone who requested your report within the past six months. You can also ask the company to send the revisions to anyone who received your credit report for employment purposes in the past two years.
Credit Repair Organizations
A credit repair organization only comes in handy if you don't have the time or simply don't want to do the work of repairing your own credit score. A credit repair company can't do anything you can't do yourself. A legitimate company will advise you up front of your capabilities and rights by giving you a copy of the "Consumer Credit File Rights Under State and Federal Law," says the FTC. It must also provide you with a written contract that reiterates your rights and responsibilities as the consumer and give you three days to review the contract. it may charge fees, but never before the service is completed.
Beware of companies that claim to repair your credit score by removing negative information from your credit report, as the FTC says deleting accurate information is illegal. The FTC warns of these signs of a scam: a required up-front payment for repair services; no discussion of your rights as a consumer or your ability to make repairs yourself; asking you not to contact the credit bureaus; and trying to establish a new credit identity under an Employer Identification Number rather than your Social Security number.
Mortgage Professionals
Some mortgage brokerages or lenders have access to rapid rescoring services which expedite the credit-reporting process in as few as 72 hours. The resource is used by loan brokers or loan officers whose applicants' credit challenges hinder their mortgage qualification. The mortgage representative maintains an account with a credit-reporting service that provides your tri-merged FICO report. If the report contains erroneous or outdated information for which you you can provide documentation, the service can send the proof directly to Experian, Transunion or Equifax. The service verifies its validity, reports it to the bureaus -- with whom it has a special relationship -- and the bureaus update the credit report and generate a new score. Mortgage professionals may also have access to rescore preview software, which allows them to analyze the effect certain changes will have on your score. Each service is for a fee, approximately $30 per trade line, per bureau, says The Truth About Credit Cards.
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