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What is Credit Repair ?
Advertisements stare at you from
newspapers, TV, and the Internet; you hear them on the radio;
you receive fliers through mails. You may even get calls from
telemarketers offering credit repair services. They all make
tall claims of erasing your bad credit history at a fee!! Do
yourselves a favor – save that money for a better cause. Your
credit report is jeopardized every time you default on payment
commitments on your cards, mortgage, insurance etc. 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. This service is available free of cost. Everything a
credit repair clinic can do for you legally, you can do for
yourself at little or no cost.
Just because you have a poor credit report doesn’t mean you
won’t be able to get credit. Not all creditors look at your
credit history the same way – they have their set their own
credit-granting standards. 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 workable 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. Most credit counselors offer services through local
offices, the Internet, or on the telephone. If possible, find an
organization that offers in-person counseling. Many
universities, military bases, credit unions, housing
authorities, and branches of the U.S. Cooperative Extension
Service operate nonprofit credit counseling programs. Your
financial institution, local consumer protection agency, and
friends and family also may be good sources of information and
referrals.
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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
state-by-state list of government-approved organizations at
www.usdoj.gov/ust. That is the website of the U.S. Trustee
Program, the organization within the U.S. 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
personalized plan to solve your money problems. An initial
counseling session typically lasts an hour, with an offer of
follow-up sessions.
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The Credit Repair Organizations Act
(CROA) is a federal law which governs how credit repair
companies may do business, and prohibits certain practices.
Congress passed this law with the understanding that consumers
who have had credit problems may look for help from credit
repair agencies which offer to improve their credit standing.
Understanding what a credit repair organization may legally do
for you will help you weed out those companies who make promises
they can’t keep, and who will disappear with your hard earned
cash.
The purpose of the CROA is to ensure that consumers are given
the information they need to make an informed decision regarding
the purchase of credit repair services; and to protect the
public from unfair or deceptive advertising and business
practices by credit repair agencies.
The CROA prohibits credit repair
agencies from
• Making any statement, or advising a consumer to make any
statement, about a consumer’s credit standing or credit
worthiness which is untrue or misleading to any creditor,
potential creditor, or consumer reporting agency.
• Advising a consumer to create a new taxpayer identification
number for the purposes of creating a new credit identity. This
is also referred to as file segregation.
• Making or use any misleading representation of what services
the credit repair agency can and will provide, including a
promise to remove accurate negative items from a consumer credit
report.
• Engaging in any act that results in fraud, or the deception of
any person, in connection with the offer or sale of credit
repair services
• Requesting payment or a deposit in advance of services being
performed.
• In addition to specifying the things a credit repair agency
cannot do, the CROA also requires that credit repair agencies:
• Provide their potential clients with a written explanation of
the rights afforded by the CROA before a contract is signed,
including the consumer's right to contact the credit bureaus
himself.
• Provide a written contract which sets forth the services to be
performed, any guarantees, and all payment arrangements.
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• Provide a copy of the contract to
the consumer.
• Provide a three day “cooling off” period before the contract
takes effects and services begin to be rendered by the credit
repair agency.
In addition to the above, a credit repair agency can not ask a
consumer to waive any of their rights under the CROA; if a
consumer does waive his or her rights under the CROA, the waiver
is not enforceable by the credit repair agency in court.
If you believe your rights under the CROA have been violated,
you have the right to sue the credit repair agency in court
within 5 years of the date of the violation. You can also report
the agency to the Federal Trade Commission which keeps tracks of
such complaints, and enforces the laws against agencies who
continually violate the laws.
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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. You’re also entitled to
one free report a year if you’re unemployed and plan to look for
a job within 60 days.
• The three nationwide consumer reporting companies — Equifax,
Experian, and TransUnion — is required to provide you with a
free copy of your credit report on request once every 12 months.
They have a central website (ftc.gov/credit), a toll-free
telephone number and a mailing address through which you can
order your free annual report.
• You can dispute mistakes or outdated items for free. Under the
FCRA, both the consumer reporting company and the information
provider (that is, the person, company, or organization that
provides information about you to a consumer reporting company)
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.
If you’ve had a problem with a credit repair company, contact
your local consumer affairs office or your state Attorney
General (AGs). Many AGs have toll-free consumer hotlines. Check
the Blue Pages of your telephone directory for the phone number
or check www.naag.org for a list of state Attorneys General.
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Article Contributed By: Sukanya
Banerjee
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