Credit 101

The Rules of Credit Repair

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There are no shortcuts to building great credit: Everyone starts with nothing, and if your credit score tumbles at some point, it takes time, patience and planning to recover.

That doesn’t mean you have to figure it out by yourself, though you certainly can. If you have poor credit, want to improve it and don’t know the best way to proceed, you can enlist the help of a credit repair company to assist you on your way to a better credit standing. Before you seek help from a credit repair company, however, there are several important things to consider:

1. Know What to Expect

Credit repair companies are there to help you improve your credit score — anything they can do, you can do for yourself. These companies essentially do the legwork for you in asking credit reporting agencies to investigate potentially inaccurate information on your credit reports, but you can probably take care of the disputing process on your own.

It’s more important that you know what credit repair companies cannot do: They cannot have accurate information removed from your credit reports, even if it’s negative. Only time can make those blemishes fade. The Federal Trade Commission oversees these companies through the Credit Repair Organization Act, which makes it illegal for credit repair companies to lie about what they can do for you or charge you before they’ve completed their services.

2. Understand Your Rights

If you decide to hire a credit repair company, get everything in writing. The written contract should outline your legal rights and details of the services the company will provide. You can cancel the services within three days without charge, and the company must tell you how long it should take to get results and how much it will cost at the end. Any guarantees must also be in writing.

If the company fails to follow through on its promises, you can sue it for your losses, seek punitive damages for its violation of the law or join a class-action lawsuit against the company.

3. Accept the Challenges Ahead

Paying someone to help you improve your credit doesn’t necessarily give you an advantage over someone who goes the DIY route. You can’t buy your way to a better credit score. Negative information (unless it’s inaccurate, in which case you should dispute it) will remain on your credit report for several years, and it’s up to you to work on establishing a more recent, positive credit history. As negative trade lines age, they’ll have less of an impact on your credit score.

If you’re looking for tips on how to improve your credit score, there are a bunch of tools available with a free account that assess your individual credit situation and identify goals you can set to raise your score in the future. There may be no shortcuts to better credit, but having a plan will get you there faster than no plan at all.

More on Credit Reports and Credit Scores:

Image: Tom Schmucker

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  • Credit Experts

    Yes, he does. You may also want to consider some other (less costly) ways to help boost his scores so that he won’t need a co-signer next time. This post has some ideas:
    How to Give Your Kid a Good Credit Score

  • Gerri Detweiler

    No it doesn’t sound like it is legal. Collection accounts may only be reported for seven years plus 180 days from the date you first fell behind with the original creditor and collection agencies are supposed to report that original date of delinquency. You can dispute this with the credit reporting agency that is reporting it if it is indeed too old.

    Another thought: Have you talked with a consumer law attorney? You may be able to sue the collection agency at no cost (they would have to pay your attorney’s fees if they are breaking federal law) and may be entitled to damages. You can find one at the National Association of Consumer Advocates. Another option is to file a complaint with the Consumer Financial Protection Bureau.

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