Free Credit Repair Advice

Companies sell credit repair advice and services, according to the Federal Trade Commission (FTC), but credit cleaning is free and can easily be done by consumers without professional assistance. Many companies make false or exaggerated promises, but in reality the FTC has free credit repair advice based on the Fair Credit Reporting Act (FCRA), and credit reporting companies also have tips on the process.

Definition

• Credit repair is a broad term that generally refers to eliminating negative items on credit reports. TransUnion, Experian and Equifax are the main three nationwide reporting agencies. The Federal Reserve Bank of San Francisco explains that they list financial information on consumers, including whether payments are made on time, credit limits and balances and adverse actions like court judgments, charge-offs, repossessions, bankruptcies and foreclosures. A person's credit score goes down with every negative item. Removing things through credit repair brings the score up.

Time Frame

• Credit repairs itself over time because most harmful entries disappear from a person's report after a designated time frame. Bankruptcies are erased after 10 years, according to the FTC, while other items like payment delinquencies, charge-offs, vehicle repossession and even house foreclosures only show up for seven years. There is no charge to the consumer for removal, which happens automatically after the appropriate time span.

Process

• Repair work is often possible on items less than seven to 10 years old. Dayana Yochim of the Motley Fool financial website explains that up to 80 percent of credit reports have mistakes. The FCRA gives consumers free dispute power, and the FTC provides free advice on getting no-cost credit report copies and using the dispute process. Everyone is entitled to one free copy yearly from each agency through annualcreditreport.com to audit for mistakes. The agencies recommend disputing any inaccuracies online through their websites, but the FTC advises consumers to write letters instead. Disputed items are erased if they are not validated by the agencies within 30 days.

Considerations

• Credit repair is also possible through proper financial management. Credit score provider FICO explains that lenders focus most heavily on recent transactions. Catch up past due accounts and pay them promptly going forward. Reduce debt and avoid opening unnecessary new accounts. Over time these steps all contribute to credit repair.

Warning

• Some consumers use credit repair companies for convenience, but the FTC warns that it is difficult to separate fraudulent firms from legitimate ones. Many repairers make impossible claims, saying they can completely eliminate all bad items or create a new credit file. They often demand money up front to do it. The FTC states that payment cannot legally be required until the services are complete and that challenging accurate items on a credit report or making a new file under an Employer Identification Number is illegal and can get a person into trouble.