This is part 5 of a 5 part series
Part 1 – Credit Reporting Agencies
Part 2 – What’s in Your Credit History?
Part 3 – Correcting Credit Report Errors
Part 4 – Rebuilding Your Credit
Part 5 – Quick Fix Methods & Other Tales From the Crypt
Quick Fix Methods & Other Tales From the Crypt
IF IT WALKS LIKE A DUCK
It’s hard to know where to begin this section. Perhaps with the most organized high-profile scam out there. Translate that “credit repair companies.” The only bigger scam than investing in property from Castle Grande in Arkansas would have to be credit repair companies.
Credit repair companies are businesses that charge exorbitant amounts of money to “clean up” a consumer’s credit record. Most charge fees ranging from $50 to as much as $2000. These companies claim they can erase bad credit and even make bankruptcies disappear from a credit record. Despite their claims, they cannot do anything you can’t do yourself for little or no cost under the terms of the FCRA. As we said before, that law gives you the right to have inaccurate or out-dated information deleted from your credit records as well as the right to have inaccuracies corrected. The FCRA says that most negative information in your credit record is legally reportable for up to ten years, although most credit bureaus voluntarily drop it after 7. Credit reporting companies do not have the authority to change the law for their clients.
These companies usually advertise impossible extravagant promises such as:
- Wipe out bankruptcies and other negative information, no matter what your credit history is.
- Little-known loopholes in the FCRA to rid your credit record of negative information.
- They are affiliated with the federal government.
File segregation, a technique used to create a new, problem free credit identity. This is flat out illegal. It is a federal crime to make false statement on a credit or loan application. It is also a federal crime to misrepresent your Social Security Number (SSN) and to obtain an employer identification number (FEIN) from the IRS under false pretenses.
Also if you use the mail or telephone to apply for credit and provide false information, you put yourself at risk of being accused of mail or wire fraud. In addition, in certain states ”file segregation” might constitute civil fraud.
The Use of Loopholes
The FCRA includes a section called “Procedure in Case of Disputed Accuracy.” Credit repair scams abuse the provision of the FCRA by inundating credit reporting agencies with numerous and repeated requests to delete negative information in a consumer’s record. The strategy is to overwhelm a reporting agency with so many requests that it cannot possibly verify all of them within a “reasonable period of time” hoping they will have to delete the info it was unable to verify. The credit reporting companies are now very wise to this tactic and exercise their right under the FCRA to dismiss the claims as frivolous.
Quick Fix Methods
Another popular scam used by these con artists is to create a new problem free credit identity for you. Their tactic here is to trick the credit bureau’s computer by the method of file segregation or skin shedding. This is usually done by the illegal process of getting a new FEIN from the IRS and using it rather than their SSN whenever they apply for credit.
Another quick fix technique is to send a check for partial payment of an account and to write on the check that in cashing it the creditor agrees to cease all collection activity and delete negative information related to the account from the consumer’s credit file. However creditors are not obligated to honor such terms of payment.
Quick fix repair methods are not recommended first and foremost because they are morally questionable and in some cases they are also illegal.
In conclusion, let me say that a good credit report is worth all of the work aggravation and diligence that is required to get it and maintain it. It can help open doors of employment, aid in acquiring insurance, come through in times of economic hardship and generally make life a lot more pleasant. Used with intelligent and responsibility it can even reflect on the image of a person that personifies respectability, a deserved respectability. Don’t sell it or yourself short by being tempted by any of the sirens of quick fix. They will only lead to the sharp rocks of disappointment.