America is a land of entrepreneurs. People start businesses every day, hoping to achieve their dreams of financial security while enjoying the satisfaction of providing goods and services that people need.

Unfortunately, this means some unethical types start businesses whose only intentions is to swindle people out of their money without providing anything in return. Some of these capitalize especially on people with poor credit, claiming they can fix your damaged credit easily and quickly, when in reality they can do little to help you. Many of these shady operators can even make your credit worse.

Within the credit-repair industry, you’ll find some legitimate companies, who really will work with you to repair your credit and improve your situation so that you can start getting the lowest interest credit cards again. But it can be hard to tell who’s for real and who’s lying to you about their intentions.

Start by examining the claims they make. Is what they’re promising even possible? How do they intend to do it? The worst of these snake-oil salesmen make ridiculous claims: They say they’ll remove every negative mark from your credit report, and that they’ll dramatically improve your credit score within a couple weeks.

Ask yourself: Is that even possible? And if it is, do I need someone else to do it for me, or can I do it myself, for free?

If you have poor credit, you’ve probably been approached by firms who promise to get your credit report all shiny and new in no time at all. But most of the time, you pay hundreds of dollars to these people, and then your credit report winds up looking about the same as it did when you started.

And why is that? Because there are laws regulating what can and cannot be on your credit report, and no amount of wheedling can change that! If there’s a negative item on your report that’s accurate and current, there’s nothing you can do to remove it. That’s just the way it is.

The people who sell “credit repair” are hoping you don’t know that, though. They’re hoping you’ve never read an article like this one, exposing their shady practices. When they say they can get all negative data taken off your credit report, they’re halfway telling the truth. What they do is, they file a dispute against every single bit of negative data on your record, even the ones that are very obviously accurate, fair, and reasonable.

Why do they do this? Well, when an item is disputed, the credit bureau is required to take it off temporarily while it investigates the claim. So for a few weeks, sure enough, your credit report is going to be spotless. It’s during that time that the credit-repair people will say, “Look! We did it! Now pay us, please.” (Assuming they didn’t make you pay in advance.)

But then the bureau will finish its investigations, conclude that most or all of the negative information was accurate and fair, and put it back on your report. You’ve paid all that money, and now you’re back at square one. You’ll try to contact the credit-repair people, but good luck with that. They’re going to become very “busy” and “unavailable” right about now...

Now you may be asking, “Is there nothing I can do if there is bad history on my credit report?” And the answer, unfortunately, is no. If the information is correct and up-to-date, it’s there until seven years have passed. (Seven years is how long negative information stays on your credit report; it’s 10 years for bankruptcies.)

On the other hand, if an item is erroneous or outdated, you are will within your rights to get it fixed. When you lodge a dispute with a credit bureau, they’re required by low to examine it within a month of your claim. What they do is they go to the source of the information – the credit card company you didn’t pay, or the mortgage lender to whom you missed a payment – and they ask that creditor to confirm the data. In some cases, the creditor might discover that the information is a mistake. If they do, they must inform all three credit bureaus of the mistake so that it can be fixed on all the records.

Hopefully this doesn’t sound like too much work on your part, because it really isn’t. There’s no charge for disputing items on your report, and all you really have to do is fill out a dispute form and file it with the bureaus. There is no reason to pay a credit-repair firm for this, especially considering what they do doesn’t usually have any positive effect anyway.

One of the most outrageous lies that these companies tell is that you can just abandon your old credit report and start a new, clean one. They’ll tell you to go to the IRS and apply for an Employer Identification Number, which works the same as a Social Security Number.

They tell you to start using that instead of your SS number, which makes it look like a totally different person – a person with no bad credit on their report! Then, when you fill out credit card applications, the creditor sees only the history associated with this new number, not the old, bad stuff.

There are a couple problems with this method. First, it’s a federal crime to get an Employer Identification Number under false pretenses, and wanting to start a new credit file is certainly false pretenses. Furthermore, if you did it, now you’d have NO credit history, which often raises as many red flags as having bad credit history. You wouldn’t get the best credit cards; you’d get stuck applying for credit cards with high fees – the cards for no credit, rather than the cards for good credit. Not much of an improvement.

A credit-repair company might be able to help you in some instances. You must be careful not to get taken advantage of, though. Insist that you will not pay until you see result, and get all their claims up front in writing. The law is on your side: The Credit Repair Organizations Act makes it clear that you are not obligated to pay any fees until they’ve actually done what they said they would. If they fail – and they often will – you are not obligated to pay them.

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Here are some signs of a disreputable credit-repair company:

• Wanting you to pay in advance.
• Not telling you what your legal rights are and what you can do yourself.
• Discouraging you from contacting the credit bureaus yourself.
• Encouraging you to create a new credit identity.
• Suggesting you dispute ALL the data in your credit report, instead of finding the actual errors.
• Offering any advice that sounds illegal or shady.

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