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Credit repair
reality check
By: Dorothy Rosen
It
finally happened. You're out of work, and your wife needs surgery.
You don't have health insurance, money for next month's rent or
money to pay the minimum balances on your overloaded credit cards.
You've finally hit bottom.
When life deals you a lousy
hand, what do you do? Maybe you pound the pavement until you find
a job that lets you go after those debts like a barracuda after
bait fish. Maybe you go to consumer credit counseling and slowly
but surely pay down the loan balances. Maybe you file for bankruptcy.
But there are no maybes about
this: You will end up with a nasty credit report that dangles like
an albatross around your neck every time you turn your head. You
apply for a mortgage and you’re turned down. You try to get
a credit card or a lower interest rate and you’re turned down again. You
look like a deadbeat on paper, and you know you're not.
If only you could get a new
identity or find a big eraser.
The big eraser
Congratulations! You're a perfect candidate for the pitchman
who will offer to help you fix your credit report. He may even call
it a credit repair kit.
Whatever it's called, the pitchman
knows he'll catch your attention with the promise of a big eraser
to rid your credit report of negative marks, so he casts this sort
of bait:
| The bait |
| Why let charge-offs,
judgments, repossessions, etc. be on your credit report when
there are new laws in the Fair Credit Reporting Act? |
| You don't have
to live with bad credit! |
| Have you filed
a bankruptcy, lost a home or had a vehicle repossessed? |
| Is there information
on your credit report that is damaging to you as a credit consumer,
making it difficult if not impossible to gain new positive credit? |
| Now you have
the power to correct your credit. |
It's pretty
tempting, isn't it? The pitch sounded good, so bankrate.com slapped
down its 50 bucks and downloaded the repair kit. Look at the claims
vs. the disclaimer and introduction that came with the material
we ordered:
| Advertisement |
Disclaimer
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| 70% of all
credit files contain errors. |
There's a
48% chance of having a questionable item on your credit report. |
| Produced
by a top credit attorney who charges hundreds, even thousands
of dollars to perform these services. |
Not intended
to be a substitute for services of professional, legal, accounting
or other specialized help. |
| Any and all
information contained on the credit profile is subject to
removal under the sub-sections of the federally mandated credit
reporting laws. |
Disputing
accurate credit information would place the individual at
risk of violating federal and/or state laws. |
| A simple
and effective system for removing items such as bankruptcy,
tax liens, repossessions, foreclosures, charged-off accounts,
collection accounts and most importantly, erroneous information. |
This system
is intended for use only in disputing inaccurate credit information
and expressly should not be used to remove accurate credit
information. |
New
identity crisis
If
you're trying to escape the shadow of your past credit mistakes,
some pitchmen may even offer to help you establish a new identity
for a fee -- paid up front, of course.
Here are some
of the claims that a pitchman might toss you and how they measure
up to reality:
| The
pitch |
What
it means |
Reality
check |
| You can have
a new social security number and a brand new identity. |
You can file
a Form SS-4 with the Internal Revenue Service and get a new
9-digit identification number called a federal employer identification
number (FEIN). |
It is a federal
crime to get a FEIN under false pretenses. |
| There is
no law against having two identities. |
It's legal
if you have two separate entities -- yourself (your
social security number) and your business (your FEIN). |
Using two
identification numbers to identify one entity -- that is you
-- is called "file segregation" and is illegal. |
| This plan
uses legal government forms. |
The government
form is the Form SS-4 mentioned above. |
Misrepresenting
yourself on the SS-4 is fraudulent. Think wire fraud, mail
fraud and civil fraud. |
| The seller
of this information will not be held legally responsible for
how the purchaser might choose to use it. |
It is illegal
to use the seller's information to establish a new identity. |
You could
go to jail. |
How
to repair mistakes on your credit report
There's
no magic eraser that can get black marks off your credit report
when you're guilty as charged.
If, however,
you're not guilty and the black mark is a mistake, the Fair Credit
Reporting Act says the reporting company has to take it off your
credit report. If there's a dispute over the item and the reporting
agency refuses to remove it, it has to let you include your side
of the story on the report. What the program above is actually selling
is help in the "often tedious process" of challenging errors on
your credit report.
The process
is tedious all right, with or without a $50 program. There is plenty
of free help on the Web if you need to correct errors on your credit
report.
The Federal
Trade Commission's March 1999 Fair Credit Reporting article provides
answers in plain English to frequently-asked questions about consumer
reports and consumer reporting agencies.
How to live
with a bad credit report
What if the black marks are no mistake? How do you live with
a blemished credit report?
It's a temporary
thing, like a broken leg, and you do whatever you can to make it
better as quickly as possible. Your credit history may whisper "bad
risk" to a potential lender, but your current actions will eventually
reduce that whisper to a whimper.
Live within
your means, pay your bills early, start saving and keep trying to
find lower interest rates for your credit card debt (real lower
rates, not teaser rates). Don't count on winning the lottery, and
don't expect to find a viable way to borrow yourself out of debt.
Do the right
thing one day at a time, and before you know it you'll be handing
that albatross right back to the Ancient Mariner.
Editor's
note: Samuel Coleridge's poem, The Rime of the Ancient Mariner,
deals with the belief that killing an albatross brings bad luck.
When a sailor kills one and his ship runs into trouble, his shipmates
make him wear the dead bird around his neck. We're not sure how
it affected his ability to get a loan.
Doroty Rosen
has a master's degree in finance, with a specialization in accounting,
from the Kellogg Graduate School at Northwestern University in Evanston,
Ill. Rosen has more than 15 years of experience in the financial
arena, serving in Illinois and Florida as a certified public accountant,
financial consultant, expert witness and educator. She is owner
of Dorothy Rosen, CPA, a public accounting firm that serves individuals
and small businesses.
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