Credit repair is a general term often applied to the controversial practice of improving or rehabilitating one's financial reputation (creditworthiness) among creditors.
To improve a credit rating damaged by poor credit habits, in the long run only one thing will work: changing those habits.
Making arrangements with the creditors to repay them is often one of the steps in improving one's credit habits. Creditors may accept slow payment schedules, as an alternative to writing off the debt. In some cases, creditors may accept a less-than-full repayment (pennies on the dollar). The key here is contact with the creditor and taking action to retire the debt.
At the same time, reviving an old debt that is no longer collectible can actually do additional damage to one's credit reputation. It is best to be aware of the circumstances regarding the debt's collectability, statute of limitations, and legal and illegal collection practices, before contacting a creditor on a very old debt.
In rare cases, bad credit is due solely to erroneous entries being reported in one's credit history, collected and presented in a credit report, though studies have found that up to 46% of individual credit reports contain erroneous entries which may impact one's credit rating. This can readily be handled by taking advantage of the protections provided in law and regulation, primarily the dispute process.
It is possible, for example, that a bad debt of a previous tenant could be associated with a current tenant, merely because of the common address.
A credit repair campaign is most likely to show results if creditworthiness has been damaged due to incorrect or misleading information in a credit report.
In summary, such a credit repair campaign involves obtaining copies of one's credit reports and formally disputing erroneous or misleading information there found.
The process in many countries (including the United States) can be quite complex and time consuming, thus spawning the credit repair industry. Both for-profit and not-for-profit organizations have formed to assist individuals in the credit repair process, always for a fee, though governments have repeatedly increased oversight and regulation of this industry because of predatory practices.
In addition, much self-help information on credit repair has become available, providing the motivated individual the tools and knowledge to proceed with their own credit repair campaign. Just as an organization hired for this purpose, the individual would initiate the credit repair process by first obtaining copies of their credit report, reviewing the credit report for errors, omissions, and misleading information, and requesting corrections to such information by means of a formal dispute.
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To dispute an entry in your credit report because it contains erroneous, misleading, or outdated information, as provided by federal law, simply write a letter to the credit reporting agency. As an example:
I am distressed that you have included the below information in my
credit profile and have failed to maintain reasonable procedures in
your operations to assure maximum possible accuracy in the credit
reports you publish.
Credit reporting laws ensure that bureaus report only 100% accurate
credit information. Every step must be taken to assure the
information reported is completely accurate and correct.
The following information therefore needs to be re-investigated. I
respectfully request to be provided proof of this alleged item,
specifically the contract, note or other instrument bearing my
signature. Failing that, the item must be deleted from the report
as soon as possible:
CREDITOR AGENCY, acct. 123-34567-ABC
The listed item is completely inaccurate and incomplete, and is a
very serious error in reporting. Please delete this misleading
information, and supply a corrected credit profile to all creditors
who have received a copy within the last 6 months, or the last 2
years for employment purposes.
Additionally, please provide the name, address, and telephone number
of each credit grantor or other subscriber.
Under federal law, you have 30 days to complete your re-
investigation. Be advised that the description of the procedure used
to determine the accuracy and completeness of the information is
hereby requested as well, to be provided within 15 days of the
completion of your re-investigation.
Sincerely,
your signature
Your Name
SSN# 123-45-6789
Many companies offer fraudulent schemes for personal credit repair, offering to wipe out legitimate records and give a person a "clean slate". In almost all cases, these are either fraudulent scams or schemes which may cause a person attempting to use them to violate more serious laws. Such schemes are primarily identified by unrealistic promises, including the infamous "new credit file" scam. Legitimate approaches which may correct erroneous, misleading, or outdated entries on a credit file, negotiate with creditors, and teach better debt habits, take months if not years to accomplish significant results.
Dispute
Your Name
123 Your Street Address
Your City, ST 01234
Big Credit Bureau
Their Street Address
Some City, ST 56789
2/10/1999
Dear Credit Bureau,
This letter is a formal complaint that you are reporting inaccurate
and incomplete credit information.
Fraud
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