Y

ou see the advertisements in newspapers, on

TV, and on the Internet. You hear them on the

radio. You get fliers in the mail. You

may even get calls from telemarketers

offering credit repair services. They all

make the same claims:



“Credit problems? No problem!”



“We can erase your bad credit

— 100% guaranteed.”



“Create a new credit identity

— legally.”



“We can remove bankruptcies, judgments, liens,

and bad loans from your credit file forever!”

Do yourself a favor and save some money,

too. Don’t believe these statements. Only time, a

conscious effort, and a personal debt repayment plan

will improve your credit report.

This brochure explains how you can improve

your creditworthiness and gives legitimate resources

for low or no-cost help.

The Scam

Everyday, companies nationwide appeal to

consumers with poor credit histories. They promise,

for a fee, to clean up your credit report so you can

get a car loan, a home mortgage, insurance, or even

a job. The truth is, they can’t deliver. After you pay

them hundreds or thousands of dollars in fees, these

companies do nothing to improve

your credit report; most simply vanish

with your money.

The Warning Signs

If you decide to respond to a credit

repair offer, look for these tell-tale

signs of a scam:



companies that want you to pay for credit repair

services before they provide any services.



companies that do not tell you your legal rights

and what you can do for yourself for free.



companies that recommend that you not contact

a credit reporting company directly.



companies that suggest that you try to invent

a “new” credit identity — and then, a new

credit report — by applying for an Employer

Identification Number to use instead of your

Social Security number.



companies that advise you to dispute all

information in your credit report or take any

action that seems illegal, like creating a new

credit identity. If you follow illegal advice

and commit fraud, you may be subject to

prosecution.

December 2005

FTC Facts

For Consumers

Federal Trade Commission

For The Consumer

1-877-ftc-help

You could be charged and prosecuted for mail

or wire fraud if you use the mail or telephone to

apply for credit and provide false information. It’s a

federal crime to lie on a loan or credit application,

to misrepresent your Social Security number, and to

obtain an Employer Identification Number from the

Internal Revenue Service under false pretenses.

Under the Credit Repair

Organizations Act, credit repair

companies cannot require you to

pay until they have completed

the services they have promised.

The Truth

No one can legally remove accurate and timely

negative information from a credit report. The law

allows you to ask for an investigation of information

in your file that you dispute as inaccurate or

incomplete. There is no charge for this. Everything a

credit repair clinic can do for you legally, you can do

for yourself at little or no cost. According to the Fair

Credit Reporting Act (FCRA):



You’re entitled to a free report if a company

takes adverse action against you, like denying

your application for credit, insurance, or

employment, and you ask for your report

within 60 days of receiving notice of the action.

The notice will give you the name, address,

and phone number of the consumer reporting

company. You’re also entitled to one free report

a year if you’re unemployed and plan to look

for a job within 60 days; if you’re on welfare;

or if your report is inaccurate because of fraud,

including identity theft.



Each of the nationwide consumer reporting

companies — Equifax, Experian, and

TransUnion — is required to provide you with a

free copy of your credit report, at your request,

once every 12 months.

The three companies have set up a central

website, a toll-free telephone number, and a

mailing address through which you can order

your free annual report. To order, click on

annualcreditreport.com, call 1-877-322-8228,

or complete the Annual Credit Report Request

Form and mail it to: Annual Credit Report

Request Service, P.O. Box

105281, Atlanta, GA 30348-

5281. You can print the form

from ftc.gov/credit. Do not

contact the three nationwide

consumer reporting companies

individually. They are providing

free annual credit reports only through

annualcreditreport.com, 1-877-322-8228, and

Annual Credit Report Request Service, P.O.

Box 105281, Atlanta, GA 30348-5281. You

may order your reports from each of the three

nationwide consumer reporting companies at the

same time, or you can order your report from

each of the companies one at a time. For more

information, see Your Access to Free Credit Reports

at ftc.gov/credit.

Otherwise, a consumer reporting company may

charge you up to $9.50 for another copy of your

report within a 12-month period.



You can dispute mistakes or outdated items

for free. Under the FCRA, both the consumer

reporting company and the information provider

(that is, the person, company, or organization

that provides information about you to a

consumer reporting company) are responsible

for correcting inaccurate or incomplete

information in your report. To take advantage

of all your rights under this law, contact

the consumer reporting company and the

information provider.

FTC Facts

For Consumers

2

Tell the consumer reporting company, in writing,

what information you think is inaccurate. Include

copies (NOT originals) of documents that support

your position. In addition to providing your

complete name and address, your letter should

clearly identify each item in your report you dispute,

state the facts and explain why you dispute the

information, and request that it be removed or

corrected. You may want to enclose a copy of your

report with the items in question circled. Your

letter may look something like the one on page 6.

Send your letter by certified mail, “return receipt

requested,” so you can document what the consumer

reporting company received. Keep copies of your

dispute letter and enclosures.

Consumer reporting companies must investigate

the items in question — usually within 30 days —

unless they consider your dispute frivolous. They also

must forward all the relevant data you provide about

the inaccuracy to the organization that provided

the information. After the information provider

receives notice of a dispute from the consumer

reporting company, it must investigate, review

the relevant information, and report the results

back to the consumer reporting company. If the

information provider finds the disputed information

is inaccurate, it must notify all three nationwide

consumer reporting companies so they can correct

the information in your file.

When the investigation is complete, the

consumer reporting company must give you the

results in writing and a free copy of your report if

the dispute results in a change. If an item is changed

or deleted, the consumer reporting company cannot

put the disputed information back in your file unless

the information provider verifies that it is accurate

and complete. The consumer reporting company

also must send you written notice that includes

the name, address, and phone number of the

information provider.

If you request, the consumer reporting company

must send notices of any correction to anyone who

received your report in the past six months. You can

have a corrected copy of your report sent to anyone

who received a copy during the past two years for

employment purposes.

If an investigation doesn’t resolve your dispute

with the consumer reporting company, you can

ask that a statement of the dispute be included in

your file and in future reports. You also can ask

the consumer reporting company to provide your

statement to anyone who received a copy of your

report in the recent past. You can expect to pay a fee

for this service.

Tell the creditor or other information provider, in

writing, that you dispute an item. Be sure to include

copies (NOT originals) of documents that support

your position. Many providers specify an address

for disputes. If the provider reports the item to a

consumer reporting company, it must include a

notice of your dispute. And if you are correct – that

is, if the information is found to be inaccurate – the

information provider may not report it again.

For more information, see How to Dispute Credit

Report Errors at ftc.gov/credit.

Reporting Accurate

Negative Information

When negative information in your report is

accurate, only the passage of time can assure its

removal. A consumer reporting company can

report most accurate negative information for seven

years and bankruptcy information for 10 years.

Information about an unpaid judgment against you

can be reported for seven years or until the statute of

FTC Facts

For Consumers

3

limitations runs out, whichever is longer. There is no

time limit on reporting: information about criminal

convictions; information reported in response to

your application for a job that pays more than

$75,000 a year; and information reported because

you’ve applied for more than $150,000 worth of

credit or life insurance. There is a standard method

for calculating the seven-year reporting period.

Generally, the period runs from the date that the

event took place.

For more information, see Building a Better

Credit Report at ftc.gov/credit.

The Credit Repair

Organizations

Act

By law, credit repair organizations

must give you a copy of the

“Consumer Credit File Rights

Under State and Federal Law”

before you sign a contract. They

also must give you a written

contract that spells out your

rights and obligations. Read

these documents before you sign anything. The law

contains specific protections for you. For example, a

credit repair company cannot:



make false claims about their services



charge you until they have completed the

promised services



perform any services until they have your

signature on a written contract and have

completed a three-day waiting period. During

this time, you can cancel the contract without

paying any fees

Your contract must specify:



the payment terms for services, including their

total cost



a detailed description of the services to be

performed



how long it will take to achieve the results



any guarantees they offer



the company’s name and business address

Have You Been Victimized?

Many states have laws regulating credit repair

companies. State law enforcement officials may be

helpful if you’ve lost money to credit repair scams.

If you’ve had a problem with a credit repair

company, don’t be embarrassed to report it. While

you may fear that contacting the government will

only make your problems worse, remember that

laws are in place to protect you.

Contact your local consumer

affairs office or your state Attorney

General (AGs). Many AGs have

toll-free consumer hotlines. Check

the Blue Pages of your telephone

directory for the phone number

or check www.naag.org for a list

of state Attorneys General.

Need Help? Don’t Despair

Just because you have a poor credit report doesn’t

mean you won’t be able to get credit. Creditors set

their own credit-granting standards and not all of

them look at your credit history the same way. Some

may look only at more recent years to evaluate you

for credit, and they may grant credit if your bill-

paying history has improved. It may be worthwhile

to contact creditors informally to discuss their credit

standards.

If you’re not disciplined enough to create

a workable budget and stick to it, work out a

repayment plan with your creditors, or keep track

of mounting bills, consider contacting a credit

counseling organization. Many credit counseling

FTC Facts

For Consumers

4

organizations are nonprofit and work with you

to solve your financial problems. But not all are

reputable. For example, just because an organization

says it’s “nonprofit,” there’s no guarantee that its

services are free, affordable, or even legitimate. In

fact, some credit counseling organizations charge

high fees, or hide their fees by pressuring consumers

to make “voluntary” contributions that only cause

more debt.

Most credit counselors offer services through

local offices, the Internet, or on the telephone. If

possible, find an organization that offers in-person

counseling. Many universities, military bases,

credit unions, housing authorities, and branches

of the U.S. Cooperative Extension Service operate

nonprofit credit counseling programs. Your financial

institution, local consumer protection agency, and

friends and family also may be good sources of

information and referrals.

If you are considering filing for bankruptcy,

you should know about one major change to the

bankruptcy laws: As of October 17, 2005, you must

get credit counseling from a government-approved

organization within six months before you file for

bankruptcy relief. You can find a state-by-state list of

government-approved organizations at

www.usdoj.gov/ust. That is the website of the U.S.

Trustee Program, the organization within the U.S.

Department of Justice that supervises bankruptcy

cases and trustees.

Reputable credit counseling organizations can

advise you on managing your money and debts, help

you develop a budget, and offer free educational

materials and workshops. Their counselors are

certified and trained in the areas of consumer credit,

money and debt management, and budgeting.

Counselors discuss your entire financial situation

with you, and help you develop a personalized plan

to solve your money problems. An initial counseling

session typically lasts an hour, with an offer of

follow-up sessions.

For more information, see Knee Deep in Debt

and Fiscal Fitness: Choosing a Credit Counselor at

ftc.gov/credit.

Do-It-Yourself Check-Up

Even if you don’t have a poor credit history, some

financial advisors and consumer advocates suggest

you review your credit report periodically



because the information it contains affects

whether you can get a loan or insurance — and

how much you will have to pay for it.



to make sure the information is accurate,

complete, and up-to-date before you apply for a

loan for a major purchase like a house or car, buy

insurance, or apply for a job.



to help guard against identity theft. That’s when

someone uses your personal information — like

your name, your Social Security number, or your

credit card number — to commit fraud. Identity

thieves may use your information to open a new

credit card account in your name. Then, when

they don’t pay the bills, the delinquent account

is reported on your credit report. Inaccurate

information like that could affect your ability to

get credit, insurance, or even a job.

The FTC works for the consumer to prevent

fraudulent, deceptive, and unfair business practices

in the marketplace and to provide information to

help consumers spot, stop, and avoid them. To file

a complaint or to get free information on consumer

issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP

(1-877-382-4357); TTY: 1-866-653-4261. The

FTC enters Internet, telemarketing, identity theft,

and other fraud-related complaints into Consumer

Sentinel, a secure, online database available to

hundreds of civil and criminal law enforcement

agencies in the U.S. and abroad.

FTC Facts

For Consumers

5

Sample Dispute Letter

Date

Your Name

Your Address

Your City, State, Zip Code

Complaint Department

Name of Company

Address

City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are

encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and

identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete)

because (describe what is inaccurate or incomplete and why). I am requesting that the item

be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed

documentation, such as payment records, court documents) supporting my position. Please

investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as

possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

For The Consumer Federal Trade Commission

www.ftc.gov 1-877-ftc-help

FTC Facts

For Consumers

6