January 05, 2015
Credit Repair
Dear Consumer Ed:
I’ve noticed a number of credit repair signs on the side of the road on my drive home. Is there a new law that will help me repair my credit?
Consumer Ed says:
With very few exceptions, Georgia law prohibits people or entities from claiming they can improve your credit history or credit report, or even to offer assistance in doing so. First, you should understand that these companies cannot remove negative information from your report if it’s accurate. Further, they almost never deliver on the claims they make. There is nothing they can do that you can’t do for yourself, at far less cost.
Before turning to a person or company that charges for such services, anyone having difficulties with their credit (due to high debt, unpaid debt, etc.) should speak with their creditor(s) directly to work out an arrangement that will allow them to pay back the debt, while easing the burden on their household. Many creditors will negotiate lower interest rates, or agree to alternative payment plans, to assist you in making the required payments.
If you need more help, there are some organizations in Georgia that can help you gain control over your debt. Since 2003, Georgia has permitted the practice of debt adjustment under a statute offering significant safeguards to debtors. Debt adjustment includes budget counseling, debt management, and debt pooling to assist in managing your debt. Under our current law, these organizations are highly regulated and must comply with strict rules set by the Legislature. Fees for these services cannot exceed 7.5 percent of the monthly amount to be paid to the creditors, and the service provider must begin to distribute payments to creditors within 30 days.
Once your debt is under control, there are some simple things you can do to improve your credit score on your own. First, check your credit reports for false entries or other items you may not know of. Occasionally, credit reports will contain reporting errors or even evidence of fraudulent activity. Each credit reporting agency is required to offer you one free credit report each year. Residents of Georgia, however, are also entitled to two free credit reports each year. You can get a free report from each of the three credit reporting agencies by going to www.annualcreditreport.com. Please note that because of the financial impact of the COVID-19 pandemic, the three credit reporting agencies are now offering free weekly credit reports through December 31, 2022. If you discover any errors in the report, contact the agency to dispute the entry and have it removed.
Second, pay your bills on time. You may have existing delinquencies on your report, but paying future bills on time is crucial to improving your score.
Third, minimize your debt on credit cards and other loans. When determining your score, credit companies factor in how much credit you currently have in relation to the amount you are approved to borrow. Keeping your balances low will improve this ratio and, ultimately, your score.
Fourth, don’t open up new lines of credit unless it’s absolutely necessary. Each time a company checks your credit, or a credit card is opened in your name, it affects your credit score. While having one or two credit cards with minimal balances could show a responsible use of credit, opening new cards and/or having numerous inquiries will actually lower your score.
The final factor in improving your credit score is simply time. Delinquencies stay on your credit report for seven years and will lower your score until they’re removed. It may seem like an impossible task to improve your credit when you’ve had some negative credit history, but those who offer a quick fix are not the solution. These companies cannot deliver the fast results they promise. If instead you take the simple steps outlined above, you’ll see your rating increase with time.