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Debt Adviser

Credit-repair firms can't erase bad debt


April 16, 2009

Dear Debt Adviser,

I understand that there are privately owned agencies that will clear your credit report for a flat-rate fee. From what I understand, it takes a few months, but they can re-establish excellent credit ratings for their clients. Are you familiar with them? How does this service work? Is it safe?

-- Eve

Dear Eve,

There is no tooth fairy, no magic cream that can remove fat while you eat all you want, no fountain of youth -- and there is no company that clears a bad credit report for you.

Companies that claim they can "erase" your bad credit have as their sole objective erasing money from your bank account. They are making false claims. Legitimate credit-repair companies are few and far between. They can advise you on actions to take to improve your credit and they can dispute inaccurate or out-of-date items in your credit report -- for a fee. However, you can do the work yourself and save the fees -- hundreds, sometimes thousands of dollars -- that you'd pay to the company.

Keep in mind that accurate information cannot legally be removed from your credit report. What you can do is dispute any information that was put into your report in error or which is in your report past the time the law says it must be removed. To do this, contact the credit bureau that reported it and file a dispute either in writing or online. The credit bureau then has 30 days to get back to you, either with proof that the item is legitimate or that it will be removed.

Don't feel that you are the last gullible lady in the USA who believes in supernatural credit intervention. You are not. Not by a long shot. In fact, the Credit Repair Organizations Act was designed for the large number of people who fall prey to credit-repair scams. It provides consumer protections requiring all credit-repair companies to give you a copy of "Consumer Credit File Rights Under State and Federal Law," a pamphlet that explains your rights in dealing with credit bureaus.

The act also stipulates that a credit-repair company cannot make false claims about their services, such as "erasing" bad credit. They must complete all promised services before you can be charged, must have a signed contract for services and must complete a three-day waiting period before they perform any services. That three-day waiting period allows you to cancel the contract with no obligation once your friends talk you out of it.

One shortcut used by some credit-repair companies to improve your score, known as "piggybacking," is no longer a viable solution because the latest FICO 08 score analytics identify and exclude those accounts. Piggybacking is the practice of paying someone to allow you to be an authorized user on the account of someone who has excellent credit. The authorized user would then benefit from the other unrelated account holder's credit history. Unfortunately, their bad credit also gets reported on your credit report. Like dating a creep, this has more negatives than I have space. But you get the idea.

A legitimate way to improve your credit score by using an authorized user account is being added to a spouse's or parent's account. These accounts will be included in your credit-score calculation and if the account is a positive, will add points to your score.

Additional steps to improve your credit include:

-- Make all payments on time and bring any open accounts current by paying any past-due amounts.

-- Keep your credit-card balances low, below 50 percent of credit limits.

-- Apply for new credit only if you need it. You may have to start with secured credit such as a secured credit card, a card account with cash that becomes the credit line. Or you could try a passbook savings loan, a loan using your savings as collateral.

In time, the positive information will outweigh the negative and your credit score will begin to improve. Just because there is no tooth fairy doesn't mean there isn't a credit fairy. A great site for more tips is It's by the Ad Council and has great information, especially in FAQs and links sections!

Good luck!


Steve Bucci is president of Money Management International Financial Education Foundation. Visit for additional debt advice. If you have a question for Steve, e-mail debtadviser(at) The Debt Adviser is a weekly feature of

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