Do credit repair letters actually work?

If your credit scores are bad, or not as strong as you’d like them to be, you may be researching ways to try to boost them. An internet search will likely turn up lots of advice about how to write credit repair letters to help you improve your credit.

But do they really work? Let's find out.

What are credit repair letters?

Credit repair letters are designed to take advantage of a provision under federal law, the Fair Credit Reporting Act (FCRA), that allows consumers to dispute items on their credit reports that they believe are inaccurate or incomplete.

The credit reporting agency that receives one of these letters generally must investigate and respond within 30 days. If the disputed information can’t be verified with the source that reported it to the credit bureau in the first place, it must be removed.

Alternatively, information that is verified but not accurate or complete can be updated by a creditor to satisfy the FCRA investigation requirements.

Reporting mistakes on credit reports

Consumers who find mistakes on their credit reports should, by all means, request an investigation.

It’s fastest and easiest to file a dispute online, but some consumers prefer to mail a dispute letter. It creates a paper trail and it may allow more flexibility to describe the problem if your dispute does not fall into the categories available with an online dispute. In addition, some consumer attorneys recommend that avenue to ensure consumers protect their right to sue if the information is not corrected.

But consumers are often also instructed by some websites and some credit repair organizations to dispute negative information even if it’s accurate.

The hope is that the credit bureau will fail to respond in a timely manner and the information will have to be removed. This is a very popular tactic and there are companies that charge hundreds – or thousands – of dollars to help write and send credit repair letters. (Keep in mind that knowingly disputing accurate information violates the Credit Repair Organizations Act.)

A few years ago, I visited the mailroom at one of the three major credit bureaus. There I saw stacks and stacks of dispute letters waiting to be processed. Many of these letters carried the same return address or used the same font on the envelope, making it pretty obvious that they were coming from some type of credit repair service.

Will it work?

Credit bureaus are very efficient at handling the disputes they receive. The process is often highly automated and, in fact, many disputes are investigated and resolved one way or the other within a couple of weeks.

Is it possible that some disputes will fall through the cracks or that the company furnishing the information to the credit bureaus won’t respond? Of course it is.

But because the large majority of information on credit reports comes from major financial institutions, it’s more likely that the credit bureau will get a response from the furnisher and, if the information is correct, it will continue to be reported. So if you are looking for a sure-fire strategy to remove accurate but negative information from your credit reports, you should know it’s something of a gamble.

If you find negative information that is inaccurate or incomplete on your credit reports — or Information that doesn’t belong to you —  you can and should dispute it. If you decide to do that by sending a letter, here are a few tips:

• Be sure to include your full contact information, including your address and your Social Security number. You need to include a copy of a government issued ID and a copy of a bill with your current address on it — phone bills or utility bills work best. The credit reporting agency needs to be able to correctly identify  information in your credit report.
• Keep your dispute short, specific, and to-the-point if at all possible. Someone is going to have to enter your dispute into the credit bureau’s computerized system. Don’t make them guess what you’re trying to dispute.
• Include any information or evidence to support your dispute, if available. For example, you could include a copy of a cancelled check that shows you paid on time.
• You don’t have to quote federal laws because the credit reporting agencies know their responsibilities when it comes to investigating disputes. But it is essential that you clearly explain clearly and concisely what you are disputing and why.  For example, don’t just say information is wrong; state why you believe it’s wrong.

Keep in mind, the FCRA applies to consumer credit reports but not to business credit reports. You can (and should) dispute incorrect or incomplete  items on your business credit reports, but there’s no requirement that the item be removed if the credit bureau doesn’t respond within 30 days.

Should I use credit repair?

There’s nothing a credit repair company can do for you that you can’t do on your own for free.

However, some consumers find themselves overwhelmed or too busy to deal with problems on their credit reports.

That’s especially true for small business owners who need to maintain strong credit but often find themselves putting out a million other fires in their business. if you find yourself procrastinating, you may want to find an affordable credit repair solution to help you cross this item off your to-do list. If you do use a credit repair service, make sure you pay for work that is done and not prior to any services being performed.