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Fix Your Credit For Free, but at What Cost?

Your right to fix your credit is protected by law under the Fair Credit Reporting Act (FCRA), and other Federal legislation meant to ensure that consumers are treated fairly by creditors and credit bureaus. This is the good news: that it is possible to fix your credit legally -- and do it for free. The question that remains, however, is what will be the actual cost of repairing your own credit? The answer might surprise you.

Cost #1: Time

Most people aren't particularly interested in learning the ins and outs of credit law, but the fact is you could spend hours trying to decipher the laws you'll need to cite when drafting dispute letters. Online templates are available, but how do you know that you've picked a letter that will be effective for your particular situation?

After you've drafted a letter you hope will work, next comes hours of letter writing as you dispute negative items line by line with each of the credit bureaus. Accurate record keeping is essential, so plan to dedicate a good amount of time to sorting, filing and keeping track of correspondence.

You also have to take into consideration the trips you'll have to make to the post office; communication with credit bureaus should be in writing, return receipt requested, which could mean additional hours standing in line waiting to mail your dispute letters. All of this time adds up, and you'd probably rather be doing something else.

Cost #2: Mistakes

If you didn't write an effective dispute letter, you may just find that those negative items on your credit report didn't budge. What do you do next when the letters haven't worked? You'll have to go back to the books and start your legal research and letter writing all over again.

If your letters were written correctly, are you sure that you got the timing right? Timing can be everything in credit repair, and if you dispute too many items at once you could put the credit bureaus on alert. Your file could get extra attention -- and not the good kind. Letters have to be spaced correctly, not too many and not too few, but you might not know what the best timing is to produce the optimal results.

Cost #3: Back to square one... or worse

For some people who are dedicated to doing "home credit repair" and all the work that goes into it, the outcome might be just what they were hoping for -- a better credit score. Then there are the many more who are left scratching their heads after all their hard work because months later they still haven't seen an improvement. This means they have to rethink their strategy and start the process from square one. The final category includes the people who are worse off than when they started -- those who see their credit scores drop as a result of their efforts.

One common mistake that can result in a huge credit setback occurs when someone attempting to repair his or her own credit inadvertently "re-ages" an account. Making a payment on an old debt that was just about to drop off your credit report can "restart the clock," meaning that the statute of limitations resets itself from the date of last activity (your well intentioned payment). This is one way a negative item that actually didn't contribute much to your low score because of its age could become a "new" item with a big impact.

Credit repair is something you can do yourself, but the real question is whether you should do it by yourself. Credit laws are complicated, and if you don't know what you're doing, trying to repair your credit on your own could leave you in an even bigger credit dilemma than when you began.

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