The Truth about Credit Repair Services

Some services will advise you to apply for an IRS Employer Identification Number (EIN) as if you were a business, and use it instead of your Social Security number to create a new credit identify. Since this new number is not linked to your credit report, you're starting with a clean slate.

Only one problem: This practice is called "file segregation" and it's blatantly illegal. Try it and your next identification number could come courtesy of the Federal prison system.

Watch out, too, for services that promise you a way to "piggyback" on another person's good credit record. Yes, piggybacking is as shady as it sounds and no, it doesn't work either.

The Dolans' Bottom Line: Credit repair services won't fix your credit and they don't deliver on their promises. They can't! There is no legal way to "beat the system" when it comes to bad credit.

In fact, there is nothing they can do that you can't easily do yourself at little or no cost. We strongly urge you to avoid them altogether.

2 Things You Must Know about Credit Repair

However, if you do choose to use a service to check or dispute items on your credit report, here are important facts to remember:

• You are not required to pay a dime until the company has completed the services it has promised. If they ask for pre-payment, find another service.
• Credit repair services are required by law to give you an explanation of your legal rights, a detailed written contract that includes their total cost and a full description of the services to be performed, and three days to cancel.

You can get full details on your legal safeguards at the Federal Trade Commission's Credit Repair Web page.

So there you have it. While you simply can't wipe the slate clean, there are ways you can make the best of the situation. Keep reading here to learn how to get your credit back on track.