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 Building a

 Better Credit

Car Loan

Mortgage

Credit Card Accounts

Report

Building a 1 Better Credit Report

I

f you’ve ever applied for a credit card, a personal loan, or insurance, there’s a file about 

you. This file is known as your credit report. It is chock full of information on where you 

live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for 

bankruptcy. Credit reporting companies sell the information in your report to creditors, 

insurers, employers, and other businesses with a legitimate need for it. They use the 

information to evaluate your applications for credit, insurance, employment, or a lease.

Having a good credit report means it will be easier for you to get loans and lower interest 

rates. Lower interest rates usually translate into smaller monthly payments.

Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and 

services that promise to erase accurate negative information in your credit report in exchange 

for a fee. The scam artists who run these ads not only don’t deliver — they can’t deliver. Only 

time, a deliberate effort, and a plan to repay your bills will improve your credit as it’s detailed 

in your credit report.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, has written 

this booklet to help explain how to build a better credit report. It has six sections:

Section 1 explains your rights under the Fair Credit Reporting Act and 

the Fair and Accurate Credit Transactions Act.

Section 2 tells how you can legally improve your credit report.

Section 3 offers tips on dealing with debt.

Section 4 cautions about credit-related scams and how to avoid them.

Section 5 offers information about identity theft.

Section 6 lists resources for additional information.
2
Section 1

3

The Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of

information in the files of the nation’s credit reporting companies. The FTC enforces the 

FCRA with respect to these companies. Recent amendments to the FCRA expand consumer 

rights and place additional requirements on credit reporting companies. Businesses that provide 

information about consumers to credit reporting companies and businesses that use credit 

reports also have new responsibilities under the law.

Here are answers to some of the questions consumers have asked the FTC about consumer 

reports and credit reporting companies.

Q. Do I have a right to know what’s in my report?

A. You have the right to know what’s in your report, but you have to ask for the information. 

The credit reporting company must tell you everything in your report, and give you a list 

of everyone who has requested your report within the past year — or the past two years if 

the requests were related to employment.

Q. What type of information do credit reporting companies collect and sell?

A. Credit reporting companies collect and sell four basic types of information:

 Identification and employment information: Your name, birth date, Social Security 

number, employer, and spouse’s name are noted routinely. The credit reporting 

company also may provide information about your employment history, home 

ownership, income, and previous address, if a creditor asks.

 Payment history: Your accounts with different 

creditors are listed, showing how much credit has been 

extended and whether you’ve paid on time. Related 

events, such as the referral of an overdue account to a 

collection agency, also may be noted.

 Inquiries: Credit reporting companies must maintain a 

record of all creditors who have asked for your credit 

history within the past year, and a record of individuals 

or businesses that have asked for your credit history 

for employment purposes for the past two years.

 Public record information: Events that are a matter of public record, such as 

bankruptcies, foreclosures, or tax liens, may appear in your report.

Q. Is there a charge for my report?

A. Under the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act 

(FACT Act), each of the nationwide credit reporting companies — Equifax, Experian, 

and TransUnion — is required to provide you with a free copy of your credit report once 

every 12 months, if you ask for it.
Section 1

4

Q. How do I order my free report?

A. The three nationwide credit reporting companies are using one website, one toll-free 

telephone number, and one mailing address for consumers to order their free annual 

report. To order, click on annualcreditreport.com, call 1-877-322-8228, or complete the 

Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, 

P.O. Box 105281, Atlanta, GA 30348-5281. The form is on page six; or you can print 

it from ftc.gov/credit. Do not contact the three nationwide credit reporting companies 

individually. You may order your free annual reports from each of the credit reporting 

companies at the same time, or you can order order them one at a time. The law allows 

you to order one free copy from each of the nationwide credit reporting companies every 

12 months.

Q. What information do I have to provide to get my free report?

A. You need to provide your name, address, Social Security number, and date of birth. If 

you have moved in the last two years, you may have to provide your previous address. 

To maintain the security of your file, each nationwide credit reporting company may ask 

you for some information that only you would know, like the amount of your monthly 

mortgage payment. Each company may ask you for different information because the 

information each has in your file may come from different sources.

Still, annualcreditreport.com is the only authorized online source for your free annual 

credit report from the three nationwide credit reporting companies. Neither the website 

nor the companies will call you first to ask for personal information or send you an email 

asking for personal information. If you get a phone call or an email — or see a 

pop-up ad — claiming it’s from annualcreditreport.com (or any of the three nationwide 

credit reporting companies), it’s probably a scam. Don’t reply or click on any link in the 

message. Instead, forward any email that claims to be from annualcreditreport.com (or 

any of the three credit reporting companies) to spam@uce.gov, the FTC’s database of 

deceptive spam. 

Q. Are there other situations where I might be eligible for a free report?

A. Under federal law, you’re entitled to a free report if a company takes adverse action 

against you, such as denying your application for credit, insurance, or employment, and 

you ask for your report within 60 days of receiving notice of the action. The notice will 

give you the name, address, and phone number of the credit reporting company. You’re 

also entitled to one free report a year if you’re unemployed and plan to look for a job 

within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, 

including identity theft. Otherwise, any of the three credit reporting companies may 

charge you up to $10.50 for another copy of your report within a 12-month period.

 To buy a copy of your report, contact:

Equifax

1-800-685-1111

equifax.com

Experian

1-888-397-3742

experian.com

TransUnion

1-800-916-8800

transunion.com
Section 1

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Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, 

New Jersey, and Vermont already have free access to their credit reports.

For more information, see Your Access to Free Credit Reports at ftc.gov/credit.

Credit Scores

Q. What is a credit score, and how does it affect my ability to get credit?

A. Credit scoring is a system creditors use to help determine whether to give you credit, and 

how much to charge you for it.

Information about you and your credit experiences, like your bill-paying history, the 

number and type of accounts you have, late payments, collection actions, outstanding 

debt, and the age of your accounts, is collected from your credit application and your 

credit report. Using a statistical formula, creditors compare this information to the credit 

performance of consumers with similar profiles. A credit scoring system awards points for 

each factor. A total number of points — a credit score — helps predict how creditworthy 

you are; that is, how likely it is that you will repay a loan and make the payments on time. 

Generally, consumers who are good credit risks have higher credit scores.

You can get your credit score from the three nationwide credit reporting companies, but 

you will have to pay a fee for it. Many other companies also offer credit scores for sale 

alone or as part of a package of products.

For more information, see Need Credit or Insurance? Your Credit Score Helps Determine 

What You’ll Pay at ftc.gov/credit.

Your Access to Free

Credit Reports

ftc.gov/credit

Need Credit or Insurance? 

Your Credit Score Helps

Determine What You’ll Pay

ftc.gov/credit
You have the right to get a free copy of your credit file disclosure, commonly called a credit report, once every 12 months, from each of

the nationwide consumer credit reporting companies - Equifax, Experian and TransUnion.

For instant access to your free credit report, visit www.annualcreditreport.com.

For more information on obtaining your free credit report, visit www.annualcreditreport.com or call 877-322-8228.

Use this form if you prefer to write to request your credit report from any, or all, of the nationwide consumer credit reporting companies. The

following information is required to process your request. Omission of any information may delay your request.

If additional information is needed to process your request, the consumer credit

reporting company will contact you by mail.

Your request will be processed within 15 days of receipt and then mailed to you.

Annual Credit Report Request Form

Once complete, fold (do not staple or tape), place into a #10 envelope, affix required postage and mail to:

Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281.

Copyright 2004, Central Source LLC

Equifax

Experian

TransUnion

I want a credit report from (shade

each that you would like to

receive):

Shade here if, for security

reasons, you want your credit

report to include no more than

the last four digits of your

Social Security Number.

Shade Circle Like This >

Not Like This >

Social Security Number:

- -

Date of Birth:

/ /

Month Day Year

First Name M.I.

Last Name JR, SR, III, etc.

Current Mailing Address:

House Number Street Name

City State ZipCode

City State ZipCode

Apartment Number / Private Mailbox For Puerto Rico Only: Print Urbanization Name

House Number Street Name

Previous Mailing Address (complete only if at current mailing address for less than two years):

Fold Here Fold Here

Fold Here Fold Here

Please use a Black or Blue Pen and write your responses in PRINTED CAPITAL LETTERS without touching the sides of the boxes like the examples listed below:

Apartment Number / Private Mailbox For Puerto Rico Only: Print Urbanization Name

31238

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 0 1 2 3 4 5 6 7 8 9
Section 2

7

Improving Your Credit Report

Under the FCRA, both the credit reporting company and the information provider (the person, company, or organization that provides information about you to a credit 

reporting company) are responsible for correcting inaccurate or incomplete information in 

your report. To take advantage of all your rights under the FCRA, contact the credit reporting 

company and the information provider if you see inaccurate or incomplete information.

1. Tell the credit reporting company, in writing, what information you think is inaccurate. 

Include copies (NOT originals) of documents that support your position. In addition to 

providing your complete name and address, your letter should clearly identify each item in 

your report that you dispute, state the facts and explain why you dispute the information, 

and request that the information be deleted or corrected. You may want to enclose a copy 

of your report with the items in question circled. Your letter may look something like the 

one on page 8. Send your letter by certified mail, return receipt requested, so you can 

document what the credit reporting company received. Keep copies of your dispute letter 

and enclosures.

Credit reporting companies must investigate the items in question — usually within 30 days 

— unless they consider your dispute frivolous. They also must forward all the relevant data 

you provide about the inaccuracy to the organization that provided the information. After 

the information provider receives notice of a dispute from the credit reporting company, it 

must investigate, review the relevant information, and report the results back to the credit 

reporting company. If the information provider finds the disputed information is inaccurate, 

it must notify all three nationwide credit reporting companies so they can correct the 

information in your file.

When the investigation is complete, the credit reporting company must give you the written 

results and a free copy of your report if the dispute results in a change. (This free report 

does not count as your annual free report under the FACT Act.) If an item is changed or 

deleted, the credit reporting company cannot put the disputed information back in your 

file unless the information provider verifies that the information is, indeed, accurate and 

complete. The credit reporting company also must send you written notice that includes the 

name, address, and phone number of the information provider.

If you request, the credit reporting company must send notices of any correction to anyone 

who received your report in the past six months. A corrected copy of your report can be 

sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the credit reporting company, you can 

ask that a statement of the dispute be included in your file and in future reports. You also 

can ask the credit reporting company to provide your statement to anyone who received a 

copy of your report in the recent past. Expect to pay a fee for this service.
Section 2

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2. Tell the creditor or other information provider, in writing, that you dispute an item. Be sure 

to include copies (NOT originals) of documents that support your position. Many providers 

specify an address for disputes. If the provider reports the item to a credit reporting 

company, it must include a notice of your dispute. And if you are correct — that is, if the 

information is found to be inaccurate — the information provider may not report it again.

Sample Dispute Letter

Date

Your Name

Your Address

Your City, State, Zip Code

Complaint Department

Name of Company

Address

City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I 

dispute also are circled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors 

or tax court, and identify type of item, such as credit account, judgment, 

etc.) is (inaccurate or incomplete) because (describe what is inaccurate or 

incomplete and why). I am requesting that the item be deleted (or request 

another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any 

enclosed documentation, such as payment records and court documents) 

supporting my position. Please investigate this (these) matter(s) and 

(delete or correct) the disputed item(s) as soon as possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)
Section 2

9

Accurate Negative Information

When negative information in your report is accurate, only the passage of time can assure its 

removal. A credit reporting company can report most accurate negative information for seven 

years and bankruptcy information for 10 years. Information about 

an unpaid judgment against you can be reported for seven years 

or until the statute of limitations runs out, whichever is longer. 

There is no time limit on reporting information about criminal 

convictions; information reported in response to your application 

for a job that pays more than $75,000 a year; and information 

reported because you’ve applied for more than $150,000 worth 

of credit or life insurance. There is a standard method for 

calculating the seven-year reporting period. Generally, the 

period runs from the date that the event took place.

Adding Accounts to Your File

Your credit file may not reflect all your credit accounts. Most national department store 

and all-purpose bank credit card accounts are included in your file, but not all. Some local 

retailers, credit unions, and travel, entertainment, and gasoline card companies are among 

those that usually aren’t included.

If you’ve been told that you were denied credit because of 

an “insufficient credit file” or “no credit file” and you 

have accounts with creditors that don’t appear in your 

credit file, ask the credit reporting companies to add 

this information to future reports. Although they 

are not required to do so, many credit reporting 

companies will add verifiable accounts for 

a fee. However, if these creditors do not 

generally report to the credit reporting 

company, the added items will not be 

updated in your file.
Section 3

10

Dealing with Debt

Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your 

home or your car?

You’re not alone. Many people face financial crises at some time in their lives. Whether the 

crisis is caused by personal or family illness, the loss of a job, or simple overspending, it can 

seem overwhelming. But often, it can be overcome. The fact is that your financial situation 

doesn’t have to go from bad to worse.

If you or someone you know is in financial hot water, consider these options: realistic 

budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. 

How do you know which will work best for you? It depends on your level of debt, your level 

of discipline, and your prospects for the future.

Self-Help

Developing a Budget

The first step toward taking control of your financial situation is to do a realistic assessment 

of how much money you take in and how much money you spend. Start by listing your 

income from all sources. Then, list your “fixed” expenses — those that are the same each 

month — like mortgage payments or rent, car payments, and insurance premiums. Next, list 

the expenses that vary — like entertainment, recreation, and clothing. Writing down all your 

expenses, even those that seem insignificant, is a helpful way to track your spending patterns, 

identify necessary expenses, and prioritize the rest. The goal is to make sure you can make 

ends meet on the basics: housing, food, health care, insurance, and education.

Your public library and bookstores have information about budgeting and money management 

techniques. In addition, computer software programs can be useful tools for developing and 

maintaining a budget, balancing your checkbook, and creating plans to save money and pay 

down your debt.

Contacting Your Creditors

Contact your creditors immediately if you’re having trouble making ends meet. Tell them why 

it’s difficult for you, and try to work out a modified payment plan that reduces your payments 

to a more manageable level. Don’t wait until your accounts have been turned over to a debt 

collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors

The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt 

collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or 

while you’re at work if the collector knows that your employer doesn’t approve of the calls. 
Section 3

11

Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And 

they must honor a written request from you to stop further contact.

Credit Counseling

If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a 

repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting 

a credit counseling organization. Many credit counseling organizations are nonprofit and work 

with you to solve your financial problems. But be aware that just because an organization says 

it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. 

In fact, some credit counseling organizations charge high fees, which may be hidden, or 

pressure consumers to make large “voluntary” contributions that can cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. 

If possible, find an organization that offers in-person counseling. Many universities, military 

bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension 

Service operate nonprofit credit counseling programs. Your financial institution, local 

consumer protection agency, and friends and family also may be good sources of information 

and referrals.

Reputable credit counseling organizations can advise you on managing your money and 

debts, help you develop a budget, and offer free educational materials and workshops. 

Their counselors are certified and trained in the areas of consumer credit, money and debt 

management, and budgeting. Counselors discuss your entire financial situation with you, and 

help you develop a personalized plan to solve your money problems. An initial counseling 

session typically lasts an hour, with an offer of follow-up sessions.

Auto and Home Loans

Your debts can be secured or unsecured. Secured debts usually are tied to an asset, like your 

car for a car loan, or your house for a mortgage. If you stop making payments, lenders can 

repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and 

include most credit card debt, bills for medical care, signature loans, and debts for other types 

of services.

Most automobile financing agreements allow a creditor to repossess your car any time you’re 

in default. No notice is required. If your car is repossessed, you may have to pay the balance 

due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the 

creditor may sell the car. If you see default 

approaching, you may be better off 

selling the car yourself and paying 

off the debt: You’ll avoid the 

added costs of repossession and 

a negative entry on your credit 

report.
Section 3

12

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. 

Most lenders are willing to work with you if they believe you’re acting in good faith and the 

situation is temporary. Some lenders may reduce or suspend your payments for a short time. 

When you resume regular payments, though, you may have to pay an additional amount 

toward the past due total. Other lenders may agree to change the terms of the mortgage by 

extending the repayment period to reduce the monthly debt. Ask whether additional fees would 

be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some 

agencies limit their counseling services to homeowners with FHA mortgages, but many offer 

free help to any homeowner who’s having trouble making mortgage payments. Call the local 

office of the Department of Housing and Urban Development or the housing authority in your 

state, city, or county for help in finding a legitimate housing counseling agency near you.

Debt Consolidation

You may be able to lower your cost of credit by consolidating your debt through a second 

mortgage or a home equity line of credit. Remember that these loans require you to put up 

your home as collateral. If you can’t make the payments — or if your payments are late — you 

could lose your home.

What’s more, the costs of consolidation loans can add up. In addition to interest on the loans, 

you may have to pay “points,” with one point equal to one percent of the amount you borrow. 

Still, these loans may provide certain tax advantages that are not available with other kinds of 

credit.

Bankruptcy

Personal bankruptcy generally is considered the debt management option of last resort because 

the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 

years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes 

get a job. Still, it is a legal procedure that offers a fresh start for people who can’t satisfy their 

debts. People who follow the bankruptcy rules receive a discharge — a court order that says 

they don’t have to repay certain debts.

The consequences of bankruptcy are significant and require careful consideration. Other factors 

to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy 

laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy 

relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady 

income, to keep property, such as a mortgaged house or car, that you might otherwise lose. In 

Chapter 13, the court approves a repayment plan that allows you to use your future income to 

pay off your debts during a three-to-five-year period, rather than surrender any property. After 

you have made all the payments under the plan, you receive a discharge of your debts.
Section 3

13

Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. 

Exempt property may include cars, work-related tools, and basic household furnishings. Some 

of your property may be sold by a court-appointed official — a trustee — or turned over to 

your creditors. The new bankruptcy laws have changed the time period during which you 

can receive a discharge through Chapter 7. You now must wait eight years after receiving a 

discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting 

period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, 

garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions 

that allow you to keep certain assets, although exemption amounts vary by state. Personal 

bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan 

obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 

13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid 

mortgage or security lien on it.

Another major change to the bankruptcy laws involves certain hurdles that you must clear 

before even filing for bankruptcy, no matter what the chapter. You must get credit counseling 

from a government-approved organization within six months before you file for any bankruptcy 

relief. You can find a state-by-state list of government-approved organizations at usdoj.gov/ust. 

That is the website of the U.S. Trustee Program, the organization within the U.S. Department 

of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 

bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your 

income does not exceed a certain amount. The amount varies by state and is publicized by the 

U.S. Trustee Program at usdoj.gov/ust.

For more information, see Before You File for Personal Bankruptcy: Information About Credit 

Counseling and Debtor Education, Knee Deep in Debt, and Fiscal Fitness: Choosing a Credit 

Counselor at ftc.gov/credit.

Before You File for

Personal Bankruptcy

Knee Deep in Debt

Fiscal Fitness: 

Choosing a Credit Counselor

ftc.gov/credit
Section 4

14

Avoiding Scams

Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. Be cautious. Before you do business with 

any company, check it out with your local consumer protection agency or the Better Business 

Bureau in the company’s location.

Ads Promising Debt Relief May Really Be Offering Bankruptcy

Whether your debt dilemma is the result of an illness, unemployment, or overspending, it 

can seem overwhelming. In your effort to get solvent, be on the alert for advertisements that 

offer seemingly quick fixes. And read between the lines when faced with ads in newspapers, 

magazines, or even telephone directories that say:

Consolidate your bills into one monthly payment without borrowing!

STOP credit harassment, foreclosures, repossessions, 

tax levies, and garnishments!

Keep Your Property!

Wipe out your debts! Consolidate your bills! How? 

By using the protection and assistance provided by federal law. 

For once, let the law work for you!

While the ads pitch the promise of debt relief, they rarely say relief may be spelled b-a-n-k-ru-p-t-c-y. And although bankruptcy is one option to deal with financial problems, it’s generally 

considered the option of last resort. The reason: it has a long-term negative impact on your 

creditworthiness. A bankruptcy stays on your credit report for 10 years, and can hinder your 

ability to get credit, a job, insurance, or even a place to live. What’s more, it can cost you 

attorneys’ fees.

Advance-Fee Loan Scams

These scams often target consumers with bad credit problems or those with no credit. In 

exchange for an up-front fee, these companies “guarantee” that applicants will get the credit 

they want — usually a credit card or a personal loan.

The up-front fee may be as high as several hundred dollars. Resist the temptation to follow 

up on advance-fee loan guarantees. They may be illegal. Many legitimate creditors offer 

extensions of credit, such as credit cards, loans, and mortgages through telemarketing, and 

require an application fee or appraisal fee in advance. But legitimate creditors never guarantee 

in advance that you’ll get the loan. Under the federal Telemarketing Sales Rule, a seller or 
Section 4

15

telemarketer who guarantees or represents a high likelihood of your getting a loan or some 

other extension of credit may not ask for or receive payment until you’ve received the loan.

Recognizing an Advance-Fee Loan Scam

Ads for advance-fee loans often appear in the classified ad section of local and national 

newspapers and magazines. They also may appear in mailings, radio spots, and on local cable 

stations. Often, these ads feature “900” numbers, which result in charges on your phone bill. 

In addition, these companies often use delivery systems other than the U.S. Postal Service, 

such as overnight or courier services, to avoid detection and prosecution by postal authorities.

It’s not hard to confuse a legitimate credit offer with an advance-fee loan scam. An offer for 

credit from a bank, savings and loan, or mortgage broker generally requires your verbal or 

written acceptance of the loan or credit offer. The offer usually is subject to a check of your 

credit report after you apply to make sure you meet their credit standards. Usually, you are not 

required to pay a fee to get the credit.

Hang up on anyone who calls you on the phone and says they can guarantee you will get a loan 

if you pay in advance. It’s against the law.

Protecting Yourself

Here are some tips to keep in mind before you respond to ads that promise easy credit, 

regardless of your credit history:

 Most legitimate lenders will not “guarantee” that you will get a loan or a credit card 

before you apply, especially if you have bad credit or a bankruptcy.

 It is an accepted and common practice for reputable lenders to require payment for a 

credit report or appraisal. You also may have to pay a processing or application fee.

 Never give your credit card account number, bank account information, or Social 

Security number out over the telephone unless you are familiar with the company and 

know why the information is necessary.

Credit Repair Scams

You see the ads in newspapers, on TV, and on the Internet. You hear them on the radio. 

You get fliers in the mail. You may even get calls from telemarketers offering credit repair 

services. They all make the same claims:

Credit problems? No problem!

We can erase your bad credit — 100% guaranteed.

Create a new credit identity — legally.

We can remove bankruptcies, judgments, liens, 

and bad loans from your credit file forever!

Do yourself a favor and save some money, too. Don’t believe these statements. They’re just 

not true. Only time, a conscientious effort, and a plan for repaying your debt will improve 

your credit report.
Section 4

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The Warning Signs

If you should decide to respond to an offer to repair your credit, think twice. Don’t do business 

with any company that:

 wants you to pay for credit repair services before any services are provided

 does not tell you your legal rights and what you can do 

yourself — for free

 recommends that you not contact a credit reporting 

company directly

 suggests that you try to invent a “new” credit report 

by applying for an Employer Identification

Number to use instead of your Social Security 

number

 advises you to dispute all information in 

your credit report or take any action that 

seems illegal, such as creating a new 

credit identity. If you follow illegal advice 

and commit fraud, you may be subject to 

prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone 

to apply for credit and provide false information. It’s a federal crime to make false statements 

on a loan or credit application, to misrepresent your Social Security number, and to obtain an 

Employer Identification Number from the Internal Revenue Service under false pretenses.

The Credit Repair Organizations Act

By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights 

Under State and Federal Law” before you sign a contract. They also must give you a written 

contract that spells out your rights and obligations. Read these documents before signing 

the contract. The law contains specific consumer protections. For example, a credit repair 

company cannot:

 make false claims about their services

 charge you until they have completed the promised services

 perform any services until they have your signature on a written contract and have 

completed a three-day waiting period. During this time, you can cancel the contract 

without paying any fees.

Your contract must specify:

 the total cost of the services

 a detailed description of the services to be performed

 how long it will take to achieve the results

 any “guarantees” they offer

 the company’s name and business address

Where to Complain

If you’ve had a problem with any of the scams described here, contact your local consumer 

protection agency, state Attorney General (AG), or Better Business Bureau. Many AGs have 

toll-free consumer hotlines. Check with your local directory assistance.
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Identity Theft

An identity thief is someone who obtains some piece of your sensitive information, like your Social Security number, date of birth, address, and phone number, and uses it 

without your knowledge to commit fraud or theft.

How Identity Thieves Get Your Information

Skilled identity thieves use a variety of methods to gain access to your personal information. 

For example, they may:

 get information from businesses or other institutions by:

 stealing records or information while they’re on the job

 bribing an employee who has access to these records

 hacking these records

 conning information out of employees

 rummage through your trash, the trash of businesses, or public trash dumps in a 

practice known as “dumpster diving”

 get your credit reports by abusing their employers’ authorized access to them, or by 

posing as a landlord, employer, or someone else who may have a legal right to access 

your report

 steal your credit or debit card numbers by capturing the information in a data storage 

device in a practice known as “skimming.” They may swipe your card for an actual 

purchase, or attach the device to an ATM machine where you may enter or swipe your 

card.

 steal wallets and purses containing identification and credit and bank cards 

 steal mail, including bank and credit card statements, new checks, or tax information

 complete a “change of address form” to divert your mail to another location

 steal personal information from your home

 scam information from you by posing as a legitimate business person or government 

official

How Identity Thieves Use Your Information

Once identity thieves have your personal information, they may:

 go on spending sprees using your credit and debit card account numbers to buy “bigticket” items like computers that they can easily sell

 open a new credit card account, using your name, date of birth, and Social Security 

number. When they don’t pay the bills, the delinquent account is reported on your 

credit report.

 change the mailing address on your credit card account. The imposter then runs up 

charges on the account. Because the bills are being sent to the new address, it may 

take some time before you realize there’s a problem.

 take out auto loans in your name

 establish phone or wireless service in your name

 counterfeit checks or debit cards, and drain your bank account

 open a bank account in your name and write bad checks on that account

 file for bankruptcy under your name to avoid paying debts they’ve incurred, or to 

avoid eviction
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 give your name to the police during an arrest. If they are released and don’t show up 

for their court date, an arrest warrant could be issued in your name.

Protecting Yourself

Managing your personal information is key to minimizing your risk of becoming a victim of 

identity theft.

 Keep an eye on your purse or wallet, and keep them in a safe place at all times.

 Don’t carry your Social Security card.

 Don’t share your personal information with random people you don’t know. Identity 

thieves are really good liars, and could pretend to be from banks, Internet service 

providers, or even government agencies to get you to reveal identifying information.

 Read the statements from your bank and credit accounts and look for unusual charges 

or suspicious activity. Report any problems to your bank and creditors right away.

 Tear up or shred your charge receipts, checks and bank statements, expired charge 

cards, and any other documents with personal information before you put them in the 

trash.

How To Tell If You’re a Victim of Identity Theft

Monitor the balances of your financial accounts. Look for unexplained charges or withdrawals. 

Other indications of identity theft can be:

 failing to receive bills or other mail signaling an address change by the identity thief

 receiving credit cards for which you did not apply

 denial of credit for no apparent reason

 receiving calls from debt collectors or companies about merchandise or services you 

didn’t buy

What To Do If Your Identity’s Been Stolen

If you suspect that your personal information has been used to commit fraud or theft, take the 

following four steps right away. Follow up all calls in writing; send your letter by certified 

mail, and request a return receipt, so you can document what the company received and when; 

and keep copies for your files.

1. Place a fraud alert on your credit reports and review your credit reports.

Contact any one of the nationwide credit reporting companies to place a fraud alert on 

your credit report. Fraud alerts can help prevent an identity thief from opening any 

more accounts in your name. The company you call is required to contact the other 

two, which will place an alert on their versions of your report, too.

Equifax: 1-800-525-6285; equifax.com

Experian: 1-888-397-3742; experian.com

TransUnion: 1-800-680-7289; transunion.com

In addition to placing the fraud alert on your file, the three credit reporting companies 

will send you free copies of your credit reports, and, if you ask, they will display only 

the last four digits of your Social Security number on them.
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2. Close the accounts that you know, or believe, have been tampered with or opened 

fraudulently.

Contact the security or fraud department of each company where you know, or 

believe, accounts have been tampered with or opened fraudulently. Follow up in 

writing, and include copies (NOT originals) of supporting documents. It’s important to 

notify credit card companies and banks in writing. Send your letters by certified mail, 

return receipt requested, so you can document what the company received and when. 

Keep a file of your correspondence and enclosures.

When you open new accounts, use new Personal Identification Numbers (PINs) and 

passwords. Avoid using easily available information, like your mother’s maiden 

name, your birth date, the last four digits of your Social Security number, your phone 

number, or a series of consecutive numbers.

3. File a report with your local police or the police in the community where the 

identity theft took place.

Get a copy of the police report or, at the very least, the number of the report. It can 

help you deal with creditors who need proof of the crime. If the police are reluctant to 

take your report, ask to file a “Miscellaneous Incidents” report, or try another

jurisdiction, like your state police. You also can check with your state Attorney 

General’s office to find out if state law requires the police to take reports for identity 

theft. Check the Blue Pages of your telephone directory for the phone number or check 

naag.org for a list of state Attorneys General.

4. File a complaint with the Federal Trade Commission.

By sharing your identity theft complaint with the FTC, you will provide important 

information that can help law enforcement officials across the nation track down 

identity thieves and stop them. The FTC also can refer your complaint to other 

government agencies and companies for further action, as well as investigate 

companies for violations of laws that the FTC enforces.

You can file a complaint online at ftc.gov/idtheft. If you don’t have Internet access, 

call the FTC’s Identity Theft Hotline, toll-free: 1-877-IDTHEFT (1-877-438-4338); 

TTY: 1-866-653-4261; or write: Identity Theft Clearinghouse, Federal Trade 

Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

For more information, see Deter, Detect, Defend: 

Avoid ID Theft or Take Charge: Fighting Back 

Against Identity Theft at ftc.gov/idtheft. Deter, Detect, Defend:

Avoid ID Theft

Take Charge: Fighting Back

Against Identity Theft

ftc.gov/idtheft
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For More Information

The Federal Trade Commission enforces a number of credit laws and has free information about them:

The Equal Credit Opportunity Act prohibits the denial of credit because of your sex, race, 

marital status, religion, national origin, age, or because you receive public assistance.

The Fair Credit Reporting Act gives you the right to learn what information is being 

distributed about you by credit reporting companies.

The Truth in Lending Act requires lenders to give you written disclosures of the cost of credit 

and terms of repayment before you enter into a credit transaction.

The Fair Credit Billing Act establishes procedures for resolving billing errors on your credit 

card accounts.

The Fair Debt Collection Practices Act prohibits debt collectors from using unfair or 

deceptive practices to collect overdue bills that your creditor has forwarded for collection.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the 

marketplace and to provide information to help consumers spot, stop and avoid them. To 

file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 

1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File 

a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the 

Consumer Sentinel Network, a secure online database and investigative tool used by hundreds 

of civil and criminal law enforcement agencies in the U.S. and abroad.

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

Toll-free 1-877-FTC-HELP

ftc.gov
Federal Trade Commission

Bureau of Consumer Protection

Division of Consumer and Business Education

March 2008
1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov