A credit sweep refers to an action taken by a credit repair company that claims to “sweep” your credit report and dispute all negative items at one time. The sweep will claim the items are fraudulent, usually as a result of identity theft.
However, unless all items on your credit report are fraudulent (which is improbable), a credit sweep is illegal. While credit card fraud statistics show that fraud cases continue to increase, a credit sweep is not the answer.
It’s important to note that any action performed by a credit repair company can be done on your own. This can save you thousands of dollars in fees. If your credit needs a clean-up, you can dispute individual issues and fix errors on your credit report yourself, for free.
Credit sweep programs typically promote the ability to remove negative items on your credit report by disputing every single item on your credit report. Often, these companies charge high fees for this service.
A credit sweep is not a wise strategy for credit repair. As mentioned, it only works if all the items on your credit report are fraudulent, which is rarely the case. You also must be able to prove identity theft with a police report. If some items are not fraudulent, a credit sweep is illegal.
If you approach a credit repair company and they demand upfront payment or seem to be withholding information, do not engage with them. These actions are prohibited by the Credit Repair Organizations Act and are clear indications that such a company is not on your side.
Before going further, it is essential to understand a key terminology difference. A credit sweep is not the same as a line of credit sweep. The latter refers to an automatic transfer of excess checking account funds into a line of credit. This is done to pay down debts from idle funds automatically.
A line of credit sweep is an arrangement between a bank and a customer, much like any other account service. Credit repair agencies do not handle these. A line of credit sweep will not affect your credit history, other than helping to pay off debts.
A credit sweep is illegal in most cases. There are rare cases where a credit sweep may be legal, such as when a child’s identity is stolen.
By their nature, credit sweep scams target vulnerable people. Often, these credit repair scams promise many impossible results that the average customer won’t understand.
Fortunately, unsavory services can be easy to spot. Avoid businesses that require an upfront payment. Watch out for blank paperwork that demands your personal information. And always avoid businesses that claim to repair your credit quickly. Credit repair is never fast, even when done correctly.
There are no genuine alternatives to credit sweeps. However, there are strategies you can use to clean up your credit. They include:
According to the Fair Credit Reporting Act, any dispute not addressed by a credit bureau, lender or debt collector within 30 days will result in the disputed item’s deletion. If negative marks can’t be removed, they will remain on your credit report for seven years.
Instead of turning to a company to repair your credit, you can take care of it yourself. If you have incorrect items due to identity theft or other inaccurate entries on your credit report, you can dispute these with the credit bureaus.
Note that credit repair is not a strategy for removing legitimate negative items.
By law, everyone can get a free credit report from each nationwide credit reporting agency every 12 months. Call 1-877-322-8228 with your name, address, date of birth, and social security number for verification.
You can also visit annualcreditreport.com. If an item you dispute comes back as an error, this does not count as your free annual report.
With diligent monitoring of your credit report, you can catch mistakes early, and doing so can help alert you to other issues, including possible identity theft. If you find an error, you must dispute it with the credit reporting companies — Equifax, Experian and Transunion.
You will have to make the dispute in writing. You can use template letters, but the content is relatively straightforward. Your dispute letter should include:
You will also want to enclose a copy of your credit report. Highlight the items in question and send the copy along with your letter. You can also send these letters to the furnisher of your credit information. These can include loan holders and landlords. Often, these entities will be contacted by a credit reporting company during the error claim investigation.
You can also contact the credit reporting agencies by phone and via their websites, but having everything in writing creates a paper trail for you to hold on to.
Once an agency receives a dispute, it has 30 days to complete its investigation. They will forward your information to the business that reported your credit information. They then must investigate the matter at the source and report back to all three reporting agencies.
All results must be sent back to you in writing. Credit bureaus will also send correction notices to anyone who received your credit report, such as employers.
In some situations, hiring a credit repair service can be worthwhile. Extensive fraud or erroneous information can be time-consuming and confusing to address. In cases such as these, reputable services can act as your representative and remove all illegitimate credit items, but you will often be charged for these services.
If you do choose to hire a credit repair company, know that there are laws protecting you including the Telemarketing Sales Rule and the Credit Repair Organizations Act.
Under these, a company can’t charge for credit repair until six months after the desired results and if your credit isn’t repaired, it is illegal for them to accept payment. It is also illegal for these companies to use any deceitful practices. This includes withholding information and providing wrong information. It is also illegal for an entity to ask you to sign away your CROA rights. These rights can’t be forfeited. Any documents you sign saying otherwise are worthless.
Despite the laws, the Consumer Financial Protection Bureau has sued many credit repair companies for deceptive practices. Always look out for the common signs of an illegitimate credit repair company. And always remember: even legitimate companies take the same actions that an individual can — they just charge you for what should be free.
If you suspect you have dealt with a credit repair company that is using illegal practices, you should report them.
What is the difference between credit repair and building credit?
The answer is easier than you might think. Credit repair focuses on repairing incorrect information or past mistakes. Building credit focuses on making smart credit decisions moving forward. This means keeping credit utilization low, making all payments on time, and checking your credit report every year.
Smart credit usage won’t fix your negative credit history immediately. It doesn’t remove any old negative items from your report. However, your credit improvement will be reflected in your credit report, and lenders will be able to see your consistent work. Plus, your past mistakes will be gone after seven to ten years, and if you maintain good habits, your credit history will reflect those good decisions.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.