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Thanks to the recession and its aftermath, millions of people suffered foreclosures, bankruptcies and job losses that tanked their credit. Given how much bad credit can cost -- in higher interest rates, more expensive insurance premiums and bigger deposits for utilities -- many want to rehabilitate their credit as quickly as possible.

But real credit repair doesn't happen overnight, and it can take even longer if you fall for any of these myths:

No. 1: Credit bureaus have to investigate disputes within 30 days.

Federal law typically requires credit bureaus to investigate consumer complaints of errors on their credit reports and report the results of that investigation to the consumer within 30 days.

But there's a pretty big exception. Under the Fair Credit Reporting Act, bureaus don't have to investigate disputes they consider "frivolous or irrelevant."

"The bureaus can look at it (the dispute) and refuse to investigate. They can even do it based on the format of the dispute letter," said Barry Paperno, community director at Credit.com and a former operations manager at Experian, one of the three major credit bureaus.

Credit firms often reject the techniques used by many credit repair firms, such as using cookie-cutter forms, disputing the same information over and over again or disputing a bunch of items. You can reduce the chances of your dispute being discarded out of hand, Paperno said, by using your own words when writing disputes and including copies of relevant documents that support your position.

Image: Liz Weston

Liz Weston

No. 2: Disputing information will remove it from my credit reports.

If the credit bureaus do investigate your disputes, they won't remove the negative information in question while they do so. The bureaus wait to hear back from the company that supplied the information about whether it's accurate.

Sometimes these companies don't respond to disputes in time. In that case, the credit bureau may delete the disputed information.

Credit repair firms often claim victory when these deletions happen, but if the creditor doesn't remove this data from its own records, it could pop back up on your reports, said Gerri Detweiler, another Credit.com blogger and author of "Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis."

"They last long enough for (the credit repair firm) to cash your check," she said.

Temporary deletions are a problem even when you get a legitimate error removed, Paperno said. That's why it's important to check your credit reports frequently and keep paperwork that proves you're in the right.

No. 3: Credit repair firms know secret ways to fix things.

Credit repair outfits love to tout their special industry knowledge and insights, Detweiler said, and people often assume the firms can do things that individuals can't.

"They're led to believe there are loopholes in the law and that if you take advantage of these loopholes, you can get things off your credit report," Detweiler said.

But what credit repair firms know is secret only in the sense that their customers don't realize they can get the same information for free at their local library or from reputable Web sites.

"People think the only way to get better credit is to pay someone to do it for them," Detweiler said. "They don't really understand how much they can do on their own."

One place to start is the FTC's page on credit repair. You can get your free annual credit reports at AnnualCreditReport.com and a free "credit report card," based on your Experian credit report, with personalized advice how to improve your standing at Credit.com.

No. 4: Paying off an old debt will help my credit scores.

Some people think that paying off a debt somehow removes it from their credit reports. That's not true. But even people who understand that may assume that reducing the balance of a past-due debt to zero will help their credit scores.

That's often not the case, said Paperno, who also worked for FICO, the leading credit score creator, for 12 years. If the debt shows up as a collection account, the balance owed is usually irrelevant for FICO credit scoring purposes, so paying it off won't help unless you convince the collection agency to stop reporting the debt -- something that's typically hard to do, Detweiler said.

Balances matter more when the debt is still held by the original creditor. Even then, though, the credit scoring formula starts to ignore the balance information after a certain length of time. FICO doesn't disclose how long that time might be.

"Paying off an old charge-off isn't going to help you like (paying off) a new one," Paperno said.

If you're trying to improve your credit scores, consider paying off your most recent defaults first and see how much that moves your numbers. (If your accounts are all current, pay down your credit card debts to improve your scores.)

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