Credit Repair Services
Credit repair services exist to help people turn their poor credit score around. These services use various tactics to turn their client’s credit scores around, usually some combination of debt consolidation, assistance with budgeting, and third-party intervention with creditors.
Some credit repair services operate outside the law, taking advantage of people’s poor credit and desire to improve their credit by making false claims about their ability to reverse credit or wipe out bad credit. These disreputable credit services charge high fees and do little more than take their client’s money in exchange for ersatz credit repair advice.
President Clinton signed the Credit Repair Organizations Act in September of 1996. This act was written in such a way that it prevents credit repair services from operating without informing their clients of all their options and disallows what the act calls “unfair or deceptive advertising and business practices”. The act mentions specific practices that are now illegal, such as not disclosing the impact of various credit repair actions, not providing liability, and the act also supplies stiff penalties for non-compliance. Thankfully, there’s a government organization watching over credit repair companies who listen to reports of non-compliance and mete out punishment.
How to Tell If You’re Being Ripped Off
If you’re approaching credit repair services, there are some thing you can do to protect yourself. First of all, credit repair companies shouldn’t be charging you exorbitant fees. Whether or not the fee you’re being charged is exorbitant or not is hard to say–the credit repair service I used to help improve my score from a 535 to a 700 charged me a little over $50 a month for credit bureau disputes and third-party intervention.
A credit repair service that charges a flat rate is probably ripping you off. If you suspect you’re being ripped off by a credit repair company, look into the following aspects of their business:
1. Written Contracts
Legitimate credit repair services should give you at least two things before you sign up: a copy of the “Consumer Credit File Rights Under State and Federal Law” and a copy of their written contract including information on your rights as a client. Like any legal contract, you should read both of these before you sign on the dotted line.
2. Legal Restrictions
According to federal law, a credit repair company is restricted from doing certain things:
- making false claims about their abilities and services
- charging you a fee until they have completed providing their services
- performing any credit repair services until you sign their written contract and have completed a three-day waiting period.
That’s right–every credit repair company has to allow you a three-day waiting period during which you can cancel the contract without paying any fees. That time is there for you to read the contracts and consult a lawyer or other adviser to determine if the company’s services are legitimate.
3. Fine Print
Before you agree to any contract and before you sign your name, make sure that you’ve worked out some specifics with the credit repair service you’ve chosen. The fine print on your contracts should specify:
- the total amount of payment and all payment terms for services including a total cost
- a description of all the financial services the company will perform on your behalf
- an estimate of how long it will take the company to achieve the desired result
- any guarantees your credit repair company offers
- the credit repair company’s name and legal business address
Credit Repair Companies
What do credit repair companies do? Unlike credit counselors, credit repair companies promise to do most of the work for you for a fee.
Companies who promise to clean up your credit report and intervene on your behalf are credit repair companies–most people turn to credit repair companies for help when they need to get a car loan, take out a home mortgage, or even when it is time to move to a new job. The big complaint about credit repair companies is that after you pay them huge fees there isn’t much they do that consumers can’t do for themselves. The big danger is that you’ll get involved with a fraudulent credit repair service who will literally take your money and run.
Credit counselors offer consumers guidance on improving their own credit reports and scores and teach people to manage their finances. Credit repair services on the other hand offer to remove incorrect information from your credit report and deal directly with your creditors to improve your credit score.
What Do Credit Repair Companies Do?
Credit repair services take pretty much the same three steps no matter the name of the company.
1) You are asked to forward the company copies of all three of your credit reports, those from Equifax, Experian, and TransUnion. Reputable credit repair services can access that information themselves, rather than ask you to forward them.
2) Credit repair services then recommend specific items on your credit report that should be disputed, such as old information, invalid reports, and instances of identity theft
3) Credit repair services then offer to contact the specific credit reporting bureaus to challenge the questionable items they found on your credit reports.
Act As Your Own Credit Repair Service
Remember, as a consumer you can dispute anything on your credit report that is inaccurate or incomplete, simply by virtue of being the consumer. All credit reporting bureaus have to investigate your dispute at no cost to you. Everything that these credit repair services claim they can do for you for a fee, you can do for yourself at no charge. It will take a little time and effort, but shouldn’t cost you a dime.